Sporting goods retailer Academy Sports & Outdoor (NASDAQ: ASO) missed Wall Street’s revenue expectations in Q2 CY2025 as sales rose 3.3% year on year to $1.6 billion. On the other hand, the company’s full-year revenue guidance of $6.13 billion at the midpoint came in 0.6% above analysts’ estimates. Its non-GAAP profit of $1.94 per share was 9.1% below analysts’ consensus estimates.
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Academy Sports (ASO) Q2 CY2025 Highlights:
- Revenue: $1.6 billion vs analyst estimates of $1.61 billion (3.3% year-on-year growth, 0.5% miss)
- Adjusted EPS: $1.94 vs analyst expectations of $2.13 (9.1% miss)
- Adjusted EBITDA: $212.5 million vs analyst estimates of $227 million (13.3% margin, 6.4% miss)
- The company slightly lifted its revenue guidance for the full year to $6.13 billion at the midpoint from $6.12 billion
- Management raised its full-year Adjusted EPS guidance to $5.95 at the midpoint, a 1.7% increase
- Operating Margin: 10.8%, down from 12.3% in the same quarter last year
- Free Cash Flow Margin: 1.4%, down from 3.2% in the same quarter last year
- Locations: 306 at quarter end, up from 285 in the same quarter last year
- Same-Store Sales were flat year on year (-6.9% in the same quarter last year)
- Market Capitalization: $3.56 billion
"We were pleased to see sales inflect to a positive comp in the second quarter, driven by steady improvements in the business that are a result of the progress we continue to make against our strategic initiatives. Customers are gravitating to our diversified assortment and our value proposition is resonating with them, which has allowed us to pick up market share in the first half of the year," said Steve Lawrence, Chief Executive Officer.
Company Overview
Founded in 1938 as a tire shop before expanding into fishing equipment, Academy Sports & Outdoor (NASDAQ: ASO) sells a broad selection of sporting goods but is still known for its outdoor activity merchandise.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $5.97 billion in revenue over the past 12 months, Academy Sports is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.
As you can see below, Academy Sports’s 4% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was sluggish.
This quarter, Academy Sports’s revenue grew by 3.3% year on year to $1.6 billion, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 5.6% over the next 12 months, an acceleration versus the last six years. This projection is healthy and indicates its newer products will fuel better top-line performance.
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Store Performance
Number of Stores
The number of stores a retailer operates is a critical driver of how quickly company-level sales can grow.
Academy Sports operated 306 locations in the latest quarter. It has opened new stores at a rapid clip over the last two years, averaging 5.8% annual growth, much faster than the broader consumer retail sector. This gives it a chance to become a large, scaled business over time.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Same-Store Sales
A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales gives us insight into this topic because it measures organic growth for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year.
Academy Sports’s demand has been shrinking over the last two years as its same-store sales have averaged 4.5% annual declines. This performance is concerning - it shows Academy Sports artificially boosts its revenue by building new stores. We’d like to see a company’s same-store sales rise before it takes on the costly, capital-intensive endeavor of expanding its store base.
In the latest quarter, Academy Sports’s year on year same-store sales were flat. This performance was a well-appreciated turnaround from its historical levels, showing the business is improving.
Key Takeaways from Academy Sports’s Q2 Results
It was encouraging to see Academy Sports’s full-year EPS guidance beat analysts’ expectations. We were also glad its full-year revenue guidance slightly exceeded Wall Street’s estimates. On the other hand, its revenue missed and its EPS fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 7.7% to $49.45 immediately following the results.
The latest quarter from Academy Sports’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
