Earnings call transcript: Academy Sports Q1 2025 misses EPS forecast

Academy Sports and Outdoors (ASO) reported Q1 2025 adjusted EPS of $0.76, missing the $0.8983 forecast, and revenue of $1.35 billion, slightly below the expected $1.37 billion; comparable sales decreased by 3.7%, though e-commerce sales rose 10%. Despite the earnings miss, ASO's stock rose 4.8% in pre-market trading, signaling investor optimism potentially driven by the company's strategic initiatives, including new store openings and digital growth, as well as the stock trading below its fair value according to InvestingPro analysis. For the full year, Academy Sports projects sales between $5.97 billion and $6.26 billion, with comparable sales expected to range from a 4% decline to a 1% increase, while maintaining adjusted EPS guidance of $5.45 to $6.25.

Analysis

Academy Sports and Outdoors (ASO) reported Q1 2025 results that missed analyst expectations, with an adjusted EPS of $0.76 against a forecast of $0.8983 and revenue of $1.35 billion versus an anticipated $1.37 billion. This represented a 0.9% year-over-year revenue decline and a 3.7% drop in comparable sales, attributed to a challenging consumer spending environment; however, sales sequentially improved through the quarter, with April posting a positive comparable sales figure, although management noted May sales trended down low single digits. Despite the headline misses, ASO's stock experienced a 4.8% pre-market increase, suggesting investor focus on strategic positives such as the 10% growth in e-commerce sales, a 60 basis point year-over-year gross margin improvement to 34%, and an attractive valuation with a P/E ratio of 7.61x. Management detailed proactive tariff mitigation strategies, including reducing direct China sourcing to a target of 6% by year-end and a strategic $85 million pull-forward of domestic inventory contributing to higher inventory levels (units per store up 6.5%). The launch of the Jordan brand is tracking ahead of plans, and SG&A expenses rose, primarily due to new store growth ($20 million) and the Jordan/Nike expansion ($7.5 million in Q1). Full-year 2025 guidance projects sales between $5.97 billion and $6.26 billion, with comparable sales from -4% to +1%, and adjusted EPS of $5.45-$6.25, a range widened due to tariff uncertainties.

Key Decisions for Investors

• Investors should weigh ASO's attractive valuation metrics and 1.17% dividend yield against the near-term pressures from a challenging consumer environment and significant tariff-related uncertainties reflected in the widened full-year guidance.
• Key performance indicators to monitor include the continued ramp-up of the Jordan brand, sustained e-commerce growth, the comparable sales performance of new store vintages, and the ability to attract and retain higher-income consumers.
• Scrutinize the company's progress in managing its increased inventory levels, aiming for normalization as guided, and its effectiveness in mitigating tariff impacts through sourcing diversification and pricing strategies to protect gross margins.