Academy Sports CEO says hobbies acquired during COVID will continue to drive sales in 2021

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Many people have acquired a hobby during COVID-19, from fishing and hiking to camping. Ken Hicks, general manager of retailer Academy Sports & Outdoor Inc. ASO,
+ 1.13%,
believes these new activities will continue to drive sales in 2021 even after the pandemic has ended.

“If 20% or 30% of those people are pursuing these hobbies, that’s a huge increase,” he told MarketWatch. “Normally, it would take years to develop this kind of business.”

A number of retailers have reported increased sales of products such as bicycles and fitness and outdoor equipment. As consumers immerse themselves in these newly acquired hobbies, they will look to improve their equipment.

“People start fishing and get a starter rod and now want a new rod or reel. They went camping and have a small tent and now want a bigger and better tent, ”he said. “These are things that will help us do well next year. “

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Academy Sports first reported its results last week after going public in October, posting profits and sales above expectations.

There were difficult times during the pandemic, Hicks said, such as in the spring when sales of clothing and footwear stopped.

Academy, which was founded in Texas in 1938, felt the pinch in comparable sales in the apparel category (down to lower numbers in Q3 2020) after the Houston Astros made a World Series appearance in 2019.

But Hicks was generally optimistic about the most recent quarter and what lies ahead.

“We’re in an industry where we have tailwinds,” he told MarketWatch.

Still, he says the Academy is looking for improvements. The company has implemented new pricing systems that can increase margins. And in private labels, a few adjustments on a t-shirt, for example, can justify a higher price tag.

“When we look at the timing of the IPO,” Hicks said, “it’s probably gone better” than the company had hoped for.

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Credit Suisse analysts led by Seth Sigman also say tailwinds give Academy Sports a boost.

“In our opinion, this is still just the beginning to reap the benefits,” said Credit Suisse.

“Most encouraging has been the growth in customer base (+3 million), which should have cumulative benefits as Academy’s large assortment means more customer trips / more opportunities throughout the year. “

Credit Suisse estimates that Academy Sports stock is outperforming with a price target of $ 24.

“In a more competitive environment with most retailers now fully reopened, Academy results show the company is able to continue to take its share,” wrote UBS analysts led by Michael Lasser. UBS notes comparable sales growth of 16.5% in the third quarter, supported by comps in the Sports & Recreation and Outdoor categories.

The company says these trends have continued so far in the fourth quarter.

“We think this shows how consumers continue to look for opportunities to stay active,” UBS said.

“We believe the Academy is uniquely positioned for the changing seasons, as its largely southern store footprint will remain conducive to outdoor activities for much of the winter. Accordingly, we believe its near-term outlook to be positive. “

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UBS evaluates the purchase of Academy shares with a price target of $ 21.

John Zolidis, president of Quo Vadis Capital, is also optimistic about the Academy, basing what the company can accomplish on Hicks’ history with Foot Locker Inc. FL,
+ 0.45%

Hicks was Managing Director of Foot Locker from August 2009 to November 2014, while holding other titles within the company, including that of President. He was Executive Chairman from December 2014 to May 2015.

“We have followed Foot Locker throughout this period and are confident that Mr. Hicks and his team will find operational and merchandising improvements to maintain a positive sales and margin momentum for Academy,” wrote Quo Vadis, who is long on the stock.

Academy stock rose 4.6% in Tuesday’s trading and gained 13% in the past month. The S&P 500 SPX index,
+ 0.09%
is up 2.4% for the last month.


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