Academy Sports reported first-quarter results that beat Wall Street targets, but the retailer lowered its outlook slightly due to macroeconomic challenges.
First quarter 2022 results
“We are pleased with our first quarter results. The company has continued to position itself for long-term growth and expansion as we execute effectively in a very dynamic environment and compared to a very strong prior year quarter,” said Ken Hicks, President and Chief Executive Officer. . “In April, we opened our first new store in over two years and we are delighted and proud of its first performance. We plan to open at least eight new stores in 2022 as part of our plan to open 80-100 stores over the next five years. Looking ahead, the team is focused on executing on our 2022 priorities, which will help drive long-term growth and sustainable profitability.
Net sales were $1.47 billion, down 7.1% from $1.58 billion. E-commerce sales increased 18.8% and comparable sales decreased 7.5%, primarily due to comparable sales exceeding 38.9% in the prior year quarter, partly due to due to the release of government stimulus payments in the first quarter of 2021. Compared to the first quarter of 2019, net sales increased by 36.3%.
Gross margin was $521.4 million, or 35.5% of net sales, compared to gross margin of $563.7 million, or 35.7% of net sales in the prior year quarter. Higher merchandise margins and lower transportation costs were offset by higher inventory and e-commerce shipping costs.
Pretax profit was $195.3 million in the first quarter, down from $224.9 million; this is the second highest pre-tax profit in the company’s history. Compared to the first quarter of 2019, this is an increase of more than 650%.
GAAP net income decreased 15.7% to $149.8 million from $177.8 million. Diluted earnings per share were $1.69 compared to $1.84 per share. Adjusted net income, which excludes the impact of certain non-cash and extraordinary items, was $153.2 million. Adjusted diluted earnings per share were $1.73 compared to $1.89 per share.
Adjusted EPS of $1.73 beat the Wall Street consensus target of $1.40. Sales of $1.47 billion beat Wall Street’s consensus estimate of $1.43 billion.
Balance sheet and capital allocation update
At the end of the first quarter, the company’s cash and cash equivalents totaled $472.4 million, with no borrowings under the $1 billion credit facility. Adjusted free cash flow was $79.8 million in the first quarter. Merchandise inventories were $1.3 billion, an increase of 22.5% from the first quarter of 2021 and 8.8% from the first quarter of 2019.
During the first quarter, Academy returned $95.0 million in cash to shareholders through share repurchases and the payment of dividends. The company repurchased 2.3 million shares for $88.5 million. On April 14, 2022, the company paid its first quarterly cash dividend of $0.075 per share, or $6.5 million, to shareholders of record as of the close of business on March 17, 2022.
Subsequent to the end of the first quarter, on June 2, 2022, Academy announced that its Board of Directors (Board) had declared a quarterly cash dividend for the quarter ended April 30, 2022 of $0.075 per common share. The dividend is payable on July 14, 2022 to shareholders of record at the close of business on June 16, 2022. The board also approved a new three-year $600 million share buyback program, increasing the total amount currently available to terms of the two share buyback programs to $700 million.
Michael Mullican, Executive Vice President and Chief Financial Officer, said, “Academy continues to effectively manage costs in this inflationary environment and generate strong cash flow, enabling us to fund investments in our strategic initiatives and growth. of our new stores. While our internal initiatives continue to drive operational improvements and consistent execution, we believe it is prudent to revise our full-year outlook to reflect current macroeconomic challenges.
Academy has revised its initial guidance for fiscal 2022 for the following metrics:
- Total net sales of $6.43-6.63 billion, down from the previous forecast of $6.56-6.77 billion;
- Same-store sales from -6.0% to -3.0% vs. -4.0% to -1.0% previously;
- GAAP Pretax income of $725 million to $805 million, from $780 million to $845 million previously;
- GAAP net income of $550-615 million, compared to $590-640 million previously;
- GAAP diluted EPS $6.30 to $7.00 $6.55 to $7.10 based on 88.0 million diluted weighted average shares outstanding;
- Adjusted diluted EPS from $6.55 to $7.25 from $6.70 to $7.25; and
- The earnings per share estimate reflects a 24.0% tax rate and first quarter share buyback activity, but does not include any potential future share buybacks.
Photo courtesy of Sports + Outdoors Academy