Academy Sports Delivers Fun for its Stockholders

© Reuters. Academy Sports Delivers Fun for its Stockholders

Academy Sports and Outdoors (ASO) has a mission to provide “Fun for All” by offering a portfolio of outdoor, apparel, footwear and sports & recreation brand and private label products to help people enjoy their favorite outdoor activities.

In recent quarters, ASO’s mission must have won a lot of followers, as evidenced by a string of strong financial reports, including one last week, which delivered fun for its stockholders. (See Academy Sports and Outdoors stock charts on TipRanks)

I am bullish on this stock.

Highest Sales in the Company’s History

The Texas-based retailer reported an 11.5% increase in net sales to an all-time quarterly high of $1.79 billion. That’s a 44.8 percent increase compared to the same quarter in 2019. Comparable sales rose 11.4% on top of 27.0% last year-- the eighth consecutive quarter of positive comparable sales, thanks to strength in the overall market and strong consumer demand across all product categories.

ASO’s strong earnings reports follows similar reports by DICK'S Sporting Goods, Inc. (DKS) and Foot Locker (NYSE:FL) last month, suggesting that demand remains strong for the industry.

"The Academy Sports + Outdoors team delivered the best quarterly financial results in the Company’s history as we surpassed the very strong store comparables from last year," said Ken Hicks, Chairman, President and Chief Executive Officer.

He continued, "We plan to build on this continued success by further sharpening our focus on the fundamentals of the business and investing in our strategic initiatives with the goal of adding new customers, gaining market share and driving sales and profit growth. I am also excited to announce the authorization of our new share repurchase program. This program signifies the current strength of the Company and the confidence we have in the future of Academy."

Low Multiple

Quo Vadis President Zolidis seems to share Hicks’ enthusiasm about ASO’s future, pointing to the strong demand for sporting goods. He’s also optimistic about the company’s shares, citing a low multiple, a big short position, and a large stake by KKR. However, he is concerned about the company's valuation and competition.

“We understand that upside was expected, but few holes to poke in a view that consumer spending on athletic and sporting goods categories remains very elevated,” he said. “Margins strong, sales strong, guidance raised materially and $500M share buyback added to boot. At $43 stk is a 7x P/E on this year? Still 12M shares short, are they going to stick around for another year of tough comparisons from a higher sales and earnings base?"

The analyst community rates ASO a Strong Buy, though they see little upside from here. They have a high forecast of $58.00 and a low forecast of $40.00. The average Academy Sport and Outdoors price target of $51.25 represents a 13.1% change from the last price of $45.31.

Summary and Conclusions

Every company has a mission, an ultimate goal it wants to achieve, creating value for its shareholders in the process. ASO’s mission is to provide “fun for all,” by offering a number of sports and recreation products that allow people to enjoy outdoor activities, and deliver happy returns for its shareholders in the process. Based on its recent financial reports, ASO is on the right road to accomplish this mission.

Disclosure: Panos Mourdoukoutas doesn’t own any shares of ASO.

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