Sporting goods retailer Academy Sports & Outdoor (NASDAQ:ASO) missed Wall Street’s revenue expectations in Q1 CY2025, with sales flat year on year at $1.35 billion. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $6.12 billion at the midpoint. Its non-GAAP profit of $0.76 per share was 14.7% below analysts’ consensus estimates.
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Academy Sports (ASO) Q1 CY2025 Highlights:
- Revenue: $1.35 billion vs analyst estimates of $1.37 billion (flat year on year, 1.5% miss)
- Adjusted EPS: $0.76 vs analyst expectations of $0.89 (14.7% miss)
- Adjusted EBITDA: $109.8 million vs analyst estimates of $120.7 million (8.1% margin, 9.1% miss)
- The company dropped its revenue guidance for the full year to $6.12 billion at the midpoint from $6.18 billion, a 1% decrease
- Management lowered its full-year Adjusted EPS guidance to $5.85 at the midpoint, a 2.1% decrease
- Operating Margin: 5.1%, down from 7.5% in the same quarter last year
- Locations: 303 at quarter end, up from 284 in the same quarter last year
- Same-Store Sales fell 3.7% year on year (-5.7% in the same quarter last year)
- Market Capitalization: $2.96 billion
StockStory’s Take
Academy Sports’ first quarter was shaped by a mix of external pressures and internal investments, as management discussed the impact of newly imposed tariffs, inventory strategies, and evolving customer dynamics. CEO Steve Lawrence attributed part of the flat sales to a slow start in February due to cold weather, but noted sequential improvement by April, especially with the introduction of the Jordan Brand and expanded Nike offerings. The company also highlighted increased foot traffic from higher-income customers, a trend that began last year and is now accelerating. CFO Carl Ford explained that the company’s gross margin benefited from better merchandise mix and improved inventory accuracy through RFID technology, while investments in new stores and the Jordan Brand launch drove higher operating costs. Management was candid about the challenges posed by discretionary spending pressures and the need for flexibility in navigating tariff fluctuations.
Looking ahead, Academy Sports’ guidance is influenced by ongoing tariff uncertainty, consumer spending pressure, and the anticipated benefits of recent strategic initiatives. Management emphasized plans to mitigate tariff impacts through diversified sourcing, inventory pull-forwards, and pricing optimization, while keeping the customer value proposition intact. CEO Steve Lawrence noted, “We believe that by remaining true to who we are, being the value provider in our space, we’re going to benefit from customers trading into Academy.” The company expects continued momentum from new store openings, digital investments, and the growing loyalty program, but acknowledged the environment remains unpredictable. CFO Carl Ford added that the company is “widening our comp sales guidance to account for an expanded range of outcomes,” reflecting a sober outlook on consumer health and inflationary risks.
Key Insights from Management’s Remarks
Management cited external tariff pressures, shifting customer demographics, and key product launches as primary factors shaping first quarter performance and future expectations.
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Tariff mitigation actions: The company described a multi-step approach to offset recent tariffs, including pausing shipments from China during peak tariff periods, accelerating sourcing diversification, and negotiating cost-sharing with suppliers. Management reduced direct private brand exposure to China to 6% by quarter end.
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Inventory and sourcing strategy: Academy Sports leveraged its balance sheet to pull forward $85 million in inventory at pre-tariff prices, focusing on evergreen categories with minimal markdown risk. This allowed the company to support spring selling and maintain its value position, while also shifting sourcing to countries like Cambodia and Bangladesh.
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Foot traffic from higher-income customers: Store traffic from households earning over $100,000 increased by double digits, driven by value-seeking behavior amid inflation. Management expects this shift to continue and sees higher retention and broader shopping patterns from this cohort.
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New store and eCommerce growth: The company opened five new stores in the quarter, expanding into Pennsylvania and Maryland, and reported a 10% sales increase in its eCommerce channel. New stores from recent vintages delivered positive comparable growth, and online penetration exceeded 10%.
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Key product launches and technology upgrades: The launch of the Jordan Brand in select stores and online, along with expanded Nike assortments, contributed to improved sales trends in April. The rollout of RFID technology and new handheld devices for store associates improved inventory accuracy and enabled better in-stock positions, supporting conversion and customer experience.
Drivers of Future Performance
Management’s outlook for the year is shaped by tariff-related sourcing challenges, shifting customer segments, and execution of growth initiatives across stores and digital.
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Tariff and sourcing uncertainty: The company’s guidance incorporates three tariff scenarios, with management emphasizing ongoing efforts to diversify suppliers and pull in inventory at pre-tariff rates. While gross margin is expected to remain stable, higher tariffs could impact sales if inflation pressures discretionary spending.
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Expanding higher-income customer base: Management believes that continued value positioning and targeted marketing will drive further traffic from households earning above $100,000. This group has demonstrated strong retention and increased average spend, partially offsetting softness among lower-income segments.
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Operational and product investments: Academy Sports plans to open 20 to 25 new stores this year, expand its eCommerce penetration, and grow loyalty program membership by an additional 2 million. The Jordan Brand launch and Nike expansion are expected to provide incremental sales, while investments in RFID technology and handheld devices should support inventory accuracy and conversion rates.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be watching (1) the pace and productivity of new store openings, especially in newly entered states; (2) stabilization or growth in same-store sales as new product launches like the Jordan Brand scale up; and (3) the effectiveness of inventory and sourcing strategies in mitigating tariff-related cost pressures. Progress in eCommerce and loyalty program growth will also be key signposts.
Academy Sports currently trades at a forward P/E ratio of 7.3×. In the wake of earnings, is it a buy or sell? See for yourself in our full research report (it’s free).
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