Dive Brief:
- Academy Sports and Outdoors plans to open 160 to 180 new stores in the next five years, the retailer said during a Thursday earnings call. Between 15 and 17 new openings are expected this year. The company opened seven stores in Q4 and 14 overall in fiscal year 2023, five more than the prior year.
- The new stores will be split 50/50 between new and existing markets. Academy said it’s focusing on smaller and mid-sized markets, which have a lower volume but higher profit opportunity. Academy said it sees the potential to nearly triple its footprint from its current 282 locations in 18 states to a national presence of over 800 stores.
- At the same time, Academy reported Q4 net sales of $1.79 billion, up nearly 3% from $1.75 billion a year earlier. For the year, net sales fell nearly 4% to $6.2 billion from $6.4 billion a year ago, while comparable sales were down 6.5%. Net income for the year fell 17% year over year to $519 million.
Dive Insight:
Academy opened 23 stores in 2022 and 2023, and it has revised its five-year opening goal upwards from 120 to 140 stores. CEO Steve Lawrence said the retailer is applying lessons from the most recent round of store openings as it fine-tunes its store growth.
In addition to striking an even balance between opening in new and existing markets, another change is adjusting the timing of store openings, Lawrence said, according to a Seeking Alpha call transcript. “We've learned that stores open in the first half of the year, get out of the gate faster than stores open up in Q3 and Q4,” Lawrence said.
Each new Academy store should require $4 million to $5 million in capital to open. The year-one sales target for new locations is $12 million to $16 million, down from $18 million, the retailer said in a presentation.
“As we move into 2025 and beyond, our goal will be to go into new markets, with a greater density of new store openings around the same time,” Lawrence said. “The end result of all this work is that we believe we have an opportunity to open up, even more stores than we initially modeled in our long-range plan.”
Another element of Academy’s five-point, long-term growth strategy is driving e-commerce penetration to 15% of total revenue. “On the surface, this doesn't seem like an overly audacious goal, when you consider that many other retailers are already at or above this level of penetration,” Lawrence said.
However, if Academy succeeds in expanding its store base by more than 50%, e-commerce sales will need to double during the next five years to hit the goal. Lawrence characterized that objective as “challenging but achievable.” The company’s 2023 e-commerce penetration was 11%.
Academy also wants to streamline its omnichannel shopping experience across all customer touchpoints. In pursuit of that goal, the retailer recently combined its marketing, customer analytics and e-commerce teams into one organization and appointed Chief Customer Officer Chad Fox to a newly created position to lead those business segments. The retailer also recently appointed a new chief supply chain officer.
Academy is responding to continued weakness in low-to-middle income cohorts by increasing its focus on delivering value in its assortment, Bank of America analyst Robert Ohmes said in a client note. That is likely to include lower prices in key categories, like bicycles and grills.
Academy’s outlook for 2024 expects net sales to range from down 1.5% to $6.1 billion to up 3% to $6.4 billion, with comps to range from down 4% to up 1%. Gross margin is projected to range from 34.3% to 34.7% and net income is expected to be between $455 million and $530 million.
“Management is confident in its long-range plan for nationwide expansion and the go-to-market strategy that is resonating with shoppers (who skew more mid- to low-income) and the vendor community,” TD Cowen analysts led by John Kernan said in a Thursday note. Due in part to the refined store strategy, Cowen said the retailer’s guidance could prove conservative.
