Academy Sports Could Face Impact From Weak Outdoor Product Demand In Q2, Analyst Warns of Margin Pressure

Telsey Advisory Group analyst Cristina Fernández reiterated an Outperform rating on Academy Sports And Outdoors, Inc. ASO with a price target of $72.

Academy Sports will release its Q2 results on Thursday, August 31, 2023.

The analyst is cautious about Academy's results owing to the recent commentary from Dick's Sporting Goods Inc DKS on lower demand for outdoor that led to industry markdowns to clear goods (Academy has a sizable exposure to outdoor products with ~30% of total sale).

For the quarter to be reported, the analyst sees EPS of $1.97, down from $2.08 vs. FS at $2.01.

In Q2, the analyst expects total same-store sales to slump 9% Y/Y, compared to the previous estimate of 8% fall. 

Fernández forecasts operating margin compression of 230 bps to 13.5% vs. FS at 13.4%. 

The analyst expects the gross margin to contract 90 bps to 34.4% vs. FS at 34.7% due to higher promotions and deleverage on the sales decline, partially offset by lower supply chain costs.

However, on the positive side, Fernández views Academy Sports as a unit and sales growth story driven by market share gains. 

The company expands in existing markets and enters new markets with a better assortment, customer service, and go-to-market strategy, notes the analyst.

For FY23, the analyst sees an operating margin contraction of ~190 bps to 11.7% vs. the previous estimate of 12%. 

For FY24, the analyst forecasts operating margin expansion of ~20 bps to 11.9%.

Related: Academy Sports & Outdoors: Set For Market Expansion And Profit Stability By 2024, Analyst Forecasts

Price Action: ASO shares are trading higher by 1.05% to $49.87 on the last check Tuesday.