Academy Sports and Outdoors, Inc. ASO is likely to benefit from expansion efforts, digital efforts and loyalty programs. Also, the focus on footwear and outdoor divisions bodes well. However, declining consumer demand and operational challenges pose concerns.
Factors Driving ASO Stock
Academy Sports focuses on expanding its footprint to drive growth. The company’s new store growth remains a primary sales driver, with its 2022 and 2023 vintages posting positive comps despite a challenging retail environment. In the second quarter of 2024, ASO opened its first Ohio store and plans to open several more in the state by 2026. Year to date, the company has opened three new stores and is on track to meet its target of opening 15 to 17 new locations by 2024-end. This expansion strategy not only fuels sales growth but also reinforces the company’s long-term potential as it enters new markets.
During the second quarter, the company reported strength in footwear and outdoor divisions courtesy of strong demand for athletic brands like Nike, Brooks and New Balance, as well as popular outdoor products from YETI and Stanley. In addition, the company has been effective in right-sizing inventory and reducing exposure to underperforming categories like pools, trampolines and fitness equipment, aligning its floor space and marketing efforts to current sales trends. This strategic approach positions the company to capitalize on future growth opportunities.
The digital landscape has become increasingly important in retail, and Academy Sports is no exception. During the second quarter, the company’s digital sales accounted for 9.7% of total revenues. Initiatives like same-day delivery through DoorDash are not only driving sales but also attracting younger, urban customers — segments that have historically been harder for ASO to reach due to its brick-and-mortar presence.
Additionally, the launch of the My Academy Rewards program has already seen impressive engagement, with sign-ups tripling compared to previous marketing efforts. This program is designed to deepen relationships with customers and increase their lifetime value, as omnichannel shoppers typically spend four times more annually than single-channel shoppers.
Concerns for ASO Stock
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Shares of ASO have declined 5.9% in the past three months against the industry’s 8.9% growth.
One of the major challenges for Academy Sports is its customer base — primarily middle-income families — who are feeling the financial pinch. These households are grappling with reduced spending power due to inflation and rising credit card debt, both of which are well above pre-pandemic levels. While inflation has moderated slightly, prices remain high and many consumers are shifting their focus away from discretionary spending, which includes sporting goods and outdoor gear.
During the second quarter, Academy Sports faced operational challenges due to inventory issues from converting its Georgia distribution center to a new warehouse system. This caused out-of-stock merchandise and $32 million in lost sales. While the company is working to resolve these problems, investors should be cautious. The company stated more warehouse conversions in the pipeline, with the next major overhaul set for 2026, potentially leading to similar disruptions.
ASO’s Zacks Rank and Stocks to Consider
Academy Sports currently carries a Zacks Rank #3 (Hold).
Some top-ranked stocks in the Zacks Consumer Discretionary sector are Norwegian Cruise Line Holdings Ltd. NCLH, Carnival Corporation & plc CCL and Cinemark Holdings, Inc. CNK. NCLH & CCL sport a Zacks Rank #1 (Strong Buy) each, whereas CNK carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Norwegian Cruise Line has a trailing four-quarter earnings surprise of 5.7%, on average. The stock has rallied 56.1% in the past year. The Zacks Consensus Estimate for NCLH’s 2024 sales and earnings per share (EPS) calls for growth of 9.9% and 127.1%, respectively, from the year-ago levels.
Carnival has a trailing four-quarter earnings surprise of 318.1%, on average. The stock has surged 63.5% in the past year. The Zacks Consensus Estimate for CCL’s 2025 sales and EPS indicates an increase of 3.6% and 25.5%, respectively, from the year-ago levels.
Cinemark Holdings has a trailing four-quarter earnings surprise of 145.9%, on average. The stock has increased 78.2% in the past year. The Zacks Consensus Estimate for CNK’s 2025 sales and EPS indicates an increase of 11.5% and 29.8%, respectively, from the year-ago levels.
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