Academy(ASO) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were approximately $1.6 billion, an increase of 3.3% year-over-year, with a comparable sales increase of 0.2% [7][23] - Gross margin was 36%, down 2 basis points from the previous year, while merchandise margin improved by 40 basis points [24][10] - Operating income was $172 million, and diluted earnings per share were $1.85, with adjusted earnings per share at $1.94 [25][26] Business Line Data and Key Metrics Changes - The e-commerce channel saw a positive comparable sales increase of approximately 18% during Q2, building on a 10% increase in Q1 [8][23] - Performance across major categories was consistent, with footwear, apparel, sports and recreation, and outdoor categories all showing low single-digit increases [8][10] - Seasonal categories like swim and summer footwear experienced a slow start but rebounded in late June and July [9][10] Market Data and Key Metrics Changes - Strong double-digit growth in foot traffic was observed among consumers in the top two income quintiles (households earning over $100,000) [12] - Traffic share remained flat among middle-income consumers (households earning $50,000 to $100,000), while there was erosion in lower-income cohorts (households earning less than $50,000) [12][13] - Market share gains were noted across key businesses such as apparel, footwear, sporting goods, fishing, and outdoor cooking [12][13] Company Strategy and Development Direction - The company’s primary growth strategy includes opening new stores, with three new locations opened in Q2, bringing the total to 306 stores across 21 states [14] - The focus on enhancing the e-commerce business includes streamlining site navigation, improving order fulfillment, and expanding product assortment [15][20] - Initiatives to improve existing store productivity include adding desirable brands and implementing new technology like RFID scanners [17][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of inflation on consumer behavior, noting a trade-down effect where consumers are seeking value [11][12] - The company remains optimistic about the momentum in the business, expecting continued positive trends in sales and market share [28][29] - Management is confident in their strategies to mitigate tariff impacts and maintain a strong value proposition for customers [22][46] Other Important Information - The company ended the quarter with $300 million in cash and maintained strong liquidity with an undrawn $1 billion revolver [26] - Free cash flow for Q2 was $21.7 million, with significant investments made in inventory and strategic initiatives [27] - The company has over $530 million remaining on its current share repurchase authorization [28] Q&A Session Summary Question: Insights on consumer behavior post back-to-school period - Management noted episodic shopping patterns and expressed optimism about momentum continuing into the remainder of the year despite a slight pullback after back-to-school [31][33] Question: Impact of tariff pricing on average ticket - Average unit retails (AURs) were up low to mid-single digits, with expectations for further price adjustments in the back half of the year [35][36] Question: Guidance on SG&A and operating leverage - Management indicated a commitment to disciplined spending, with expectations for SG&A deleverage to moderate in the back half of the year [40][50] Question: Promotional environment and merchandise margin - The promotional environment remains competitive, with higher take rates observed during promotional events, while merchandise margins are expected to benefit from a favorable mix [79][80] Question: Performance of higher income consumer segments - The top two income quintiles showed double-digit growth in traffic, which is expected to continue driving comp growth [81][83] Question: Expansion of Nike and Jordan assortments - The company has significantly expanded its Jordan brand assortment and is seeing strong performance from both Nike and Jordan products [87][90]