Academy Sports and Outdoors saw shares drop in pre-market trading Thursday after the retailer reported third quarter numbers that fell short of expectations.
The Katy, Texas-based retailer saw a 6.4 percent decline in net sales to $1.4 billion, down from $1.49 billion the same time last year and short of the expectations of analysts surveyed by Yahoo, who were looking for $1.44 billion. Net income in the quarter also took a 24.1 percent hit to $100 million, down from $131.7 million last year. Adjusted earnings per share were down 17.4 percent to $1.38, short of analysts’ estimate of $1.59.
By 3:00 p.m. ET, the stock had settled and shares of Academy were up less than 1 percent.
Academy CEO Steve Lawrence attributed the weak Q3 results to soft consumer sentiment and higher -than-usual temperatures during the quarter, following a similar trend across other footwear retailers this fall. The weather trends mainly impacted apparel sales, but footwear was not immune.
Overall, footwear sales for the quarter were down 8.2 percent. Outdoor and casual performed better than athletic business, though team sports and cleats was a standout.
“The challenges in footwear are the same challenges that are across the whole house,” Academy Sports EVP and chief merchandising officer Matt McCabe told FN in an interview after the earnings results went live on Thursday. “And that’s just that customers are under pressure and are being careful about when they decide to shop and how they want to spend their money”
While customers are seeking out value, they are also interested in newness, McCabe said. He called out brands like Hey Dude, which he said has gotten stronger over the course of the year. The company’s Brooks business was also up during Q3.
“Performance run continues to be pretty good. Brooks leads it for us,” McCabe said. “But we have a premium position in Nike. We also have strong business with Asics and Saucony as well.”
In light of the Q3 results, Academy downgraded its outlook for fiscal year 2023 and now expects net sales between $6.11 billion and $6.17 billion, down from its prior guidance of between $6.18 billion and $6.37 billion. The company lowered its top line guidance for net income and now plans for it to land somewhere between $520 million and $530 million.
Despite the lowered outlook, Lawrence is still optimistic about Academy’s ability to drive traffic and growth during the fourth quarter by using “aggressive marketing that features the outstanding values we are offering our customers to help them stretch their wallets as they celebrate this holiday season with their families.”
McCabe said that Black Friday week this year was one of the best in company history. Within footwear, early Q4 trends are showing a consumer focus on value and key brands like Brooks and Nike.
At its investor day in April, the retailer said that it was looking to achieve $10 billion in revenue by 2027, with a net income margin of 10 percent. This goal will be accomplished by opening new stores as well as by investing in omnichannel and existing business.
In line with Academy’s robust store expansion plan, the retailer opened five new stores in Q3 and seven new stores in November, bringing the total to 14 new stores in 2023. The company is still aiming to open 120 to 140 new stores by 2027, expanding its store base by 50 percent in existing and new markets.
“Beyond this holiday, we remain focused on executing our long-term strategy and investing in our growth initiatives,” Lawrence said. “We believe that we have a solid operating model, a strong value position and deep customer affinity that will allow us to continue to grow and expand our footprint.”
