Academy Sports and Outdoors (NASDAQ: ASO) was not known to Wall Street for many years, but 2023 could be the year that this quickly growing store becomes well known.
After a great year in 2023, ASO has big plans for growth that will likely boost stocks in the coming year. Take a better look at why investors should think about this store.
Explosive Growth Trajectory
Academy Sports and Outdoors (ASO) has 282 shops in 18 states in the US as of November 2023. In 2023, the business opened 14 new stores. By the end of 2027, it plans to have opened between 120 and 140 more stores.
The company wants to grow its market position and reach, and this expansion is part of its strategic growth plan.
The number of units would grow by a burning 50% over the next three years. Many of these shops are in places like Texas that make a lot of money, so this expansion into brick-and-mortar stores means that sales will go through the roof.
Sales Growth Drivers
ASO made $6.77 billion in sales as a whole in 2021. In a very unstable year like 2022, sales fell a little to $6.3 billion, but they held up surprisingly well despite high inflation and other economic headwinds.
It’s important to note that ASO’s 2023 sales numbers don’t yet include the store’s busy holiday season, which is usually its busiest sales time. After Christmas sales are counted, ASO’s 2023 top line will probably be much higher than its 2022 top line.
Looking ahead, ASO could make more than $8-$10 billion in sales every year by 2027 if its predictions come true. The company is set to grow its sales by 15-20% or more each year in the coming years thanks to new stores opening and market share wins.
Margin Expansion Opportunities
As sales go up, ASO’s margins should grow by a large amount. At the store level, the company’s EBITDA margins are currently around 15.19%, but its most established stores have profits of over 20%.
As new stores open, get better at turning over their stock, and buy more, their profits should slowly rise to match those of stores that have been open for a while. Within a few years, it seems possible for the company’s EBITDA margins to reach 18–20%.
ASO’s fast-growing e-commerce section could one day be as profitable as its in-store channel. The company’s leaders think that online sales will reach $1 billion by 2025, which is about 15% of the total they hope to make. Multichannel margins should grow as set e-commerce costs are spread out over more sales.
Margin Expansion Opportunities
As sales go up, ASO’s margins should grow by a large amount. At the store level, the company’s EBITDA margins are currently around 14%, but its most established stores have profits of over 20%.
As new stores open, get better at turning over their stock, and buy more, their profits should slowly rise to match those of stores that have been open for a while. Within a few years, it seems possible for the company’s EBITDA margins to reach 18–20%.
ASO’s fast-growing e-commerce section could one day be as profitable as its in-store channel. The company’s leaders think that online sales will reach $1 billion by 2025, which is about 15% of the total they hope to make. Multichannel margins should grow as set e-commerce costs are spread out over more sales.
The 2024 Outlook
ASO is set up for huge growth in FY 2024 thanks to fast store growth, market share gains, margin upside, and a recent secondary selling that strengthened the company’s balance sheet.
ASO could make over $1.3 billion in running profit by the end of 2024 if it increases sales at a rate of 20% per year and raises EBITDA margins to 18%. That would be almost 80% more than what was scored in 2021 in just two years!
Strong cash flows from rising profits can pay for more growth, settle debt, and maybe even start a bonus. As soon as Wall Street learns about this turnaround story, ASO shares, which are currently trading at about 10x EBITDA, could easily reach the mid-teens EBITDA values of leisure retail peers.
Income Statement (Annual)
Financials in millions USD. Fiscal year is February – January.
| Year | 2022 | 2021 | 2020 | 2019 | 2018 |
|---|---|---|---|---|---|
| Revenue | 6,395 | 6,773 | 5,689 | 4,830 | 4,784 |
| Revenue Growth (YoY) | -5.58% | 19.05% | 17.79% | 0.96% | -1.07% |
| Cost of Revenue | 4,183 | 4,422 | 3,955 | 3,399 | 3,416 |
| Gross Profit | 2,213 | 2,351 | 1,734 | 1,431 | 1,368 |
| Selling, General & Admin | 1,366 | 1,443 | 1,314 | 1,252 | 1,239 |
| Operating Expenses | 1,366 | 1,443 | 1,314 | 1,252 | 1,239 |
| Operating Income | 846.55 | 907.95 | 420.4 | 179.42 | 128.95 |
| Interest Expense / Income | 46.44 | 48.99 | 86.51 | 101.31 | 108.65 |
| Other Expense / Income | -18.21 | -0.58 | -5.24 | -44.75 | -3.1 |
| Pretax Income | 818.32 | 859.54 | 339.12 | 122.86 | 23.39 |
| Income Tax | 190.32 | 188.16 | 30.36 | 2.82 | 1.95 |
| Net Income | 628 | 671.38 | 308.76 | 120.04 | 21.44 |
| Net Income Growth | -6.46% | 117.44% | 157.21% | 459.85% | -63.35% |
| Shares Outstanding (Basic) | 82 | 91 | 78 | 72 | 72 |
| Shares Outstanding (Diluted) | 84 | 94 | 81 | 75 | 75 |
| Shares Change | -11.02% | 15.78% | 8.87% | -0.54% | 0.03% |
| EPS (Basic) | 7.70 | 7.38 | 3.96 | 1.66 | 0.30 |
| EPS (Diluted) | 7.49 | 7.12 | 3.79 | 1.60 | 0.29 |
| EPS Growth | 5.20% | 87.86% | 136.88% | 451.72% | -63.20% |
| Free Cash Flow | 443.7 | 597.46 | 970.33 | 200.87 | 101.01 |
| Free Cash Flow Per Share | 5.44 | 6.57 | 12.44 | 2.77 | 1.39 |
| Dividend Per Share | 0.300 | – | – | – | – |
| Gross Margin | 34.60% | 34.71% | 30.48% | 29.63% | 28.59% |
| Operating Margin | 13.24% | 13.41% | 7.39% | 3.71% | 2.70% |
| Profit Margin | 9.82% | 9.91% | 5.43% | 2.49% | 0.45% |
| Free Cash Flow Margin | 6.94% | 8.82% | 17.06% | 4.16% | 2.11% |
| Effective Tax Rate | 23.26% | 21.89% | 8.95% | 2.29% | 8.34% |
| EBITDA | 971.51 | 1,008 | 545 | 345.39 | 264.83 |
| EBITDA Margin | 15.19% | 14.89% | 9.58% | 7.15% | 5.54% |
| Depreciation & Amortization | 106.75 | 99.75 | 119.36 | 121.22 | 132.78 |
| EBIT | 864.76 | 908.53 | 425.63 | 224.17 | 132.05 |
| EBIT Margin | 13.52% | 13.41% | 7.48% | 4.64% | 2.76% |
Balance Sheet (Annual)
Financials in millions USD. Fiscal year is February – January.
| Year | 2022 | 2021 | 2020 | 2019 |
|---|---|---|---|---|
| Cash & Equivalents | 337.15 | 486 | 377.6 | 149.39 |
| Cash & Cash Equivalents | 337.15 | 486 | 377.6 | 149.39 |
| Cash Growth | -30.63% | 28.71% | 152.77% | 97.36% |
| Receivables | 16.5 | 19.72 | 17.31 | 14 |
| Inventory | 1,284 | 1,172 | 990.03 | 1,100 |
| Other Current Assets | 49.51 | 38.22 | 30.08 | 26.31 |
| Total Current Assets | 1,687 | 1,716 | 1,415 | 1,289 |
| Property, Plant & Equipment | 1,452 | 1,425 | 1,522 | 1,587 |
| Goodwill and Intangibles | 1,440 | 1,439 | 1,439 | 1,439 |
| Other Long-Term Assets | 17.62 | 4.68 | 8.58 | 15.85 |
| Total Long-Term Assets | 2,909 | 2,869 | 2,969 | 3,042 |
| Total Assets | 4,595 | 4,585 | 4,384 | 4,331 |
| Accounts Payable | 686.47 | 737.83 | 791.4 | 428.82 |
| Current Debt | 112.08 | 86.08 | 84.34 | 110.45 |
| Other Current Liabilities | 240.17 | 303.21 | 291.35 | 211.38 |
| Total Current Liabilities | 1,039 | 1,127 | 1,167 | 750.65 |
| Long-Term Debt | 1,657 | 1,761 | 1,932 | 2,570 |
| Other Long-Term Liabilities | 271.77 | 229.63 | 173.83 | 19.2 |
| Total Long-Term Liabilities | 1,928 | 1,991 | 2,105 | 2,590 |
| Total Liabilities | 2,967 | 3,118 | 3,272 | 3,340 |
| Total Debt | 1,769 | 1,847 | 2,016 | 2,681 |
| Debt Growth | -4.26% | -8.36% | -24.80% | 64.97% |
| Common Stock | 216.98 | 198.89 | 128.14 | 996.29 |
| Retained Earnings | 1,411 | 1,268 | 987.17 | 0 |
| Comprehensive Income | 0 | 0 | -3.32 | -8.07 |
| Shareholders’ Equity | 1,628 | 1,467 | 1,112 | 988.22 |
| Net Cash / Debt | -1,431.58 | -1,361.33 | -1,638.31 | -2,531.5 |
| Net Cash Per Share | -17.06 | -14.44 | -20.12 | -33.85 |
| Working Capital | 647.96 | 588.64 | 247.93 | 538.8 |
| Book Value Per Share | 19.96 | 16.13 | 14.26 | 13.63 |
Cash Flow Statement (Annual)
Financials in millions USD. Fiscal year is February – January.
| Year | 2022 | 2021 | 2020 | 2019 | 2018 |
|---|---|---|---|---|---|
| Net Income | 628 | 671.38 | 308.76 | 120.04 | 21.44 |
| Depreciation & Amortization | 106.75 | 99.75 | 119.36 | 121.22 | 132.78 |
| Share-Based Compensation | 21.18 | 39.26 | 31.62 | 7.88 | 4.63 |
| Other Operating Activities | -203.92 | -137.13 | 551.86 | 14.53 | 39.62 |
| Operating Cash Flow | 552.01 | 673.27 | 1,012 | 263.67 | 198.48 |
| Operating Cash Flow Growth | -18.01% | -33.45% | 283.66% | 32.84% | 138.12% |
| Capital Expenditures | -108.3 | -75.8 | -41.27 | -62.8 | -97.48 |
| Acquisitions | 0 | 0 | 8.13 | -3.99 | -4.14 |
| Other Investing Activities | -0.5 | -0.22 | – | – | 2.59 |
| Investing Cash Flow | -108.81 | -76.02 | -33.14 | -66.78 | -99.03 |
| Dividends Paid | -24.63 | 0 | 0 | 0 | 0 |
| Share Issuance / Repurchase | -463.18 | -359.05 | 206.96 | -0.37 | 1.25 |
| Debt Issued / Paid | -103 | -102.25 | -665.07 | -122.82 | -53.25 |
| Other Financing Activities | -1.24 | -27.56 | -292.12 | – | -2.81 |
| Financing Cash Flow | -592.05 | -488.85 | -750.23 | -123.19 | -54.81 |
| Net Cash Flow | -148.85 | 108.39 | 228.22 | 73.69 | 44.65 |
| Free Cash Flow | 443.7 | 597.46 | 970.33 | 200.87 | 101.01 |
| Free Cash Flow Growth | -25.74% | -38.43% | 383.05% | 98.88% | – |
| Free Cash Flow Margin | 6.94% | 8.82% | 17.06% | 4.16% | 2.11% |
| Free Cash Flow Per Share | 5.44 | 6.57 | 12.44 | 2.77 | 1.39 |