Academy Sports' Growth Potential Uncertain Amid Macroeconomic Challeneges: Analyst Explains Why

On Friday, JPMorgan analyst Christopher Horvers reiterated the Neutral rating on Academy Sports and Outdoors, Inc. ASO, raising the price forecast to $54 from $52.

Yesterday, the firm reported fourth-quarter adjusted earnings per share of $1.96, beating the street view of $1.83. Quarterly sales of $1.676 billion (down 6.6% year over year) missed the analyst consensus estimate of $1.677 billion by a hairline.

The analyst notes that Academy Sports has made progress in improving new store site selection for the second half of 2024, following underwhelming performance when it initially started its unit growth story in 2022.

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Furthermore, the company's IT improvements and plans show promise in enhancing the performance of its existing stores, Horvers writes.

Academy Sports is also expanding its Nike, Inc. NKE product assortment to 145 of its 300+ locations, as well as on its website, starting this April, aiming to compete with Dick’s Sporting Goods Inc DKS for brand access.

However, Horvers points out that the macroeconomic environment presents challenges for Academy Sports, particularly compared to competitors like Dick’s Sporting, due to its higher exposure to lower-income consumers.

Despite this, the analyst remains neutral on Academy Sports, acknowledging its attractive valuation but expressing “uncertainty” about how much growth the company can achieve given the current market conditions.

The analyst models 1Q/FY25 comps of -3.5%/flat, respectively.

Price Action: ASO shares are trading higher by 1.14% to $47.96 at last check Friday.

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