Academy Sports (ASO)

Sporting goods retailer Academy Sports & Outdoor (NASDAQ:ASO) fell short of the markets revenue expectations in Q3 CY2025 as sales rose 3% year on year to $1.38 billion. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $6.11 billion at the midpoint. Its non-GAAP profit of $1.14 per share was 7.5% above analysts’ consensus estimates.

Company Overview

Founded in 1938 as a tire shop before expanding into fishing equipment, Academy Sports & Outdoor (NASDAQ:ASO) sells a broad selection of sporting goods but is still known for its outdoor activity merchandise.

Some of us spend our leisure time vegging out, but many others take to the courts, fields, beaches, and campsites; sports equipment retailers cater to the avid sportsman as well as the weekend warrior. Shoppers can find everything from tents to lawn games to baseball bats to satisfy their athletic and leisure needs along with competitive prices and helpful store associates that can talk through brands, sizing, and product quality. This is a category that has moved rapidly online over the last few decades, so these sports and outdoor equipment retailers have needed to be nimble and aggressive with their e-commerce and omnichannel presences.

Retailers offering sporting and outdoor goods include Dick’s Sporting Goods (NYSE:DKS), Sportsman’s Warehouse (NASDAQ:SPWH), and Hibbett (NASDAQ:HIBB).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $6.01 billion in revenue over the past 12 months, Academy Sports is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.

As you can see below, Academy Sports struggled to generate demand over the last three years (we compare to 2019 to normalize for COVID-19 impacts). Its sales dropped by 2.4% annually despite opening new stores. This implies its underperformance was driven by lower sales at existing, established locations.

This quarter, Academy Sports’s revenue grew by 3% year on year to $1.38 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.5% over the next 12 months, an acceleration versus the last three years. This projection is admirable and indicates its newer products will spur better top-line performance.

Number of Stores

A retailer’s store count often determines how much revenue it can generate.

Academy Sports operated 317 locations in the latest quarter. It has opened new stores at a rapid clip over the last two years, averaging 6.4% annual growth, much faster than the broader consumer retail sector. This gives it a chance to become a large, scaled business over time.

When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.

Same-Store Sales

The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales provides a deeper understanding of this issue because it measures organic growth at brick-and-mortar shops for at least a year.

Academy Sports’s demand has been shrinking over the last two years as its same-store sales have averaged 3.6% annual declines. This performance is concerning - it shows Academy Sports artificially boosts its revenue by building new stores. We’d like to see a company’s same-store sales rise before it takes on the costly, capital-intensive endeavor of expanding its store base.

In the latest quarter, Academy Sports’s year on year same-store sales were flat. This performance was a well-appreciated turnaround from its historical levels, showing the business is improving.

At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.

Academy Sports has bad unit economics for a retailer, signaling it operates in a competitive market and lacks pricing power because its inventory is sold in many places. As you can see below, it averaged a 34.3% gross margin over the last two years. That means Academy Sports paid its suppliers a lot of money ($65.70 for every $100 in revenue) to run its business.

Academy Sports’s gross profit margin came in at 35.7% this quarter, marking a 1.7 percentage point increase from 34% in the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting it strives to keep prices low for customers and has stable input costs (such as labor and freight expenses to transport goods).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Academy Sports has done a decent job managing its cost base over the last two years. The company has produced an average operating margin of 9%, higher than the broader consumer retail sector.

Looking at the trend in its profitability, Academy Sports’s operating margin decreased by 1.5 percentage points over the last year. Even though its historical margin was healthy, shareholders will want to see Academy Sports become more profitable in the future.

In Q3, Academy Sports generated an operating margin profit margin of 7.3%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Academy Sports has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 5.2% over the last two years, better than the broader consumer retail sector.

Taking a step back, we can see that Academy Sports’s margin dropped by 3.9 percentage points over the last year. This decrease came from the higher costs associated with opening more stores.

Academy Sports broke even from a free cash flow perspective in Q3. The company’s cash profitability regressed as it was 3.2 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Academy Sports’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 17.3%, slightly better than typical consumer retail business.

Academy Sports reported $289.5 million of cash and $1.87 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $675.4 million of EBITDA over the last 12 months, we view Academy Sports’s 2.3× net-debt-to-EBITDA ratio as safe. We also see its $18.26 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Academy Sports beat analysts’ gross margin expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its revenue slightly missed. Overall, this print had some key positives. The stock remained flat at $48.77 immediately after reporting.

Updated: December 9, 2025 at 8:10 AM EST

When considering an investment in Academy Sports, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Academy Sports isn’t a terrible business, but it doesn’t pass our bar. First off, its revenue has declined over the last three years. And while its new store openings have increased its brand equity, the downside is its shrinking same-store sales tell us it will need to change its strategy to succeed. On top of that, its gross margins make it more challenging to reach positive operating profits compared to other consumer retail businesses.

Academy Sports’s P/E ratio based on the next 12 months is 7.8x. While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $57.30 on the company (compared to the current share price of $48.77).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.