The Cady, Texas-based retailer reported Thursday that its net income rose 9% to $157.65 million in the fourth quarter ended Jan. 28 from $141.77 million in the year-ago period. On a diluted share basis, net income rose to $1.97 per share, from $1.57 in the year-ago period.
Between the profit rise, healthy cash flow and bullish attitude on store openings, Wall Street was impressed, sending the stock price up 9% to $65.25 by noon on Thursday.
Net sales decreased 3.4% to $1.75 billion and comparable sales declined 5.1%. Sales were impacted by 6.4% fewer transactions, partially offset by a 1.3% increase in average ticket size. When compared to the fourth quarter of 2019, net sales increased 27.4%.
E-commerce sales grew 1.4% compared to the prior-year quarter and 100% compared to the fourth quarter of 2019.
“For Academy, 2022 was a year that was both rewarding and challenging,” said Ken Hicks, chairman, president and chief executive officer. “The company accomplished many of the strategic goals we set at the beginning of the year to build a strong foundation for the future, including opening nine new stores.”
Hicks said 13 to 15 new stores will open in 2023.
“While our business faced pressures from the uncertain macro-economic environment throughout the year, our team effectively executed against our strategic plan, and as a result, we delivered solid earnings, generated and returned a significant amount of free cash flow, and created value for our stakeholders, even though we did not meet our sales expectations. Our focus in 2023 will be investing for growth by opening new stores, building a more powerful omnichannel business, strengthening our current store base, and leveraging and scaling our supply chain.”
Hicks also stressed that the company has been providing increased value to shareholders through share buybacks, dividends and reducing debt.
Though sales overall were down, softlines, including apparel and footwear, team sports and cleats, showed increases. So did outdoor cooking. Categories showing declines included hunting, fitness, bicycles and kayaks.
“Apparel was one of the better performers in last quarter and we expect it to be a growth engine,” said Steve Lawrence, executive vice president and chief merchandising officer, during a conference call with investors and retail analysts.
During the conference call, the topic of CEO succession came up. “I am having fun,” said Hicks. “Our board has taken a very thoughtful approach to succession planning. I envision being associated with Academy for some time to come and would like to be a part of it for the future. What that will exactly be, we’ll see but right now, I am having fun.”
Projecting strong optimism for the future, Hicks said, “Our view of the industry is still very bullish. It’s very fragmented. Nobody has a significant share; from that degree, it’s open.” He said the sports and outdoor categories should not be considered discretionary, suggesting that regardless of macro headwinds, and consumers currently being financially challenged, “Kids are still going to play baseball. Families will still go camping and spend time on the patio,” where they might barbecue. He said Academy fits in by supporting the nation’s interest in hobbies, sports, staying healthy, and by providing value to consumers.
Michael Mullican, executive vice president and chief financial officer, said, “Academy’s operational and financial transformation continues to deliver solid financial results. For the second consecutive year, the company delivered gross margins greater than 34% and operating margin above 13%. Since the beginning of 2021, we have returned over $1.1 billion to our stakeholders through stock buybacks, dividend payments and debt reduction. In 2023, our goal is to accelerate sales and profit growth through new store openings, omnichannel expansion and increasing the productivity of existing stores, all while generating significant free cash flow.”
For all of 2022, the company reported sales of $6.4 billion, a decline from $6.77 billion in 2021. Net income was $628 million, compared to $671.4 million in 2021.
For fiscal 2023, the company expects sales between $6.5 billion to $6.7 billion; comparable sales from down 2% to up 1%, and net income from $535 million to $595 million.