Academy Sports Earnings Call Balances Growth and Caution

Academy Sports And Outdoors, Inc. ((ASO)) has held its Q4 earnings call. Read on for the main highlights of the call.

Academy Sports and Outdoors’ latest earnings call mixed solid operational execution with clear-eyed caution on the consumer backdrop. Management emphasized renewed top-line growth, margin expansion, and strong cash returns, but also acknowledged negative comps, weaker traffic among lower-income shoppers, and macro risks that could delay a full demand recovery.

Revenue Growth Returns with Market Share Gains

Academy posted Q4 net sales of $1.70 billion, up 2.5% year over year, and full-year revenue of $6.05 billion, a 2% increase and its first annual top-line growth since 2021. Management said the company gained market share across its footprint, signaling that self-help initiatives are working even as the broader consumer environment remains uneven.

Gross Margin Expansion Underpins Profitability

Gross margin in Q4 rose 140 basis points to 33.6%, while full-year gross margin reached 34.8%, up 90 basis points from last year. The improvement was driven by supply-chain efficiencies and better pricing and mix, giving the retailer more earnings power even without strong comparable sales growth.

Higher AUR and Ticket Offset Fewer Transactions

Average unit retail jumped about 10% in Q4 and 6% for the full year, with the Q4 average ticket up 5.1% despite a decline in transactions. This pricing and mix strength supported margin expansion, but management acknowledged that relying on higher ticket amid falling transactions is not a sustainable long-term growth model.

Digital Momentum and Early AI Investments

The .com business grew 13.6% for the year as Academy improved site performance and search capabilities. Management is layering in AI tools, including image generation, item enrichment, and a Scout agent, with AI semantic search slated for late Q2 to further boost conversion and drive incremental online growth.

New Stores Outperform and Build Future Comp Tailwind

The company opened 24 new stores in 2025, and the cohort is tracking ahead of year-one expectations. Stores opened from 2022 to 2024 are delivering mid-single-digit comps, creating a structural tailwind that should help 2026 results as the 2025 vintage rolls into the comp base.

RFID Drives Inventory Accuracy and In-Stock Gains

Academy’s RFID rollout, with scanners expected in all stores by Q2 2025, helped improve in-stock levels by roughly 500 basis points, aided by assortment rationalization. The company plans to tag private brand apparel and footwear so that RFID covers about one-third of sales by the end of spring, supporting both sales and customer experience.

Robust Cash Generation and Investor Returns

The retailer generated $435 million in operating cash flow and about $263 million in adjusted free cash flow for the year. It returned $234 million to shareholders through dividends and buybacks, finished Q4 with $330 million in cash, and the board approved a 15% dividend increase, reinforcing confidence in cash durability.

Loyalty Scale and Credit-Card Relaunch

The My Academy Rewards program now has more than 13 million members, providing a sizable base for targeted offers. A Q2 relaunch will unify loyalty and introduce a private-label card tier plus a new My Academy Rewards Mastercard, aimed at deepening engagement and driving frequency and basket growth.

2026 Outlook Targets Growth with Margin and EPS Upside

Management’s 2026 outlook calls for net sales growth of 2% to 5% and comps ranging from down 1% to up 2%, with a midpoint of 0.5%. Gross margin is expected at 34.5% to 35.0%, GAAP EPS at $5.65 to $6.15, adjusted EPS at $6.10 to $6.60, and adjusted free cash flow of $250 million to $300 million after elevated capital spending on growth.

Comparable Sales Under Pressure

Comparable store sales fell 1.6% in Q4, reflecting softer demand and a pressured consumer. The 2026 comp guidance band, which still contemplates potential negative comps, underscores that management remains cautious on near-term traffic and is not banking on a sharp consumer rebound.

Traffic and Mix Shift Reflect Consumer Strain

Transactions declined 6.4% in Q4, partially offset by higher ticket, with lower-income customers under particular pressure. Households earning under $50,000 saw high-single-digit traffic declines, while households above $100,000 grew about 10%, signaling a mix shift toward healthier, higher-income shoppers.

Growth Investments Weigh on Operating Expenses

SG&A rose to 23.7% of sales in Q4, up roughly 70 basis points year over year, adding about $21 million of cost. New stores and technology investments, while key to long-term growth, drove roughly 135 basis points of deleverage and are pressuring near-term operating margins.

Elevated Inventory Levels Add Risk

Ending inventory stood at $1.50 billion, up 15% from a year earlier, with inventory dollars per store up 6.3% while units were flat. Higher stock levels position the chain for better in-stocks and growth, but also raise risk if demand softens and clearance activity becomes necessary.

Weather and One-Off Events Distort Comparisons

Severe winter storms in late January forced about half the store base to close for two to three days, creating an estimated 100-basis-point headwind to Q4 comps. Management also noted that lapping prior port disruptions helped margins, while cautioning that external shocks can still skew quarterly performance.

Tariffs and Import Inflation Pressure Costs

Incremental tariffs and inflation on imported goods remain a headwind, particularly in the first half of 2026. To blunt the impact, Academy is pursuing sourcing changes, pulling forward some inventory, and taking selective pricing actions, though these levers have limits in a value-conscious environment.

Category Softness in Seasonal and Discretionary Goods

Seasonal categories such as footwear, outerwear, drinkware, and ride-on toys were soft during the holiday quarter, pressuring top-line performance. Ammunition sales were down for much of 2025 before stabilizing and then accelerating after certain geopolitical events, highlighting volatility in key outdoor categories.

Macro and Consumer Health Remain Key Wildcards

Management highlighted elevated consumer stress, pointing to higher credit delinquencies versus 2024 and cautious expectations for job growth. They also flagged gas prices and prolonged tariff effects as potential drags on demand, and these risks are embedded in the lower end of the company’s guidance ranges.

Guidance and Strategic Priorities for 2026

Looking ahead, Academy expects 2026 to be its strongest in Q1 as it laps a weak prior-year quarter and benefits from early positive comp trends. The plan includes opening 20 to 25 new stores, expanding RFID to roughly one-third of sales, growing its Jordan shop count, relaunching the co-branded credit card, and continuing share repurchases and dividend growth within a disciplined free-cash-flow framework.

Academy’s earnings call painted a picture of a retailer executing well on controllable levers while bracing for a still-fragile consumer backdrop. Management is betting that digital upgrades, loyalty, new stores, and better inventory discipline will support positive comps and margin expansion by 2026, but investors will be watching traffic trends and macro pressures as key swing factors for the story.