Telsey Advisory Group analyst Cristina Fernández reiterated an Outperform rating on Academy Sports And Outdoors, Inc. (NASDAQ:ASO) with a price target of $72.
Academy Sports will release its Q2 results on Thursday, August 31, 2023.
The analyst is cautious about Academy’s results owing to the recent commentary from Dick’s Sporting Goods Inc (NYSE:DKS) on lower demand for outdoor that led to industry markdowns to clear goods (Academy has a sizable exposure to outdoor products with ~30% of total sale).
For the quarter to be reported, the analyst sees EPS of $1.97, down from $2.08 vs. FS at $2.01.
In Q2, the analyst expects total same-store sales to slump 9% Y/Y, compared to the previous estimate of 8% fall.
Fernández forecasts operating margin compression of 230 bps to 13.5% vs. FS at 13.4%.
The analyst expects the gross margin to contract 90 bps to 34.4% vs. FS at 34.7% due to higher promotions and deleverage on the sales decline, partially offset by lower supply chain costs.
However, on the positive side, Fernández views Academy Sports as a unit and sales growth story driven by market share gains.
The company expands in existing markets and enters new markets with a better assortment, customer service, and go-to-market strategy, notes the analyst.
For FY23, the analyst sees an operating margin contraction of ~190 bps to 11.7% vs. the previous estimate of 12%.
For FY24, the analyst forecasts operating margin expansion of ~20 bps to 11.9%.
Related: Academy Sports & Outdoors: Set For Market Expansion And Profit Stability By 2024, Analyst Forecasts
Price Action: ASO shares are trading higher by 1.05% to $49.87 on the last check Tuesday.
Academy Sports Could Face Impact From Weak Outdoor Product Demand In Q2, Analyst Warns of Margin Pressure
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