Academy’s Q2 2027 Call: Gross Margin and Cohort Growth Claims Don’t Match

Date of Call: Sep 9, 2026

Financials Results

• Revenue: $1.6 billion, up 3% YOY; sales year-to-date $3.1 billion, up 4.7% YOY
• EPS: Diluted EPS $2.17, up 17.3% YOY; Adjusted EPS $2.31, up 19.1% YOY
• Gross Margin: 40.4%, up 440 basis points YOY; annual guidance raised to 35.5% to 36.0%
• Operating Margin: Operating income $246 million, up 42.9% YOY

Guidance:

• Sales for FY2026 expected in range of $6.23B to $6.36B, representing growth of 3% to 5%.
• Comp sales expected flat to plus 2%.
• Gross margin rate guidance raised to 35.5% to 36.0%.
• Net income expected in range of $390M to $415M.
• EPS expected in range of $6.05 to $6.45; Adjusted EPS in range of $6.50 to $6.90.
• Adjusted free cash flow expected in range of $300M to $350M.
• Back-half comp sales midpoint implied to be approximately 1%.

Business Commentary:

Revenue Growth and Strategic Initiatives:

• Academy Sports and Outdoors reported sales of $1.6 billion for the second quarter, up 3% in total.
• Despite a negative comp at down 0.4%, the company's dot-com business grew double digits at up 12.8%.
• The growth was driven by strategic initiatives like reinvesting tariff refunds into pricing, enhancing their loyalty program, and expanding new stores.

Consumer Spending Patterns:

• Sales from households with income less than $50K were down high single digits, whereas traffic from households with income greater than $100K was up high single digits.
• The shift in consumer spending patterns was attributed to inflationary pressures, with consumers focusing on key calendar events for shopping.

Category Performance and Newness:

• The sports and recreation category was the best performer, up 6%, with notable strength in soccer gear and fitness equipment like treadmills.
• Categories such as footwear saw a decline, with sales down 1%, but the company is focusing on newness and innovation by launching new brands like HOKA and expanding existing ones like Burley Bow.

Gross Margin and Pricing Strategy:

• The company's gross margin for the quarter was 40.4%, up approximately 440 basis points year-over-year.
• This increase was driven by tariff refunds, partially offset by reinvestments into pricing for private brand products to stimulate demand.

SG&A Leverage and Strategic Investments:

• SG&A was 25.5% of sales, showing a 20 basis point year-over-year improvement.
• The improvement was driven by investments in strategic growth initiatives, including new stores, e-commerce, and technology, despite some deleveraging from tariff refund-related expenses.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed confidence in hitting annual guidance, citing progress on long-term strategies, new store openings, e-commerce growth, and loyalty program success. Quotes: 'we feel really good about the initiatives we have, and it's showing so far through this year that we can overcome some headwinds out there.' 'we're making solid progress against our long-range plan initiatives, but we still have a lot more opportunity ahead of us.'

Q&A:

• Question from Chris Harbers (J.P. Morgan): Can you talk about how you're thinking about the cadence of sales in the back half of the year? And isolate how much the back to school shift tax holiday shift was a detriment to the second quarter?
  Response: The tax-free weekend shift in four states would have made Q2 sales essentially flat; Q3 is running up low single digits positive. Cadence expected to be fairly consistent between Q3 and Q4 with comps around 1%.

• Question from Carl Ford (Academy Sports and Outdoors): Is your outlook for gross margin any different than it was prior to today for the back half of the year? And to what extent do you see promotional pressures in footwear?
  Response: Annual gross margin guidance is roughly flat for the back half. Promotional pressures are expected to increase, especially around key events; plans include rationalizing pricing walls to fund promotions.

• Question from Jeff Lick (Stevens): Given a competitor's disappointing results, what are key differences in merchandise or geography?
  Response: Academy's diverse assortment across sports, outdoor, and footwear insulates it from downturns in specific categories like footwear, where it gained market share despite a decline.

• Question from Kate McShane (Goldman Sachs): Did the World Cup cannibalize sales, and how will you lap it next year?
  Response: World Cup sales were additive but somewhat muted due to prior year's Oklahoma City Thunder win; next year's Women's World Cup, improved localization, and price adjustments should help offset volume.

• Question from Simeon Gutman (Morgan Stanley): Should we expect positive comps going forward given new stores and newness?
  Response: Guidance range includes a midpoint of 1% comp; consumer backdrop remains a wild card, but initiatives like new stores, loyalty program, and price investments provide tailwinds.

• Question from Michael Lazar (UBS): Has the current quarter been driven by the same hard goods categories? Can you achieve guidance if footwear and apparel remain under pressure?
  Response: August/September saw a shift with back-to-school categories picking up; soft goods are expected to be more competitive, but overall back-half guidance accounts for these dynamics.

• Question from John Heinbockel (Guggenheim Partners): How do higher-income consumers shop differently, and where are you under-indexing with them?
  Response: Higher-income shoppers are less episodic and more responsive to newness; launching exciting new brands like HOKA and expanding work/western shops should attract this cohort.

• Question from Greg Millick (Evercore): How should we think about tariff reinvestment in pricing and SG&A for the back half? How is store footage reallocation progressing?
  Response: Pricing reinvestment is embedded in flat gross margin guidance; SG&A reinvestment in labor/marketing was selective and not part of the long-term algorithm. Footage is being reallocated towards trending categories via new stores and remodels.

• Question from Jonathan Muzinwatzki (Jefferies): Will pricing gaps relative to peers remain consistent after reinvestment? How is assortment mix changing?
  Response: Pricing gaps have remained consistent; select price reductions on key items have been made to stimulate demand. Assortment includes 25-30% 'best' tier, with growth expected but core 'good' value offering maintained.

Contradiction Point 1

Gross Margin Outlook for 2027 and Beyond

Contradiction on whether gross margin is expected to decline after lapping tariff actions.

Michael Lazar (UBS) - Michael Lazar (UBS)

2027Q2: For FY27 and beyond, gross margin is not expected to regress. - Carl Ford(CFO)

What are your expectations for back-half gross margin and whether gross margin will decline in 2027 after lapping tariff-related adjustments? - Chris Harbers (J.P. Morgan) - Follow-up:

2027Q2: Gross margin guidance is now raised to 35.5%-36.0%. Embedded assumptions for the back half are roughly flat gross margin... - Carl Ford(CFO)

Contradiction Point 2

Customer Cohort Size and Performance

Inconsistency regarding the size and growth rate of the >$100K customer cohort.

Jeff Lick (Stevens) - Follow-up: - Jeff Lick (Stevens) - Follow-up:

2027Q2: The >$100K cohort, now the largest and fastest-growing (~40% of customers), is seeing traffic up high single digits. - Steve Lawrence(CEO)

How are spending trends differing between lower-income (<$50K) and higher-income (> $100K) consumers? - Simeon Gutman (Morgan Stanley) - Follow-up:

2027Q2: Customers >$100K are the largest and fastest-growing cohort (~40% of traffic). - Carl Ford(CFO)

Contradiction Point 3

SG&A Leverage Expectations

Contradiction on the sustainability of SG&A leverage.

Okay, let's see. The user wants me to take the input "John Heinbockel (Guggenheim Partners)" and turn it into a single concise earnings-call question. The rules are pretty strict: only one line, no explanations, just the question ending with a question mark if possible. If it's not a question or too vague, output the input as-is.First, I need to figure out what the input represents. It looks like a person's name with their company in parentheses. John Heinbockel works at Guggenheim Partners. The task is to form an earnings-call question from this. Typically, in earnings calls, analysts or investors ask questions to the company's executives. The question should relate to the company's performance, financials, strategy, etc.But the input doesn't have any specific question or context. It's just a name and company. So maybe the question is about the company's performance? For example, "What are Guggenheim Partners' earnings results for the quarter?" But the user wants to include John Heinbockel. Maybe the question is directed at him, like "What is John Heinbockel's perspective on Guggenheim Partners' earnings performance this quarter?" Wait, but the input is just the name and company, no other info. The user might be expecting to form a question that would be asked to the company's representative (John) about their earnings. So the question should be something like "What are Guggenheim Partners' earnings results for the current quarter?" but including the person's name. But the input doesn't specify the quarter or any details. Maybe the question is more general: "What is Guggenheim Partners' earnings performance overview?" But the rules say if it's too vague, output as-is. Since the input is just a name and company without any question, maybe the correct output is to leave it as-is. However, the user wants to form a question. Let me think again. In earnings calls, common questions are about revenue, profit, performance, guidance, etc. Since the input is a person from the company, maybe the question is about their company's earnings. So the question could be "What are Guggenheim Partners' earnings results for the quarter?" but since the input includes John Heinbockel, maybe the question is directed at him: "John Heinbockel, can you provide an overview of Guggenheim Partners' earnings performance?" But the user wants exactly one line and only the final question text. Also, the output must end with a question mark if possible. The input is a name and company, not a question. So technically, the input isn't a question. But the task is to rewrite it into a question. The user might expect forming a question using the name and company. Since the input is not a question, but we can form one, perhaps the correct approach is to create a question like "What is Guggenheim Partners' earnings outlook?" or "What are Guggenheim Partners' earnings results for the quarter?" However, the name John Heinbockel should be part of the question. Maybe "What is John Heinbockel's assessment of Guggenheim Partners' earnings performance?" But I need to make sure it's concise. The key is to form a clear earnings-call question. The most straightforward would be to ask about the earnings results of the company, using the person's name. So the question could be "John Heinbockel, can you provide Guggenheim Partners' earnings results for the quarter?" But maybe shorter. Alternatively, "What are Guggenheim Partners' earnings results for the quarter?" without the name, but the input includes the name. However, the user might want to include the name in the question. But the rules say to output exactly one line. Let me check the example. Suppose the input is a name and company, the output should be a question. So the correct question would be "What are Guggenheim Partners' earnings results for the quarter?" but since the input includes the name, maybe "What is Guggenheim Partners' earnings performance under John Heinbockel's leadership?" But that's making an assumption about his role. If we don't know his role, maybe it's better to just ask about the company's earnings. Alternatively, since the input is from an earnings call context, the standard question would be about the company's earnings. So the output is "What are Guggenheim Partners' earnings results for the quarter?" but the input includes a person. Maybe the question is directed at him, so "John Heinbockel, what are Guggenheim Partners' earnings results for the quarter?" But the input is just the name and company. The user's instruction is to rewrite into a question. Since the input isn't a question, but we can form one, we need to do so. The key is to form a valid earnings-call question using the provided - John Heinbockel (Guggenheim Partners)

2027Q2: It's not realistic to sustain 130 bps of leverage on a slightly negative comp, but on a low single-digit comp, it becomes a powerful driver... - Carl Ford(CFO)

What is driving the strong base SG&A leverage, and is this trend sustainable? - Christopher Horvers (JPMorgan Chase & Co)

2026Q4: The primary driver of the lower SG&A growth is the normalization of store growth... Additional modest leverage is expected through automation and efficiency opportunities. - Earl Ford(CFO)

Contradiction Point 4

Financial Health of the Consumer as a Headwind

Contradiction on whether consumer financial pressure is still a major headwind.

Simeon Gutman (Morgan Stanley) - Simeon Gutman (Morgan Stanley)

2027Q2: Internally, the midpoint implies a ~1% comp for the back half. Confidence comes from controllable initiatives... and new store additions. - Steve Lawrence(CEO)

Will new stores, loyalty inflection, and newness drive positive comps moving forward? - Simeon Gutman (Morgan Stanley)

2026Q4: The main headwind is the ongoing financial pressure on the American consumer, which persisted from 2025 into early 2026. - Steven Lawrence(CEO)

Contradiction Point 5

Gross Margin Outlook

The expected trajectory for gross margin pressure and its drivers change between the quarters.

Chris Harbers (J.P. Morgan) - Follow-up - Chris Harbers (J.P. Morgan) - Follow-up

2027Q2: Embedded assumptions for the back half are roughly flat gross margin, with a mix of tailwinds (shrink, tariffs) and headwinds (pricing investments, elevated fuel). - Carl Ford(CFO)

Is the back-half gross margin outlook different than prior guidance due to clearance or promotional pressure in footwear? - Katharine McShane (Goldman Sachs Group, Inc.)

2027Q1: Tariffs were the primary driver (110 bps) of Q1 gross margin degradation... Tariff pressure is expected to subside throughout the year. - Earl Ford(CFO)