Academy Sports Outdoors' Q3 2026: Contradictions Emerge on Pricing Strategy, Promotional Environment, Demographic Shifts, and Expansion

Date of Call: None provided

Financials Results

• Revenue: $1.38B, up 3% YOY; comp -0.9%
• EPS: $1.05 diluted, up >14% YOY; adjusted EPS $1.14, up >16% YOY
• Gross Margin: 35.7%, up 170 bps YOY
• Operating Margin: Operating income ~ $100M, up 9.7% YOY

Guidance:

• FY25 comp sales narrowed to -2% to 0% (from prior -3% to +1%).
• FY25 gross margin guidance raised to 34.3%–34.5% (low end up from 34.0%).
• Q4 SG&A expected flat to slightly down as the company laps accelerated openings.
• Q4 AURs expected up high-single to low-double digits and to plateau into Q1–Q2 2026.
• Plan to open 20–25 stores in 2026 (approx. 80% legacy/existing, 20% new markets).
• Long-range dot-com penetration target remains 15%.
• Intend to resume share repurchases in Q4 (not embedded in guidance).

Business Commentary:

• Financial Performance and Strategic Initiatives:
• Academy Sports & Outdoors reported sales of $1.38 billion for the third quarter, which was up 3% year-on-year, but resulted in a negative 0.9% same-store sales (comp) decline.

• The sales increase was driven by strategic initiatives such as new store openings and technology investments, despite a challenging consumer environment and increased tariffs.

• E-commerce Growth and Market Share:

• The company's e-commerce channel grew 22% for the third quarter, marking the third consecutive quarter of double-digit growth.

• This growth was supported by new store openings acting as fulfillment hubs and investments in technology and talent to improve the online shopping experience.

• *Inventory Management and Margin Improvement:

  

• Gross margin rose by 170 basis points to 35.7%, with a 130 basis points increase in merchandise margin inclusive of tariffs and a 30 basis points improvement in freight costs.

• Margin improvement was due to better inventory management, including the use of RFID technology, and successful clearance management strategies.

• Higher-Income Customer Engagement:

• Academy observed high single-digit growth in foot traffic from households making over $100,000 annually, now representing 40% of sales.
• This trend is attributed to value-driven shopping behavior and improved product assortment, including high-end brands like Nike and Jordan.

Sentiment Analysis:

Overall Tone: Positive

• Management: "Sales came in at $1.38 billion, up 3%"; "gross margin rate to 35.7%, or up 170 basis points"; "Operating income grew 9.7% to approximately $100 million"; repeated phrases: "strategic initiatives are working" and "extremely optimistic about the future of Academy."

Q&A:

• Question from Paul Lejuez (Citi): You noted average ticket up 3.3%—can you break AUR vs UPT, explain the build to ticket increases, how price increases in Q3 compared to tariff costs run through the P&L given pulled-forward inventory, and what the dynamic looks like for Q4 and early 2026? Follow-up: what price increases should we expect in Q4 and will that be the peak?
  Response: AURs rose mid‑ to high‑single digits in Q3 while UPT fell mid‑single digits; tariffs flowed through as expected due to weighted‑average cost and pulled‑forward inventory; expect Q4 AURs up high‑single to low‑double digits and to plateau into Q1–Q2 2026.

• Question from Simeon Gutman (Morgan Stanley): Color on Jordan contribution at the store level—sales, margin, rollout cadence next year—and pipeline for other brand partnerships or expanded collaborations?
  Response: Combined Nike+Jordan drove high‑single‑digit comps, elements are in all stores with further apparel/footwear rollouts planned in spring, and the company will continue expanding both traditional and digitally‑native brand partnerships.

• Question from Christopher Horvers (J.P. Morgan): Since Academy remains negative comp overall, is the Nike/Jordan lift less than originally expected (last quarter was double‑digit vs high single this quarter), or is the consumer weaker? Follow-up: Q4 comp guide is wide (~-3.5% to +3.5%)—why so wide and what drives hitting high vs low?
  Response: Nike/Jordan performance is meeting expectations and ammo was the primary drag; the wide Q4 range reflects localized factors (weather) and consumer elasticity—higher AURs can be offset by unit declines, and the degree of that offset determines where results land.

• Question from Kate McShane (Goldman Sachs): How would you characterize the health of the Academy customer and how does the level of trade‑in from upper‑income customers compare to Q2?
  Response: Customer mix is shifting upward—households >$100k now ~40% of sales (high‑single‑digit growth this quarter vs double digits earlier); middle steady; lower‑income still down mid‑single digits but improving.

• Question from Ike Boruchow (Wells Fargo): E‑commerce was strong—was that in line or better than planned and how might that change store strategy in new markets; and how does the cost of opening a store in a new market compare to an existing market?
  Response: E‑commerce outperformed (22% comp), supporting the thesis that new stores fuel digital demand; stores cost ~$4–5M all‑in (inclusive of net inventory) and legacy/existing markets generally offer stronger ROIC and faster payback than brand‑new markets.

• Question from Michael Lasser (UBS): Merchandise margin up 120 bps in Q3—what are potential pressure points for Q4 gross margin? Follow-up: do recent vintages' strong year‑one performance provide a floor for next year's comps?
  Response: Primary Q4 margin wildcard is consumer response to promotions (take rate); inventory composition is healthy; recent new‑store vintages are performing to plan (year‑one targets) and provide a comp tailwind as they cycle into the base.

• Question from Robbie Ohmes (Bank of America): How did Black Friday promotions compare to last year and is there risk of needing deeper promos later in the quarter (given peers' clearance); where are you raising price vs seeing unit degradation?
  Response: Black Friday promos were roughly in line with last year; the key risk is higher take‑rate on promos from consumers; price increases are broader but more pronounced in hard goods, with promotional/clearance management prioritized before ticket price increases.

• Question from John Heinbockel (Guggenheim): How do year‑two and year‑three comps for new stores trend versus high single digits in year one; how significant is the World Cup tailwind; and thoughts on Florida real estate/opportunity?
  Response: New stores show expected strength after year one though the 14th month often dips due to anniversary effects; World Cup is expected to be a material multi‑year tailwind for soccer participation and sales; Florida is attractive but selections are disciplined to maintain ROIC.

• Question from Anna Glaessgen (B. Riley): Ammo and firearms are <10% of sales—why did ammo have such a big impact on the quarter, is there seasonality with hunting, and if ammo stabilizes at current negative levels can you still post a positive comp?
  Response: Ammo (~5% of sales) was a ~130 bps headwind in Q3 driven by lapping an election‑period surge last year; sales stabilized after November, and if that new level holds comps can still be positive.

• Question from Joseph Civello (Truist): How should we think about Nike/Jordan contribution in 2026 vs 2025 given lapping comps but broader assortment and more doors; and what margin benefits from pulled‑forward inventory pre‑tariffs?
  Response: Expect combined Nike+Jordan to remain a high‑single to low‑double‑digit growth driver as rollout expands; pulled‑forward inventory mainly preserved pricing/value into holiday rather than delivering a large incremental margin lift.

• Question from Adrienne Yih (Barclays): What percent of product price increases were implemented in fall 2025 and what to expect for spring 2026; where are elasticity thresholds by category given AUR up mid‑high single digits and transactions down 4%?
  Response: Q3 AURs rose mid‑to‑high single digits and Q4 is expected high‑single to low‑double digits, carrying into early 2026; elasticity varies by category—some front‑end items are inelastic while others (category dependent) show unit sensitivity.

• Question from Justin Kleber (Baird): Q4 guidance implies SG&A dollars below Q3—what drives the lower SG&A and is that sustainable; and how will the buyback cadence compare to Q1 when repurchases resume?
  Response: Q4 SG&A midpoint implies modest leverage largely from lapping accelerated prior openings and one‑time items; buybacks are planned to resume in Q4 but are not embedded in the guidance and no detailed cadence was provided.

• Question from Eric Cohen (Gordon Haskett): The income cohort shifted (high income now 40%)—what can you do to retain higher‑income customers and is this a structural change or trade‑down from other retailers?
  Response: Shift reflects both higher‑income customers seeking value and improved assortment (better/best brands); the company will continue adding premium and trend‑right brands while leveraging private brands to retain those customers.

• Question from Christina Fernandez (Telsey Advisory Group): Where are the high‑income customers coming from (which competitors) and how are private brands performing—are consumers trading into private brands as national brand prices rise?
  Response: Data (Placer.ai and CDP) show share shifts toward Academy driven by value and new brands; private brands like Magellan and Freely are performing well and are capturing trade‑ins as consumers seek value.

Contradiction Point 1

Pricing Strategy and Consumer Behavior

It involves the company's pricing strategy and its impact on consumer behavior, which are critical for understanding the company's financial performance and competitive positioning.

Can you clarify the 3.3% average ticket price increase in Q3, the AUR versus UPT comparison, and the Q4 outlook? - Paul Lejuez(Citi)

2026Q3: The price increases were primarily to offset tariff costs, with AURs up high single to low double digits expected for Q4. - Steve Lawrence(CEO)

How do you assess the impact of tariffs on sourcing and product costs? - Greg Melich(Evercore)

2025Q4: Tariffs are being managed by working with vendors to absorb costs or offsetting through price optimization. - Steve Lawrence(CEO)

Contradiction Point 2

Impact of Promotional Environment

It involves changes in the promotional environment and its impact on the company's financials, which affect investor expectations.

How do this year’s Black Friday promotions compare to last year’s, and what risks do additional promotional efforts pose? - Maddie Chacon(Bank of America)

2026Q3: Promotions were consistent with last year. Consumer take rates are up, impacting promotional effectiveness. - Steve Lawrence(CEO)

Can you discuss the promotional environment and how it balances with merchandise margins? - Eric Cohen(Gordon Haskett)

2026Q2: Promotional environment is similar to past years, but with higher take rates from customers. - Steven Lawrence(CEO)

Contradiction Point 3

Consumer Behavior and Customer Health

It involves changes in consumer behavior and the health of the customer base, which are critical for assessing market demand and sales performance.

How is Academy customer health, and how does trade-in activity from high-income customers compare to Q2? - Emily Ghosh(Goldman Sachs)

2026Q3: High-income consumers grew high single digits, lower than Q2 and Q1, but still above last year's double-digit growth. - Steve Lawrence(CEO)

What inventory growth can we expect in the second half? How did outdoor/apparel compare to footwear/ammo in performance? - Robert Ohmes(Bank of America)

2026Q2: Our consumer studies show that 30% of our high-income and 44% of our middle-income consumers are doing better financially, resulting in a high double-digit comp for the quarter for high-income and mid-single-digit for middle-income. - Steven Lawrence(CEO)

Contradiction Point 4

Customer Demographic Shifts

It highlights changes in customer demographics, which are crucial for understanding market positioning and target audience.

How would you assess the health of the Academy customer and compare upper-income trade-ins to Q2? - Emily Ghosh(Goldman Sachs)

2026Q3: High-income consumers grew high single digits, lower than Q2 and Q1, but still above last year's double-digit growth. - Steve Lawrence(CEO)

Can you elaborate on the higher-income shoppers at Academy and whether this is a recent trend? - Kate McShane(Goldman Sachs)

2025Q4: We started seeing higher income cohorts in Q3, with accelerating growth in Q4. - Carl Ford(CFO)

Contradiction Point 5

Expansion and New Store Growth

It involves strategic decisions on expansion and new store growth, which directly impact the company's future revenue and market reach.

How do strong e-commerce results impact new store costs in new versus existing markets? - Adam(Ike Boruchow, Wells Fargo)

2026Q3: E-commerce up 22% exceeds expectations; new store openings drive demand. - Steve Lawrence(CEO)

How are weather and macroeconomic factors influencing consumer behavior and sales guidance? - Christopher Horvers(J.P. Morgan)

2025Q4: Our new stores are exceeding expectations, contributing positively to our comps and are driving incremental traffic. - Steve Lawrence(CEO)