Sunbelt Expansion And Digital Upgrades Will Drive Robust Secular Trends

Key Takeaways

• Expansion in southern suburban markets and enhanced omnichannel shopping experiences are expected to drive sustained customer growth and higher sales both in-store and online.
  
• Technology upgrades, private brand focus, and exclusive partnerships should increase efficiency, differentiate offerings, and support stronger margins and profitability.
  
• Competition from e-commerce, shifting demographics, concentrated market exposure, and evolving brand strategies pose significant risks to Academy’s growth, profitability, and long-term relevance.

Catalysts

Through its subsidiaries, operates as a sporting goods and outdoor recreational retailer in the United States.

• Store expansion into fast-growing Sunbelt and suburban markets is set to unlock new customer acquisition and revenue streams, supported by ongoing urbanization and population growth trends in key southern U.S. regions. This is expected to drive consistent top-line growth over the next several years.
  
• Investments in omnichannel capabilities—including buy-online-pickup-in-store, curbside delivery, and same-day shipping—position Academy to capture market share as consumer expectations for seamless shopping experiences rise, fueling higher customer retention and increased online and offline transaction volume, with a direct effect on net sales growth and earnings.
  
• Technology-driven initiatives such as the rollout of RFID for inventory accuracy, new warehouse management systems, and advanced handheld devices in stores will enhance operating efficiency and fulfillment rates. These improvements are likely to increase gross margins and support scalable earnings growth as operating costs are optimized.
  
• Enhanced private label development and focused value propositions are set to further differentiate Academy from competitors, appealing to cost-conscious shoppers amid macroeconomic uncertainty. Continued growth in proprietary brands is expected to boost gross margin expansion and improve overall profitability.
  
• Strategic partnerships and brand launches—such as the introduction of Jordan and expanded Nike offerings—tap into growing demand for health, wellness, athleisure, and youth sports. These exclusive and high-demand assortments are expected to accelerate traffic and conversion in both existing and new stores, driving revenue and projected EPS growth.

Academy Sports and Outdoors Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Academy Sports and Outdoors compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Academy Sports and Outdoors's revenue will grow by 9.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 7.1% today to 6.4% in 3 years time.
• The bullish analysts expect earnings to reach $498.5 million (and earnings per share of $7.95) by about April 2028, up from $418.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 9.7x on those 2028 earnings, up from 6.1x today. This future PE is lower than the current PE for the US Specialty Retail industry at 15.4x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.16%, as per the Simply Wall St company report.

Academy Sports and Outdoors Future Earnings Per Share Growth

Risks

• Intensifying competition from e-commerce and digital-native retailers continues to pressure Academy’s store traffic and comp sales, as revealed by flat e-commerce penetration at roughly 11 percent of sales in 2024 and the company’s ongoing efforts to upgrade online experience; persistent e-commerce underperformance could negatively impact long-term revenue growth.
  
• Demographic shifts and evolving consumer preferences, with younger generations favoring experiences over discretionary goods, coupled with an aging US population and trends toward urbanization, may undermine demand in core outdoor and sporting goods segments, reducing Academy’s addressable customer base and putting downward pressure on same-store sales and overall revenue.
  
• High geographic concentration in the Southeastern US and slow national expansion means Academy remains overexposed to local economic conditions and vulnerable to weather-related disruptions, as evidenced by depressed quarterly results due to regional winter storms; such concentration could limit long-term revenue and earnings growth potential.
  
• The specialty retail landscape faces mounting challenges from major brands such as Nike and Adidas expanding direct-to-consumer models, reducing Academy’s relevance as a multi-brand retailer and potentially compressing wholesale margins, which may result in lower gross margin rates and pressured profitability.
  
• Dependence on price-sensitive lower
• to mid-income consumers, many of whom demonstrated constrained spending in the most recent holiday season, increases earnings volatility and margin risk in downturns or inflationary environments, as maintaining value positioning amid tariff or supply chain cost pressures could erode net margins.

Valuation

• The assumed bullish price target for Academy Sports and Outdoors is $70.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Academy Sports and Outdoors's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $70.0, and the most bearish reporting a price target of just $43.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $7.8 billion, earnings will come to $498.5 million, and it would be trading on a PE ratio of 9.7x, assuming you use a discount rate of 9.2%.
  
• Given the current share price of $38.06, the bullish analyst price target of $70.0 is 45.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.