E-commerce Acceleration And Suburban Store Expansion Will Spark Retail Transformation

Key Takeaways

• Rapid e-commerce growth and store expansion into underserved markets are enhancing market share, revenue prospects, and operating leverage.
  
• Focused investments in private label, loyalty programs, and supply chain efficiencies are supporting margin stability, customer growth, and improved earnings.
  
• Reliance on higher-income customers, cost pressures, intensified promotions, vendor dependencies, and regional concentration all pose significant risks to revenue growth and profitability.

Catalysts

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

• Strong acceleration in e-commerce (18% growth in Q2 and expanding digital assortment/omnichannel capabilities) positions Academy to capture greater share as consumer spending shifts online, likely supporting outperformance in future revenues and market share.
  
• An ongoing store expansion strategy focused on secondary/tertiary markets with growing populations and suburban migration (20-25 new stores in 2025, robust early comps in new stores) sets up above-peer top-line growth and improved operating leverage as these locations mature.
  
• Investments in private label (strong value proposition, strategic price points, differentiated products) and ongoing negotiations with vendors to offset tariffs are expected to support gross margin stability and even expansion, positively impacting net margins and EPS.
  
• Targeted customer loyalty and marketing programs (over 12 million rewards members, focus on higher-income cohorts trading into Academy) are driving higher spending per customer and improved traffic from desirable demographics, supporting more resilient comp sales and margin profile.
  
• Implementation of supply chain and technology initiatives (RFID rollout, handhelds for inventory/order fulfillment, improved DC operations) are already yielding better in-stock levels and inventory accuracy, with management targeting 100bps SG&A and supply chain savings, which should enhance future earnings and working capital efficiency.

Academy Sports and Outdoors Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Academy Sports and Outdoors's revenue will grow by 6.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.2% today to 6.4% in 3 years time.
• Analysts expect earnings to reach $460.3 million (and earnings per share of $7.48) by about September 2028, up from $370.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.2x on those 2028 earnings, up from 8.8x today. This future PE is lower than the current PE for the US Specialty Retail industry at 18.7x.
• Analysts expect the number of shares outstanding to decline by 5.24% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.65%, as per the Simply Wall St company report.

Academy Sports and Outdoors Future Earnings Per Share Growth

Risks

• Academy's strong recent comps and growth are being driven mainly by higher-income customers ($100k+ households), while lower and middle-income cohorts continue to show flat or declining traffic and spending, posing a long-term risk to revenue growth if economic conditions worsen or if these segments don't rebound.
  
• Persistent cost pressures from rising tariffs, labor inflation, and higher e-commerce fulfillment/shipping costs are eroding gross margins and compressing net earnings, and these headwinds may accelerate if wage or tariff environments deteriorate further.
  
• The promotional environment is intensifying year-over-year, and Academy is seeing sharper customer aggregation around promotional events, suggesting erosion of pricing power and a risk to both gross margins and sustained market share gains.
  
• Dependence on brand partnerships (Nike, Jordan, Adidas, etc.) exposes the company to risks from vendor direct-to-consumer shifts and loss of exclusivity or favored access, which could limit future product variety, reduce competitive differentiation, and put downward pressure on revenues.
  
• Heavy regional market exposure (Southeast, South Central U.S.) and store expansion strategy make Academy vulnerable to natural disasters (as shown by recent floods), regional economic cycles, and demographic shifts away from traditional team sports, all of which could negatively impact long-term revenue and store productivity.

Valuation

• The analysts have a consensus price target of $57.5 for Academy Sports and Outdoors based on their expectations of its future earnings growth, profit margins and other risk factors. 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 $47.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $7.2 billion, earnings will come to $460.3 million, and it would be trading on a PE ratio of 9.2x, assuming you use a discount rate of 9.6%.
• Given the current share price of $48.76, the analyst price target of $57.5 is 15.2% 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.