On Tuesday, JPMorgan (NYSE:JPM) adjusted its outlook on Academy Sports & Outdoors Inc. (NASDAQ:ASO), reducing the price target to $52 from the previous $53 while maintaining a Neutral rating on the company's shares.
The adjustment comes after the retailer reported a miss on second-quarter comparable store sales (comp) and earnings per share (EPS), and subsequently decreased its net income forecast for the fiscal year 2024 by approximately 13%.
Academy Sports & Outdoors attributed a 6.9% decline in comp partly to one-time factors, including the impact of tornadoes in May, a hurricane in June, and issues with warehouse management system installations that led to out-of-stock situations.
Despite these setbacks, the company noted a positive trend in August, helped by a shift in back-to-school sales and an uptick across various business segments, including hunting and fishing, which continued through Labor Day.
The company has presented a broad range for its second-half comp projections, from flat to a decline of around 6%. The upper end of this range assumes sales trends similar to those seen in August will persist, while the lower end does not anticipate any significant change in consumer behavior from the first half of the year.
The firm highlighted Academy Sports & Outdoors' conservative approach, evidenced by a reported increase in gross margin and strong cost control, suggesting that the company could achieve the higher end of its EPS guidance.
JPMorgan's analysis also points to broader concerns, such as the potential for declining trends due to a weaker lower-end consumer base, continued softness in big-ticket item sales, and an unfavorable holiday calendar. The firm remains cautious, suggesting that while the stock experienced a short squeeze today, this might reverse in the future.
In other recent news, Academy Sports and Outdoors has reported a decline in sales for the second quarter of 2024. The company's total revenue reached $1.55 billion, marking a 2.2% decrease compared to the same period last year.
This downturn was influenced by economic pressures including inflation and high credit card debt, severe weather events, and challenges with a new warehouse management system. Despite these obstacles, the company remains focused on growth strategies such as expanding its store footprint and enhancing its online presence.
In light of these developments, Academy Sports and Outdoors has revised its annual sales guidance to a range of $5.9 billion to $6.07 billion. The firm also announced a dividend of $0.11 per share. Notably, the company plans to open between 160 to 180 new stores over the next five years.
The recent launch of the My Academy Rewards program, aiming to reach over 10 million members, and the growth of same-day delivery via DoorDash (NASDAQ:DASH), accounting for 9.7% of total sales, are part of the company's strategic initiatives.
Analysts have noted the company's resilience in the face of these challenges, with optimism about future sales and earnings growth. The company's expansion to 19 states, including the opening of its first store in Ohio, and plans for a new distribution center in early 2026, are seen as positive steps towards achieving its growth objectives.
InvestingPro Insights
Academy Sports & Outdoors Inc. (NASDAQ:ASO) has caught the attention of investors and analysts alike, with a recent adjustment in JPMorgan's price target. To provide further context, InvestingPro data reveals a market capitalization of $4.01 billion and an attractive P/E ratio of 8.26. This aligns with the company's aggressive share buyback strategy, as noted in one of the InvestingPro Tips, which could indicate management's confidence in the firm's value.
The InvestingPro Tips also highlight that the company is trading at a low earnings multiple, with a P/E ratio of 8.16 for the last twelve months as of Q1 2025. This suggests that the stock may be undervalued compared to its earnings potential. Additionally, the company's liquid assets exceed its short-term obligations, providing financial stability in the face of uncertain market conditions.
Another key metric to consider is the company's gross profit margin, which stands at 34.18% for the last twelve months as of Q1 2025. This healthy margin, coupled with the fact that analysts predict Academy Sports & Outdoors will be profitable this year, paints a positive financial picture for the company. For investors seeking more detailed analysis, there are additional InvestingPro Tips available, offering a comprehensive look at the company's financial health and future prospects.
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