ASO: Tough 1Q Print, with More Questions than Answers Go-Fwd; Sidelined, PT to $50

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ASO: Tough 1Q Print, with More Questions than Answers Go-Fwd; Sidelined, PT to $50

Academy Sports and Outdoors, Inc. Equity Research

Investment Thesis

Key themes surrounding the name include:

1. New Store Targets Laid Out. At their 2026 Analyst Day, ASO laid out a plan to grow their store

base from ~325 to 450 stores overt the next 5 years (opening approximately 25 per year)

- driving an incremental $1.9B of sales (or ~$15M/store), and an even longer-term national

expansion opportunity for 800+ stores. The company further refined its new store opening

strategy from "inside-out" (i.e., focusing on urban locations then moving into suburban locations)

to "outside-in" (i.e., focusing on rural locations first then working to urban locations), noting that

stores in smaller communities provide a larger reach with higher customer affinity, while also

costing less, and in some cases driving higher sales volume in the first year. Importantly, the new

store size of 55K sq/ft (from 63K prior) implies a lower square footage growth than previously

estimated, but may lead to higher productivity in our view.

2. More on Financial Targets. ASO's 5-Yr targets don't appear overly aggressive: +5% top-line

growth (to $8.0B from 2025 $6.1B) - driven by +LSD comp growth and ~125 new stores, with

eCom penetration over 15% (from 12% in 2025) and +100bps of EBIT margin expansion to 10%

(from ~9.0% 2025). The margin expansion is a function of +50bps from leverage, +50bps from

supply chain, +30bps from retail media opportunity, and +20bps from PL and softlines mix (offset

by -50bps of reinvestment to drive value to customers). This would generate +HSD EPS growth to

~$9.00 (from $5.54 2025). Half of free cash flow going to capital return (buybacks and dividends)

are included in this.

3.