ASO — Q2 2026 Financial Report Analysis

Overview

Academy Sports + Outdoors, a big-box sporting goods chain with 327 stores across 21 states (mostly in the southern US), reported second-quarter fiscal 2026 net sales of $1,647.3 million, up 3.0%, and diluted EPS of $2.17, up 17.3%. The quarter ended August 1, 2026. Those headline profit figures are flattered by a one-time item. The company received $83.7 million in refunds of tariffs that the Supreme Court struck down in February 2026 (the IEEPA tariffs), and booked them as a reduction to cost of goods sold. Without the refund, gross margin would have fallen. Sales growth came entirely from new stores: comparable sales slipped 0.4%, and comparable transactions fell 5.3%.

At a glance

• Operating margin 15.0% vs 10.8% a year ago. Operating margin is the share of sales left after running the business, before interest and tax. The jump is almost entirely the tariff refund, which added 510 basis points (5.1 percentage points) to gross margin. Excluding the refund, operating income was about $162.7 million, roughly 5.6% below last year's $172.4 million.
• Comparable sales -0.4%. These are sales at stores open more than 13 months plus all online sales, which isolates demand from store openings. Shoppers spent 4.9% more per purchase, but there were 5.3% fewer purchases. The 21 stores opened in the past year contributed $61.5 million of sales, more than the entire $47.4 million increase.
• Diluted share count down 6.1% (63.6 million vs 67.7 million) after $180.5 million of buybacks in the first half. That alone accounts for roughly 6 points of the 17.3% EPS growth.

Results versus a year ago

*Our calculation: gross margin minus the $83.7 million refund, divided by net sales. It matches management's statement that the refund added 510 basis points to a 440-basis-point increase.

Where the sales came from

By merchandise division, sales rose 6.3% in sports and recreation and 4.4% in outdoor. Footwear fell 1.0% and apparel was "relatively constant". On a comparable basis, footwear and apparel declined while sports and recreation and outdoor grew. Outdoor (29% of quarterly sales) and apparel (28%) are the two largest divisions, so the weakness in apparel and footwear (together 47% of sales) is not a small corner of the business.

The split between transactions and ticket is the key detail. Comparable sales fell 0.4% "as a result of a 5.3% decrease in comparable transactions, partially offset by an increase in average ticket of 4.9%." Fewer customers are buying, but they spend more per visit. In the earnings release, CEO Steve Lawrence said consumer spending "remains pressured, particularly among lower-income households." The filing does not split the ticket increase between higher prices and larger baskets.

Online is the bright spot. E-commerce net sales grew 14.1% and reached 12.1% of merchandise sales, up from 10.9%. Buy-online-pick-up-in-store orders count as e-commerce. New stores are also doing their job. The 47 stores opened since the program restarted in 2022 that have been open at least 12 months averaged about $13 million in sales each over the last twelve months.

The tariff refund: three lines to read together

The refund appears in three places, and reading only one of them gives a distorted picture:

1. Cost of goods sold: $83.7 million of IEEPA tariff refunds from US Customs reduced cost of goods sold, adding 510 basis points to gross margin.
2. Other expense: In 2025 Academy had sold part of its rights to any future tariff refunds to an outside buyer (the "Participation Agreement"). Once the refunds arrived, it paid that buyer $72.2 million. It also recognized the $10.5 million it originally received for those rights. The net $61.7 million cost sits below operating income, in "other expense (income), net" ($58.0 million expense vs $1.5 million income a year ago).
3. Pricing: Management "reinvested" part of the benefit in lower prices. Merchandise margin fell 90 basis points, "inclusive of 70 basis points of reinvestment of tariff refunds into strategic pricing."

So the refund boosts gross margin and operating income, and most of it is then paid away beneath the operating line. That is why operating income rose 42.9% while pre-tax income rose only 8.2% ($178.4 million vs $164.8 million). Management puts the net tariff-refund benefit at $0.06 of EPS, including reinvestments. On the company's own numbers, most of the $0.32 increase in diluted EPS did not come from the refund.

Takeaway: Strip out the tariff refund and this was a modest quarter. Comparable sales fell, the underlying gross margin slipped about 70 basis points, and operating income was down roughly 5–6%. EPS still grew double digits, because the refund's small net benefit was added to a 6.1% smaller share count. The business is adding stores and online sales, but each existing store is losing customer traffic.

What the headline numbers hide

• Operating margin overstates profitability this quarter. The 15.0% operating margin includes the full $83.7 million refund, while the $72.2 million payout to the claim buyer sits below the line. Comparing operating margin with peers or prior years without that adjustment would overstate Academy's profitability by about 5 points this quarter.
• "Adjusted" EPS does not remove the refund. Adjusted EPS of $2.31 excludes only stock-based compensation ($9.3 million) and the $1.9 million loss on refinancing debt. The refund and the claim-buyer payment stay in. The GAAP and adjusted figures both include the one-off.
• Most EPS growth came from buybacks and the refund, not operations. Net income rose 9.9%, and the 6.1% lower diluted share count lifted per-share growth to 17.3%. Pre-tax income excluding the net refund effect ($83.7 million gain minus $61.7 million net cost to the buyer) was about $156 million, slightly below last year's $164.8 million. A lower tax rate also helped: 22.7% vs 23.9%, which the company attributes to "the purchase of transferable tax credits and the effect of cross-border tax laws." Lower interest added a little too, $8.1 million vs $9.0 million.
• Cash flow is flattered by classification. Operating cash flow was $188.4 million in the quarter vs $78.6 million a year ago. That includes the $83.7 million refund, but the $72.2 million paid to the claim buyer is classified as a financing outflow. Adjusted free cash flow (operating cash flow minus investing) was $115.9 million vs $21.7 million. Subtracting the payment to the buyer leaves roughly $44 million, still ahead of last year. For the first half, operating cash flow of $349.0 million comfortably exceeded net income of $190.6 million, partly because last year's first half had tied up cash buying inventory early at pre-tariff prices.
• Inventory is under control. Merchandise inventories were $1,657.4 million, up 4.4% on a 6.9% larger store base. Per store, inventory was down 5.6% in units and 2.3% in dollars, according to the earnings release. That is not a build-up that would force markdowns.
• Refinancing. In May the company issued $500 million of 5.875% senior secured notes due 2031. It used them to retire its 2020 notes and term loan, and extended its undrawn $1.0 billion credit line to 2031. Nothing matures before 2031.

Guidance: higher EPS, same profit

With the results, Academy updated its fiscal 2026 outlook (year ending January 30, 2027) against its June 9 guidance:

The "raised EPS guidance" headline needs a caveat. Net income guidance did not change, so the $0.10 increase in the EPS range comes from assuming 1.5 million fewer diluted shares. The gross-margin range rose a full point, reflecting the tariff refund, but expected profit stayed flat. That implies the refund is offset by the payment to the claim buyer and the price reinvestment. Comparable sales of 0% to +2% for the year require a turn in the second half: the first half was +1.1%, and Q2 alone was -0.4%. At the midpoint, the guidance implies second-half sales of about $3.2 billion (+3% year on year) and second-half net income of about $212 million, against $205.5 million last year. Eleven new stores are planned for Q3 and the rest of the year's openings for Q4. Capital spending guidance is unchanged at $200–240 million, about 60% of it for new stores.

Our read: The new-store engine and e-commerce growth are real. But this quarter's margin expansion was a one-time refund, and the core of the business is losing transactions at existing stores. Over the next two quarters, watch whether comparable transactions stop falling, especially in apparel and footwear. Also watch whether the underlying gross margin (excluding any further refunds) holds near last year's level as the price reinvestment continues. With $256.1 million left on the buyback authorization, buybacks will likely keep supporting per-share growth, but they cannot replace a return to positive comparable sales.