Academy Sports + Outdoors has an aggressive strategy to open new stores and expand into new markets. They opened 9 new stores in 2022 and 14 in 2023. With that they have some lessons learned that they’re using to adjust their process.
They found that sales ramp-up more quickly in stores opened in existing markets where consumers are already familiar with the Academy brand. Similarly, opening a cluster of stores in one market in close time proximity helped with marketing synergy, amongst other efficiencies.
As we move into 2025 and beyond, our goal will be to go into new markets with a greater density of new store openings around the same time. The end result of all this work is that we believe we have an opportunity to open up even more stores than we initially modeled in our long-range plan.
Steve Lawrence, CEO of Academy
They’ve also seen that the time of year a store is opened impacts sales curve. Stores opened in the first half of the year have a higher initial performance than those opened in the second half.
We’ve learned that stores opened in the first half of the year get out of the gate faster than stores opened up in Q3 and Q4. Based on this, starting in 2025 and forward, we’re building our new store pipeline to support roughly 50% of the stores for each year to open up in the first and second quarters.
Steve Lawrence, CEO of Academy
Another lesson learned from their store openings is the economic benefits of opening in smaller and midsized markets. For profitability, smaller markets generally have cheaper land and building costs coupled with lower labor costs to more than offset any revenue reductions. It’s a store dynamic that Lowe’s also noted as they rolled out a plan to open stores in more rural areas.
While these stores may have slightly lower volume potential, the favorable expense structure it takes to run these stores helps ensure the profitable investments and clear our ROIC hurdles. As we build out our future pipeline, we’re opening the aperture of our consideration set to include more single or two-store markets versus focusing primarily on large multistore markets. Once again, it will be a balanced approach between various market sizes.
Steve Lawrence, CEO of Academy
Based on their lessons learned, Academy has adapted their new store strategy. They’ve put Year 1 sales volume at between $12 million to $16 million with a five-year ramp to maturity. With a lower capital budget to open new stores, and updated markets/timing, they’re still preserving their Return On Invested Capital hurdle of 20%.
