Academy Sports & Outdoors (ASO) Deep Research Report: Traffic Test vs. Margin Strength – What 2026 Investors Need to See

At DeepValue, we like retailers that are boring on the surface but quietly compounding earnings underneath. Academy Sports & Outdoors fits that profile—at least on paper. You get a regional sporting goods chain with strong store economics, double-digit e-commerce growth, and a balance sheet that’s in solid shape.

Yet the stock is stuck in a “prove it” zone. At roughly $59 per share when our report was run, Academy trades at about 10.5x earnings, which screens cheap for a company still opening 20–25 new stores per year. The problem: the market no longer trusts the growth story until one datapoint flips—traffic.

Management has shown they can protect margins and grow via new stores, but comparable transactions are still negative. According to the 10-Q (2025), p. 23, Q3 FY2025 comps were down 0.9%, driven by a 4.1% decline in comparable transactions partially offset by a 3.3% increase in average ticket. That’s not the kind of comp quality that gets you a multiple rerating.

This is why our rating on ASO is WAIT, not buy. At today’s price, we think investors are getting a fair deal for a steady earner, not a clear bargain for a compounding growth story. The next two quarters will be critical in determining which way this breaks.

If you don’t want to spend hours digging through SEC filings and earnings transcripts yourself, tools like DeepValue can do the heavy lifting.

In this piece, we’ll walk through how we see Academy Sports & Outdoors as of early 2026: the business model, the margin structure, the store growth math, and—most importantly—the traffic and margin tests that investors should watch before sizing up their position.

What Does Academy Sports & Outdoors Actually Look Like Today?

Academy is a value-oriented sporting goods and outdoor retailer with 317 stores across 21 contiguous states, heavily skewed to the southern U.S. As described in the 10-Q (2025), p. 21, the company sells everything from sporting equipment and apparel to patio furniture, grills, and hunting and fishing gear.

Crucially, this is not a pure-play e-commerce story. Management treats digital as an extension of the stores rather than a separate P&L. Stores still facilitate around 95% of total sales, including in-store purchases, ship-from-store orders, and buy-online-pickup-in-store (BOPIS) flows, according to the 10-Q (2025), p. 22.

That store-centric model is the backbone of the thesis:

• Stores act as mini-fulfillment hubs, supporting fast, local delivery and pick-up.
• New units are the declared growth engine, with 20–25 openings planned for fiscal 2025. The 10-K (2025), p. 47 and 10-Q (2025), p. 23 both emphasize this.
• E-commerce is growing quickly—+22.2% year-over-year in Q3 FY2025, now 10.4% of merchandise sales—but designed to be incremental rather than dilutive to margins, per the 10-Q (2025), p. 23.

The shift since 2022 is clear. Management re-launched the new-store program and has opened 58 stores since then, with a stated productivity anchor: among the 34 stores opened since 2022 and open at least twelve months, the average was roughly $13 million in net sales per store over the last twelve months, including e-commerce, according to the 10-Q (2025), p. 23.

That productivity number matters a lot. It’s one of the key inputs to our base, bull, and bear valuation scenarios.

Is ASO Stock a Buy in 2026 – Or Is It Too Early?

Our stance: ASO is a hold/watch, not a table-pounding buy, at around $59.

Here’s how we frame it:

• Rating: WAIT
• Conviction: 3.0 (on our internal scale)
• Attractive Entry Zone: ~$54
• Trim Zone: ~$72
• Base Case Value: ~$66 per share
• Bull Case Value: ~$78
• Bear Case Value: ~$45

At current levels, the stock reflects a base-case outcome where Academy continues to be a solid, if unspectacular, earner:

• P/E is roughly 10.5x on EPS of $5.87. (FMP financials)
• EV/EBITDA sits around 7.27x. (FMP financials)
• Liquidity is strong: $289.5M in cash, no ABL borrowings, and $992.4M available on a $1.0B asset-based revolver as of November 1, 2025, per the SEC 10-Q signed Dec 9, 2025.

So why are we not buyers here?

Because in our view, the multiple is fair for what the business has proved so far. To justify a higher multiple—or to see real upside from here—you need to believe in a few things that are not yet visible in the numbers:

1. Traffic improves. Comparable transactions need to move from -4.1% in Q3 FY2025 toward around -1% or better over the next two quarters.

2. Margins hold. Gross margin has to remain near the FY2025 guidance range of 34.3%–34.5%, even as discrete tailwinds roll off.

3. New stores stay productive. The $13M-per-store matured cohort sales level remains intact as Academy pushes into new and adjacent markets.

Our call is that this is a “show me” period. If those three proof points show up, today’s price looks like a decent entry into a higher earnings power base. If they don’t, valuation support can erode quickly.

Inside the Numbers: Traffic, Comps, and E-Commerce Mix

The most important piece of the puzzle is the quality of comps.

According to the 10-Q (2025), p. 23:

• Q3 FY2025 comps: -0.9%
• Comparable transactions: -4.1%
• Average ticket: +3.3%

Year-to-date, the pattern is similar: comps are down 1.4%, driven by a 3.4% decline in comparable transactions, partially offset by a 2.1% increase in average ticket, per the 10-Q (2025), p. 24.

That tells us:

• Customers are spending more per visit, but they’re visiting less.
• The “comp recovery” you see in some headlines is ticket-led, not traffic-led.
• Once ticket inflation normalizes, the underlying weakness in traffic becomes harder to mask.

From a long-term investor’s standpoint, we’re much more comfortable underwriting:

• Slightly negative or flat ticket, but stable or rising transactions

than

• Rising ticket masking ongoing transaction declines.

Why? Because traffic is the more durable driver of store health, especially in a competitive, promotion-heavy category like sporting goods.

On the digital side, the company is making progress:

• E-commerce sales grew 22.2% year-over-year in Q3 FY2025.
• Digital penetration reached 10.4% of merchandise sales, up from 8.8% in the prior-year quarter.

Both datapoints come from the 10-Q (2025), p. 23.

Management has talked about a long-range target around 15% digital penetration. The challenge is to grow into that without materially eroding margins through shipping and fulfillment costs, a risk explicitly flagged in the 10-K (2025), p. 20.

In Q3 FY2025, higher e-commerce mix created a 10 bps gross margin headwind from shipping. That’s manageable today. But if penetration climbs and that headwind scales, it can start to offset some of the otherwise positive trends.

Margin Story: Real Strength or Temporary Boost?

On the surface, margin performance looks great. In Q3 FY2025, gross margin expanded 170 basis points to 35.7%, driven by:

• +130 bps merchandise margin
• +30 bps freight
• +20 bps shrink
• Offset by -10 bps from e-commerce shipping

Those figures come from the 10-Q (2025), p. 23.

Our read:

• The merchandise margin gains are encouraging and tie to mix, pricing, and better inventory management.
• The freight and shrink benefits are discrete tailwinds that may partially reverse:
• Freight can re-normalize with fuel and logistics dynamics.
• Shrink is notoriously volatile and has been a rising concern across retail; Academy itself warns in the 10-K (2025), p. 47 that prolonged shrink increases can materially hit gross margin.

Gross margin guidance for FY2025 sits around 34.3%–34.5%, according to the Dec 9, 2025 Nasdaq/GlobeNewswire press release (8-K 2025). Our base case assumes Academy can hold the line around ~34.4% as those tailwinds normalize.

The more subtle issue is operating leverage. SG&A as a percentage of sales has delevered:

• YTD SG&A increased from 25.5% of sales to 27.4%, primarily due to strategic investments and new-store ramp costs, per the 10-Q (2025), p. 23–24.

So even while gross margin looks better, operating margin is feeling pressure from:

• New-store pre-opening costs
• Higher labor and occupancy linked to the rollout
• Continued investment in omnichannel tech and capabilities

This is precisely why the next 6–12 months matter. If traffic stabilizes and new stores ramp, SG&A should begin to re-lever and allow that higher gross margin to flow through to earnings. If not, we can end up in a structurally lower margin structure despite today’s attractive snapshot.

For investors trying to systematically track how margin levers offset each other across multiple retailers, Read our AI-powered value investing guide to see how we use automation to speed up multi-ticker deep dives and standardize the analysis.

Store Growth: When Does Expansion Add Value vs. Risk?

Store expansion is management’s central growth lever. Since 2022, Academy has:

• Re-started its new-store program.
• Opened 58 new locations.
• Added 24 new stores just since the end of Q3 FY2024, generating $48.6 million in Q3 FY2025 net sales, including e-commerce, per the 10-Q (2025), p. 23.

And as noted earlier, 34 stores opened since 2022 and open at least 12 months averaged about $13 million in net sales per store over the last twelve months. That is the key underwriting assumption supporting our base and bull scenarios.

The implication:

• If Academy can keep new-store productivity near $13M, the rollout can drive meaningful top-line growth and support earnings, even if comps are only modestly positive.
• If productivity starts to slip—either because of weaker markets, cannibalization, or macro pressure—then the same rollout becomes a drag on returns and SG&A leverage.

The AlphaStreet Q3 FY2025 earnings call transcript (Jan 2026) indicates management has visibility into the 2026 pipeline and remains confident in the economics. Our base case assumes they’re broadly right. But this is something investors must keep testing each quarter.

Our explicit thesis-breaker on this front:

• If, during FY2026 updates, management slows or pauses the rollout because new stores fail to approach that ~$13M productivity marker, we would treat that as a structural change and reassess the entire thesis, as laid out in our risk framework tied to the 10-Q (2025), p. 23.

How Strong Is Academy’s Balance Sheet and Margin of Safety?

From a solvency and liquidity standpoint, Academy is in a comfortable spot:

• Cash: $289.5M as of Nov 1, 2025
• ABL facility: $1.0B with $0 drawn and $992.4M available
• Debt: $400M 6.00% notes due Nov 15, 2027, plus an $86.5M term loan due Nov 6, 2027 at an 8.12% variable rate

All of this is detailed in the SEC 10-Q signed Dec 9, 2025 and echoed in the Dec 9, 2025 Nasdaq/GlobeNewswire press release.

That liquidity profile gives management breathing room:

• They can keep opening stores.
• They can invest in omnichannel capabilities.
• They can maintain a shareholder return program—$99.9M in buybacks and $26.0M in dividends in the 39 weeks ended Nov 1, 2025, per the 10-Q (2025), p. 24 and press release (8-K 2025).

But margin of safety is about earnings power, not just liquidity.

Our margin-of-safety read:

• At ~10.5x earnings, the stock is not demanding a growth premium.
• Yet the current earnings base is partly supported by freight and shrink tailwinds that may not repeat.
• Traffic is still negative. If comps remain ticket-led and those tailwinds fade, operating margins can compress.

We think of downside boundaries in two layers:

1. Operational boundary:

Capital impairment risk rises if:

• Comparable transactions fail to improve from -4.1% over the next two reported quarters, and
• Gross margin gives back the Q3 freight (+30 bps) and shrink (+20 bps) gains while e-commerce keeps pushing shipping costs higher.

This scenario is drawn directly from the 10-Q (2025), p. 23.

2. Cash/working-capital boundary:

In FY2025, Academy pulled forward inventory purchases at pre-tariff rates, which reduced cash flow from working capital by $104.2M year-to-date versus the prior year, per the SEC 10-Q signed Dec 9, 2025. If tariff-related pull-forwards repeat while traffic is weak, management may need to choose between buybacks, store growth, or maintaining current leverage into the 2027 maturities.

We don’t see a high probability of a balance sheet crisis here. But we do see a limited margin of safety in the equity if the traffic and margin tests break negatively at the same time.

What Is the Market Already Pricing In?

Sell-side and media narratives are fairly aligned on ASO right now: “value retailer, good execution, but needs a real earnings upcycle, not just defensive performance.”

According to Barron’s, Jan 2026 and Benzinga, Dec 2025, the market has noticed:

• Solid margin control and profitability resilience.
• Persistent demand questions, especially in big-ticket categories and amid inflationary pressure.

Recent trading reactions have been telling:

• Negative price moves on “EPS beat but revenue miss” quarters, as highlighted in Benzinga, Dec 2025. The market is clearly focused on top-line health and traffic, not just margin engineering.
• Coverage describing ASO as a “prove the comeback” story, where the stock doesn’t get a full rerating until comps and traffic genuinely improve, per Barron’s, Jan 2026.

Our reading of market-implied assumptions (from sources like Investing.com, Sep 2025 and Investor’s Business Daily, Feb 2026):

Over the next 12–24 months, investors broadly expect:

• Comparable sales to move from slightly negative to flat or modestly positive.
• E-commerce growth to remain a double-digit tailwind.
• Gross and operating margins to avoid structural deterioration, even amid promotions and tariffs.
• Store expansion to remain a net positive, not a drag.
• Technical strength in the stock to persist alongside steady earnings delivery.

That’s a reasonable, but not trivial, bar to clear. It supports our view that the stock is priced fairly for a base case, with upside if execution beats and downside if it falters.

Key Risks and Monitoring Plan for ASO Investors

We think about the ASO thesis in terms of clear, testable checkpoints, not vague hopes.

Here are the key ones we’re watching:

Over the Next 90 Days (Through Early May 2026)

Traffic:

If the next earnings release still shows comparable transactions in the low negative single digits (near -4.1%) and ticket is doing all the work, we’d see that as a clear weakening signal. Our guidance here would be to reduce exposure until traffic stabilizes, consistent with the triggers we laid out based on the 10-Q (2025), p. 23.

Gross margin:

If gross margin trends below the 34.3%–34.5% guide and management explicitly blames shrink reversal or e-commerce shipping deleverage, we’d see that as a sign the margin “floor” is breaking. That scenario is spelled out in both the press release (8-K 2025) and the 10-Q (2025), p. 23.

Digital economics:

If e-commerce continues to grow at double digits, penetration rises above 10.4%, and the shipping headwind remains around -10 bps, we’d actually treat that as a positive validation of the omnichannel model.

Over the Next 6 Months (Through Early August 2026)

Two quarters of traffic data:

If two consecutive quarters pass with no improvement in comparable transactions from -4.1% and SG&A remains elevated due to store and tech investment, we’d interpret that as a shift to structurally lower earnings power.

Store rollout guidance:

If management provides FY2026 store opening plans that keep the pipeline robust and reiterates productivity in line with the ~$13M/store matured cohort, the rollout thesis remains intact. If they quietly slow the rollout or hedge on productivity, we’d reassess.

Monitoring this type of structured checklist is exactly the kind of workflow that DeepValue is designed to compress from days to minutes across multiple holdings.

So, How Should Long-Term Investors Approach ASO Now?

Putting it all together, here’s how we, as the DeepValue team, think about Academy Sports & Outdoors as of February 2026:

1. Business quality:

• Solid, not spectacular.
• Strong store economics, credible omnichannel strategy, and a focused regional footprint.
• Real risks around tariffs, shrink, and digital shipping costs, but nothing we’d call existential at this stage.

2. Balance sheet:

• Clearly adequate for the growth plan.
• 2027 maturities are manageable given current liquidity and cash generation.
• Working-capital swings from tariff mitigation are a real but manageable watchpoint, as shown in the SEC 10-Q signed Dec 9, 2025.

3. Valuation:

• A low-teens multiple on earnings that assumes “steady” more than “growth”.
• Base case value around $66 offers some upside from the high-50s, but not a huge dislocation.
• Bull and bear cases around $78 and $45 imply a moderately skewed payoff if you can time entry around traffic and margin inflections.

4. What we’d like to see before upgrading to Buy:

• Two consecutive quarters where comparable transactions improve toward -1% or better.
• Gross margin holding ~34.4% without leaning too heavily on freight and shrink.
• Evidence that digital growth is scaling without expanding the shipping headwind beyond the ~10 bps range.
• Confirmation that the new-store cohort continues to support ~$13M/store in annual sales as more openings land in newer markets.

5. Portfolio implications:

• For existing holders:

We’d be comfortable maintaining a core position sized modestly, with clear triggers to trim if traffic and margins break against us. Upsizing should be tied to evidence of traffic stabilization.

• For new capital:

We’d prefer an entry closer to the low-to-mid $50s, where the balance of risk/reward improves and the valuation bakes in less optimism about traffic and margin resilience.

In other words, ASO is not a broken story—it’s an unproven next chapter. The underlying business is strong enough to merit close watching, but not yet compelling enough at current prices to justify aggressive buying without waiting for the next couple of quarters of operational proof.

If you’re managing a diversified portfolio of similar “prove it” retailers, compressing this level of deep research across multiple tickers is where AI tools shine.

Sources

• 10-K (2025)
• 10-Q (2025)
• 8-K (2025) – Q3 FY2025 Press Release
• DEF 14A (2025)
• Nasdaq / GlobeNewswire press release, Dec 9, 2025 – “Academy Sports + Outdoors Reports Third Quarter Fiscal 2025 Results, Updates Guidance”
• AlphaStreet Q3 FY2025 Earnings Call Transcript, Jan 2026
• Barron’s, Jan 2026 – Academy Sports stock outlook
• Benzinga, Dec 2025 – ASO shares drop after revenue miss
• Benzinga, Sep 2025 – ASO lifts outlook on tariff measures
• Investing.com, Sep 2025 – ASO Q2 earnings coverage
• Investor’s Business Daily, Feb 2026 – ASO relative strength rating