RISK FACTORS SUMMARY
Investing in our securities involves a high degree of risk. The following is a summary of the principal factors that make an investment in our securities speculative or risky, all of which are more fully described below in the section entitled “Risk Factors.” In addition to the following summary, you should consider the information set forth in the “Risk Factors” section and the other information contained in this Annual Report before investing in our securities.
Risks Related to Our Business and Industry
• overall decline in the health of the economy and consumer discretionary spending;
• risks associated with our reliance on internationally manufactured merchandise which exposes us to various international risks, including additional tariffs;
• our ability to operate, update or implement our information systems;
• our ability to manage our use of machine learning and other types of artificial intelligence in our business;
• our ability to manage our inventory balances;
• our ability to predict or effectively react to changes in consumer tastes and preferences, and/or to acquire and sell brand name merchandise at competitive prices;
• risks associated with our e-commerce business;
• our ability to safeguard sensitive or confidential data relating to us and our customers, team members and vendors;
• intense competition in the sporting goods and outdoor recreation retail industries;
• risks associated with disruptions in our supply chain;
• our ability to successfully continue our store growth plans or manage our growth effectively, or any failure of our new stores to generate sales and/or achieve profitability;
• the effectiveness of our marketing and advertising programs;
• our ability to attract, train and retain quality team members in sufficient numbers, increases in wage and labor costs, and changes in laws and other labor issues;
• our ability to protect against inventory shrink;
• payment-related risks;
• the occurrence of severe weather events, catastrophic health events, natural or man-made disasters, social and political conditions or civil unrest;
• the geographic concentration of our stores;
• fluctuations in merchandise (including raw materials) costs and availability;
• any disruption in the operation of our distribution centers;
• our reliance on key personnel (including our executive officers) to support our existing business and future initiatives;
• our reliance on suppliers to supply us with merchandise that we purchase for resale;
• risks related to our private label brand merchandise;
• any failure of our third-party vendors of outsourced business services and solutions;
• harm to our reputation;
• quarterly and seasonal fluctuations in our operating results; and
• our ability to successfully pursue strategic acquisitions and integrate acquired businesses.
Legal and Regulatory Risks
• our ability to comply with laws and regulations affecting our business, including those relating to the sale, manufacture and import of consumer products;
• claims, demands and lawsuits to which we are, and may in the future, be subject;
• our insurance or indemnities coverage may be insufficient;
• risks related to product safety; and
• our ability to protect our intellectual property and avoid the infringement of third-party intellectual property rights.
Risks Related to Our Indebtedness
• our level of indebtedness and related debt service payments and our ability to generate sufficient cash flow to satisfy all of our obligations under our indebtedness;
• our ability to incur substantially more debt;
• our ability to generate sufficient cash to service all of our indebtedness;
• restrictions on our current and future operations imposed by the terms of our indebtedness;
• our variable rate indebtedness subjects us to interest rate risk;
• our ability to borrow under the ABL Facility (as defined below); and
• our level of indebtedness may hinder our ability to negotiate favorable terms with our vendors.
Risks Related to the Ownership of Our Common Stock
• our stock price is volatile or may decline;
• our ability or decision to pay dividends on our common stock or conduct stock repurchases;
• anti-takeover provisions in our organizational documents could delay or prevent a change of control;
• our exclusive forum provision; and
• you may be diluted by any future issuances of shares by us.
PART I
Item 1. Business
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes included elsewhere in this Annual Report for the fiscal year ended January 31, 2026. This discussion contains forward-looking statements that involve risks and uncertainties. See the section of this Annual Report entitled “Cautionary Statement Regarding Forward-Looking Statements.” When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that characterize our business. Known material factors that could affect our financial performance and actual results, and could cause actual results to differ materially from those expressed or implied in any forward-looking statements included in this discussion or otherwise made by our management, are described in the “Risk Factors” section of this Annual Report.
Who We Are
Academy Sports + Outdoors is a leading full-line sporting goods and outdoor recreation retailer in the United States. Originally founded in 1938 as a family business in Texas, we now operate 322 stores across 21 contiguous states as of January 31, 2026. Our mission is to provide “Fun for All” and we fulfill this mission with a localized merchandising strategy and value proposition that deeply connect with a broad range of consumers. Our product assortment focuses on key categories of outdoor, sports & recreation, apparel, and footwear (representing 31%, 22%, 27% and 20% of our 2025 net sales, respectively) through both leading national brands and a portfolio of 19 private label brands, which go well beyond traditional sporting goods and apparel offerings.
We believe the following attributes differentiate us from our competitors:
• Value-based assortment that enables our customers to participate and have fun, no matter their budget.
• Broad assortment that extends beyond sporting goods and apparel to outdoor recreation and is localized for individual stores.
• Emerging, growing and profitable omnichannel strategy that leverages our buy-online-pickup-in-store program (“BOPIS”) and shipping fulfillment capabilities.
• Strong customer loyalty, with opportunities to increase penetration in existing markets.
• Regional focus primarily in the southern United States with a growing presence in some of the fastest-growing Metropolitan Statistical Areas (or “MSAs”).
• Core customers comprising active families that we support with one-stop shop convenience.
• Significant whitespace opportunity for new stores for both existing and adjacent geographies and new markets.
We believe we sit in a sweet-spot of consumer demand, offering a broad, value-based assortment of sporting goods and outdoor recreation products, so our customers can participate and have fun, no matter their budget. We carefully curate our products to provide the right assortment that appeals to customers from beginners to experts, including families and casual participants.
Our access to national brand and private label brand merchandise creates a comprehensive portfolio of value-based and diversified products, spanning various price-points, that differentiates our assortment from our peers. Our category, brand and price-point mix is unique to Academy and difficult to replicate at other retailers. Approximately 78% of our 2025 merchandise sales was comprised of national brand products, with the remainder coming from exclusive products in our portfolio of private label brands. No single brand we carry accounted for more than approximately 12% of our 2025 sales.
We endeavor to offer products for customers of all ages, incomes and aspirations across sporting and outdoor recreation activities, seasons and experience levels. As such, we have a balanced, year-round business and a large customer base. Our average customer visits our stores anywhere fr o m two to three times per year.
Merchandising
Our merchandise consists of a full range of industry-leading national brands and strong private brands providing our customers with diversified product categories of good, better, and best price points. We deliver Academy’s unique product assortment through our strong partnerships with our vendors. In 2025, we purchased merchandise from approximately 1,500 vendors. For 2025, 2024 and 2023 no vendor represented more than 12% of our total purchases. Our relationships with key brands, on-trend private brands, and exclusive product offerings differentiates our assortment from our peers.
We have preferred access to hundred s of well-recognized national brands, such as Nike, including its Jordan Brand , Under Armour, adidas, Win chester, Columbia Sportswear, The North Face, Brooks, Skechers, Yeti, Stanley and Carhartt, which are critical to our market penetration. These and some of our other national brands rely on us to broaden their consumer reach, which fosters a mutually beneficial relationship when it comes to pricing and assortment. We play a critical role in delivering customer volume for these brands. We complement our national brand assortment with our private label brand assortment, which is priced below the national brand price spectrum. As such, we receive favorable product allocations from leading suppliers.
Our private label brand portfolio consists of 19 brands, including Magellan Outdoors, Academy Sports + Outdoors, BCG, O'rageous, Game Winner, Outdoor Gourmet, Freely, Redfield, H2OX, and R.O.W. Our private label brand strategy focuses on in-filling categories and price points that our national brand products may not satisfy. Our private label brand offerings support and complement our overall merchandising strategy due to limited price-point overlap with national brands. Additionally, our private label brands generate strong brand equity and drive significant customer loyalty. Approximately 53% of our customers purchased a private label brand from us in 2025 and approximately 22% of our 2025 merchandise sales was comprised of private brand products.
As of January 31, 2026, we generally organized our merchandise in four divisions made up of sixteen categories as follows:
Division
Category
Primary product types
Outdoors
Camping
Coolers and drinkware, camping accessories, camping equipment, watersports and equipment
Fishing
Marine equipment and fishing rods, reels, baits and equipment
Hunting
Firearms, ammunition, archery and archery equipment, camouflage apparel, waders, shooting accessories, gun safes, optics, airguns and hunting equipment
Sports and Recreation
Fitness
Fitness equipment, fitness accessories and nutrition supplies
Team sports
Team and specialty sports equipment, including baseball, football, basketball, soccer, golf, racket sports, volleyball, backpacks and sports bags
Recreation
Patio furniture, outdoor cooking, wheeled goods (bicycles, skateboards and other ride-on toys), trampolines and play sets
Front end
Sunglasses and front-end (consumables, batteries, etc.), electronics and watches
Apparel
Outdoor and seasonal apparel
Outdoor apparel, denim, work apparel, graphic t-shirts, accessories and outerwear
Youth apparel/Swim
Boys and girls outdoor and athletic apparel and swimwear
Athletic apparel
Sporting apparel and apparel for fitness
Licensed apparel
Professional and collegiate team licensed apparel and accessories
Footwear
Casual and seasonal footwear
Casual shoes, slippers, seasonal footwear and socks
Work footwear
Work and western boots, shoes and hunting footwear
Youth footwear
Boys and girls footwear
Athletic footwear
Running shoes, athletic lifestyle and training shoes
Team sports footwear
Team and specialty sports footwear and slides
The following table sets forth the approximate amount of sales (all of which are based in the U.S.) by merchandise divisions for the periods presented (amounts in thousands):
Fiscal Year Ended
January 31, 2026
February 1, 2025
February 3, 2024
Merchandise sales (1)
Outdoors
Sports and recreation
Apparel
Footwear
Total merchandise sales (2)
Other sales (3)
Net sales
(1) Certain products and categories were recategorized in the current fiscal year amongst various categories and divisions, respectively, to better align with our current merchandising strategy and view of the business. As a result, we have reclassified sales between divisions for 2024 and 2023 for comparability purposes. This reclassification is in divisional presentation only and did not impact the overall net sales balances previously disclosed.
(2) E-commerce sales represented 11.7%, 10.5% and 10.7% of merchandise sales for 2025, 2024 and 2023, respectively.
(3) Other sales consisted primarily of gift card breakage income, credit card bounties and royalties, shipping income, sales return allowance and other items.
Stores
Our stores, all of which are based in the U.S., are designed to provide our customers with an easy-in, easy-out shopping experience. The interior of most of our stores are built around a central “racetrack” aisle that allows customers to efficiently navigate our selling floor. Additionally, our stores generally have consistent store layouts providing our customers familiarity across our entire store base. We seek to offer our customers a strong merchandise assortment and a localized customer experience, which is facilitated by various types of merchandise fixtures and our large selling floor. Our central “racetrack” aisle and adjacent end-cap merchandising space allows us to adjust our inventory presentations throughout our various selling seasons.
Our stores average approximately 70,000 gross square feet, of which approximately 85% is dedicated to selling space. Our store locations are typically positioned adjacent to major highways or thoroughfares, allowing customers to easily locate our stores. We seek to position our stores in areas with certain population densities, demographics and other characteristics to maximize sales. These markets consist of metropolitan, suburban and smaller cities. Additionally, our stores are typically placed in retail centers adjacent to co-tenants who drive significant traffic. At this time, no stores are connected to malls. We seek to lease all of our stores in long-term lease agreements with third-party landlords, which typically range from 15 to 20 years with various renewal options and lease escalation structures. Of the 322 stores operated as of January 31, 2026, 321 are leased from third parties and one store is owned by the Company.
We are active members of the communities in which we operate, and our long-time customers have grown up with Academy and have passed their passion for us on to the next generation, enabling us to benefit from strong customer loyalty and shopping frequency.
As of January 31, 2026, the number of stores that we operated, exclusively in the U.S., by state was as follows:
State
Number of Stores
Texas
Georgia
Florida
Louisiana
North Carolina
Alabama
Tennessee
Oklahoma
Missouri
South Carolina
Arkansas
Mississippi
Indiana
Kansas
Kentucky
Virginia
Illinois
West Virginia
Ohio
Pennsylvania
Maryland
We believe our real estate strategy has positioned us well for further expansion, and our track record has demonstrated that we can open and operate stores profitably. We believe there is significant near-term opportunity for expansion in both new and existing markets.
Marketing
Our marketing approach is anchored in helping Always Game Families have fun in their pursuit of sports and outdoors activities. The strategy is designed to generate awareness and consideration for the Academy brand while improving intent to purchase across our broad selection of fun categories of top national and private brands at a compelling value within our assortment. We analyze first-party data from across our customer data ecosystem, inclusive of our data lake for analysis/model-building and our Customer Data Platform for audience creation and activation. We combine insights from our customer data ecosystem with customer research studies and retail industry market share data sources to develop annual and seasonal go-to-market strategies that lead to the creation of engaging content and customer experiences that are communicated across a diverse range of owned and paid media channels.
Furthermore, using data from our data lake, we leverage our Customer Data Platform to generate first-party data audiences for targeted customer lifecycle management campaigns designed to retain current customers and encourage omnichannel shopping behaviors. First-party data is also used to inform creation of third-party data audiences across a mix of media channels to drive engagement and acquisition of new customers through the use of brand design, influencer and customer created content. These campaigns are executed across a blend of digital and traditional media, including paid search, email, text message, mobile app, digital advertising networks, affiliates, and social media along with linear and digital video, audio, print, outdoor and direct mail.
We are focused on implementing and continually improving our customer centric marketing technologies, omnichannel services and experiences to save customers time and money while improving the long-term health of our customer portfolio. In July 2024, we launched our loyalty platform, myAcademy Rewards, which provides us a powerful tool to build a deeper connection and understanding of our customers. The Academy Credit Card program, myAcademy Rewards, and Academy Sports + Outdoors app are foundational to build loyalty among customers while providing a seamless omnichannel shopping experience.
We are committed to making a positive impact on the communities we serve and partner with over 523 organizations, including youth sports leagues that reach approximately 1.1 million participants. We also partner with school districts, professional sports properties, local parks, hunting and fishing organizations, military bases and local first responders.
Distribution Centers
We operate three distribution centers in Katy, Texas; Twiggs County, Georgia; and Cookeville, Tennessee. The distribution centers receive and store products from vendors and use sophisticated sorting and logistical equipment to fill the product needs of the retail store locations they serve, as well as to fulfill e-commerce orders from customers. Our distribution centers are leased under long-term agreements. Third-party trucking companies are used to disburse inventory from the distribution centers to and from our stores. These distribution centers are strategically located throughout our footprint to efficiently serve our retail locations and have the capacity to service up to approximately 150 stores per distribution center.
Competition
The retail sporting goods and outdoor industry is highly competitive based on many variables including price, product assortment, customer service, omnichannel experience and store locations. We compete with mass merchants, department stores, large format sporting goods and outdoor stores, traditional sporting goods and outdoor stores, specialty retailers, and online retailers. We seek to attract a broad range of consumers by providing sporting goods and outdoor recreation products that appeal to customers of all experience levels, including families and casual participants. We differentiate ourselves from our competitors by providing a value-based assortment through both leading national brands and our private label brands. For additional information related to our competitors, see the risk factors herein in “Item 1A. Risk Factors”.
Information Systems
Our information systems are critical to our day-to-day operations as well as to our long-term growth strategies. Our technology is integrated across multiple functions throughout the organization, providing the data analysis, automation and solutions necessary to support our communications, inventory and supply chain management, store operations, distribution, point-of-sale, e-commerce, customer, financial reporting and accounting functions. Our technology is the foundation of our merchandising and marketing functions; it processes our customers’ orders and integrates our e-commerce sales with stores. We are leveraging our data to make more informed decisions around inventory, marketing, store-level operations, and customer engagement. We have agreements with third parties to provide hosting services and administrative support for portions of our infrastructure, and utilize cloud-based systems in addition to those hosted on premises.
Seasonality
Our business is subject to seasonal fluctuations. A significant portion of our net sales and profits is driven by summer holidays, such as Memorial Day, Father’s Day and Independence Day, during the second quarter. Our net sales and profits are also impacted by the July/August back-to-school selling season during the second and third quarters, the November/December holiday selling season, and in part by the sales of cold weather sporting goods and apparel during the fourth quarter.
Our Team Members
Our missi on is to provide “Fun for All” and a critical component to our success is our people. As of January 31, 2026, we employed approximately 23,000 team members in the U.S. and Hong Kong. Of those team members, approximately 45% were full-time and 55% were part-time. Our employment levels may fluctuate over the course of the year due to the seasonality of our business. None of our team members are covered by collective bargaining agreements. The Company believes that it has a good working relationship with its team members.
Culture and Core Values. We strive to provide rewarding careers, benefits, and a workplace culture where team members are empowered to be their authentic self—drawing on their unique perspectives, passions, skills, interests, and experiences in their day-to-day jobs. Our core values establish a strong foundation for our culture and represent the key expectations we have of our team members. These include the following:
• Customer focus and service
• Excellence in all we do
• Responsible leadership
• Initiative with urgency
• Students of the business
• Integrity always
• Positive impact on our communities
Talent Management. We believe the best way to serve our customers is to invest in top talent, be open to innovation, and have the vision to succeed. We are focused on creating a winning team by recruiting and retaining great people, promoting teamwork, and fostering an enjoyable and rewarding work environment. We also strive to provide all team members with opportunities for personal growth, cross-functional training, job opportunities and career advancement. We offer a mix of instructor-led, online, and blended courses in several key areas, including Career Development and Leadership Development. Our wide variety of courses ranges from job specific (i.e., functional) to broad-based leadership training to safety, security, ethics, and compliance training. We also engage in regular and ongoing feedback, annual performance reviews and annual talent calibration conversations. Succession planning is conducted on an annual basis to identify suitable internal candidates for key positions within the Company.
Compensation and Benefits. In addition to offering competitive compensation, we offer comprehensive benefits to eligible team members. Our benefits include, but are not limited to: medical, dental, and vision insurance; participation in the Company’s 401(k) retirement savings plan with a Company match; participation in the Company’s Employee Stock Purchase Plan; paid time off; professional and educational reimbursement programs; medical, family, and bereavement leave; life, legal, pet, and accident insurance; paid parental leave; and a team member discount.
Workplace, Health and Safety. The health and safety of our customers, team members, and communities is our top priority. We strive to ensure that a safe and hygienic working environment is provided and that occupational health and safety practices which prevent accidents and injury are promoted. Throughout our stores, distribution centers, and corporate headquarters, we employ policies, procedures, and training to promote safe and healthy work environments.
Our team member handbook outlines safety expectations, but we also empower our team members with knowledge and skills from various safety training courses during the onboarding process and on an ongoing basis through our learning engagement system with topics such as incident reporting, evacuation, active shooter response, hazardous materials, and heat safety. We continue to focus on developing and driving our safety-first culture through awareness, training, and actions to reduce the frequency and severity of safety incidents.
Information about our Executive Officers
Below is a list of our executive officers, their respective ages as of March 17, 2026 and a brief account of the business experience of each of them.
Name
Age
Position
Steven (Steve) P. Lawrence
Chief Executive Officer
Samuel (Sam) J. Johnson
President
Earl Carlton (Carl) Ford IV
Executive Vice President and Chief Financial Officer
Matthew (Matt) M. McCabe
Executive Vice President and Chief Merchandising Officer
Steven (Steve) P. Lawrence has served as Chief Executive Officer and on the Board of Directors since June 2023. Mr. Lawrence joined the Company in February 2019 as Executive Vice President and Chief Merchandising Officer. Prior to joining the Company, Mr. Lawrence was President, Chief Executive Officer and served on the board of directors at francesca’s from October 2016 to January 2019. From May 2012 to September 2016, he served as Chief Merchandising Officer at Stage Stores. Mr. Lawrence also spent nearly 12 years working in various merchandising leadership roles at J.C. Penney after 10 years at Foley’s/May Co. Mr. Lawrence obtained his Bachelor of Business Administration in Finance from the University of Notre Dame.
Samuel (Sam) J. Johnson has served as President since October 2023. Mr. Johnson joined the Company in April 2017 as Executive Vice President, Retail Operations. Prior to joining the Company, Mr. Johnson spent seven years with hhgregg, Inc., where he most recently served as Chief Retail Officer. While a t hhgregg, Inc., he led functions including store operations, customer relations, commercial sales, real estate and visual merchandising. Prior to hhgregg, Inc., he spent more than 20 years in various leadership roles with Sears Holdings Corporation, including Vice President of Small Stores .
Earl Carlton (Carl) Ford IV has served as Executive Vice President and Chief Financial Officer since July 2023. Mr. Ford joined the Company in January 2019, and served as the Senior Vice President, Finance, where he led the Financial Planning and Analysis function of the Company from January 2019 to July 2023 and the Loss Prevention and Inventory Control teams from February 2020 to July 2023. Prior to joining the Company, Mr. Ford served as the Vice President of Financial Planning & Analysis at Belk, Inc. He also served as the Vice President of Internal Audit and held other leadership roles in accounting and treasury during his 15 years at Belk, Inc. Prior to joining Belk, Inc., Mr. Ford worked for Deloitte & Touche in their Audit practice. Mr. Ford holds a Master's Degree in Accounting from the University of Alabama, a Bachelor's Degree in Accounting from the University of Southern Mississippi and is an active Certified Public Accountant.
Matthew (Matt) McCabe has served as the Executive Vice President and Chief Merchandising Officer since June 2023. Mr. McCabe joined the Company in December 2016 as the Vice President, Divisional Merchandise Manager of Athletic and Licensed Apparel and served as the Senior Vice President, General Merchandise Manager of Footwear from September 2017 to June 2023. In this role, he was responsible for setting the merchandising objectives and business strategy for the Footwear division. Prior to joining the Company, Mr. McCabe served as Vice President at Golfsmith International, where he led the apparel, footwear and soft consumables buying and private brand businesses. He has more than 25 years of experience in men's and women's apparel and footwear, and held various leadership roles at The Bon Ton Department Stores, Bachrach, Sears & Roebuck Co., and Mark Shale. Mr. McCabe holds a Bachelor of Science from Miami University.
Intellectual Property
Our trademarks, service marks, copyrights, patents, processes, trade secrets, domain names and other intellectual property, including our Academy Sports + Outdoors brand, our private label brands, such as Academy Sports + Outdoors, Magellan Outdoors, BCG, O’rageous, Game Winner, Outdoor Gourmet, Freely, R.O.W., Redfield, and H2OX, and our designs, names, slogans, images and trade dress associated with these brands, are valuable assets that are critical to our success.
We also enter into intellectual property agreements whereby the Company receives the right to use third-party owned trademarks typically in exchange for royalties. These agreements typically contain a one to three-year term and contractual payment amounts required to be paid by the Company.
Governmental Regulations
We operate in a complex regulatory and legal environment that exposes us to regulatory, compliance and litigation risks that could materially affect our operations and financial results. Specifically, we are subject to regulation by numerous federal, state and local regulatory agencies and authorities, including the U.S. Consumer Product Safety Commission, Equal Employment Opportunity Commission, Department of Labor, Occupational Safety and Health Administration, Department of Justice, Department of Treasury, Federal Trade Commission, Customs and Border Protection, Bureau of Alcohol, Tobacco, Firearms and Explosives, SEC, Internal Revenue Service, or IRS, and Environmental Protection Agency and comparable state and local agencies.
Laws and regulations affecting our business may change, sometimes frequently and significantly, as a result of political, economic, social or other events. Some of the federal, state or local laws and regulations that affect us include but are not limited to:
• consumer product safety, product liability or consumer protection laws;
• laws related to advertising, marketing, pricing and selling our products, including but not limited to firearms, ammunition, and related accessories;
• labor and employment laws, including wage and hour laws and forced labor prevention laws;
• tax laws or interpretations thereof, including collection of state sales tax on e-commerce sales;
• data protection and privacy laws and regulations;
• environmental laws and regulations;
• hazardous material laws and regulations;
• customs or import and export laws and regulations, including collection of tariffs on product imports;
• intellectual property laws;
• antitrust and competition regulations;
• banking and anti-money laundering regulations;
• Americans with Disabilities Act, or ADA, and similar state and local laws and regulations;
• website design and content regulations;
• U.S. Foreign Corrupt Practices Act, or FCPA and other anti-corruption laws; and
• securities and exchange laws and regulations.
We are a federally licensed firearms dealer, and we sell firearms, ammunition, and related accessories, including suppressors. Firearms represented approximately 6% of our net sales in 2025. Numerous federal, state and local laws and regulations govern the procurement, transportation, storage, distribution and sale and marketing of firearms, ammunition, and related accessories, including the regulations governing the performance of federally and state mandated procedures for determining customer firearm purchase eligibility (such as age and residency verification, background checks and proper completion of required paperwork). In June 2021, the United States Department of Justice announced a policy emphasizing “zero tolerance” for willful violations of the law by federally licensed firearms dealers; in 2025 that policy was repealed. Federal, state, and local agencies continue to regulate and enforce compliance requirements applicable to firearms dealers. In the future, there may be increased federal, state or local regulation and enforcement affecting the sale of firearms, ammunition, and related accessories, including taxation or restrictions on the type of firearms, ammunition, and accessories available for retail sale, which could reduce our sales and profitability.
For additional information, see the risk factors herein in “Item 1A. Risk Factors” under the sub-caption “Legal and Regulatory Risks”.
Available Information
Our website address is www.academy.com. We use our website as a channel of distribution for company information. We will make available free of charge on the Investor Relations section of our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act. We will also make available through our website other reports filed with or furnished to the SEC under the Exchange Act, including our proxy statements and reports filed by officers and directors under Section 16(a) of the Exchange Act, as well as our Ethics and Code of Conduct Policy. Financial and other material information regarding the Company is routinely posted on our website and is readily accessible. We do not intend for information contained on our website to be part of this Annual Report on Form 10-K.
Item 1A. Risk Factors
Investing in our securities involves a high degree of risk. In addition to the other information contained in this Annual Report, you should consider the following risk factors before investing in our securities. Risks in this section are grouped in the following categories: (1) Risks Related to Our Business and Industry; (2) Legal and Regulatory Risks; (3) Risks Related to Our Indebtedness; and (4) Risks Related to the Ownership of Our Common Stock. Many risks affect more than one category, and the risks are not in order of significance or probability of occurrence because they have been grouped by categories.
Risks Related to Our Business and Industry
Our results of operations are highly dependent on the U.S. economy and U.S. consumer discretionary spending and an economic and financial downturn may cause a decline in U.S. consumer discretionary spending and may adversely affect our business, operations, liquidity, capital resources and financial results.
Our results of operations are affected by the relative condition of the U.S. economy. All of our sales are generated within the United States, making our results of operations highly dependent on the U.S. economy and U.S. consumer discretionary spending. A decline in discretionary spending by U.S. consumers could negatively affect our business and results of operations.
The general conditions that affect U.S. consumer discretionary spending in our markets include:
• health of the economy;
• consumer confidence in the economy;
• wages, jobs and unemployment trends;
• political or social unrest, global hostilities, trade disputes, labor shortages, and other disruptions to the supply chain;
• public health events (such as pandemics and epidemics) and their effect on our customers, team members, vendors/suppliers and other stakeholders;
• consumer credit availability;
• consumer debt levels;
• changes to raw material and commodity prices;
• interest rates and inflation;
• tax rates and tax policy;
• immigration policy;
• import and customs duties/tariffs and policy;
• impact of natural or man-made disasters;
• legislation and regulations;
• the housing market, including real estate prices and mortgage rates;
• gasoline and fuel prices; and
• national and international security and safety concerns.
Increasing volatility in financial markets may cause some of the aforementioned conditions to change with even greater degree of frequency and magnitude.
Our comparable sales, net sales per square foot, customer traffic or average value per transaction may be adversely affected if, for example, our customers reduce their purchases with us due to inflationary pressures, job losses, foreclosures, bankruptcies, higher consumer debt and interest rates, higher taxes, reduced access to credit, falling home prices and lower consumer confidence. A reduction in overall consumer spending which causes customers to shift their spending to products other than those sold by us or to products sold by us that are less profitable could result in lower net sales, decreases in inventory turnover or a reduction in profitability due to lower margins, which could make it more difficult for us to generate cash flow sufficient to satisfy our obligations under our indebtedness. A prolonged period of depressed consumer spending could have a material adverse effect on our business.
Additionally, if the U.S. or global economy experiences a crisis or downturn, including any capital markets volatility or government intervention in the financial markets, or if the U.S. or global economy experiences a prolonged period of decelerating or negative growth, then our liquidity, capital resources or results of operations could be materially and adversely impacted. For example, although we typically generate funds from our operations to pay our operating expenses and fund our capital expenditures, our ability to continue to meet these cash requirements over the long-term may require access to additional sources of funds, including our ABL Facility, incremental term loan facilities and the equity and debt capital markets. Adverse financial and economic conditions, including as a result of increases in interest rates, may adversely affect our ability to draw on our ABL Facility, the ability of banks to honor draws on our ABL Facility or our ability to obtain incremental term loan facilities or access the equity and debt capital markets. In addition, adverse economic conditions could adversely affect our suppliers’ access to the capital and liquidity required to maintain their inventory, production levels, timeliness and product quality and to operate their businesses, which could adversely affect our supply chain, or could reduce our suppliers’ offerings of trade credit, customer incentives, vendor allowances, cooperative marketing expenditures and product promotions, which could adversely affect our results of operations. Adverse economic conditions could also make it difficult for both us and our suppliers to accurately forecast future product demand trends, which could cause us to carry too much or too little merchandise in various product categories or could adversely affect our landlords and real estate developers of retail space, which may limit the availability of attractive leased store locations. The potential ongoing effects of an economic and financial crisis are difficult to forecast and mitigate. We may experience difficulties in operating and growing our operations to react to a U.S. or global financial or economic crisis or downturn. We may be unable, in such cases, to predict how robust a recovery of the U.S. or global economy will be or whether or not it will be sustained.
A significant portion of the merchandise that we sell is manufactured in foreign countries which exposes us to various international risks, including additional tariffs, that could have a material adverse effect on our business and results of operations.
A significant portion of the merchandise that we sell, including merchandise we purchase from domestic suppliers and much of our private label brand merchandise, is manufactured in countries such as China, Bangladesh, Vietnam, Cambodia, and Brazil. Foreign imports subject us to the risks of changes in tariffs and duties, quotas, loss of “most favored nation” status with the United States for a particular foreign country, delays in shipment, shipping port and ocean carrier constraints, supply and demand constraints, labor strikes, work stoppages, supply chain disruptions including those caused by extreme weather, natural disasters, public health events (such as pandemics) or other disruptions, freight cost increases and economic uncertainties (including the United States imposing anti-dumping or countervailing duty orders, tariffs, safeguards, remedies or compensation and retaliation due to illegal foreign trade practices). To the extent that any foreign manufacturers from whom we purchase products directly or indirectly employ labor, environmental, corruption, workplace safety, or other business practices that vary from those commonly accepted in the United States, we could be hurt by any resulting negative publicity or, in some cases, potential claims of liability. For example, in late 2021, the United States government enacted the Uyghur Forced Labor Prevention Act (“UFLPA”), which presumes goods produced in the Xinjiang Uyghur Autonomous Region of China, or with labor linked to specified Chinese government-sponsored labor programs, were produced using forced labor and prohibits importation of such goods into the United States absent clear and convincing evidence proving otherwise. Compliance with the UFLPA has become increasingly complex and the UFLPA Entity List has expanded, with additional industries and materials designated as high-priority sectors for enforcement. As a result, we may experience shipment delays, seizures, supply disruptions, increased compliance and documentation costs, or the need to source alternative suppliers, any of which could have a material adverse effect on our business, financial condition, and results of operations. Merchandise or raw materials purchased from alternative sources may be of lesser quality or more expensive than the merchandise or raw materials we currently purchase.
These trade-related risks are heightened by the evolving, frequent, and unpredictable nature of global trade policies, including the use of executive authority to impose, modify, suspend or expand tariffs and other trade restrictions. Such actions may be implemented with limited advance notice and may apply to a broad range of countries, materials, and products, including steel, aluminum, and other derivative products, and may be subject to retaliation by affected countries. As a result, we may be unable to timely adjust our sourcing, pricing, or operational strategies to mitigate the impacts of such changes, which could materially increase our costs and adversely affect our margins, results of operations, and financial condition.
The political, health, safety, security, and economic environments of the countries in which we or our vendors obtain merchandise or raw materials have the potential to materially affect our operations. In the event of disruptions or delays in supply due to economic, political, health, safety or security conditions in foreign countries or their relations with the United States, such disruptions or delays could adversely affect our results of operations unless and until alternative supply arrangements could be made. For example, we have experienced, and may continue to experience, disruptions resulting from public health events, significant changes in trade policy, labor shortages, geopolitical tensions, and constraints within global transportation and logistics networks, any of which may result in increased costs, delays, or reduced availability of merchandise. The imposition of trade tariffs, sanctions
or other regulations against merchandise imported by us, or the loss of “normal trade relations” status with the countries in which we or our vendors obtain merchandise or raw materials, could significantly increase our cost of products imported into the United States and harm our business. The continuation or escalation of global trade tensions could have further adverse effects on our sales and profitability, results of operations and financial condition. Additionally, the prices charged for the merchandise that we purchase by foreign manufacturers may be affected by the fluctuation of their local currency against the U.S. dollar.
In addition, the federal government periodically considers other restrictions on the importation of products obtained by our vendors and us. If the United States were to withdraw from or materially modify any international trade agreements to which it is a party, or if tariffs were raised on the foreign-sourced goods that we sell, or if border taxes were implemented, then the goods we import may become more expensive or may no longer be available at a commercially attractive price or at all, each of which in turn could have a material adverse effect on our business, financial condition and results of operations.
In addition, the increases in the costs of labor and other costs of doing business in China could significantly increase our costs to produce our merchandise and could have a negative impact on our net sales, operating income and net income. Factors that could negatively affect our business include a potential significant revaluation of the Chinese Yuan, which may result in an increase in the cost of producing products in China, labor shortages and increases in labor costs in China, and difficulties in moving products manufactured in China through the ports on the western coast of North America, whether due to port congestion, labor disputes, product regulations and/or inspections or other factors, and natural disasters or health pandemics impacting China.
Problems with operating, updating or implementing our information systems could disrupt our operations and negatively impact our business operations and materially and adversely affect our financial results.
The efficient operation of our business is dependent on the successful integration and operation of our information systems, some of which require interoperability to perform the intended function or are dependent on services managed or provided by third-parties. For example, we rely on our information systems to manage merchandise planning and replenishment, warehousing and distribution, store operations, customer relationships, e-commerce, and customer transactions, optimize our overall inventory levels, process financial information and sales transactions, pay and receive funds, prevent security breaches and fraud, communicate internally and externally, provide support services, and comply with legal and regulatory obligations.
Our information systems, if not functioning properly or if failing to function altogether, could disrupt our ability to track, record, and analyze sales and inventory and could cause disruptions of operations, including, among other things, our ability to order, process and ship inventory, process financial information including credit card transactions, prepare financial statements, defend against potential data breaches and credit card fraud, process payrolls or vendor payments or engage in other similar normal business activities. Our information systems, including our back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, worms, other malicious computer programs, denial-of-service attacks, security breaches or other cybersecurity incidents, catastrophic events and severe weather such as fires, floods, tornadoes, earthquakes and hurricanes, and usage or coding errors by our team members or partners. From time to time we have experienced, and we may in the future, further experience interruptions, damages, or failures of our information systems, some of which disrupt our business and cause us to expend additional resources to rectify. Although we attempt to mitigate the risk of possible business interruptions by employing customary strategies, any material disruption, malfunction or any other similar problem in or with our information systems could negatively impact our business operations and materially and adversely affect our financial results.
From time to time, our information systems may require repair, upgrade, enhancement, integration and/or replacement for us to maintain successful current operations and achieve future sales and store growth.
Updating our existing information systems subjects us to numerous additional risks, including:
• loss of information;
• disruption of normal operations;
• changes in accounting or other operating procedures;
• changes in internal control over financial reporting or general computer controls;
• problems maintaining accuracy of historical data;
• data breaches caused by mistakes made in the process of updating or upgrading applications or hardware;
• allocation and dedication of key business resources to the updating of existing systems;
• ability to attract and retain adequate experienced technical resources and third-party contractors for the updating of existing systems;
• unknown impact on remaining systems;
• adequacy of training and change management to address critical changes in business processes and job functions; and
• updated information system ultimately does not meet the needs of the business.
Any failure to successfully update and maintain our information systems, and any missteps, delays, cost overruns, vendor disputes, technical challenges or other similar issues that may arise during the updating of our information systems, could have a material impact on our business, financial condition, results of operations, internal controls over financial reporting and ability to manage our business effectively.
From time to time, we may undertake initiatives involving numerous information systems to improve and enhance our capabilities, whether for operational, financial or risk reduction purposes. Any failure to timely, properly or adequately implement these information systems initiatives could result in increased costs or risks, the diversion of our management’s and team members’ attention and resources and could materially adversely affect our results of operations, our internal controls over financial reporting or general computer controls, our ability to manage our business effectively and possible disruption of our business operations or financial reporting.
We use and expect to continue to use machine learning and other types of artificial intelligence in our business, and challenges with properly managing its use could adversely affect our business.
We use and expect to continue to use artificial intelligence and machine learning technology that is rapidly evolving and gaining capabilities. Advancements in technology may allow us to expand the use of artificial intelligence, including generative artificial intelligence, into key operational and/or administrative aspects of our business over time. Our business, financial condition, and results of operations may be adversely affected if the output of our use of artificial intelligence is or is alleged to be deficient, inaccurate, or biased. As with other emerging technology, new providers may arise from time to time, regulatory and legal limitations on its use may evolve, costs may not be predictable, and the successful use of such technology may require changes to business processes, data systems and processes, and the delivery of products and services provided to customers. We may be required to expend additional resources in order to use artificial intelligence responsibly and effectively in compliance with applicable laws and standards. Our competitors may incorporate artificial intelligence into their business more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.
If we are not successful in managing our inventory balances, our sales may decline and our results of operations may be negatively affected.
We must maintain sufficient inventory levels of merchandise that our customers desire to successfully operate our business. A shortage of popular merchandise could reduce our net sales. Conversely, we also must seek to avoid accumulating excess inventory to maintain appropriate in-stock levels. If we overstock unpopular merchandise, then we may be forced to take significant inventory markdowns or miss opportunities for the sale of other merchandise, both of which could have a negative impact on our profitability, and, in turn, our sales may decline or we may be required to sell the merchandise we have obtained at lower prices. For example, the popularity of much of the licensed apparel we offer is dependent on the performance of certain sporting teams throughout the course of the applicable sports seasons. If we overestimate or underestimate the projected success of a certain sports team, we may have to take significant mark-downs of our licensed apparel for that sports team or we may miss the opportunity to sell additional licensed apparel or other products with that sports team’s logo. The success of sporting teams is highly uncertain and difficult to predict. In addition, factors beyond our control, such as severe weather, local safety concerns, player-lockouts or strikes, may significantly affect whether or not certain sports leagues are able to host their games in their usual seasons, and if they are, whether or not spectators can or are able to attend. Our licensed apparel is significantly more popular when spectators are able to attend the games of the sports teams featured on such apparel. Rapid changes in trade policy, tariffs, or sourcing strategies may also contribute to inventory forecasting challenges, including the timing and quantity of inventory purchases, which could increase the risk of excess inventory, supply shortages, or mismatches between product availability and consumer demand.
If we are unable to predict or effectively react to changes in consumer tastes and preferences, or if we fail to obtain access to, and sell brand name merchandise at competitive prices, then we may lose customers and our sales may decline and our results of operations may be negatively affected.
The level of success we achieve is dependent on, among other factors, the frequency of merchandise and service innovations, how accurately and timely we predict consumer tastes and preferences regarding sporting goods and outdoor recreation merchandise, the level of consumer demand, the availability of merchandise, the related impact on the demand for existing merchandise, and the competitive environment. Our products must appeal to a broad range of customers whose preferences cannot be predicted with certainty and are subject to change. We must identify and obtain access to a broad assortment of brands and styles, to enable us to offer to our customers attractive, innovative and high-quality merchandise on a continuous basis. It is difficult to predict consistently and successfully the products and services our customers will demand as we often purchase products from our vendors several
months in advance of the proposed delivery. Our failure to timely identify or effectively respond to changing consumer tastes, preferences and spending patterns could negatively affect our relationship with our customers, the demand for our merchandise and services and our market share, which could have a material adverse effect on our net sales and results of operations.
An unexpected major shift in consumer demand away from sporting goods, sports and casual apparel and footwear, and outdoor recreation products could have a material adverse effect on our business, results of operations and financial condition. Consumer spending on sporting goods, sports and casual apparel and footwear, and outdoor recreation products could decrease or be displaced by spending on other activities due to a number of factors, including:
• shifts in behavior away from team sports and outdoor activities in favor of travel, media (including social media) and electronics-driven leisure activities;
• state, local and federal government budget cuts on facilities and activities, such as school athletic budgets, parks, ball fields, recreational sports leagues, hunting and fishing services, etc.;
• weak economic conditions, recession, inflation or other factors, such as global or local pandemics;
• legal and regulatory changes in federal and state hunting and fishing seasons, bag limits and firearm and ammunition restrictions;
• consumer activism relating to controversial products we may carry, services we may perform, or our corporate philosophy, including those relating to firearms and ammunition, which could cause them to take their retail business elsewhere;
• escalating costs of sporting and outdoor activities due to adverse changes in economic conditions, including inflation, rising fuel prices, rising participation fees and rising sporting license fees; and
• severe weather and natural or man-made disasters (e.g., an oil spill closing large areas of hunting or fishing), including heat waves, freezes, hurricanes, tornadoes, large storms and floods.
Total consumer spending may not continue to increase at historical rates due to slowed production growth and shifts in population demographics, and it may not increase in certain product categories given changes in consumer interests and participation rates. Our results of operations could be negatively affected if consumer spending on sporting goods and outdoor recreation products or sports participation rates decline.
Our business is highly dependent upon our ability to purchase brand name merchandise from our vendors at competitive prices. We cannot guarantee that we will be able to acquire such brand name merchandise at competitive prices or on competitive terms in the future. In this regard, brand name merchandise that is in high demand may be allocated by brand name vendors based upon the vendors’ internal criterion which is beyond our control. If we lose any of our brand name vendors or if any of our brand name vendors fail to supply us with their brand name merchandise, we may not be able to meet the demand of our customers for brand names merchandise.
Changes in consumer preferences and spending patterns may be long-lasting or structural rather than temporary and could be amplified by pricing actions taken in response to higher costs or tariffs, which may cause consumers to reduce discretionary spending or shift purchases to alternative products or channels.
Our e-commerce activities expose us to various risks that could have a material adverse impact on our overall results of operations.
Our customers are increasingly using computers, tablets, mobile phones and other devices to shop in our stores and online for our products. Our business has become increasingly omnichannel as we strive to deliver a seamless shopping experience to our customers through both online and in-store shopping experiences. We utilize our own e-commerce platform that allows us to control our customer experience without relying on a single third-party provider. Maintaining and continuing to improve our e-commerce platform involves substantial investment of capital and resources, integrating a number of information and management systems from different vendors, artificial intelligence initiatives, increasing supply chain and distribution capabilities, attracting, developing and retaining qualified personnel with relevant subject matter expertise, and effectively managing and improving the customer experience. Our e-commerce operations are subject to numerous risks that could have a material adverse impact on our overall results of operations, including:
• expansion of our sales across the United States, thereby, subjecting us to the regulatory and other requirements of the 50 states;
• website operating issues, including website availability, system reliability, website operation, Internet connectivity, website errors, computer viruses, telecommunication failures, electronic break-ins or similar disruptions;
• overall website design and functionality, including search capabilities;
• the need to keep pace with rapid technological change and investments from competitors, and maintain investments necessary for our e-commerce operation;
• legal compliance issues related to the online sale of merchandise;
• intellectual property litigation related to the enforcement of patent rights;
• privacy and personal data security;
• protection against credit card and gift card fraud;
• fulfillment, inventory control and shipping issues for e-commerce transactions;
• tax issues, including state sales tax collection for e-commerce transactions;
• hiring, retention and training of personnel qualified to conduct our e-commerce operation;
• ability to procure adequate computer hardware and software and technology services and solutions from third-party providers; and
• reduction in visits to, diversion and/or cannibalization of sales from, existing retail stores.
Our e-commerce activities also carry challenges such as identifying our e-commerce customer, marketing our website, establishing a profitable on-line merchandising mix, managing shipping costs to our customers, setting prices to compete against other on-line retailers, maintaining accurate website content and functionality, timely and accurately fulfilling orders, integrating our e-commerce business with our store operations, and growing the operation as part of our overall strategic plan. In addition, offering different products through each channel could cause conflicts and cause some of our current or potential e-commerce customers to consider our competitors. Offering products through our e-commerce platform could also cause some of our current or potential vendors to consider competing internet or mobile offerings of their products either on their own or through competing distributors. If we do not successfully manage the risks and navigate the challenges associated with our e-commerce activities, it could have a material adverse effect on our results of operations. Further, governmental regulation of e-commerce continues to evolve in such areas as marketing and advertising, taxation, privacy, data protection and privacy, pricing, content, copyrights, distribution, mobile communications, electronic contracts and other communications, consumer protection, the provision of online payment services, the design and operation of websites and the characteristics and quality of products and services. Unfavorable changes to regulations in these areas could have a material adverse impact on our e-commerce activities.
Any failure to protect the integrity, confidentiality, and availability of our information systems (including our technology infrastructure and networks, third party services, and hosted and on-premises software) and data that we hold relating to us and our customers, team members, and partners (including vendors) could result in lost sales, fines, penalties, assessments, investigations, inquiries, and/or lawsuits, a loss of confidence in us, and harm to our reputation, business, results of operations, and financial condition.
The security of our information systems (including our technology infrastructure and networks, third party services, artificial intelligence, and hosted and on-premises software) and data (including from our customers, team members and partners) is critical to our business as a retailer, and we devote significant resources to protecting our information systems and data. In order to operate our business and to provide products and services to our customers, we collect, source, store, maintain, and process data that can be used to identify a person (i.e., personal data or personally identifiable information), including customers, partners, and team members, along with our intellectual property and proprietary business information. We share data with third parties for further processing consistent with applicable terms and conditions. Our retail stores and online operations depend on the secure transmission and processing of confidential information and the continued operation of information systems necessary to perform store operations and to process transactions. Our customers provide payment card and gift card information, alternative payment information, and other personal information to purchase products or services, enroll in promotional programs, apply for credit, create accounts and make purchases on our website or mobile applications, participate in our loyalty program, or otherwise communicate and interact with us. Job applicants provide personal information in connection with their employment application and our team members provide personal information in connection with their continued employment. We may share information about individual persons with partners assisting with certain aspects of our business. Some personal data and personally identifiable information may be deemed sensitive or otherwise protected under applicable laws or regulations and may be subject to specific requirements for collection, processing, sharing, security, and disposal.
We and our partners rely on commercially available information security technology and industry standard operational practices for collecting, storing, maintaining, transmitting, protecting, and processing data. Despite our security measures, we may not be able to anticipate, prevent, and stop future cybersecurity incidents, including attacks to our information systems and data and those of our partners. Threat actors may have the ability to defeat our security measures and may obtain access to data (including personal data or personally identifiable information) that we hold relating to us and our customers, team members, and vendors, or may cause operational harm. For example, ransomware events could cause key systems to be unavailable for use, or credential stuffing attacks
of customer accounts on our website could cause customer privacy breaches and unauthorized charges to payment or gift cards, or phishing/smishing attacks, in which attackers masquerade as a trustworthy entity in an electronic communication (including email or text message), could gain control of a user's device and/or credentials. The techniques used by threat actors to attack or access information systems and data evolve and may not be recognized until or after being launched against a target. We may not have the resources or technical sophistication to anticipate, prevent or stop new or evolving cybersecurity incidents, including attacks to our information systems and data and those of our partners. We may also be vulnerable to breaches due to human error or other disruptions, including data privacy breaches by employees, insiders or others with authorized access, or other cybersecurity incidents. As new and improved technologies and methodologies become available to threat actors (for example, artificial intelligence), increased risks and currently unknown vulnerabilities could result in significant future expenditures related to our information systems, technology infrastructure and operations. A future cybersecurity incident could also (1) result in unauthorized access, disclosure, loss, or misuse of our intellectual property, proprietary information, or team member, customer or supplier data, (2) attract substantial media attention, (3) damage our relationships with our customers, team members, and partners, (4) cause a loss of confidence in us or cause us to violate applicable privacy laws and obligations, (5) expose us to costly government enforcement actions or private litigation and financial liability (possibly beyond our insurance coverage), (6) increase the costs we incur to protect against or remediate cybersecurity incidents and vulnerabilities, (7) result in additional costs and operational activities to comply with consumer protection and data privacy laws and obligations, and/or (8) disrupt our operations and distract our management and other key personnel from performing their primary operational duties, any of which could adversely affect our reputation, competitiveness, business, results of operations, and financial condition. Any of the foregoing can be exacerbated by a delay or failure to detect a cybersecurity incident or the full extent of such incident.
We maintain cyber liability insurance in an amount and coverage we deem appropriate, taking into account the specific coverages and coverage requirements in the marketplace. There is no guarantee that our cyber liability insurance will cover a particular cyber incident, that such coverage will be sufficient, or that insurance proceeds will be paid in a timely manner. If an insurance carrier seeks to deny coverage of a particular loss, we may incur costs to dispute the denial of coverage, which could result in paying costs that otherwise would be recovered from insurance and delays in or ultimate denial of coverage.
The data privacy and cybersecurity regulatory environment is constantly changing, with new and increasingly rigorous or complex requirements. Consumer data privacy, cybersecurity, artificial intelligence, and other laws and related regulations have been enacted and additional laws, regulations, and standards are under consideration by various state and federal legislatures, regulatory authorities, and standards bodies. Maintaining compliance with those requirements may require significant effort, cost, new or improved technical capabilities, and changes to our business practices, and may limit our ability to obtain or use data to provide a personalized customer experience or to engage in certain marketing practices. In addition, any alleged or actual failure to comply with applicable requirements could subject us to fines, sanctions, governmental investigations, lawsuits, reputational damage, and other risks and costs that may be difficult to anticipate but could become material.
Intense competition in the sporting goods and outdoor recreation retail industries could limit our growth and reduce our profitability.
The market for sporting and outdoor recreation goods is highly fragmented, intensely competitive, and continually evolving. Our current and prospective competitors include many large companies, some of which have substantially greater market presence, name recognition and financial, marketing, technological, and other resources than us. We compete directly or indirectly with the following categories of companies:
• mass general merchants;
• department stores;
• large format sporting goods stores;
• traditional sporting goods stores;
• specialty outdoor retailers;
• specialty footwear retailers;
• internet retailers;
• suppliers that sell directly to customers; and
• emerging or non-traditional retail formats, including digitally native brands and marketplace platforms.
Pressure from our competitors could require us to reduce our prices or increase our spending for advertising, promotion, and customer acquisition. Traditional competitors have become increasingly promotional and, if our competitors reduce their prices, it may be difficult for us to reach our net sales goals without reducing our prices, which could impact our margins. The adoption by competitors of innovative store formats, aggressive pricing, promotion or delivery strategies and alternative retail models, such as mobile-first commerce, social commerce, and third-party marketplaces, could cause us to lose market share and could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, as the popularity and use of Internet sites, free merchandise shipping, and suppliers selling directly to consumers continue to increase, our business faces increased competition from various domestic and international sources, including our suppliers. The ability of consumers to compare prices on a real-time basis through the use of smartphones, apps, and digital technology puts additional pressure on us to maintain competitive prices, inventory availability, and fulfillment capabilities.
We may require significant capital in the future to sustain or grow our business, including our store and e-commerce activities, due to increased competition and market entry by new or disruptive retailers. There is no assurance that cash flow from operations will be sufficient to meet those needs or that additional sources of capital will be available on acceptable terms or at all.
A significant disruption to our distribution network or the timely receipt of inventory could adversely impact sales or increase our transportation costs, which would decrease our profits.
We rely upon various means of transportation, including ships and trucks, to deliver products from vendors to our distribution centers and from our distribution centers to our stores. Consequently, our results can vary depending upon numerous factors affecting transportation, including the price of fuel and the availability of trucks and ships. The price of fuel and demand for transportation services has fluctuated significantly over the last few years, and has resulted in increased costs for us and our vendors. For example, during fiscal 2021, we experienced a period of decreased or delayed supply and high inflation as a result of increased competition across the industry for resources, which constrained the supply chain and negatively impacted our transportation and inventory costs. While we have seen some improvement to these constraints, resulting in decreased freight costs over the past couple of years, we may from time to time experience decreased or delayed supply. In addition, changes in regulations may result in higher fuel costs through taxation, transportation restrictions or other means. Fluctuations in transportation costs and availability could adversely affect our results of operations.
Labor shortages in the transportation industry have historically had and could potentially continue to negatively affect transportation costs and our ability to supply our stores in a timely manner. In particular, our business is highly dependent on the shipping and trucking industry to deliver products to our distribution centers and our stores. Our results of operations may be adversely affected if we, or our vendors, are unable to secure adequate transportation resources at competitive prices to fulfill our delivery schedules to our distribution centers or our stores.
Difficulties in moving products manufactured overseas and through the ports of North America, whether due to port congestion, government shutdowns, labor disputes, product regulations and/or inspections or other factors, including man-made or natural disasters and public health events, could negatively affect our business.
We may not be able to continue our store growth plans successfully or continue to manage our growth effectively, and our new stores may not generate sales levels necessary to achieve store-level sales or profitability comparable to that of our existing stores, which could materially and adversely affect our business, financial condition and results of operations.
Our growth strategy includes opening stores in existing markets and, from time to time, new markets. We must successfully choose our store sites, execute favorable real estate transactions on terms that are acceptable to us, construct and equip the stores with furnishings and appropriate merchandise, hire and train competent personnel and effectively open and operate these new stores and integrate the stores into our operations. We may also need to expand our distribution infrastructure, including the addition of new distribution centers, as it might be difficult to extract additional efficiencies from our existing distribution infrastructure. Our plans to increase our number of retail stores will depend in part on the availability of existing vacant retail stores or developable store sites. The availability of second-generation retail store space and developable store sites (i.e., land and redevelopment sites) that meet our criteria is very low and highly-sought after by our competitors. In addition, land prices and lease rents have continued to increase due to various macroeconomic factors. Further, a lack of available financing on terms acceptable to real estate developers or a tightening credit market may adversely affect the retail sites available to us. We cannot expect that stores or sites will be available to us, or that they will be available on terms acceptable to us. If additional retail store sites are unavailable on acceptable terms, we may not be able to carry out a significant part of our growth strategy. Rising real estate costs and acquisition, construction and development costs, available credit to landlords and developers and landlord bankruptcies could also inhibit our ability to grow. If we fail to locate desirable sites, obtain lease rights to these sites on terms acceptable to us, hire adequate personnel and open and effectively operate these new stores, our financial performance could be adversely affected.
We typically lease our stores under operating leases with initial terms of approximately 15 years, and we generally cannot cancel these leases at our option. If a store is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. Similarly, we may be committed to perform our obligations under the applicable leases even if current locations of our stores become unattractive as demographic patterns change. In addition, as each of our leases expire, we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could require us to close stores in desirable locations.
In addition, our expansion into new and existing markets may present competitive, merchandising, marketing, human resources, distribution and regulatory challenges that differ from our current challenges, including expanding and improving our operating capabilities, competition among our stores, diminished novelty of our store design and concept, added strain on our distribution centers, maintaining our levels of customer service, training our store team members, additional information to be processed by our management information systems and diversion of our management’s attention from operations, such as the control of inventory levels in our stores. New stores in new markets, where we are less familiar with the target customer and less well-known by the target customer, may face different or additional risks and increased costs compared to stores operated in existing markets or new stores in existing markets. Expansion into new markets could also bring us into direct competition with retailers with whom we have no past experience as direct competitors. To the extent that we are not able to meet new challenges in expanding in new and existing markets, our sales could decrease and our operating costs could increase.
There also can be no assurance that we will be able to continue our expansion plans successfully or continue to manage our growth effectively, or that our new stores will generate sales levels necessary to achieve store-level profitability or profitability comparable to that of our existing stores. Our continued growth also depends in large part, upon our ability to open new stores in a timely manner and to operate them profitably. A slower than expected pace of new store openings may negatively impact our net sales growth and operating income. New stores also may face greater competition and have lower anticipated sales volumes relative to previously opened stores during their comparable years of operation. We may not be able to advertise cost-effectively in new or large markets in which we have less store density, which could slow sales growth at such stores. We also cannot guarantee that we will be able to obtain and distribute adequate product supplies to our new stores or maintain adequate warehousing and distribution capability to support our new stores at acceptable costs. Furthermore, the success of our stores depends on several factors including the sustained success of the shopping center where the store is located, consumer demographics, and consumer shopping habits and patterns. Changes in consumer shopping habits and patterns, reduced customer traffic in the shopping centers where our stores are located, financial difficulties of our landlords, or the shopping center operators, anchor tenants or a significant number of other retailers, and shopping center vacancies or closures, could impact the profitability of our stores and increase the likelihood that our landlords or the shopping centers operators fail to fulfill their obligations and conditions under our lease agreements or governing documents. Thus, our failure to achieve our expansion plans could materially and adversely affect our business, financial condition and results of operations.
Our success depends on the effectiveness of our marketing and advertising programs.
Brand marketing and advertising significantly affect sales at our locations, as well as e-commerce sales. Our marketing and advertising programs may not be successful, which may prevent us from attracting new customers and retaining existing customers. If sales decline, we will have fewer funds available for marketing and advertising, which could materially and adversely affect our revenues, business and results of operations. As part of our marketing efforts, we rely on print, television and radio advertisements, as well as search engine marketing, web advertisements, social media platforms and other digital marketing to attract and retain customers. These efforts may not be successful, resulting in expenses incurred without the benefit of higher revenues or increased customer or team member engagement. Customers are increasingly using internet sites and social media to inform their purchasing decisions and to compare prices, product assortment, and feedback from other customers about quality, responsiveness and customer service before purchasing our services and products. If we are unable to continue to develop successful marketing and advertising strategies, especially for online and social media platforms, or if our competitors develop more effective strategies, we could lose customers and our sales could decline.
Our failure to attract, train and retain quality team members in sufficient numbers, increases in wage and labor costs, and changes in laws and other labor issues could adversely affect our business.
The success of our business depends significantly on our ability to hire and retain quality team members, including store managers, Enthusiasts and other store team members, distribution center team members and corporate directors, managers and other personnel. We plan to expand our team member base to manage our anticipated growth. Competition for non-entry-level personnel, particularly for team members with retail experience, is highly competitive. Additionally, our ability to maintain consistency in the quality of customer service in our stores is critical to our success. Many of our store team members are in entry-level or part-time positions that historically have high rates of turnover, which can lead to increased training and retention costs, particularly if employment opportunities increase. We are also dependent on the team members who staff our distribution centers, many of whom
are skilled. We may be unable to meet our labor needs and control our costs due to external factors such as the availability of a sufficient number of qualified persons in the work force of the markets in which we operate, competition, unemployment levels, changes in immigration laws, demand for certain labor expertise, prevailing wage rates, wage inflation, changing demographics, health and other insurance costs, adoption of new or revised employment and labor laws and regulations, and the impacts of man-made or natural disasters, such as tornadoes, hurricanes, and public health events. We have experienced, and expect to continue to experience, a shortage of labor for certain functions, which has increased our labor costs and negatively impacted our profitability. The extent and duration of the effect of these labor market challenges are subject to numerous factors, including availability of qualified persons in the markets where we and our contracted service providers operate and unemployment levels within these markets, behavioral changes, prevailing wage rates and other benefits, inflation, adoption of new or revised employment and labor laws and regulations (including immigration/visa processing) or government programs, safety levels of our operations, and our reputation within the labor market.
Potential future legislative initiatives may seek to increase the federal minimum wage in the United States, as well as the minimum wage in a number of individual states or markets. As federal or state minimum wage rates increase, we may need to increase not only the wage rates of our minimum wage team members, but also the wages paid to our other hourly team members as well. Further, should we fail to increase our wages competitively in response to increasing wage rates, the quality of our workforce could decline, causing our customer service to suffer. Any increase in the cost of our labor could have an adverse effect on our operating costs, financial condition and results of operations. If we are unable to hire and retain store-level team members capable of providing a high level of customer service, skilled distribution center team members or other qualified personnel, our business could be materially adversely affected.
Although none of our team members are currently covered under collective bargaining agreements, we cannot guarantee that our team members will not elect to be represented by labor unions in the future. If some or all of our entire workforce were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements or work practice, it could have a material adverse effect on our business, financial condition and results of operations.
If we are unable to protect against inventory shrink, our results of operations and financial condition could be adversely affected.
Our business depends on our ability to effectively manage our inventory. We have historically experienced loss of inventory (also called shrink) due to damage, theft (including from organized retail crime), and other causes. We continue to experience elevated levels of inventory shrink relative to historical levels, which has adversely affected, and could continue to adversely affect, our results of operations and financial condition. To protect against rising inventory shrink, we have taken, and may continue to take, certain operational and strategic actions that could adversely affect our reputation, customer experience, and results of operations. In addition, sustained high rates of inventory shrink at certain stores could impact the profitability of those stores and result in the impairment of long-term assets.
We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business.
For our sales to our customers, we accept a variety of payment methods, including credit cards, debit cards, electronic funds transfers and electronic payment systems. Accordingly, we are, and will continue to be, subject to significant and evolving regulations and compliance requirements, including obligations to implement enhanced authentication processes that could result in increased costs and liability, and reduce the ease of use of certain payment methods. For certain payment methods, including credit and debit cards, as well as electronic payment systems, we pay interchange and other fees, which may increase over time. We rely on independent service providers for payment processing, including credit and debit cards. If these independent service providers become unwilling or unable to provide these services to us or if the cost of using these providers increases, our business could be harmed. The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems. We are also subject to payment card association operating rules and agreements, including data security rules and agreements, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply or increase our costs of compliance. If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for losses incurred by card issuing banks or customers, subject to fines and higher transaction fees, lose our ability to accept credit or debit card payments from our customers, or process electronic fund transfers or facilitate other types of payments. Any failure to comply could harm our brand, reputation, business and results of operations.
The occurrence of severe weather events, catastrophic public health events, natural or man-made disasters, social and political conditions or civil unrest could significantly damage or destroy our retail locations, could prohibit consumers from traveling to our retail locations or could prevent us from resupplying or staffing our stores or distribution centers or fulfilling our e-commerce orders, especially during peak shopping seasons.
Unforeseen events, including public health events, such as pandemics, natural disasters, such as earthquakes, hurricanes, tornadoes, freezes, snow or ice storms, floods and heavy rains, heatwaves, and man-made disasters, such as an oil spill closing large areas of hunting or fishing, could disrupt our operations or the operations of our suppliers, as well as affect the behavior of our consumers. For example, frequent or unusually heavy snowfall, ice storms, rainstorms or other extreme weather conditions over a prolonged period could make it difficult for our customers to travel to our stores and thereby reduce our sales and profitability. In addition, extreme weather conditions could result in disruption or delay of production and delivery of materials and products in our supply chain and cause staffing shortages in our stores. Global climate change may result in significant natural disasters occurring more frequently or with greater intensity, such as drought, wildfires, storms, sea-level rise, and flooding. We have significant operations in certain states where natural disasters are more prevalent. Natural disasters in those states could result in significant physical damage to or closure of one or more of our stores, distribution centers, facilities, or key vendors Socio-political factors, such as foreign wars, civil unrest or other economic or political uncertainties that contribute to consumer unease or harm to our supply chain or store base, may also result in decreased discretionary spending, property damage and/or business interruption losses. For example, we may face losses related to civil unrest in the United States. To the extent these events result in the closure of one or more of our distribution centers, a significant number of stores, or our corporate headquarters or impact one or more of our key suppliers, our operations and financial performance could be materially adversely affected through an inability to support our business, resupply or staff our stores, distribution centers or corporate headquarters or fulfill our e-commerce orders, especially during peak shopping seasons, and through lost sales and any precautions that we may take may not be adequate to mitigate the impact of such events. If these events impact areas in which we have our corporate headquarters, distribution centers, a concentration of retail stores or vendor sources or foreign and/or U.S. ports, such events could have a material adverse effect on our business, financial condition and results of operations.
Our stores are located primarily in the southern United States which could subject us to regional risks.
Because our stores are located primarily in the southern United States, we are subject to regional risks, such as the regional economy, weather conditions and natural disasters such as floods, droughts, tornadoes and hurricanes. Man-made disasters, such as an oil spill impacting the Gulf Coast region of the United States, a nuclear power plant crisis or other events, may also impact our regional area. We sell a significant amount of merchandise related to sports and outdoor activities which can be adversely affected by such events that may postpone the start of or shorten sports seasons or inhibit participation in other outdoor activities or otherwise have a significant impact on our operations. Several of our competitors operate stores across the United States and thus are not as vulnerable to the risks of operating in one region. If there is a regional economic downturn or any other adverse regional event in the southern United States, there could be an adverse impact on our net sales and results of operations and our ability to implement our planned expansion program.
Fluctuations in merchandise costs, increases in commodity prices and other factors could negatively impact our consolidated and combined results of operations.
The cost of our merchandise has increased and may continue to increase due to, among other factors, higher raw material prices, tariffs, labor costs, freight and logistics expenses, and increased regulatory compliance requirements. A substantial rise in the price of raw materials, including as a result of increases in commodity prices and tariffs on them, could dramatically increase the costs associated with manufacturing the merchandise that we purchase from our suppliers, which could cause the price of our merchandise to increase and could have a negative impact on our sales and profitability. If we increase the price for our products in order to maintain gross margins for our products, such increase may adversely affect demand for, and sales of, our products, which could have a material adverse effect on our financial condition and results of operations.
A disruption in the operation of our distribution centers would affect our ability to deliver merchandise to either our stores or customers, which could adversely impact our revenues and harm our business and financial results.
We operate three distribution centers located in Katy, Texas; Twiggs County, Georgia; and Cookeville, Tennessee, to manage the receipt, storage, sorting, packing and distribution of our merchandise to the appropriate stores or to the customer directly. We depend in large part on the orderly operation of our receiving and distribution process, which depends, in turn, on adherence to shipping schedules, proper functioning of our information technology and inventory control systems and overall effective management of our distribution centers. A disruption or a prolonged interruption in the operations at any of these distribution centers or third-party transportation providers due to a work stoppage, labor shortage, operations significantly below historical efficiency levels, supply chain disruption, public health events (such as pandemics), severe weather (such as tornadoes) or natural or man-made disasters (including events that may be caused or exacerbated by climate change), system or power grid failures or cyber incidents,
slowdowns or strikes, acts of terror or other unforeseen events in the areas or regions of these facilities could impair our ability to adequately stock our stores, process returns of products to vendors and ship products to our e-commerce customers, thereby adversely affecting our sales and profitability. In addition, we could incur significantly higher costs and longer lead times associated with distributing our products to our stores and customers during the time it takes for us to reopen or replace these distribution centers.
Although we maintain business interruption and property insurance for these facilities, there can be no assurance that our insurance coverage will be sufficient, or that insurance proceeds will be timely paid to us, if our distribution centers are shut down or interrupted for any unplanned reason.
We depend on key personnel in order to support our existing business and future initiatives and may not be able to retain or replace these team members, recruit additional qualified personnel or effectively manage succession.
Our future success may be adversely impacted if we are not able to attract, retain and develop talent and future leaders, including our senior executives and team members. Our senior executive team closely supervises all major aspects of our business, including the design and development of our strategy, and procurement of merchandise; operation of our information technology platforms, supply chain, and store network; development and retention of critical talent; and financial planning, reporting and compliance. Our senior executive team has substantial experience and expertise in our retail business, and serves an integral role in the growth and support of our various initiatives. If we were to lose the leadership of senior executives or other key team members without appropriate successors in place, our business could be adversely affected. In addition, if significant unexpected turnover occurs at the team member level, the loss of the services of these individuals, or any resulting negative perceptions of our business, could damage our reputation and our business. Competition for such qualified talent is significant, and we cannot be sure we will be able to find suitable successors promptly, or at all, or to successfully integrate any successors, or that we will be able to attract, retain, and develop a sufficient number of qualified individuals in future periods.
We depend on approximately 1,500 suppliers to supply us with the merchandise we purchase for resale and our significant dependence on these suppliers exposes us to risks associated with disruption in supply and losses of merchandise purchasing incentives that could have a material adverse effect on our business and results of operations.
We depend on approximately 1,500 suppliers to supply us in a timely and efficient manner with the merchandise we sell. Our significant dependence on these suppliers exposes us to various risks that could have a material adverse effect on our business and results of operations. In 2025, purchases from our largest vendor represented approximately 12% of our total inventory purchases. The merchandise we sell is sourced from a wide variety of domestic and international suppliers and our ability to find qualified suppliers and access merchandise in a timely and efficient manner is often challenging, particularly with respect to merchandise sourced outside the United States. We generally do not have long-term written contracts with our suppliers that would require them to continue supplying us with merchandise, particular payment terms or the extension of credit. As a result, these suppliers could modify the terms of these relationships due to general economic conditions or otherwise. In the past few years, we have begun to see increased competition across the industry for resources throughout the supply chain, which resulted in disruptions to the flow of products from our vendors, labor shortages, reduced shipping container availability, and longer delays at the port. As a result, we have experienced a period of decreased or delayed supply and high inflation which negatively impacted transportation and inventory costs. Fluctuations in the supply chain or changes in our relationships with our suppliers (which can occur for various reasons in or out of our control) have the potential to increase our expenses and adversely affect our results of operations. The formation and/or strengthening of business partnerships between our suppliers and our competitors could directly alter the available supply of merchandise we desire to sell, which could have a material adverse effect on the level of customers purchasing merchandise from us and, thus, our results of operations. Further, vendors increasingly sell their products directly to customers or through broadened or alternative distribution channels, such as department stores, family footwear stores, or e-commerce companies. Moreover, many of our suppliers provide us with merchandise purchasing incentives, such as return privileges, volume purchasing allowances and cooperative advertising, and a decline or discontinuation of these incentives could severely impact our results of operations. If there is a disruption in supply from a principal supplier (which can occur for various reasons in or out of the control of these suppliers), we may experience merchandise out-of-stocks, delivery delays or increased delivery costs, or otherwise be unable to obtain the same merchandise from other suppliers in a timely and efficient manner and on acceptable terms, or at all, which could materially affect our results of operations and our customers’ confidence in us.
Our private label brand merchandise exposes us to various risks generally encountered by companies that source, manufacture, market and retail exclusive private label brand merchandise.
In addition to national brand merchandise, we offer customers private label brand merchandise, most of which is sold exclusively by Academy. The sale of private label brand merchandise subjects us to certain risks, including:
• our ability to successfully and profitably conduct sourcing and manufacturing activities internally or with third-party agents, manufacturers and distributors;
• our failure or our manufacturers’ failure to comply with federal, state and local regulatory requirements, including product safety, working age and conditions, anti-corruption, import and customs and retail sale restrictions;
• potential mandatory or voluntary product recalls;
• claims and lawsuits resulting from injuries associated with the use of our private label brand merchandise;
• our ability to successfully protect our intellectual property or other proprietary rights (e.g., defending against counterfeit, knock-offs, grey-market, infringing or otherwise unauthorized goods);
• our ability to successfully navigate and avoid claims related to the intellectual property or other proprietary rights of third parties;
• our ability to successfully administer and comply with the obligations under license agreements that we have with the licensors of brands, including in some instances certain sales minimums that if not met could cause us to lose the licensing rights or pay damages;
• sourcing and manufacturing outside the United States, including foreign laws and regulations, political unrest, disruptions or delays in cross-border shipments, changes in economic conditions in foreign countries, exchange rate and import duty fluctuations and conducting activities with third-party manufacturers; and
• increases in the price of raw materials used in the manufacturing of our private label brand merchandise and other risks generally encountered by entities that source, manufacture, market and retail private label brand merchandise.
Our failure to adequately address some or all of these risks could have a material adverse effect on our business, results of operations and financial condition.
A failure of our third-party vendors of outsourced business services and solutions to meet our performance standards and expectations could adversely affect our operations.
As part of our long-term strategy, we look for opportunities to cost-effectively enhance the capabilities of our business services. In some cases, we outsource certain business services and solutions, and rely on the third-party vendors of these business services and solutions, to support a variety of our business functions, including portions of our information technology and management information systems, data security and credit card fraud detection, supply chain (including product manufacturers, logistics service providers or independent distributors), retail operations, administrative services and other core business functions. In some cases, we rely on a single vendor for such services. While we believe we conduct appropriate due diligence before entering into agreements with these third-parties, if we fail to properly manage these vendors or if they fail to meet, or are prevented from meeting, our performance standards and expectations, then our reputation, sales, and results of operations could be adversely affected. Any significant interruption in the operations of these service providers, over which we have no control, could also have an adverse effect on our business. In addition, we could face increased costs or incur substantial time in finding and implementing replacement service vendors or, alternatively, hiring new team members, making additional technology purchases, and changing information systems configurations to provide these business services and solutions in-house.
Harm to our reputation could adversely impact our ability to attract and retain customers, team members, vendors and/or other partners.
Negative publicity or perceptions involving us or our brands, products, team members, operations, vendors, spokespersons, or marketing and other partners may negatively impact our reputation and adversely impact our ability to attract and retain customers, team members, vendors and/or other partners. Failure to detect, prevent or mitigate issues that might give rise to reputational risk or failure to adequately address negative publicity or perceptions could adversely impact our reputation, business, results of operations, and financial condition. Issues that might pose a reputational risk include failure of our cybersecurity measures to protect against cybersecurity incidents, product liability and product recalls, our social media activity, our handling of issues relating to corporate responsibility matters, including our response to such matters, failure to comply with applicable laws and regulations or enforce our own policies, our policies related to the sale of firearms, ammunition and accessories, our policies relating to public health, public stances on controversial social or political issues, concerns surrounding labor, environmental, workplace safety and other practices that may vary from U.S. standards in any of our foreign manufacturers, whether directly or indirectly, and any of the other risks enumerated in these risk factors. As part of our marketing efforts, we rely on social media platforms and other digital marketing to
attract and retain customers. A variety of risks are associated with our social media activity and digital marketing, including the improper disclosure of proprietary information, negative comments about or negative incidents regarding us, exposure of personally identifiable information, fraud or out-of-date information. The inappropriate use of social media and digital marketing vehicles by us, our customers, team members or others could increase our costs, lead to litigation or result in negative publicity that could damage our reputation. Many social media platforms immediately publish the content, videos and/or photographs created or uploaded by their subscribers and participants, often without filters or checks on accuracy of the content posted. Information posted on such platforms at any time may be adverse to our interests and/or may be inaccurate. The dissemination of negative information related to us or our brands, products, team members, operations, vendors, spokespersons or partners could harm our business, results of operations and financial condition, regardless of the information’s accuracy, and the harm may be immediate without affording us an opportunity for redress or correction. It may be difficult to address negative publicity across media channels, regardless of its accuracy or the reputability of its source, and this challenge could be further exacerbated by fictitious media content, such as content produced by generative artificial intelligence or bad actors. Furthermore, the prevalence of news coverage, the internet, and social media may accelerate and increase the potential scope of any negative publicity we might receive and could increase the negative impact of these issues on our reputation, business, results of operations, and financial condition.
Our quarterly operating results and comparable sales may fluctuate due to seasonality and other factors outside of our control.
We have historically experienced and expect to continue to experience seasonal fluctuations in our net sales, operating income and net income. A significant portion of our net sales and profits is driven by summer holidays, such as Memorial Day, Father’s Day and Independence Day, during the second quarter. Our net sales and profits are also impacted by the November/December holiday selling season, and in part by the sales of cold weather sporting goods and apparel during the fourth quarter. We must carry a significant amount of inventory, particularly before these selling periods. If we miscalculate the demand for our products generally or for our product mix during certain holiday or sporting seasons, our net sales could decline resulting in lower margins, higher labor costs as a percentage of sales and excess inventory, which would harm our financial performance. If we are not successful in selling our inventory during these periods, we may be forced to rely on markdowns or promotional sales to dispose of the excess inventory or may not be able to sell the inventory at all, which could have a material adverse effect on our business, financial condition and results of operations.
Our quarterly results of operations and comparable sales have historically fluctuated, and may continue to fluctuate, as a result of factors outside our control, including:
• general regional and national economic conditions;
• consumer confidence in the economy;
• unseasonal or extreme weather conditions, natural or man-made disasters or public health emergencies (such as snow storms, hurricanes, tornadoes, floods, pandemics, and civil disturbances);
• catastrophic or tragic events (such as tragedies involving firearms);
• changes in demand for the products that we offer in our stores;
• lack of, or access to, new products or brands;
• lockouts or strikes involving professional sports teams;
• retirement of sports superstars used in marketing various products;
• sports scandals, including those involving leagues, associations, teams or athletes with ties to us or our markets;
• costs related to the closure of existing stores;
• litigation;
• the success or failure of college and professional sports teams in our markets;
• expansion of existing or entry of new competitors into our markets;
• the impact of competitive developments in our markets;
• shift in consumer tastes and fashion trends;
• calendar shifts or holiday or seasonal periods;
• the timing of income tax refunds to customers;
• changes in laws and regulations, politics or consumer advocacy affecting our business, including sentiment relating to the sale of firearms and ammunition;
• cancellations of tax-free holidays in certain states;
• pricing, promotions or other actions taken by us or our existing or possible new competitors; and
• changes in other tenants or landlords or surrounding geographic circumstances in the shopping centers in which we are located.
Our quarterly operating results and comparable sales may also be affected by the timing of new store openings and the relative proportion of new stores to mature stores, the level of pre-opening expenses associated with new stores and the amount and timing of net sales contributed by new stores. Furthermore, our operating margins may be impacted in periods in which incremental expenses are incurred as a result of upcoming new store openings.
We may pursue strategic acquisitions, which could have an adverse impact on our business, as could assimilation of companies following acquisition.
Although we have never done so in the past, we may from time to time acquire companies or businesses in the future. Acquisitions may result in difficulties in assimilating acquired companies, and may result in the diversion of our capital and our management’s attention from other business issues and opportunities. We may not be able to successfully integrate companies or businesses that we acquire, including their personnel, financial systems, distribution, operations and general store opening procedures. If we fail to successfully integrate acquisitions, our business could suffer. In addition, the integration of any acquired business and their financial results may adversely affect our results of operations.
Legal and Regulatory Risks
W e are subject to costs and risks associated with laws and regulations affecting our business, including those relating to the sale, manufacture and import of consumer products and other matters, and the substance or enforcement of such laws may change or become mor e stringent.
We operate in a complex regulatory and legal environment that exposes us to regulatory, compliance and litigation risks that could materially affect our operations and financial results. We are subject to regulation by numerous federal, state and local regulatory agencies and authorities, including the U.S. Consumer Product Safety Commission, Equal Employment Opportunity Commission, Department of Labor, Occupational Safety and Health Administration, Department of Justice (DOJ), Department of Treasury, Federal Trade Commission, Customs and Border Protection, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), Securities and Exchange Commission (SEC), Internal Revenue Service, or IRS, and Environmental Protection Agency and comparable state and local agencies.
Laws and regulations affecting our business may change, sometimes frequently and significantly, as a result of political, economic, social or other events. Some of the federal, state or local laws and regulations that affect us include but are not limited to:
• consumer product safety, product liability or consumer protection laws;
• laws related to advertising, marketing, pricing and selling our products, including but not limited to firearms, ammunition, and related accessories;
• labor and employment laws, including wage and hour laws;
• immigration laws and regulations;
• tax laws or interpretations thereof, including collection of state sales tax on e-commerce sales;
• data protection and privacy laws and regulations;
• environmental laws and regulations;
• hazardous material laws and regulations;
• customs or import and export laws and regulations, including collection of tariffs on product imports;
• intellectual property laws;
• antitrust and competition regulations;
• banking and anti-money laundering regulations;
• Americans with Disabilities Act, or ADA, and similar state and local laws and regulations;
• website design and content regulations; and
• securities and exchange laws and regulations.
We are a federally licensed firearms dealer and we sell firearms, ammunition, and related accessories, including suppressors. Firearms represented approximately 6% of our net sales in 2025. Numerous federal, state and local laws and regulations govern the procurement, transportation, storage, distribution and sale and marketing of firearms, ammunition, and related accessories, including the regulations governing the performance of federally and state mandated procedures for determining customer firearm purchase eligibility (such as age and residency verification, background checks and proper completion of required paperwork). In June 2021, the DOJ announced a policy emphasizing “zero tolerance” for willful violations of the law by federally licensed firearms dealers; in 2025 that policy was repealed. Federal, state, and local agencies continue to regulate and enforce compliance requirements applicable to firearms dealers. In the future, there may be increased federal, state or local regulation or enforcement affecting the sale of firearms, ammunition, and related accessories, including taxation or restrictions on the type of firearms and ammunition available for retail sale, which could reduce our sales and profitability. A failure by us to follow these laws or regulations may subject us to claims, lawsuits, fines, penalties, adverse publicity and government action (up to and including the possible revocation of licenses and permits allowing the sale of firearms and ammunition), which could have a material adverse effect on our business and results of operations.
Another significant risk relating to our operations is compliance with the FCPA and other anti-corruption laws applicable to our international operations. In many foreign countries, particularly in those with developing economies, it may be a local custom that businesses operating in such countries engage in bribery and other business practices that are prohibited by the FCPA or other U.S. and foreign laws and regulations applicable to us.
We have internal policies, procedures and standards that we require all of our team members, agents and vendors to meet. Although we have implemented policies, procedures and standards of conduct designed to ensure compliance with the laws or regulations affecting our business, there can be no assurance that all of our team members, agents and vendors will comply with such laws, policies, procedures and standards of conduct. If we or one of our domestic or foreign agents or vendors fails to comply with a law or regulation, including any of the foregoing laws or regulations, or if we or one of our domestic or foreign agents or vendors fails to comply with our required policies, procedures or standards of conduct, then we may be forced to discontinue conducting business with the agent or vendor and we or they may be subject to claims, lawsuits, fines, penalties, loss of a license or permit and adverse publicity or other consequences that could have a material adverse effect on our business, results of operations and financial condition.
We are, and may in the future, be subject to claims, demands and lawsuits.
From time to time we may be involved in lawsuits, demands or other claims arising in the ordinary course of business. For example, we are, and may in the future, be subject to claims, demands and lawsuits, and we may suffer losses and adverse effects to our reputation, related to:
• injuries or crimes associated with merchandise we sell, that has been associated with an increased risk of injury, including but not limited to firearms, ammunition, firearm accessories, air pistols, crossbows and other archery equipment, knives, deer stands and other hunting equipment, trampolines, wheeled goods such as bicycles and ride-on toys, certain merchandise qualifying as hazardous material and other products;
• product liability claims from customers or actions required or penalties assessed by government agencies relating to products we sell, including but not limited to products that are recalled, defective or otherwise alleged to be harmful;
• the design, purchase, manufacture, import, distribution and sale of our private label brand products;
• the procurement, transportation, storage, distribution and sale of firearms, ammunition, and suppressors, including improper performance of federally mandated procedures for determining customer firearm purchase eligibility (such as age and residency verification, background checks and proper completion of required paperwork);
• municipalities or other organizations attempting to recover costs from firearm manufacturers and retailers, relating to the use of firearms and ammunition;
• the operations of a third-party owned fleet of trucks for distribution purposes, including transportation of hazardous materials by such fleet ;
• the procurement and ownership, leasing or operation of property for retail stores, distribution centers and other corporate needs;
• the alleged infringement upon intellectual property rights to merchandise we sell or technology or services we use, including information technology, marketing and advertising services;
• global sourcing, including international, customs and trade issues;
• real estate issues, including construction, leasing, zoning and environmental issues;
• employment issues, including actions by team members, the Equal Employment Opportunity Commission, the Department of Labor, the Occupational Safety and Health Administration and other federal and state employment agencies;
• immigration issues, including enforcements actions, investigations and/or related litigation;
• commercial disputes, including contractual and business disputes with vendors, landlords, or competitors;
• tort, personal injury and property damage claims related to our stores, e-commerce, distribution centers or corporate headquarters;
• unauthorized access to our information systems or facilities that results in a breach of data security or privacy; and
• regulatory compliance, including relating to consumer protection, marketing and advertising, product safety, workplace safety, firearms, ammunition and related accessories, knives, import/export customs, taxes, tariffs, duties, and surcharges, data security and privacy, food and other regulated products, accounting, labor and employment, environmental matters, and hazardous materials.
We sell firearms, ammunition, and related accessories, which carries inherent liability and reputational risk. These products are associated with an increased risk of injury and related lawsuits with respect to our compliance with federal and state laws and regulations covering such products. Any improper or illegal use by our customers of firearms, ammunition, or related accessories sold by us could have a negative impact on our reputation and business. We are, and may in the future also be, subjected to claims and lawsuits, including potential class actions, relating to our policies and practices on the sale of firearms, ammunition, or related accessories. We are, and may in the future also be, subjected to claims and lawsuits relating to the improper use of firearms, ammunition, or related accessories sold by us, including lawsuits by victims or municipalities or other organizations attempting to recover losses or costs from manufacturers and retailers of firearms, ammunition, and related accessories.
Due to the inherent uncertainties of claims and lawsuits, we cannot accurately predict the ultimate outcome of any such matters. These claims and lawsuits could cause us to incur significant expenses and devote substantial resources to defend against them and, in some cases, we could incur significant losses in the form of settlements, judgments, fines, penalties, injunctions or other orders, as well as negative publicity, that could have a material adverse effect on our business, results of operations and financial condition. Even if a claim is unsuccessful or is not fully pursued, the negative publicity surrounding any such assertions could adversely affect our reputation.
Our insurance or indemnities may not be sufficient to cover damages related to claims and lawsuits.
We maintain insurance coverage with third-party insurers. However, not every risk or liability is or can be protected by insurance, and, for those risks we insure, the limits of coverage we purchase or that are reasonably obtainable in the market may not be sufficient to cover all actual losses or liabilities incurred. Liability insurance coverage is expensive and there is a risk that commercially available liability insurance will not continue to be available to us at a reasonable cost, if at all. If we or other industry participants sustain significant losses or make significant insurance claims, our ability to obtain future insurance coverage at commercially reasonable rates could be materially adversely affected. An inability to obtain liability insurance, significant increases in the cost of insurance we obtain, or losses in excess of our liability insurance coverage could have a material adverse effect on us.
Any insurance we carry, including the aforementioned insurance coverage, reflects deductibles, self-insured retentions, limits of liability and similar provisions that we believe are prudent based on our operations. To offset negative insurance market trends, we may elect to self-insure, accept higher insurance deductibles or reduce the amount of insurance coverage in response to market changes. Additionally, we self-insure a portion of expected losses under our workers’ compensation, general liability, Academy, Ltd. Texas Work Injury Benefit Plan, and group health insurance programs. We currently self-insure a portion of our commercial insurance deductible risk through our captive insurance company. To the extent that our captive insurance company is unable to bear that risk, we may be required to fund additional capital to our captive insurance company or we may be required to bear that loss. We use the services of independent actuaries for loss adjustment expense reserve analyses for the aforementioned lines of insurance. Liabilities associated with these lines of insurance are based on actual claim data and estimates of incurred but not reported claims, developed using actuarial methodologies, and may be based on historical claim trends, industry factors, claim development, as well as other actuarial assumptions. Unanticipated changes in any applicable actuarial assumptions and management estimates underlying our recorded liabilities for these losses, variability in inflation rates, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, insolvency of insurance carriers, and changes in discount rates could result in materially different expenses than expected under these programs, which could have a material adverse effect on our results of operations and financial condition.
We require many of our vendors to carry their own insurance, and we have indemnity agreements with many of our vendors, but we cannot be assured that (1) any specific claim or lawsuit will be subject to a vendor’s insurance or indemnity agreement, (2) our vendors will carry or maintain such insurance coverage or meet their indemnity obligations or (3) we will be able to collect payments
from our vendors sufficient to offset liability losses or, in the case of our private label brand products, where almost all of the manufacturing occurs outside the United States, that we will be able to collect anything at all.
With all claims and lawsuits, however, there is a risk that liabilities, fines and losses may not be covered by insurance or indemnity or may exceed insurance or indemnity coverage.
Our sales and operating results could be adversely affected by product safety concerns.
If the products that we offer, including from both national brands and our private label brands, do not meet applicable safety standards or our customers’ expectations regarding safety, we could experience decreased sales, increased costs, and/or be exposed to legal and reputational risk. All of our vendors must comply with applicable product safety laws, and we rely on our vendors to ensure that the products we buy comply with all federal, state, and local requirements for sale, including product safety, labeling, and testing requirements. Negative customer perceptions and publicity regarding the safety and sourcing of the products we sell, and events that give rise to actual, potential, or perceived product safety concerns could expose us to government enforcement action and/or private litigation. Furthermore, reputational damage caused by real or perceived product safety concerns could have a negative impact on our sales and operating results.
Our failure to protect our intellectual property or avoid the infringement of third-party intellectual property rights could be costly and have a negative impact on our results of operations.
We believe that our trademarks, service marks, copyrights, patents, processes, trade secrets, domain names and other intellectual property, including our Academy Sports + Outdoors brand, our private label brands, such as Academy Sports + Outdoors, Magellan Outdoors, BCG, O'rageous, Game Winner, Outdoor Gourmet, Freely, R.O.W., Redfield and H2OX, and our goodwill, designs, names, slogans, images and trade dress associated with these brands, are valuable assets, and are essential to our success and our competitive position due to their name recognition with customers. The unauthorized use or other misappropriation of our intellectual property could diminish the value of our brands or goodwill and cause a decline in our sales. In addition, any infringement or other intellectual property claim made by or against us, whether or not it has merit, could be time-consuming, result in costly litigation, cause product delays, cause us to discontinue affected products, distract key resources from our core business or require us to enter into royalty or licensing agreements. As a result, any such claim made by or against us or our failure to protect our intellectual property could have an adverse effect on our results of operations.
Risks Related to Our Indebtedness
Our level of indebtedness requires that we dedicate a portion of our cash flows to debt service payments and reduces the funds that would otherwise be available for other general corporate purposes and other business opportunities, which could adversely affect our operating performance, growth, profitability and financial condition, which in turn could make it more difficult for us to generate cash flow sufficient to satisfy all of our obligations under our indebtedness.
As of January 31, 2026, we had approximately $85.8 million outstanding under the Term Loan and $400.0 million outstanding under the Notes, all of which is secured. As of January 31, 2026, we had no borrowings outstanding under the ABL Facility (as defined in Note 4 of the accompanying financial statements), an available borrowing capacity under the ABL Facility of approximately $992.4 million (which is subject to customary borrowing conditions, including a borrowing base), and outstanding letters of credit of $7.6 million, all of which were issued under the ABL Facility.
Our overall level of indebtedness requires that we dedicate a portion of our cash flows to debt service payments. The Term Loan (as defined in Note 4 of the accompanying financial statements) requires quarterly principal payments through September 30, 2027, and monthly cash interest payments through maturity. The ABL Facility, under which we had no borrowings as of January 31, 2026, matures on March 8, 2029. The Notes (as defined in Note 4 of the accompanying financial statements) require semi-annual payments of interest (in arrears) and matures on November 15, 2027.
Our indebtedness reduces the funds that would otherwise be available for operations, future business opportunities and payments of our debt obligations and limits our ability to:
• obtain additional financing, if necessary, for working capital and operations, or such financing may not be available on favorable terms;
• make needed capital expenditures;
• make strategic acquisitions or investments or enter into joint ventures;
• react to changes or withstand a future downturn in our business, the industry or the economy in general;
• meet store growth, distribution center expansion, e-commerce growth, budget targets and forecasts of future results;
• engage in business activities, including future opportunities that may be in our interest; and
• react to competitive pressures or compete with competitors with less debt.
These limitations could adversely affect our operating performance, growth, profitability and financial condition, which would make it more difficult for us to generate cash flow sufficient to satisfy our obligations under our indebtedness.
Our ability to make scheduled payments on our debt obligations also depends on our financial condition, results of operations and capital resources, which are subject to, among other things: the business, financial, economic, industry, competitive, regulatory and other factors discussed in these risk factors, and on other factors, some of which are beyond our control, including: the level of capital expenditures we make, including those for acquisitions, if any; our debt service requirements; fluctuations in our working capital needs; our ability to borrow funds and access capital markets; and restrictions on debt service payments and our ability to make working capital borrowings for debt service payments contained in our debt instruments.
If we are unable to generate sufficient cash flow to permit us to make scheduled service payments on our debt, then we will be in default and holders of that debt could declare all outstanding principal and interest to be due and payable. If our existing indebtedness were to be accelerated, there can be no assurance that we would have, or be able to obtain, sufficient funds to repay such indebtedness in full. In addition, in the event of a default, the lenders under the ABL Facility could terminate their further commitments to loan money and our secured lenders under the Term Loan and the ABL Facility and/or holders of the Notes could foreclose against the assets securing their borrowings, and we could be forced into bankruptcy or liquidation.
Despite our level of indebtedness, we may still be able to incur substantially more debt, which could further increase the risks to our financial condition described above.
Despite our level of indebtedness, we may be able to incur significant additional indebtedness in the future, including off-balance sheet financings, trade credit, contractual obligations and general and commercial liabilities. Although the credit agreements governing the Term Loan and the ABL Facility and the indenture governing the Notes contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness, and additionally we have further borrowing capacity under the ABL Facility. As of January 31, 2026, we had no borrowings outstanding under the ABL Facility, and an available borrowing capacity under the ABL Facility of approximately $992.4 million (which is subject to customary borrowing conditions, including a borrowing base). We may be able to increase the commitments under the ABL Facility by $250.0 million, subject to certain conditions. We may also be able to increase the capacity under the Term Loan by up to the greater of (x) $480.0 million and (y) 100% of the Consolidated EBITDA (as defined in the Term Loan), plus an additional amount, subject to certain conditions, which borrowings would be secured indebtedness. The addition of new debt to our current debt levels could further exacerbate the related risks to our financial condition that we now face.
If we are unable to generate sufficient cash to service all of our indebtedness, we may be forced to take other actions to fund the satisfaction of our obligations under our indebtedness, which may not be successful.
If our cash flow is insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, raise additional debt or equity capital or restructure or refinance our indebtedness. However, we may not be able to implement any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. Even if new financing were available, it may be on terms that are less attractive to us than our then existing indebtedness or it may not be on terms that are acceptable to us. In addition, the credit agreements governing the Term Loan and the ABL Facility and the indenture governing the Notes restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. Thus, we may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.
If we cannot generate sufficient cash flow to permit us to make scheduled payments on our debt, then we will be in default and holders of that debt could declare all outstanding principal and interest to be due and payable. If our existing indebtedness were to be accelerated, there can be no assurance that we would have, or be able to obtain, sufficient funds to repay such indebtedness in full. In addition, in the event of a default, the lenders under the ABL Facility could terminate their further commitments to loan money and our secured lenders under the Term Loan and the ABL Facility and/or holders of the Notes could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.
The terms of our outstanding indebtedness may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.
The credit agreements governing the Term Loan and the ABL Facility and the indenture governing the Notes contain restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our best interest, including restrictions on our ability to:
• incur additional indebtedness and guarantee indebtedness;
• pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock;
• prepay, redeem or repurchase certain debt;
• make loans, investments and other restricted payments;
• sell or otherwise dispose of assets;
• incur liens;
• enter into transactions with affiliates;
• alter the businesses we conduct;
• enter into agreements restricting our subsidiaries’ ability to pay dividends; and
• consolidate, merge or sell all or substantially all of our assets.
Additionally, at certain times, the ABL Facility requires maintenance of a certain minimum adjusted fixed charge coverage ratio. Our ability to comply with the covenants and restrictions contained in our credit agreements and indenture may be affected by events beyond our control. If market or other economic conditions deteriorate, our ability to comply with these covenants and restrictions may be impaired.
A breach of the covenants under one of these agreements could result in an event of default under the applicable indebtedness, which, if not cured or waived, could have a material adverse effect on our business, results of operations and financial condition. Such a default, if not cured or waived, may allow the creditors to accelerate the related debt principal and/or related interest payments and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. If our existing indebtedness were to be accelerated, there can be no assurance that we would have, or be able to obtain, sufficient funds to repay such indebtedness in full. In addition, an event of default under the credit agreement governing our ABL Facility would permit the lenders under our ABL Facility to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay the amounts due and payable under secured indebtedness, the lenders/holders of such indebtedness could proceed against the collateral granted to them to secure that indebtedness, and we could be forced into bankruptcy or liquidation.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
Borrowings under the Term Loan and ABL Facility are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed will remain the same, and our net income and operating cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. In the past we have used, and in the future we may again use interest rate swap agreements to hedge market risks relating to possible adverse changes in interest rates with the intent of reducing volatility in our cash flows due to fluctuations in interest rates. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk, may prove disadvantageous, or may create additional risks. In addition, our hedging activities are subject to the risks that a counterparty may not perform its obligations under the applicable derivative instrument.
If the financial institutions that are lenders under the ABL Facility fail to extend credit under the facility or reduce the borrowing base, our liquidity and results of operations may be adversely affected.
One of our sources of liquidity is the ABL Facility. Each financial institution that is a lender under the ABL Facility is responsible on a several but not joint basis for providing a portion of the loans to be made under the facility. If any participant or group of participants with a significant portion of the commitments under the ABL Facility fails to satisfy its or their respective obligations to extend credit under the facility and we are unable to find a replacement for such participant or participants on a timely basis (or at all), our liquidity may be adversely affected. In addition, the lenders under the ABL Facility may reduce the borrowing base under the facility in certain circumstances, which could adversely impact our liquidity and results of operations.
Our level of indebtedness may hinder our ability to negotiate favorable terms with our landlords, vendors and suppliers, which could negatively impact our operating performance and, thus, could make it more difficult for us to generate cash flow sufficient to satisfy all of our obligations under our indebtedness.
Our new store profitability is partially attributable to our ability to negotiate attractive rental rates with our landlords and, in the future, to secure sale-leaseback financing at attractive cap rates. Our level of indebtedness may adversely affect our credit profile or rating, which may adversely affect our ability to negotiate favorable rental rates for our new store locations or expiring existing store leases or secure sale-leaseback financing. This could negatively impact the profitability of new and existing stores and potentially limit the number of viable new store locations or replacement store locations for expiring store leases.
Our successful retail strategy is partially attributable to our ability to negotiate favorable trade terms with our vendors. Our level of indebtedness may adversely affect our credit profile or rating, which may adversely affect our ability to negotiate favorable trade terms from our current or future merchandise vendors, including pricing, payment, delivery, inventory, transportation, defective and marketing allowances and other terms, and may increase our need to support merchandise purchases with letters of credit. We may also be unable to negotiate favorable trade terms for our current or future service and non-merchandise vendors, including vendors that assist us in critical aspects of the business such as real estate, transportation and logistics, customs, hazardous material and firearm compliance, warehousing and storage, insurance and risk management, procurement, marketing and advertising, store and online operations and information technology. This could negatively impact the profitability of our business and our ability to effectively compete against other retailers. Thus, our level of indebtedness could adversely affect the profitability of our business, which could make it more difficult for us to generate cash flow sufficient to satisfy our obligations under our indebtedness.
Risks Related to the Ownership of Our Common Stock
Our stock price may be highly volatile or may decline regardless of our operating performance, and you may not be able to resell shares of our common stock at or above the price you paid or at all, and you could lose all or part of your investment as a result.
The trading price of our common stock may be highly volatile and may be adversely affected due to a number of factors, many of which are beyond our control, including without limitation those listed elsewhere under this “Risk Factors” section, and the following:
• results of operations that vary from the expectations of securities analysts and investors;
• results of operations that vary from those of our competitors;
• changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors;
• changes in economic conditions for companies in our industry;
• changes in market valuations of, or earnings and other announcements by, companies in our industry;
• declines in the market prices of stocks generally, particularly those of sporting goods and outdoor recreation retail companies;
• additions or departures of key management personnel;
• strategic actions by us or our competitors;
• announcements by us, our competitors, our suppliers of significant contracts, price reductions, new products or technologies, acquisitions, dispositions, joint marketing relationships, joint ventures, other strategic relationships or capital commitments;
• changes in preference of our customers and our market share;
• changes in general economic or market conditions or trends in our industry or the economy as a whole;
• changes in governmental fiscal policy or interest rate regulation;
• changes in business or regulatory conditions;
• future sales of our common stock or other securities, or the perception that such sales may occur;
• investor perceptions of or the investment opportunity associated with our common stock relative to other investment alternatives;
• changes in the way we are perceived in the marketplace, including due to negative publicity or campaigns on social media to boycott certain of our products, our business or our industry;
• the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;
• changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business;
• announcements relating to litigation or governmental investigations;
• guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;
• changes in accounting principles; and
• other events or factors, including those resulting from informational technology system failures and disruptions, epidemics, pandemics, natural disasters, acts of terrorism, civil unrest, wars or responses to these events.
Furthermore, the stock market may experience extreme volatility that, in some cases, may be unrelated or disproportionate to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock is low.
In the past, following periods of market volatility, stockholders have instituted securities class action litigation against various issuers. If we were to become involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation, which may adversely affect the market price of our common stock.
We cannot provide any guaranty of future dividend payments or that we will repurchase our common stock pursuant to our share repurchase program, and our indebtedness could limit our ability to pay future dividends on our common stock.
We declared and paid our first quarterly cash dividend for the fourth quarter for fiscal 2021 and have paid a quarterly cash dividend consistently thereafter. However, we are not required to declare dividends. Any determination to pay future dividends to holders of our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including our financial condition, results of operations, projections, liquidity, earnings, business strategy, legal requirements, covenant compliance, restrictions in our existing and any future debt agreements and other factors that our Board of Directors deems relevant. Therefore, there can be no assurance that we will pay any dividends to holders of our common stock or as to the amount of any such dividends. In addition, our historical results of operations, including cash flow, are not indicative of future financial performance, and our actual results of operations could differ significantly from our historical results of operations. We have not adopted, and do not currently expect to adopt, a separate written dividend policy. Furthermore, although our Board of Directors has authorized a share repurchase program, the timing, manner, price and amount of any common stock repurchases will be determined by the Company in its discretion and will depend on a variety of factors, including legal requirements, price and economic and market conditions. We are not obligated to make any purchases under the program, and we may discontinue it at any time.
Additionally, our operations are conducted through our wholly owned subsidiaries and our ability to generate cash to meet our debt service obligations or to make future dividend payments or conduct share repurchases, if any, is highly dependent on the
earnings of, and the receipt of funds from, our subsidiaries via dividends or intercompany loans. In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock or our ability to repurchase our common stock.
Anti-takeover provisions in our organizational documents could delay or prevent a change of control.
Certain provisions of our restated certificate of incorporation and amended and restated bylaws may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt, or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.
These provisions provide for, among other things:
• a classified Board of Directors, as a result of which our Board of Directors is divided into three classes, with each class serving for staggered terms until the 2028 Annual Meeting at which time our Board of Directors will be elected annually;
• the ability of our Board of Directors to issue one or more series of preferred stock without stockholder approval;
• advance notice requirements for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings;
• certain limitations on convening special stockholder meetings; and
• the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2/3% of the shares of common stock entitled to vote generally in the election of directors.
Unless we remove or sunset some or all of these provisions, these anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares.
Our restated certificate of incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders and the federal district courts will be the exclusive forum for Securities Act claims, which could limit our stockholders’ ability to bring a suit in a different judicial forum than they may otherwise choose for disputes with us or our directors, officers, team members or stockholders.
Our restated certificate of incorporation provides, subject to limited exceptions, that unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of our company, (ii) action asserting a claim of breach of a fiduciary duty owed by any director, officer, or other employee or stockholder of our company to the Company or our stockholders, creditors or other constituents, (iii) action asserting a claim against the Company or any director or officer of the Company arising pursuant to any provision of the Delaware General Corporation Law, or the DGCL, or our restated certificate of incorporation or our amended and restated bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) action asserting a claim against the Company or any director or officer of the Company governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act, which already provides that such claims must be bought exclusively in the federal courts. Our restated certificate of incorporation also provides that, unless we consent in writing to the selection of an alternative forum, the U.S. federal district courts will be the exclusive forum for the resolution of any actions or proceedings asserting claims arising under the Securities Act. While the Delaware Supreme Court has upheld the validity of similar provisions under the DGCL, there is uncertainty as to whether a court in another state would enforce such a forum selection provision. Our exclusive forum provision does not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our stockholders are not deemed to have waived our compliance with these laws, rules and regulations.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the forum provisions in our restated certificate of incorporation. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other team members or stockholders. Alternatively, if a court were to find the choice of forum provision contained in our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial conditions.
You may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitions or otherwise.
We have approximately 235 million shares of common stock authorized but unissued. Our restated certificate of incorporation authorizes us to issue these shares of common stock, options and other equity awards relating to common stock for the consideration and on the terms and conditions established by our Board of Directors in its sole discretion, whether in connection with acquisitions or otherwise. As a result, our Board of Directors may authorize the issuance of additional shares of common stock or securities convertible into or exercisable for common stock without stockholder approval, subject to applicable laws and stock exchange requirements. We have reserved shares for issuance under our New Academy Holding Company, LLC 2011 Unit Incentive Plan (the “2011 Equity Plan”), our 2020 Omnibus Incentive Plan (the “2020 Equity Plan”), and our 2020 Employee Stock Purchase Plan (the “ESPP”). Any common stock that we issue, including under our 2011 Equity Plan, 2020 Equity Plan, ESPP or other equity incentive plans that we may adopt in the future, will dilute the percentage ownership of our existing stockholders. In the future, we may also issue our securities in connection with investments or acquisitions. The amount of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to you and could adversely affect the market price of our common stock.
