Academy Sports and Outdoors Inc. (Academy Sports (ASO)) had a good day Wednesday, with shares surging over 11% after the sporting goods retailer posted fiscal second-quarter earnings that beat Wall Street's expectations. The company also raised its full-year outlook, which always gets investors in a good mood. Revenue, though, was just about in line with what analysts had penciled in.

Earnings Beat As Sales Rise 3%

For the quarter, Academy reported net sales of $1.647 billion, up 3% from $1.600 billion a year earlier. That was a hair below the $1.650 billion analysts were looking for. Adjusted earnings came in at $2.31 per share, up 19.1% from $1.94 and ahead of the $2.08 estimate.

On a GAAP basis, diluted EPS increased 17.3% to $2.17 from $1.85. Net income rose 10% to $137.9 million from $125.4 million.

Comparable sales slipped 0.4%, compared with a 0.2% increase in the same period last year. But there's a bright spot: e-commerce sales jumped 12.8%. New stores also posted positive comparable sales in the mid-single-digit range, which suggests the expansion strategy is still working.

Gross margin expanded nicely to 40.4% from 36%, and operating income climbed to $246.4 million from $172.4 million. That's a solid improvement in profitability.

During the quarter, Academy opened three new stores in Pennsylvania and Tennessee, bringing its total to 327 locations. The company plans to open 11 more stores in the third quarter, with the remaining fiscal 2026 openings scheduled for the fourth quarter.

Academy Raises Earnings Outlook

Looking ahead, Academy raised its fiscal 2026 adjusted EPS guidance to $6.50-$6.90 from $6.40-$6.80. Analysts had been expecting $6.46, so the new range is comfortably above that. The company also bumped its GAAP EPS outlook to $6.05-$6.45 from $5.95-$6.35, versus the $6.10 estimate.

On the top line, Academy affirmed its net sales forecast of $6.23 billion-$6.355 billion, compared with the $6.331 billion analyst estimate. It continues to expect sales growth of 3%-5% and comparable sales ranging from flat to growth of 2%.

The retailer also raised its adjusted free cash flow outlook to $300 million-$350 million from $250 million-$300 million. Capital expenditure guidance remained unchanged at $200 million-$240 million.

Cash Flow And Capital Returns

Academy generated $349 million in operating cash flow during the first 26 weeks of the fiscal year, up from $236 million a year earlier. Adjusted free cash flow climbed to $237.6 million from $128.1 million. That's a big jump and gives the company plenty of room to reward shareholders.

As of Aug. 1, cash and cash equivalents stood at $298.2 million, compared with $300.9 million a year earlier. Merchandise inventory increased 4.4% to $1.657 billion, but here's an interesting detail: inventory per store fell 5.6% in units and 2.3% in dollars. That suggests the company is managing its inventory more efficiently, which is always a good sign in retail. Long-term debt was $494.2 million.

The company repurchased $182.1 million of its own stock during the first 26 weeks, up from $99.9 million a year earlier. It also paid $19 million in dividends, compared with $17.4 million a year ago. And the board just declared a quarterly dividend of 15 cents per share, payable Oct. 14 to shareholders of record as of Sept. 16.

Management Commentary

CEO Steve Lawrence didn't sugarcoat the consumer environment. He said spending remains pressured, particularly among lower-income households. That's a theme we've been hearing across retail, and it's worth paying attention to.

But Lawrence also highlighted what Academy is doing about it. The company is reinvesting tariff-related benefits into value, expanding new brands and categories, and accelerating its store, omnichannel, and loyalty initiatives. In other words, they're not just sitting back and hoping for the best.

Lawrence said those efforts are helping Academy gain market share and strengthen customer engagement, which supports confidence in its fiscal 2026 sales and earnings goals. It's a classic retail playbook: when times are tough, double down on value and customer experience.

ASO Stock Price Activity: Academy Sports shares were up 11.59% at $49.89 during premarket trading on Wednesday.