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Academy Sports + Outdoors (ASO) reported downside 1Q26 results, marking another quarter of underperformance as EPS and revenue misses have become a recurring theme lately. Revenue declined 0.9% yr/yr -- the fifth consecutive quarter of contraction -- driven by weak consumer spending particularly among lower-income customers who form a significant portion of ASO’s value-oriented customer base, and intensifying competitive pressures from Dick’s Sporting Goods (DKS), which has been gaining market share.

Despite the disappointing Q1 results and a downward revision to FY26 guidance, with comparable sales now expected to range from -4% to +1% (previously -2% to +1%) and adjusted EPS guidance lowered to $5.45-$6.25 from $5.75-$6.20, ASO’s stock is trading higher. This counterintuitive rally is likely driven by low expectations heading into the report, which cushioned the impact of the miss, and the company’s commentary on sequential improvement in comparable sales throughout the quarter, culminating in a positive comp in April. The widened comp sales guidance reflects caution due to potential tariff-related disruptions, but the market appears to be focusing on the improving monthly trends and the company’s proactive stance on managing external risks, fueling optimism that the worst may be behind it.

• Comparable sales in Q1 declined by 3.7%, slightly below analysts’ expectations, continuing a trend of negative comps, as macroeconomic headwinds continue to disproportionately impact ASO’s lower- to middle-income customer base. On a positive note, ASO reported strong traffic growth from higher-income consumers, suggesting its value proposition and product assortment continue to resonate with a more resilient demographic.
• Furthermore, by maintaining the high end of its FY26 comp sales guidance at +1%, ASO signaled confidence in its ability to potentially return to positive comps as its growth initiatives, including new store openings and brand expansions, gain traction.
• A significant highlight of the quarter was the launch of the Jordan Brand in 145 stores and online, described as the biggest brand launch in ASO’s history. This move enhances ASO’s appeal in the competitive athletic apparel and footwear market, particularly as DKS strengthens its footwear segment through the proposed acquisition of Foot Locker (FL), expected to close in 2H25. 
• The Jordan Brand, with its strong cultural cachet and broad appeal across men’s, women’s, and kids’ categories, positions ASO to capture incremental market share and drive traffic, especially among younger and trend-conscious consumers. This launch could help ASO differentiate itself in a crowded market and counter competitive pressures from DKS’s, which is leveraging its scale and enhanced Nike (NKE) partnership post-acquisition to bolster its footwear dominance.
• Gross margin improved by 60 bps yr/yr to 34.0%, reflecting effective cost management and proactive tariff mitigation strategies. The company has reduced its direct import exposure to China to approximately 9% of its private label cost of goods sold, with plans to further decrease this to 6% by the end of FY26. Actions such as diversifying its supply chain to include trusted suppliers in other countries and pulling forward domestic inventory receipts of evergreen products at pre-tariff prices have helped mitigate the impact of tariffs.

ASO faced another challenging quarter marked by an EPS miss and continued revenue declines, driven by weak consumer spending and competitive pressures. However, the sequential improvement in comparable sales, culminating in a positive comp in April, and the strategic launch of the Jordan Brand signal potential for a turnaround, suggesting stronger results may be on the horizon.