Photo: Academy Sports + Outdoors
Academy Sports Tweaks Formula for Entering New Markets
Academy Sports + Outdoors has accelerated its store opening targets, but it is also adjusting its real estate strategy, including the geographic mix of new stores, the pace of openings, and initial sales targets.
When announcing its fourth-quarter results, the Texas-based chain said it now plans to open between 160 and 180 locations in new and existing markets in the next five years, an increase from its previous projections of 120 to 140 openings set in March 2023. Academy Sports ended 2023 with 282 stores across 18 states, mostly in the Southeast and Midwest.
On its quarterly call with analysts, CEO Steve Lawrence said the retailer “learned a lot” in opening 23 stores during 2022 and 2023 after not opening any stores the prior two years due to the pandemic. He said, “As we move forward, we will continue to refine the tactics that support us in achieving our long-range goals.”
Among the shifts in its real estate strategy, Academy Sports + Outdoors is:
- Increasing focus on fill-ins: Academy is now planning for a 50/50 split between openings in existing and new markets. Previously, the aim was about a third in existing markets and the remainder in new or adjacent markets. The change comes as Academy continues to see stronger openings in existing markets. Lawrence told analysts, “Where we’ve got high brand awareness, you know, we’re seeing those stores start out very, very strong. And some of these smaller markets where we’re going in with one or two stores at a time, it’s taking a little longer to build brand awareness.”
- Emphasizing smaller- and medium-sized markets: While recent openings have largely focused on large metropolitan areas, an increased focus will be on smaller- and medium-sized markets after success in some smaller markets, including Christiansburg, Virginia, and Harlingen, Texas. Lawrence said, “More stores may be a slightly lower volume, but because they’re in smaller markets, the operating costs to run those stores are very favorable and more than offset the slightly lower volume target.”
- Expanding first-half openings: Academy now plans to open about half of its new locations in the first and second quarters starting in 2025 after finding first-half openings ramped up faster than ones opened in the second half of the year. Previously, openings skewed toward the back half.
- Planning multiple openings when entering new regions: Academy now plans to enter new markets with “greater density” after finding opening too few stores impacted the ability to raise brand awareness. Lawrence said, “While they did not all open in the same weekend, [adding] a cluster of stores that opened in a relatively close time proximity to each other helped us gain greater efficiencies across multiple fronts, with the clear win being in driving greater marketing synergy.”
Largely due to the slower start in new markets, Academy lowered its first-year sales targets for new stores to a range between $12 million and $16 million, down from $18 million previously. While they’re starting out at a lower base, new stores are still expected to reach maturity and have sales similar to the average store within 10 to 15 years.
“We’re trying to be very deliberate and thoughtful about how we pace out these new stores,” Lawrence said. “It’s kind of going slow so you can go fast in the future.”
Academy still sees the potential for over 800 stores in the U.S.
Discussion Questions
What lessons should be gleaned from Academy Sports’ adjustments to its real estate strategy, particularly around entering new markets?
What overall advice do you have for chains entering a new market?
Poll
Loading …BrainTrust
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
Bob Amster
Principal, Retail Technology Group
While the sports market is quite competitive, Academy Sports’ focus on smaller and medium markets is sensible. These are often underserved by sports stores and are not the domain of Dick’s (other than via online sales), so there is some market share up for grabs. Plus, property and rental costs are often lower. I also think the decision to increase density in new regions is prudent; too few stores in a region leads to inefficiencies and saps margins.
This does make sense. I see Academy is lot of small and medium markets and they really thrive. I think they offer great product at great pricing and provide customers with a great assortment. I think their expansion is well thought out.
I appreciate Academy Sports’ cautious approach to opening new stores – slow, steady and deliberate. Investing more time and effort upfront in site selection and store configuration should improve the probability of success of any new location. Furthermore, their strategy of clustering new store openings to create critical mass in a new market also makes good sense. I would advise Academy Sports’ leadership to analyze store traffic volume and conversion rate performance of their best performing stores and consider these characteristics as they build-out new stores. The important thing to remember is that, opening stores is the easy part – getting the stores to deliver the outcomes required is a different matter. Even the very best store locations won’t be successful if the store team can’t execute effectively.
It is a bold move that signals confidence in the brand’s business model and growth potential. This approach, which focuses on a mix of new and existing markets, more miniature- and medium-sized markets, and clustering stores to enhance market penetration, reflects a nuanced understanding of retail dynamics. It’s an inspiring plan that may set a new standard for how retail chains adapt and thrive in a rapidly evolving marketplace.
Academy Sports + Outdoors’ strategic shift in its real estate strategy is a commendable move. By accelerating store openings, focusing on fill-ins, emphasizing smaller markets, expanding first-half openings, and planning multiple openings when entering new regions, the company is demonstrating adaptability and foresight. The decision to lower first-year sales targets for new stores, while initially seeming conservative, is a strategic move that allows for sustainable growth. CEO Steve Lawrence’s statement about going slow to go fast in the future encapsulates this approach. This strategy, coupled with their vision for over 800 stores in the U.S., positions Academy Sports + Outdoors for long-term success.
Academy Sports’ real estate expansion plan is prudent and methodical, as the chain builds anticipation and creates pent-up demand before opening new stores.
The chain is wise to adapt store footprints according to local needs and demand. Opening new stores in the first half of the year allows Academy Sports to resolve operational issues well ahead of retail’s critical fourth quarter.
Academy Sports realizes the importance of brand awareness in driving foot traffic and revenues. Focusing on multiple locations in markets is a smart strategy to help accelerate brand awareness in new markets and leveraging the brand image in the markets where they are adding additional stores.
Overall advice: If you are going to follow the multiple openings when entering new regions strategy, be careful to not open more stores than the market can bear. This typically leads to eventually closing the ‘underperforming stores” about which we read too often. gradual and surgical expansion… To its credit, Academy Sports + Outdoors appears to be analyzing and reacting to lessons learned in other markets.
Academy Sports + Outdoors’ real estate strategy adjustments offer valuable insights for retailers. By shifting focus to a 50/50 split between new and existing markets, they capitalize on brand awareness. Prioritizing smaller markets leverages lower operating costs and successful examples like Christiansburg, Virginia, demonstrate potential. Clustering store openings boosts marketing synergy, crucial for brand recognition.
Lowering initial sales targets in new markets emphasizes sustainable growth over short-term gains, highlighting the importance of long-term strategy over immediate returns. These adjustments underscore the complexity of entering new markets and the necessity of adaptability in retail expansion strategies.
Retail chains should prioritize thorough market research, adaptability, and brand awareness. Understand local demographics and competition. Cluster store openings for marketing impact and focus on building long-term community relationships.