Academy Sports + Outdoors, Inc.

Crossing the Chasm

Firstly, an explanation.

The Diffusion of Innovation (DOI) Theory is a framework originally proposed by sociologist Everett Rogers to explain how new ideas, products, or technologies spread through cultures over time. Applying this theory to online purchase behavior sheds light on how consumers adopt e-commerce, new online shopping platforms, or digital purchasing habits, at first principles.

We can see that there are 5 categories of ‘adopters’ in this case:

Innovators are the first to adopt new technologies and behaviors; they are typically risk-takers, tech-savvy, and open to trying unfamiliar online platforms.

Early adopters are socially influential, often younger, and more affluent. They have a strong social network and tend to influence others in their social circle.

The early majority is deliberate and adopts new technology once it has been tested by the innovators and early adopters. They seek reliable options and wait until the technology or platform has been validated.

The late majority is more skeptical and adopts new behaviors or technology out of necessity rather than desire. They look for cost-effectiveness, stability, and simplicity.

Laggards are the last to adopt new technology and prefer traditional shopping methods. They are generally averse to change, often due to trust issues, unfamiliarity, or lack of access.

Rogers’ theory is generally accepted, with one exception. The CHASM was defined by Geoffrey Moore in his book Crossing the Chasm.

This is the chasm that beats most businesses. List building for launches is one thing. Acquiring customers over the longer term is a much bigger challenge. Remember, innovators and Early Adopters are VERY different to Majorities.

This is important, and something we have seen consistently. A launch goes well. Launch ends. Then ‘crickets’. We change things up a bit. More crickets. This means the majorities haven’t accepted, and it’s painful. So, during the launch phase, while it’s important to get innovators and early adopters listed, it is critical that you also test sales to the early majority as soon as possible. But how? Well, that’s exactly what we’ll address in our Product / Market fit course.

https://cruaoutdoors.typeform.com/to/UBq6AbXR

Academy Sports + Outdoors - a history

The History of Academy Sports + Outdoors: From Humble Beginnings to a Sporting Empire

Academy Sports + Outdoors has grown from a modest San Antonio-based store into one of the largest sporting goods and outdoor retail chains in the United States. Known for its extensive selection of sports, recreation, and outdoor products, Academy has built a reputation for affordability, variety, and even (some) community engagement. Let’s explore the company’s fascinating journey, from its early days to its rise as a major player in the sporting goods industry, including key dates, founding figures, and significant milestones. As usual, we must start at the start..

1. The Early Beginnings (1938–1945)

Although Arthur Gochman is usually the name we come across when reading about the beginning, Academy Sports + Outdoors traces its roots back to 1938, when it was actually founded by Arthur’s father, Max Gochman. The name actually evolved from a former San Antonio Catholic school named St. Henry's Academy, which was on the same street as the original store. Originally, however, the store was not focused on sporting goods at all. The Gochmans, Jewish immigrants from England and Russia, opened the store as Academy Tire Shop in San Antonio, Texas. The store specialized in tire sales at a time when people were beginning to rely on car travel at a larger scale. However, Academy Tire Shop began selling military surplus a year later, and indeed changed its name to "Academy Super Surplus" in post war 1945.

After World War II, Max Gochman showed his business acumen by recognizing an emerging market for military surplus goods, such as clothing and camping supplies, that returning servicemen and civilians alike were interested in. He gradually shifted the store’s focus from automotive products to selling a wider variety of goods that included military surplus and outdoor equipment. In 1956 Max moved the business to Austin, Texas, and expanded to four stores.

2. The Shift to Sporting Goods and Expansion (1960s–1980s)

In the 1960s, under the direction of Max’s son Arthur Gochman and, later, Arthur’s son David Gochman (David served as Chairman, President, and Chief Executive Officer between 1997 and 2011) the business expanded its product lines even further, this time turning its focus toward sporting goods. This was a period when America’s interest in recreational sports and outdoor activities was growing rapidly, creating a ripe opportunity for a sporting goods retailer. The Gochman family capitalized on this trend by including equipment for hunting, fishing, camping, and other outdoor activities, again recognizing the trend early

By the 1970s, Academy had established itself as a major player in Texas, particularly for families looking to buy affordable sports and outdoor gear. At this point, the company began slowly expanding its footprint across the state. In 1973 Arthur Gochman purchased Southern Surplus Sales in Houston and changed its name to "Academy Corp." Arthur opens six Academy Super Surplus stores in Houston. Arthur stopped practicing law (he specialized in civil rights law) in 1978, and devoted his time wholly to Academy, and moved their corporate office to Houston as well.

Under Gochman’s leadership, Academy opened its first full-line sporting goods store in Houston in 1978. This store offered a broad range of products for a variety of sports and outdoor activities, from hunting and fishing to fitness and team sports. The Houston location marked a key shift in Academy’s business model, as it became a one-stop shop for sports and outdoor equipment in Texas.

3. The Regional Expansion and Modernization Era (1990s–2000s)

The 1990s marked a significant period of growth for Academy Sports + Outdoors. Academy purchased its current corporate office and distribution center at 1800 N. Mason Road in Katy, Texas in 1990. The company grew to 28 stores across Texas, exited the military surplus business and hit $100m in sales in the same year. The brand gradually expanded to surrounding states like Louisiana, Oklahoma, and Arkansas. At this time, the company also standardized its large-format store model, which featured expansive square footage, wide aisles, and high product variety. This format became a hallmark of Academy stores.

Academy’s business model continued to focus on offering products at lower prices than competitors, a strategy that appealed to budget-conscious consumers across the southern United States. By the early 2000s, Academy had become one of the largest sporting goods chains in the country. The company’s slogan, “Right Stuff, Low Price, Every Day!” became synonymous with its brand identity and customer promise. It has more than a hint of Sam Walton about it!

The growth in the 1990s and early 2000s wasn’t only driven by geographic expansion but also by strategic choices. This strategy included partnerships with top sporting goods brands such as Nike, Adidas, Under Armour, and Columbia, which actually helped Academy attract a broad customer base.

4. Acquisition by Private Equity and National Expansion (2011)

In 2011, Academy Sports + Outdoors attracted the attention of Kohlberg Kravis Roberts & Co. (KKR), one of the largest private equity firms in the world. (KKR posted $22.7 billion in revenue and nearly $4.1 billion in profits in 2023 - Forbes). KKR purchased a controlling interest in the company, which marked a pivotal moment in Academy’s history. This acquisition provided Academy with the financial backing and resources needed to pursue more aggressive national expansion plans. Rodney Faldyn was named CEO & President shortly after and Academy.com launched as an eCommerce retail site in the same year.

Under KKR’s ownership, Academy’s growth trajectory accelerated significantly. The company expanded into new markets outside the southern United States, including states like Indiana, Kansas, and Kentucky. In addition to geographic growth, Academy invested heavily in technology and infrastructure to enhance its supply chain and streamline operations. E-commerce became more and more of a key focus for the growing company.

With the resources provided by KKR, Academy began focusing more heavily on its proprietary brands, such as Magellan Outdoors, BCG (for fitness and sports apparel), and Ozone 500 (for bicycles). These in-house brands allowed Academy to offer quality products at competitive prices, further solidifying its value-oriented reputation. Not dissimilar to Decathlon in Europe and Asia.

5. Financial Milestones and IPO (2020)

Academy’s much anticipated initial public offering (IPO) happened in October 2020. The IPO came at a time when the demand for sports, outdoor, and fitness products had surged due to the COVID-19 pandemic, as people sought recreational outlets during lockdowns and quarantine periods. Academy went public on the NASDAQ under the ticker symbol “ASO,” raising $203 million through the sale of 15.6 million shares.

In the years leading up to the IPO, Academy Sports + Outdoors experienced impressive revenue growth. In 2019, the company reported annual revenues of $4.83 billion. By 2020, the company saw a significant increase, reporting revenues of $5.69 billion—largely driven by the pandemic-induced demand. The IPO provided Academy with the capital needed to accelerate its digital transformation further, expand its e-commerce capabilities, and increase its market presence nationwide.

Academy’s IPO also marked a new era of growth, with the company expanding its total store count and distribution capabilities. By 2022, Academy operated over 260 stores across 17 states, with plans to continue growing its footprint both in existing markets and new ones.

6. Key People and Leadership Shifts

Throughout its history, Academy has been influenced by key leaders who steered its growth. Max and Arthur Gochman, the company’s founders, laid the groundwork for the company’s initial success, while David Gochman, took the company to new heights by focusing on sporting goods and large-format stores thus playing a pivotal role in transitioning Academy from a Texas-based retailer to a regional chain before the company was eventually sold to KKR. (Max passed away in 1985 and Arthur from a heart attack in 2010 - RIP.)

Ken Hicks, who joined the company as CEO in 2018, has been a very significant figure. Hicks was brought in for his extensive retail experience, having previously served as CEO of FootLocker. Under Hicks’ leadership, Academy has focused on operational efficiency, e-commerce growth, and expanding the company’s store footprint. His leadership was especially instrumental during the IPO process, guiding the company through a successful public offering and capitalizing on the heightened interest in fitness and outdoor products during the pandemic. In 2023 Steven P. Lawrence was named as CEO, and Samuel J. Johnson was named as President while Ken C. Hicks was named as Executive Chairman of the Board of Directors.

7. Key Business Metrics and Financial Performance

Academy Sports + Outdoors has seen steady revenue growth, particularly since the late 2010s. The company’s revenue for 2021 reached approximately $6.77 billion, up from $5.69 billion in 2020. Net income increased from $120 million in 2019 to over $300 million in 2021, underscoring Academy’s ability to manage its expenses effectively while expanding its revenue base.

Academy’s key performance indicators, such as same-store sales and e-commerce growth, have also shown positive trends. Same-store sales saw a notable increase from 2019 through 2021, largely driven by strong consumer demand and Academy’s ability to meet that demand with timely inventory and competitive pricing. E-commerce sales also became a more significant portion of the company’s overall revenue, with online sales growing exponentially during and after the pandemic. However it’s notable that things have softened in the most recent results.

Speaking on Sep 24, , Chief Financial Officer (CFO) Carl Ford said second-quarter sales were "more challenging than expected." He explained the results were hurt by "a tough economy, a temporary distribution center backlog related to going live with a new warehouse management system and by a very active storm season across key portions of our footprint."

Ford added that based on the company's first-half performance and expectations for the rest of 2024, it was revising its full-year outlook. Academy Sports + Outdoors now sees revenue in a range of $5.895 billion to $6.075 billion versus the previous $6.07 billion to $6.35 billion. It expects same-store sales to decline by as much as 6.0%, down from the earlier slide of up to 4.0%. So, even the big guys are feeling it, although Academy is faring better than most.

Final comments

From its beginnings as a tire shop to its transformation into a nationwide sporting goods retailer, Academy’s journey is a unique evolution. One which often displayed a keen understanding of the market. With its focus on affordability, customer satisfaction, and community engagement, Academy has carved out its own understated niche in the ultra competitive world of sporting goods retail.

Post IPO there seems to still be a strong focus on growth, both in-store and online. Although now a public company, they would do well to retain some of that Gochman acumen when analyzing market wants and needs.

References if you’d like to read further

• https://corporate.academy.com/our-history/ 

• https://investors.academy.com/news-releases/news-release-details/academy-sports-outdoors-reports-fourth-quarter-and-fiscal-2023 

• https://www.investopedia.com/sales-fall-at-academy-sports-outdoors-as-it-faces-tough-environment-8709474