Here's Why Academy Sports Stock Jumped Higher on Thursday

What happened

Shares of athletic retailer Academy Sports and Outdoors (ASO 2.79%) jumped higher on Thursday, ironically after the company reported that its business slowed down during its fiscal second quarter, which ended in July. The company's net sales were down 6.2% year over year, leading to a 17% drop in net income. 

However, investors seem willing to forgive the slowdown because it's happening with companies across the sector -- this isn't unique to Academy Sports. Moreover, in certain metrics, the company's results and guidance were stronger than some of its competitors. And that's why the stock was up a hearty 15% as of 10:30 a.m. ET on Thursday.

So what

Second-quarter net income of $157 million was down year over year, but analysts actually expected worse from Academy Sports. These low expectations could be related to its larger rival Dick's Sporting Goods, whose gross profit margin has fallen due to higher theft in its stores. However, Academy Sports' gross margin improved in the second quarter to 35.6% compared to a gross margin of 35.3% in the prior-year quarter.

The improvement is small, but it played a part in quarterly profits being better than expected. And beating expectations often leads to jumps in stock price, as is happening today.

Now what

In addition to beating expectations in the second quarter, Academy Sports reiterated most of its full-year guidance. This stands in contrast to many of its rivals, which lowered guidance with their financial reports. 

One noteworthy change for Academy Sports' guidance is positive. Management expects full-year earnings per share of $6.65 to $7.35, compared with previous guidance of $6.50 to $7.20. The update is due to an assumption of a lower full-year share count, implying that the company is repurchasing more shares than previously anticipated.

I've personally been on the fence with Academy Sports, uncertain whether it was a good business or merely benefiting from industry tailwinds. But second-quarter results are adding to the argument that it is a good business.