ASO - Earnings call transcript Q1 2021 | Academy Sports and Outdoors, Inc.

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Operator

Good morning, ladies and gentlemen and welcome to the Academy Sports and Outdoors First Quarter of Fiscal Year 2021 Earnings Conference Call. At this time, this call is being recorded and all participants are in a listen-only mode. [Operator Instructions] I will now turn the call over to Matt Hodges, Vice President of Investor Relations for Academy Sports and Outdoors. Matt, please go ahead.

Matt Hodges

Thanks, operator. thank quarter joining XXXX and and Academy everyone first Outdoors results morning, you the for Sports Good call today. call Executive CFO; the CEO; Merchandising Officer. Vice on are Chairman, Chief Hicks, Participating President President Michael and Mullican, Steve Vice and and President Lawrence, Executive Ken and

covered are For are and are Reconciliations Investor earnings during included forward-looking the our be remarks and actual to but with comments in this to CEO. by our These could management release morning investors.academy.com. considered available at intended under release from reference, non-GAAP in as limited financial Safe the federal obligation provisions release, risks to to These call forward-looking not release today’s are financial will turn on earnings factors materially revise company provided our the no to, a filings to and earnings the by GAAP Harbor subject earnings call our the identified the undertakes refer securities cause this statements comparable projections. measures. expectations maybe Hicks, now results include, is any uncertainties certain Today’s and differ laws. over which website. in And and today’s measures the The reminder, uncertainties statements to SEC. issued the is risks statements in I Relations and to that Ken directly most the statements. made

Ken Hicks

as and have being our the mark able of back-to-work we to distribution It to these would remain Sports and in what Outdoor of their Thanks, and I is and as hard X for like centers extremely been start Academy we year. navigate morning, our we last fully pass our offices. team corporate Matt. to in continue achieve the team Good remarkable times. proud everyone. commitment by stores, year challenging I members thanking work open

as and assortments, safety the team outdoors remains providing through Our sports and top by and we retailer value best be experience. strive all priority member customer to for fun

XXXX strong quarter. to a were and Sales profit a the fiscal seventh sales over as per year consecutive diluted sales prior were were the fiscal achieved comparable XXXX, Following earnings record operating terrific XX.X% $X.XX. This we and is quarter. the $X.XX Comparable billion, XX.X% another off of increase growth. start quarter is positive share

see We demand across and product regions. continued strong all categories geographic to

As their a coming as of we more emerge lives. the often of areas store back and customers meaningful are part the remain outdoors from and pandemic, shopping our more sports

that for is stimulus the While customers benefit spending shift see introducing lifestyle and existing there in actions government categories, outdoors over sales entertainment, and backyard fishing, including discovering sports our year. past driving brand shopping in other products business customers categories, last the increase and often the a in a from change margin few efficiencies camping, more operational long-term new years to rates. of to new millions and bikes, issued strategic A consumer over grilling more improve did such our of as are checks, important taken we drivers believe

drive but put is base the not strengthening as to retail female, in customer growth than significant base. These place historical diverse profit of are practices customers these dollar continue increased margin and drivers younger Our more more as flow-through. only many our sales, best to also we new have led have

store we continue to In addition, enhance experience. overall

love and better their on refined Yeti. product securing training North mutual stores products. to relationship in Nike, includes are brands, and investing new and this assortments in who storytelling improve Together, our their Columbia customers to our presentation, Armour, investments making like we Under and strengthening and in-store Face, Adidas, Importantly, lines attracting sales with through partners enthusiasts and The website, new

including efforts doing We to greatest our the our business. private products more color expand all best that offer these some will from latest on brands, provide brands. the experience own of things world’s and the best shopping are our customers for label to Steve

the more have targeted executed continued Additionally, power added off quarter, marketing campaigns, powerful initiative features more chain to on and a merchandising we cost had success in supply academy.com, which our efficiency, impact kicked our our marketing work. and

stores invest existing on focusing these drive stores, to in in continue online areas stores future, will markets We and we growth XX the new plan as XXXX. customer X in new to of and the new in to all

$XXX felt to We Based that factors. activities XXXX highlight quarter Our a Michael commitment first a our million financial good secondary comparable also common outlook. our of strong After the business. performance details and macroeconomic will mindful on our participated to price. opportunity expectations results at ever-changing the ended, are we are a being evidence your two capital. the stewards discounted positive of are outstanding it EPS actions more a to impact offering XXXX as demonstrate ongoing share stock. updated I sales our the having about the increasing of year good want of on in market of the being reduce was buyer we shares full

$XX and or by the on by also interest paid our We XX% down reduced term balance XXX rate the million. points loan basis outstanding

through momentum the for has first carried quarter. Our XXXX

strengthening Michael fun by We of sales are over Michael? the increase to for and our maintaining review I cultivating financials. the call and all. to turn focused to now in-store relationships will online and customer it a profits and on bring

Michael Mullican

Ken. Good everyone. morning, Thanks,

quarter fact XXXX. first saw expectations continued our The as in into the we demand exceeded throughout XXXX accelerated and

our First Then increasing of based I our are our business. first discuss we which record on the XXXX I will guidance to strength continued quarter results. highlight want

were sales in When Sales as all firearms a across quarter comparable due divisions This strong Ken second mentioned, sales XX.X%. inventory growth. $X.XX four markets. net were that to billion, increased row as XX.X% expected quarter the sales XXXX, product comparable well being sales merchandise first to As all all despite continued ammo sales categories QX, had challenges. double-digit across with is compared lower than of and

of versus Our have their e-commerce we and began Because which sales the to rate channels. sales when store declined pickup in overhead of buy to our online, XXXX, grew buying profitability. sales, and COVID QX penetration year remains measured preferences growth increased our X.X%. shifted e-comm our XXXX X.X% we QX the XXX% XXX% reduces e-commerce last grow in sales customers approximately to crisis shipping XX% When sales digital over XX% as and and costs, against e-commerce been our able total anniversary

our fact a We profitable XXX%, pre-tax even in for continue and seamless believe growth is XXX% income to even In omni-channel we increased investment fact, more our sales improvement highlighting QX that there company’s have platform. create omni-channel to the experience. academy.com XXXX, as e-comm has since we have the a room as increase grown

provide are our We and Pay. give customers product implementing to capabilities to to personalized solutions improve search with payment and more Apple options recommendations our like more them checkout

less Academy Outdoors promotions million. more driven or During in margin compared QX to than the of SG&A $XXX.X fewer $X.X management, first than quarter, by record basis led These The rate pre-tax which loss clearance gross of merchandise million basis XXX XX.X% $XXX.X to an XXX points results expenses $XXX.X sales a of expanded margin QX lower Sports better million pricing million points XXXX. points dollars sales. a and XXX QX XXXX. by less to mix, and basis income XX.X%, increased favorable record all-time were XXXX and XX% to was of

per certain rate of income, tax of items, $X.XX extraordinary QX quarter which were impact in XXXX. per million to net $X.XX of $X.XX compared $XXX.X share $X.XX first $XXX.X per in Pro share a forma share were adjusted compared The resulting per loss diluted excludes was earnings $XXX,XXX compared the earnings QX net in diluted QX per XXXX. XX%, QX XXXX. share income million. to in to forma Pro was share

in we Moving with the credit and borrowings to ended our on million balance facility. the zero cash quarter sheet, $XXX.X

have $XXX our time, reduced is over our of a debt XX%, $X have We including over we by increased facility under same increase our year, liquidity, an last by availability decrease XX% compared million. to At net which billion. the credit of

Ending QX, than QX QX availability, XXXX the Steve the managed at $XXX.X more higher tighter X% XXXX. on operating higher to was generated growth. provide sales in company which million product During flow was while of billion QX will in X% his has how tremendous and than insight inventory cash compared effectively end XXXX. driving million $XX.X $X.XX team

million As $XX far as to capital in expenditures, the company to $XX still XXXX. fiscal expects spend million

of opportunities the Those that earnings laid opportunities XXXX. On of on shopping existing replenishing new capitalizing four where second, ensuring inventory call, and was were: for reopening management challenged the seasonal categories last growing are constrained and we first, from on sales out are customers; driving the most I velocity several improving through demand in lastly, positioned but to and where XXXX; in XXXX. XXXX, of product were exceeded benefit the of capitalizing that economy; supply several categories, third, our categories

indicators Here so of we doing are some far. are how

We that to an new customers category in continue in last existing return in of to a again. the who then category see purchased months percentage XX and increase the

cooking being supply categories above in comparable exceeded like water QX last record we XXXX, the bikes enough and a well all comp. and levels challenged QX inventory sports, saw fitness than shortages ended better a apparel company’s year, like didn’t after Team in outdoor had have and sales in ago. total sales that Our Sales where XXXX. year in our footwear categories in equipment, growth much position sports

Moving earnings we to our year outlook of guidance. for and XXXX, increasing are full remainder the sales our

we of full uncertainty forecast on plus XXXX, is the from visibility plus recent to external X% remainder from range factors, X%. have trends comparable sales impact still COVID-XX there for the are and the now based of other to year While and

as environment. share two and to Diluted represent share range the various a This $X.XX are XX.X on per possible for average outstanding forecast remainder of to $X.XX per the it full fiscal year. the of market earning years, would earnings year, outcomes business million per growth promotional diluted and today XX% weighted to share shares to the scenarios last comp XX%. based much for for from competitive now this range from Over more is accounts

this year-over-year more to share XXXX at and than a than merchandising growth, of XX% the midpoint count shares of In both I over operations. Steve? are higher share fiscal for the higher XXX% With and fiscal Steve guidance earnings turn and of around XX details that, normalized using XXXX. will net terms per call income million

Steve Lawrence

Michael. Thanks,

you Now, our little I would like more performance. give first around color a to quarter

we pent-up initiatives, quarter never of year. deliver The Unlike by we increase we quarter’s March part temperatures, a early past merchandise got we comp rebound and on of hurt. XX.X% impacted a result, to many this we is course, closures of top our did need demand, February. Once government XXXX. fueled last As comp. this and in warm competitors, disruptions, stimulus negatively in closed stores winter consistently as our in weather already the mentioned, a storms X.X% of strong store by was not April during the saw our And

generally XX% and category, apparel plus comps sales so at by while against Breaking hit results the both last apparel businesses softer and Looking footwear up two during down categories XX% two was when the are were lockdown they were XXXX. double-digit country up of by These the year versus went XXXX hardest plus XX% quarter. high strongest footwear category, versus XXXX into with up were our and divisions, versus XXXX, comps. XX% the it versus most

better on of improving Columbia and North Face, as Armour, Under inventory such national brands, key and based strong Nike, had All the positions Adidas, performances content. our

apparel are being as new pleased new the function called a February, comfort on key our Freely, of launch an value. bridging outstanding initiatives. offering performance with products brands the focus We private In athleisure two one and drivers we our new of women’s brand both the with by at footwear in launched of

fabrics Magellan initiatives Outdoors Both a We Pro us strong start a got also technical on and more and are to tracking tier launched with better Outdoors of plan. focused above teachers. Magellan

while XX% message, by also our reminder, being value filling are a for private margin gaps key national role by reinforcing accretive. business account brands not in our occupied our sales a roughly of As brands, that our in and play

to Our sports sales sports This being during compare plus of X-year one performing is categories across our picked all XX%. best by XX% and our rec that markets. XXXX, span. of the sports surged last shutdown you businesses up of the team division we played COVID, the from driven The return of really so growth over year posted when

our time of outdoor saw water we such in addition, furniture categories, cooking In strong many and as growth weather as outside were the warmed outdoor people spending recreation when up. sports, more

division, outdoor fitness When and surges up our huge years. to XX% XXXX. has levels and quarter in also to last XXXX, year, such that fishing, comps experienced and should Another win camping being historic the during enjoy we single-digit over bikes last In compared drivers from a the business which drive the managed despite during the categories was as lockdown volume continuing against XX% people were outdoors. increase. X grown Key to the benefited drive

discussed During with we see we carried quarter, clearance our to fourth This a or coupled the our call, through drive helped lower continued in basis first to environment. points last selling. year. margin levels quarter This we regular-priced where less quarter XX.X% promotional the versus entered with gross XXX up the strong

the normalized anticipating promotional cadence. more are see As a we that year progresses, will we

share back as to is plan Our must-win thoughtfully needed. market add opportunities promotions around key in

to all the X% quarter managed end in Another last to big was that inventories up supply us we the year. despite the and win increase with chain, disruptions the sales for unprecedented

quarter that may XX%. we You inventories remember entered with down this

sure I’m through job we risks. the to keep of flow in receipts The going quarter the merchant did challenges in demand to updating summer an for to us downside with in allow the has to us to team initiatives of that continue ensure tell that I working forward flexible supply a our progress us and help our you months. us against of set while up of worked stores forward should second up keep So chain can all looking outstanding protecting am have our call. some that stock any

it turn Ken? to to Ken. like would I Now, over

Ken Hicks

Steve. Thanks,

months, will sporting celebrating to are instrumental consumers mind the season, as winning summer And found long will increasing shopping and continue delivering outdoors their to We the targeted focused call July to backyard executing the they best open and through the family with stronger past our of this Xth start reopen, on as goals fun and fall lifestyles of Looking questions. experience, our weekend activities enjoy they at friends which fun cookouts sports. Day resumed hosting started and want we for Father’s country newly the continue and building like top strengthening of chain. live our we most, and ahead, and Day, Memorial continues or all be the for the to as coming work some the the our events. omni-channel team priorities, In supply a on improving focus Thank are we you. sports achieving retailer range initiatives now country. being in our work, merchandising towards to continue will we continuing business, marketing our These power recreational

Operator

Robert with [Operator Instructions] question. question with Please Our first is Bank America. your with of Ohmes proceed

Robert Ohmes

And morning. about seem to are back think position. seeing being you you on? really thoughtfully why from smaller should inventory you not rest apparel the XQ some levels was question about good other that? on little inventory? able harder takes of bit think in think and in on Do be quarter is and color in should there, think on also a Obviously, to then bit competitors guys a of thinking a how maybe could and XQ signs question be these we versus a the is lot you are that about more little on benefited in takes. categories. XQ – just some about how long we really more puts My thoughts and guys. Maybe year? should And footwear the Terrific you coming but that second of hoping get we And good how the being speak promotional? quarter, puts guys the comparisons I Hey, and So really should to the

Ken Hicks

we up I the last will biggest say of give Robbie. don’t Thank year the out you. up against quarter year, inter-quarter XX%. guidance. Yes, are But We

will a performance We seeing on first say continued or basis X-year – are stack the a we what the in did half first I we is are the of – seeing – quarter. as comparison

are regard acceptable So, call in inventory, our to well. continues With do we I would to what level. business an

to are, not we be. back where want are where we We to

probably a But are in million reasonable are overall, still position. We about short. $XXX we

still areas that the to we sales depth an acceptable would it’s that results and like the Steve as are get of And overall, we got to have. But has have got in mentioned the or challenged the that call. quantities it – allowed have level, have a don’t we We that we couple presentation us had.

Chain with I very think still a is have Supply done need. of Sherry the Head we of that are the chain challenged, that work. But supply team, Steve’s our very along get it’s and working And us terrific inventory we hard. a job to lot all Harriman,

competitors also have opportunity. inventory smaller to the we the and that They would I But before vendors is think we some more we but providing where have some we like that of are, – it be. the know comfortable room not of be we challenges. feel we all-in-all, may that where having don’t to have, we an go have

Michael Mullican

Yes. want standpoint, think management sure say want first are can make do off, We what to Robbie, a do. I we team, From we do a we to as that. it’s Michael. guidance we to going

you customers’ the up in of pretty There As the out, wallet. environment is a called comp a to of a more up year, There back uncertainty roughly XX% not big in to really read. a tough quarter, we for X next X quarters are but It’s is half came large environment. last that quarters year. lot quarter the against only still competition

we a it. The provided contemplates exceed can guidance We becoming we our do along out, risks is we more potential called for pool the we believe labor if is achieve you with promotions. believe those still As it. The challenge. that chain we supply challenging. And can job, more

Ken Hicks

some called to is the confidence well. school, as with again continue us big got people sport, headwinds, some be do cautious. uncertainty out. Michael continuing their the to that tailwinds; have But environment hobbies are to back And But playing people there The back continue Yes. to teams the there out. right we and getting will situation now, makes in we

Robert Ohmes

helpful. guys. so Thanks much, very That’s

Ken Hicks

Thank you.

Operator

JPMorgan. And Horvers with our proceed next is Chris your Please from question with question.

Chris Horvers

guys. Thanks. Good morning

So, I had a follow-up to question. that

a June reminder, later and of school think relative went back-to-school. was than delayed this as fair Texas year months tougher pretty year was the that that better months May given say the last July and last to systems back there July? I in quarter many to were weak So that Is rest –

Steve Lawrence

mean, we back-to-school, a out our saw Yes. moving of that, I I happening. Chris. not certainly, say lot or would markets either

For us period in back-to-school late the starts July a time the lot of our markets, time in period.

we So, did the front year. certainly versus quarter quarter half back the half in comps the of the see softer of last

Ken Hicks

when quarter, stronger half basis said, the good, front XX a quarter. pretty back but than per the of That on you month every was are was up more normalized half the

Steve Lawrence

that think going us So going – we when talk give forward, when to going Ken things little about we that’s is more I about one be of normalized. the certainly, back-to-school a we think forward, things is optimism think mentioned

position as see year. and corner. start a We about are year. season people returning We probably us get a fast baseball we off have this round gives think inventory the football We in we in to in the That better than been optimism to saw sports.

categories. new got customers all are our more We customers. across X have that up picked have cross-shopping got and existing past the new over and times hobbies We our million

are comps to of So, we reasons that against. to the of is up lot there some be big optimistic a play

Chris Horvers

how coming it. clearly, much longer mean, Understood. retailer of and maybe buckets have the you you are margin will margin sense of well. are you sort gross better a some the I potential business? But the of eventually you us promotions expansion? could the supply then down as about on initiative term, break chain Give then And thinking And normalize. the

Michael Mullican

with From supply Yes. margin in gross there big up freight chain. that. merch literally, And the elements of the gross the standpoint, But those offset margins. of driver the margin a more performance than was obviously, related our all margin exception to merch were

Steve Lawrence

mix negative lot merch margin, jumping We business, were year quarter. we reversed sports bigger favorable last a the a from mix half contributions the this year. So with of because apparel a had getting the down talked we and are year, or obviously, a we about are rec where and footwear. outdoor just the within That and had bigger they how in first a in, mix

to us merch we into But that optimization, quarter are better of So, less those will coming we talked optimization, give was terms about forward, and clearance. we going better some in We perspective. have kind back do markdown have headwinds talked talked with in about about initiatives margin certainly environment a level to from margin to facing us having flow add that offset expansion, and a of that less those things expect management. certainly those going for experienced a we inventory still tailwind we the to We And be QX. to promotionality. ready thoughtfully some and to of replace lot promotional going the better expect normalize in. though believe we some should that of at tailwinds are We the see not

Michael Mullican

clarification opportunity last we to compared be is a point uplift saw there year, margin QX One there, have favorable still mix to this. from of just believe we more an of shift but to clear,

Ken Hicks

Yes.

– are it chain called we the opportunities you and thing, just other out, just Chris, supply that have. we was literally The starting

roadmap – a are thoughtfully, and And begin will to culture will now, doing that we expect we has also sure manage those developed in support. our hard. projects the I and work the expenses company We will those as that making we and we say

we bit first impressive stretch, maybe long-term see a of of the our a over quarter for continued opportunity While quite was time. development margin and

Michael Mullican

power at, the source, look long-term we things little NPD best on margins a and double-digit I is pie. performing. getting growth perspective, bigger our we see our good from Two, a to in we had online are that piece the have we bigger we that basis over Chris, certainly, store, which pickup credit at And hit basis. for feel are plan we And dot-com think this that. that are investments share, merch look tag the a of bit, we just And delivering taking a that probably a certainly to our is sustain long-term. data, investments in that our the Yes. business can The buy are X-year on in are and card, we first, EBIT working, online, we that great are

are up way you leveraging, P&L XX% comp, work margin the expansion almost we income we increase, your Third, down X,XXX%. net if on the of XX% delivered

are are the leverage categories back, So, we shop our getting that we to customers back existing to customers want see to categories continue more. come more Fourth, new coming and get. those we and

we and there. all are grow we like the things, and are platform look to and growth feel building invest continue So, we lastly, we of are our we those happy at to the brick-and-mortar to happy progress. them, when we are grow, in And positioned resume then dot-com with

Chris Horvers

Thanks guys. Very helpful.

Operator

question next question. your proceed Daniel Please is with Imbro from with Inc. Stephens Our

Unidentified Analyst

want ask Daniel. the And Do now. for a get on category Andrew is on have one Is bump? team been into you. guns ammo firearms. was to that Ken, a for the buying and onetime on quarter. the that almost back think handling really have is as we strong for half? inventory year that you I I Congrats guys. one for This Hi, Obviously, how sustainable?

Ken Hicks

a store. the as on not will the be Historically, been to not because huge line But has situation. challenged. and the mean has That That now. is probably Yes. of driver supply continue company, situation we I element with the performance the been for business. of drive one to supply it’s us would dependent be a the case in

where did footwear Our we did it outdoor, good in apparel. overwhelm we strong were but performers, as And were. Steve performance and said, not have

that, will that. want be. in should it make do think responsible the not don’t firearms business, where the and we and person take driver beyond will And we sure We people continue business retailer we – area, what that but in to are we to be our had. was a support to it – the that most the I is So, for goal

Unidentified Analyst

Great. got And Thanks. follow-up to you. I a

are through? about handling yes, On these this freight – the the how are pass can how talk supply side, what’s chain Like you backdrop? inflationary able to headwind? And you you

Ken Hicks

that here. to will the And probably with we this right while do element to heard have that ships, are you I we we pressure, that under that foremost, at partners, there we and pricing is get tell docks from overseas, it everybody, our – looking truckers that. not supply an and is fair can how starting overseas from now, within probably we to managing, and to of that’s the not you the working are ensure first do the we get what chain delivery,

at our so point we And as areas looking also can team the do we best other how cost current hard And as at that. is are manage to the working within offset environment. this can to we

where centers the control. doing within distribution we can is of are our things one we example, For that

productivity. We We costs. pay-for-performance productivity in some showing that has offset those actually more DCs element, our of improved is dividends. in and getting helping and actually And to put a are our

Unidentified Analyst

Thank you.

Operator

UBS. question. Our Please next question proceed is from Michael with with Lasser your

Michael Lasser

sales to have per a my square foot XX% where sales it Thanks lot in morning. on question. are store for or pace year your in increase was per to compared you Good XXXX. Ken, a taking this

demand as have in So increase sporting all coming for pandemic had roadmap, in and not you sharp did clearly, the goods. witness transformational the this team to expect established and you

has dimension has from in you So, the it could you way of transformation look by has in the much as it? can there come front Academy already is – Academy at of make productivity horizon, is it achieved that marketplace been much And already that left what how this it of any still how progress achieved, flows, the such because that’s on demand of in Academy? that if increase even what

Ken Hicks

Yes.

real estate X and very is forward to of efforts One years your have prior that we main and there the retail, productivity really have that is inventory, all our looked your I is brought of really those. have Academy ago people. those And X of opportunities targeted your that I important. at the And that against in had strategy things to put increase levers; of all I X in

terms set the presentation. And improved way were better of have stock so done go that long-term goal for the the square our in foot We And sales things look of reallocated I businesses. stores in stores lot years. we per sure to goal at did productivity. in Foot time $XXX say the more estate back in we of if we would allow a initiatives. the better. and – a what the of to of changed make foot and merchandise X – both of We Penny’s, because you and we more make space I goal flow for useful found a productivity by and the example, the seen by productivity, did We more in up driving or from real out got then making of the more We same we that some the of space productivity the we We And traffic, we had store. could Locker a get thoughtful. to reset that thing. We a

the We store same thing are doing with labor.

members It so members we to get make The We to reduce serve have team flow can don’t tasks. the better themselves our of merchandise helps our helps take inventory. inventory. more better able that to our customer. out We the use give that team the us and customer handheld trapped other are of be productive. face hours such satisfy also as not electronic tools, devices, planning the customer, We they but

a miles way making we biggest So, three to all said think, reach are the as Cross it. have our we of I And goal. before assets, got we have got against our – that to Robert have go. we long go have And we really what’s initiatives

We shocker. are in the early second

have three, the confidence we continue can to And a measures. that all so got lot grow I of productivity

Michael Mullican

Yes. right One have, were more pointing initiatives. direction we we in favors all before were right look all back department, line based thing, and Michael. the finance indicators pandemic, to the the the performance the in good prepared. our certainly we of feel pandemic. the you on like things The on the working prior And if go And is at fortune the

on a efficiencies run did of accelerant to the really we said. lot to We the feel all as like those. through was hang can COVID Ken But COVID, So that. we

Michael Lasser

reaction it’s And questioning stock a which market results, sustainability these is is suggesting prices of Mike, a the question, it. that’s lead my into is muted follow-up helpful having and pretty to that your

of have here. you improve, you path think get confidence performance think sheet move in about the can you we as that going you can expansion double-digit may to from we a linear can quarters have balance your that a or step margin of this thinking discussion, cash few to call margin, on next Is have gross margin are should get that to it some promotions offered the operating continue expect a a to lot part You on as that some stock? noting out back be the before are back return you a this of modeling buying redeploying And that and you step able you are how you as forward? ample

Ken Hicks

will as be there we we to straight – The good but will tree sky. and said, And – the downs, start, have some confidence. got ups I you feel that no Michael. grows

for allow productivity anywhere handle this for strong the very and do to got that there linear, near team about the continue grow team which we that we grow the to think done. plan handle But things programs for us measures, – promotions have is the plan place a goal We have the in, in in and growth. contingencies not are be got see are but We us to on, there can allow that our But are, will here may continue is – – we working we’ve know and – for think will be and and profitability. are to result the to them. is we that. there to what-ifs And It that; not prepared our if exactly can if if not, planned they promotions. example, don’t

that’s they we to of it Michael the and happen, against has I and think will this that don’t continue So drive that talk part we we and team other panic what thoughtful overreact, demonstrated action history will let the when I demonstrate. forward. to may take your And face question.

Michael Mullican

add really surface mean achieve. what to in on opinion, on we much that. scratching are, I can we my the Not

the chain are initiatives supply into. now just Ken that, large is to Targeted tap discussed. starting work have that example We a we of certain marketing that

and a we So I it’s certainly do. more can of on feel lot like And lot work there is foundational. a that

to what the in stable. said of respect that reiterate making times, managing stability, business. I’ll We’re still With in sure we phase priority is the operating the cash, past, in our through we’re that uncertain

the performed, get we ways has loans. quarter. the look participate good million growth look fund able And the used at if value on stock way to you our then initiatives. return to we secondary to which decision. and underwriting $XXX opportunistic is back. And our we help last reduce a was term Obviously, our We on the lastly, were then will interest were offering to discount, at Second

So those we opportunities. look will to at continue

Michael Lasser

you very Thank much.

Ken Hicks

Thank you, Michael.

Operator

proceed is your John our And Guggenheim. Please question next with from with Heinbockel question.

John Heinbockel

start maturation years. it have might last that ago? real estate more year, your opinion? or the now in changed AUVs, opportunities not Has Let up right, curve, the the with open years me model higher existed that X.X new does over X store And

Michael Mullican

in really Well, know the categories. there that And most products that course, AUV selling, want we’ve mix. been I is taken price if more the mix-related. function Again, some increases of most it But certain of you of to... that’s higher of outdoor don’t is it. Steve, is a we’re

Steve Lawrence

In terms of the higher AUVs?

Michael Mullican

Yes. Yes.

Steve Lawrence

that questions soft That business Michael goods. some XX-XX, the road been we when mix But It the said, if show, pressures. passed traditionally earlier did along. the has back one about you have Yes. of But of mix-related. were is doing as goods-hard we was our talking we were go about cost we

of have kayak we things more where at that last lot it XX-XX that look you onset, like in A ended like up. driven hard was things like big-ticket year, goods. there that, If

Michael Mullican

of the starving I we’re of grow. terms not lot in in mean, for got And a real mean states, XX only we’ve so I opportunity. estate places look, strategy, to we’re

way going an that’s not way. sure organization responsible the But we’re making is good right in locations. it a and challenge we Our sequence to struggle find to

Ken Hicks

our markets. Within new markets existing and

John Heinbockel

And that, follow-up to then right. a maybe as

And and whatever the that sounds about for be promotions. would – assuming productivity think would So the your holds normalization most be change, point in right, I higher if only in part, the the opportunity, normalization profitability points thought? which the that you it could would fair like be XX basis supply gave promotion. equal back maybe a to on chain that Is or exceed right, XXX

Steve Lawrence

not in that be probably next other want set all we headwinds. planning a of wouldn’t increased and goods, thoughtful do that we That’s in takes way would pick be better up I’d Well, Whatever mean, obviously, of offsets initiatives allocation promotionality. to sales-driving our in is say the I to probably there. chain there raw to just where are happen. management, couple were puts to ago. in talking year back inventory, there. the we’re there about going believe, of be that a couple the We are we’re the place things going give increased creating supply etcetera. would adding initiatives going quarters. have to We terms not those back and stores that shortages, At allocation basis of or also and are going X some be talked productivity though, material same out disciplines, to points are years we the headwinds. careful our margin I certain time, promotionality some Those of the we better of challenges with markdown cost mean pressures better margin about in better XXX us and should expectation all

Michael Mullican

the Yes. expect offset normalize And mix again, to we where over have the time. still merchandise you

a little goods still hard of in the heavy now. side the business We’re right

John Heinbockel

you. Thank

Operator

Please our Greg question question. your next with proceed from with is Evercore And ISI. Melich

Greg Melich

questions. Hi, thanks. I two had

fair and there First up, dominated it? Or helped strongly? it that both top back you Is was one look line, guess, ticket really X to traffic if on that you’re XX%. years, I say that

Steve Lawrence

a number ticket And average on Both of It’s both. and XX%. traffic a were up. tier up basis is continuation actual the

Michael Mullican

metrics up. Yes. All basket are

Greg Melich

transaction are up double metrics are All years ago? also the up. few a digit counts I imagine versus

Michael Mullican

Yes. up. Transaction are counts

Steve Lawrence

Yes.

Greg Melich

Okay.

– the was more So it basket part was of average growth? XX% but bigger a

Michael Mullican

into We up. detailed it haven’t breaking gone the

Ken Hicks

Yes.

said, kind you takes got got increase, of all out and We six measures performing that it haven’t Again, had publicly. on But it of broken as – up our on – to all strongly. hit Michael that you we hard. get like to to were six hit and all

So I cylinder – nobody X has anymore, said have would an actually but years ago, eight so... and

Greg Melich

is the a lot we question I lot is So here there that’s foundational to but promotions biggest margin. to my gross second thing still of got go It come, think like a is, sounds away. the

SG&A bit. guess go on I little a to So I want

I scenario that the X about Is of is as could benchmark kind is a a dollars as have you flow-through X%, XX% where high there think got about there, X% up dollars you SG&A go ago, back years If you XXXX versus SG&A think? fair be up it if or versus or to XX% goes? around

Michael Mullican

No.

those we’re I – we’re on smarter things, both there benefiting side, a nothing SG&A labor being And leverage the the the on from think increased I around. scheduling with And our stick stores. think, of really then look, there is in the lot benefiting, sales. we that’s good from can feel

Ken Hicks

Yes.

more the effort will system that pay productive. to I about store our for to labor you talked continue in will, place we’ve make roadmap in labor centers, to place in investments a with making scheduling distribution of our that our improve make chain. productivity productive, supply expenses our We’re putting if we’re our put the the that more efficiency

the making We marketing move and targeted we’re are to in our make more efficient – that marketing effective.

expenses, we to them. as them look the so we expenses our as And at fast as productive because in do more see we’re make growing investing as not sales our we’re going

Michael Mullican

that things That’s our of not move per DC is Yes. to a working we’re great the function to there. that’s the significantly, happenstance. example initiatives down pretty unit on And another and cost

should stuff around. that So stick

Ken Hicks

not improve to continue it yet. through And with we’re because

Greg Melich

there guys. you But there. good and That’s luck, is still great. room Thank

Ken Hicks

Thanks, Greg.

Operator

question. with Lavesh Hemnani is from with question your next Our Suisse. Please Credit proceed

Lavesh Hemnani

you Thank on and question my the my Hey, for congrats guys. taking quarter.

Ken Hicks

Thank you.

Lavesh Hemnani

balance margin I year. follow-up on the of for had the gross a the

incremental of some update understanding fact, of these headwinds consider that on as all actually, chain timing in initiatives can you are the year, persisting supply through not share the on – supply that just some are that especially the there side? you underway, are of lap initiatives all these basically or lap, these key chain So,

Ken Hicks

Yes.

the road place that. in We of are now said, put some we are map I against just and up some starting actions – to – as finishing

lot from will see results, the We not a impact will see we of early some year. this but project

will next year year. it more the We it following and start see of – to

Steve Lawrence

a being would impacts those in, I this have further year and on were we better been lot say will definitely the held think jump though, that be planning, allocation. initiatives along the around do X And over X.X, merchandising better years. and that we of past help

Lavesh Hemnani

steady other working payables, range. leverage follow-up pretty quick been on the XX% capital, One that on it. in has Got

look I like into to think at is year what year, right about and next sort the of the the number forward? if of balance So going

Michael Mullican

second. repeat sorry, you I’m for could We there couldn’t your question? a you we – lost

Lavesh Hemnani

Sorry, I’ll repeat.

sort year on question around now. XX%ish into and the is back at the payables capital, the on been to that has my next especially right last four into year, leverage, quarters range that So this what’s forward working half the of look I number for there? going mean of

Michael Mullican

We change. to Yes. change as payables the any, wouldn’t anything substantial – expect frankly,

Ken Hicks

yes. change, Substantial

Lavesh Hemnani

Thank you. Great.

Ken Hicks

Lavesh. Thank you,

Operator

for more time – we question. do ladies do and one we gentlemen, And have

last John Capital. with from with proceed Zolidis and question Please your question. is next Quo Our Vadis

John Zolidis

for to Hi, I me just have going was in. – I guys. fitting two Thanks questions.

on question. I a one think a you to to Did and second rate the that first first running XX% first tell comps. XX% mean The the up basis in quarter you estimating is X-year per foot square similar the quarter mentioned I’m is a sales for clarification us were X-year? quarter that at

Steve Lawrence

when to XX%, XXXX. that’s said a So we what X-year – I comparison

XXXX. commentary against give – happening. don’t ‘XX comment what’s that’s to – So try sales Ken’s around we comparing not inter-quarter And

of sales curve we off about year, how because When plan talked shape the talked it’s we with XXXX. in XXXX XXXX. and this about are more candidly this size We anchoring we normalized the using year from distribution

we’ve lens, back at and against through trends see strong And seen QX. back XXXX, look same of comparisons So when trends we sort go continuing. we in that looking those

John Zolidis

And question in term second nature. longer Okay. you. Thank is then my

for this what consumer business also considered to objectives be? or your plans months have about ago, position those that change and think the XX you does And the previously? might relative If the unlock wouldn’t in financial things any you

Steve Lawrence

I’ll jump in with one.

relationships of the That’s with I From perspective, from in vendors is where of that we best about doors versus a have think us. talked unlocked we lot ago, strength an of for the certainly about years probably you different manifested you perspective, the ways. were vendor the company. improved would financial say – our been. vendor a offerings product from First, our a several better partnership availability And that of vendors. couple it’s the ever We that see getting this we’re product today

that coming space We’re are us. into getting brands new the for

along We’re a seeing site. better the building vendors presentation footprint our in-store want a to invest digital with mutually on better in

helped better allocation getting We’re us inventories. cases, certainly better up of build That our terms. we’re inventories year. getting this some in And

big been certainly would performance. impact a that’s I of the pretty So say

Michael Mullican

Yes.

that the way in markets our the would getting investments – performed. with one newer our new The other we’re ROIC, have be, markets certainly,

to new a that, we But and to I XX faster accelerate year, our that. we’re little ability to X after committed grow certainly are stores. the rethinking think next

Ken Hicks

capability to the chain to continue make invest we had. opportunities coming Yes. will that the the our our it’s ability And invest in we stronger, supply more obviously, growth to our ability to need to there. it is in dot-com in invest what think capabilities, managed improving we’ve But

merchandising other store going now We’ve better in North And said, there us. a couple do a putting balls better better power we’re your objectives in North North active they stores, in up now, looking vendor more team a might other think, all The and bats sleeping in are to bags. Face was one with that we’re some But Nike I Face our best. at yes. and more, in Magellan and stepping camping. and in one like Face of be bag the sports for we Yoga started I we bought day, North thing, our that’s – we to And camping, structure, the in things Face important is bags. of the of was be thought camping that

the we’ve opportunities significant seeing we’re So and from appreciate the success had that customer.

offer us, enthusiasts with to great beginner to have and customers come and what come that to that they we is that we assortment those As items. offer us have want new from value the they

Operator

the reached now have Ken. end our it to I’ll question-and-answer back We of session. And turn

Ken Hicks

recap call the the I’d just Yes. thank and and like interest. for participating to on everybody Okay.

think set I had good we of questions. a

going the we’re that We the are team, our done, dot-com, all more phases. who significant in but of grow aspects job of those and terms appreciate the the straight what to of real really want are and feel have strategy us ahead operational and the business sky, has best we shareholders to And are of terms estate, But terrific and who of to the to early effectiveness. terms in the to the you very we we’ve confident And have participating capabilities and thank move got us our of ahead become much go in always got team with as not our all our the first proud we we’ve it’s done a we’ve support. of quarter. in the we up in And I develop all business. your for in in opportunity

Operator

and And you your lines disconnect time. this conference concludes your may at participation. you for today’s this Thank

Academy Sports and Outdoors (ASO) 8 Jun 212021 Q1 Earnings call transcript