ASO - Earnings call transcript Q2 2021 | Academy Sports and Outdoors, Inc.

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Operator

Good morning, ladies and gentlemen and welcome to the Academy Sports and Outdoors Second 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 second 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

in As statements Litigation that These uncertainties These could the defined in forward-looking our statements the as in earnings measures. on I SEC. revise release, turn include, Private CEO. obligation Securities are in comparable Today’s are undertakes statements. release earnings made and XXXX. the to Ken which subject Reconciliations GAAP comments investors.academy.com. earnings website from the today’s Relations certain projections. statements a risks to results any to no management Hicks, and to considered release company but provided to, materially during and included non-GAAP with forward-looking risks cause Act reminder, is will Reform of refer differ by filings call identified this The today’s and Investor to over limited to remarks call maybe actual measures most uncertainties financial factors are expectations financial not the in the our and directly now the our

Ken Hicks

Thanks, morning, Matt. everyone. Good

the impacted hurricane start team, stores in of saying efforts chain by proud now of out area I'm our Ida. that and thanks tremendous are open. impacted by operations me everyone very to Let say our all go thoughts prayers the our to and that supply to stores, that

possible, and also our recover the stocked support and team their families supporting as our community effective and fully that can working their area so in quickly get serve communities. impacted assisting of to We're get they are and customers. all help our the they We staff and to customers need continue to and stores local as members

comparable were the we customers quarter history by Day, focused and often, of summer quarter store. driven shopping profit results. of major was posted in sales areas success said sales very that growth of the company's helped $X.X eight compared Last the operating weeks comparable spending dating more especially coming Father's quarter on sales the I'm these record of of of our more sales quarter, has we of Academy holidays. second back growth and achieved our events and The the XXXX. quarter now when season, highest positive I primarily This the consecutive Memorial Day more July. sales of share billion, second to the back and Xth to shifting to second from XX.X% Now XX.X% the drive winning XXXX. of quarters third to pleased

million mix, of record gross We continued promotional and fewer markdowns. favorable less $XXX.X margin product also achieve activity, by driven

higher gross margin shipping value and providing and Our growth more increases to than our costs product still set customers. great we're

history. store employees, the activities, highest of made the implemented In ended the Overall, market our earnings labor $XXX.X as members unproductive in to serving tools changes on quarter company's terms to retain management using have letting net with customer. labor costs, and reward also we've million, of quarterly needed reduce the but team focus earnings adjustments we

chain discussion our flow working diligently of all inventory and year. There's Our position end a supply to XX% been at availability was allocations. partners to constraints. last about the inventory and been compared We've the of ensure quarter of up vendor lot merchandise with

and a there sport believe as environment, with to suppliers, relationship Adidas good what are expect we will dynamic and challenges, excellent now, Nike, The fall about a job holiday the line team months. we and few strong is Under on supply doing have in and navigating an such back-to-school and right this over Armour, sight our of next we're while season. the excited position efficient Given of and be

performance consistent years continued grow margin health the are satisfaction the are in to billion home shift in category. over consumer experiences two when and working. category their top well-performing being sharing lifestyle and making the line leader estimated continues nesting and oasis. Our profit outdoors with made lasting refinements financial and outdoors we $XXX enhanced time to sports at outdoor focused sales, the People and demonstrates and we to the last strong changes customer spending sports more pandemic that the our implemented operational prior operating a model, on backyard improve Along changes and are at wellness, to

needs. working as an for continue We has will assortment believe more attire. all more from casual are addition, for prominent, and our shopping value trends as excellent work foreseeable become the customers of future of that us all their home these and to In for products meet broad consumers positions quality also option

the of our has million in repurchase our I'm and financial that Directors $XXX sheet, consistent announce program. of confidence to Board strength our the a Academy's balance performance Given share excited authorized future,

allocation We the the growth and for in the shareholders. built disciplined business capital returning capital prioritizing reinvesting are strategy on company, establishing a to of financial security

and to will QX based being over mindful of the the external Lastly, ever-changing review now numerous financials. for Michael? the our Michael I full turn EPS call factors. we're year guidance. on Once strong XXXX increasing of sales sales, comparable again,

Michael Mullican

Thanks, Ken, morning, and good everyone.

are our records margin, will set and XXXX, I Our healthy second of our billion top gross quarter XXXX across results, pretax updated of raising comparable comp. on results sales $X.X XX.X% financial net reviewing QX, revenue, then by based discuss of which including XX.X%. market increased XX% last earnings. trends. year our When compared second key sales quarter income was on start metrics, record company to strength we business sales with Net were and the continued outlook,

size. it's all sales and divisions growth. was had growth third is it quarter which merchandise The in eighth and by the ticket positive have mentioned, an unit quarter positive increases. of was sales comparable broad-based of that five The the Ken consecutive double-digit have comparable average As our driven last increase consecutive been growth transactions, four retails

resonating based to excellent value with customers more service where is a time and differentiated is in have assortment Our fun. looking everyone our

We are that for the Sales down our quarter. minus e-commerce were progress X.X% pleased the business. slightly with

product compared e-commerce effective second the new store XXXX, rate to store online, such However, XX% launch more in more continued sales, July XXX%. X.X% search sales penetration growth. be sales Buy quarter checkout as way functionality a enhanced capabilities transact XXXX of of in with profitable will to omnichannel we The and us double XXXX. increased of in recommendations, the to and the made when exceeded ship very continues pickup rate and customers. penetration the mobile of sales app, sales was and QX, relevant in QX, investments for The our drive our than

higher dollar QX, QX, a normalized retails were increase so year, with XXX XXX XXXX In XXX QX basis basis the to the towards is associated basis expenses expenses we margin Last advertising a a unit margins than some one-time fact, were XXXX, the Academy.com strong. XX% The first payroll or points to expenses encouraging. XXXX product was sales margin normalized again as recorded sales Similar stock-compensation mix, to $XXX.X the and positive accelerated XX% quarter, XX.X%, record QX, of a Merchandise but gross markdowns. this fewer points the gross certain over which increase seven million, the SG&A million higher lower from a to weeks benefited points XXXX. quarter. trajectory very XX.X% and we rate onset were sales, year, a margins reduced leading for vesting. shift performance than of of over once run pandemic, operating also compared average $XXX share sales due to expanded and such of rate last more quarter This by

the to subject compared due as XXXX income sales quarter to $XXX.X share Pro forma IPO. the second income, $XXX.X shares to $X.XX have non-recurring sales. expenses, $X.XX a compared XX.X% were in income compared income the margin the adjusted federal led not the the QX been year. increased pretax extraordinary XX%, outstanding the The the million, compared year. tax a record finished XXXX. and would to share impact rate company of lower was last SG&A diluted to of record earnings per items, share $XXX.X million net per in increase and prior quarter a we is results quarter certain to forma to number Excluding diluted tax October, After compared which of applying Pro $XXX.X excludes net XX.X% prior with share of rate million to per $XXX.X last of expenses The $X.XX share decrease XX.X% tax $X.XX were per million of XXXX. earnings QX, per million. QX, to

Looking the at sheet. balance

our cash in $XXX at $XXX We a facility the We financial with capacity. undrawn strong the of in end borrowing on with million ABL quarter. of are over position million remain

In ending is The X% the was higher leverage QX, and reducing XXXX, $XX inventory this at billion. loan balance of was and lowering end S&P. quarter, our term addition, X% less QX, XX% last after our million ratio, our than and by quarter upgraded by higher Moody's $X.X This debt than XXXX. than

adjusted QX, $XXX flow. the During free company in cash million generated

from were customers, and of categories main the capitalizing have throughout Lastly, would identified last the benefit our beginning that XXXX capital was fiscal several sales in XXXX. growth were At new of $XX in of growth the improving we certain year, exceeded the and XXXX, management expenditures fiscal are supply where economy, of replenishing approximately most the on categories have opportunities. we initiatives. demand and reopening challenged seasonal growing categories shopping accelerated Those of existing be driving as expected four opportunities to where million the constrained inventory but velocity product year,

Here's our midyear report card.

category to category who of in and then last continues First, number a new made existing XX purchase the customers again, over purchase that a months, the increase.

constraints inventory ending categories improved. Second, is

like are For stock in example, and back and equipment. fitness categories bikes we

sports, water have enough last Third, didn't in exceeded the quarter first sports and XXXX, the year and of team to comp. sales seasonal we footwear like outdoor Fourth, categories second company's rate. have comp furniture also company compare the apparel growth exceeded sales half have supply where

We having and deeper products stock by gaining the at market customers engagement to existing share. are price right growing time, the with driving business right by right at the the

profitable. our result, stores more and a are productive As becoming

and And our XXX%. XXXX, store store per have $X.X XX%. increased per by created to when the sales period and EBIT XX-month trailing $X.X store of to XX% has grown million have are it for average sales XXX% Over our XX months, EBIT a stores sales foot store and square XXX%, grew per by profitable, basis, the trailing per earnings. million. compared same a increased we per compared On

represent over diluted QX, per the supply XX% from any as per call weighted With and of impact EPS to XX%. it a to repurchases. that, a updated XX% business on the much QX and of per promotional full diluted up operations. with comparable more full for for the environment XXXX. This for accounts challenging of our from on the details year I guidance more we does a to outstanding year. to more marketplace. visibility X% raising now year. the trends from are or to remainder increase outlook for year, for around our constraints, fiscal based are competitive shares Steve range we share forecasted forecast million to and will recent the this various XX% On is to comp varying profitable This potential Based turn X% $X.XX Now share now market and $X.XX to have average Steve? currently sales outcomes scenarios merchandising an basis, today results, share and would of QX range the for not to chain GAAP include growth XX.X earnings two-year into

Steve Lawrence

Michael. Thanks,

quarter color second Now, you performance. little I'd to more like give a around our

was business see you year we last mentioned, comp momentum an comp We're all trend we to the and up QX since growth already it significant pleased continued was our versus up four into carry divisions our XX%. largest in which As the XX.X% increases, against we're XXXX, to which XX.X% posting with compare delivered when plus XXXX. against

footwear at One markets. businesses. divisions these our was our sales comp continued these a results XX% saw categories against were believe up the and with footwear this our division. Looking our youth particularly we strength common demonstrates strengthening theme across of the XXXX. of the XXXX of up XX two and compared once and XXXX. Apparel Footwear again XX% newer I compared young strongest apparel by versus both to divisions the in families, Both when position in outperformed quarter. XX% was and were ran when Apparel during

the the to us youth With getting such continue us note strong in offerings delivering saw customers outperformed XXXX to also and a distribution the key total national from plans. as and the stay continued Pro QX only also with innovative better more stock all normalized comp. which Outdoors our driver We're new, outpace brands Freely, is are North that Under attribute brand business Nike, private while new our positions, partnerships our Adidas, key by inventory that our also for beyond. back-to-school of love. original both that would this our with company which growth We had driven excited I'd Columbia helping stronger, Face, improving momentum and national Magellan rollouts two in Armour, performance, more to continue our should marketplace. content businesses which brands, and into controlled for be year, businesses The

be to fun, of to a us back sizes who of expect and brands sales Magellan limited fueled collaboration Whataburger with of partner our was co-branded freely capsule. to rollout deliver We year edition along launch the the drivers Outdoors of by first for with the plus private women's continue half the

trended we as started events As for increase. enthusiasm sporting live up sports licensed our business to expected

we only business this and pro football expect head We the into college we stronger get seasons. as fall

ran categories footprint. of many in in XX% played had our versus last a business. categories, and key was such at the rec surge we see strong the decrease but year's versus and saw large quarter. spring, COVID plus exercise second comp The being good soccer all It our comps, running in double-digit XXXX, also sports despite sports we summer upper in our started We growth which saw performance sports posted equipment baseball try strong up and kicking the as strength across sports was quarter. XXXX also versus tail by Our and and end up XXXX. of solid the of spot XX% football versus fueled sports, cooking, historic In division versus in XX% versus and team is quarter, sustain soft The and the to the shooting continued increases to double-digit coolers being We return business digit youth at We year during is against positive water single and shutdown. sports the one had a up the the finishing increase sales up comp division, drove low a levels from we XXXX. last volume we're XXXX. outdoor camping momentum

AURs more work all, effort we've our achieved the knowing. productivity On higher front, XXX strategy margin up done around points are basis price gross XX.X% Key our driving localization last overall improved the has factors margin targeted are: profit the refining with driving year. rate in coupled is inventory we is higher first allocation better of than regular through merchandise growth that which the quarter,

see a to promotional during discounts allowed high periods. back scale traffic to continue us less has time we Second, marketplace. This

through price our driving we're optimization when of along with regular AURs markdown do sell clearance on the and with goods helped at amount has margins strategy reduce strong better the higher the we the taking coupled have. Third, clearance

terms chain. the to the to page inventory are is with last is quarter of up X% facing us supply quarter and at to improving content. year probably Turning biggest the in starting inventory challenges, level inventory, versus the disruptions the these industry all ended year. plus our the XX% challenge We numerous last Despite the our and overall

stock, apparel, all not footwear. and have fully fitness, across a to the still categories as Other hundred such where and such percent not we're like of accelerated ammunition are bikes, that as we're at we'd in many fishing, demand, categories optimal areas, seen While levels be. back them

supply We back building have stores. to inventory our enough start levels in

the have we of key to and sales receipts strong believe with driving flowing we inventory forward, relationships growth. our coupled and Looking strategies partners pipeline keep with

year, sales the forward that to half carry both see back the momentum to look and to we margin. that improvements and continue factors As lead us of we'll several believe in

strong expect for consumer the to merchandise we outdoor foreseeable sports continue the this carry First, future. we and and demand for

Second, is for us accelerating expect to the.com it a long-term continue be basis. we to and business a tailwind on

will of conversion year. months, demonstrated Fourth, and our follow overall more in finally, strategic which key DCs effectiveness years the the which drive this all that build last and sales which should continue the communications, driving the that believe spend Thanks to turn over over we've industry we're several improving through execution, sales. customers help we improving stores cost the external in product, your help rates their time the the levels of Third, back like and Fifth, the Ken. overall to more to their trade improve done we XX time result to challenges offset targeted past into work can the call the challenges improve better held kind over And also is of that allocations, and our I'd of more our for brands today. that localization marketing pressures our and distribution, facing. the stores. supply And we've chain overcome stocks, should half and of the business efforts back couple

Ken Hicks

Steve. Thanks,

and to driven The equipment. team use by start, the including very and apparel, in-stock popular a as sports items, on is season, back-to-school sports third and robust are a quarter strong most footwear, off backpacks, prepared we

capitalize are in maintaining strong the year. last opportunity. a is phase on sports is momentum, trends team also to fall achieved the favorable remain off, this a a tremendous focused our season, quarter. we gains the and the start the Market business has while good apparel entering to growth Academy and kicking experiencing position With over on very retaining and positive licensed a consumer

retailer sports outdoors remains the be the goal in country. best the to same and Our

We priorities, and building our marketing, executing preparing will our are improving targeted do strengthening a by power growth. for omnichannel efforts, our merchandising Thank stronger online chain this shopping which you. our increasing our continuing and supply in-store experience, future business, store our

We up call now for the open questions. will

Operator

[Operator now your question. questions. with will is proceed up And company UBS. with Please The the first Lasser Instructions] open your for call our Michael question from

Michael Lasser

my lot taking Good a Thanks question. morning. for

is run on the that? is to respond XX.X% compares of onset How the range gross Your gross seems be you mid-XX% margin? right what year, struggling in ongoing the be to margin that pace prior your the with, to to Market this do pandemic. rate for to

Michael Mullican

been expanding before margins gradually we've began. Michael, well Yeah. pandemic our the

As you know initiatives of to working lot been we've that. a on do

If I'd you too to expansion, large it a bicycles lot had that as we we've has products items take accommodation AURs we say, priced we think a of products because about Again, part up we've been service were categories, smartly. mix our peers. the about was the That think about that been that low were will talked where probably but we -- able in That think lowest more as that pretty we than price the said, it normalized. back enter being part still providing is promotions it hasn't the should be give stronger the were of we market, be There environment. like our some sticky.

tackling initiatives chain clearance Freight returns in offset know, you expect would the the has had that points been levels a a as should we've to there the the back we normal. why From help of to been I the to as mix we improvement that's supply still headwind, future. basis in standpoint, say back don't past. that clearance be, come go So XX to XX,

of behind think below those are us XX.X back days the XX, us. well I going

at be expect we're long-term. is XX.X to So, somewhere XX.X that where between would a we today and

Michael Lasser

your on My share in over billion just sitting sheet, large It's program. authorized cash follow-up very well purchase very a in helpful. you balance $X.X you're is question

value at to the stores open deploy the coming this setting to value very new gave are earnings You're have stock of How or capital quarters. earnings a today? trades in cash you just create to You you create that deployment growth flow prioritizing for need stage to the potential your guidance a low opportunities multiple the -- on lot to shareholders. of that

Ken Hicks

financial our we that with same the that run stability agree the proper the ensure cash Michael, amount I sure the first remain priorities the to making of company, and of business. to have

in continuing Second is in will continuing which opportunities, helped power our work beginning there, our continuing the efforts to and and got our continue starting that processes omnichannel, And merchandising systems new we're with the efforts that with supply to better we with our growth pursue we've in operations have like we our going stores, margins. have ensure to stores is chain, on we recognize our things -- growth our substantial improve then we provide and in continue and provide good The have capital we the operations. third will our reward our took managers we'll And I priorities. the that omnichannel making have today, the are think, of to that. three to nod step significant we a priority for to and stakeholders. support be is capital those big continue that sure to And key adequate and

Michael Lasser

you good luck. Thank much and very

Ken Hicks

you, Michael. Thank

Michael Mullican

Michael. Thanks,

Operator

is your And next question our question. proceed with Kate Please Fargo. from Fitzsimons Wells with

Kate Fitzsimons

the for Thanks Hi. congrats and very the strong results. on much Yes. question

Ken Hicks

Thank you, Kate.

Kate Fitzsimons

what's one, $X.XX presume EPS the point the of GAAP. of is just clarification $X.XX. on to Michael, outlook this I one

basis. $X.XX Your forma are running a pro year-to-date above earnings on about

the I'm GAAP So, pro we about $X.XX outlook. updated trying the to Thank rationalize you. forma forma on basis. about pro think to with guidance $X.XX just a as the

Michael Mullican

Good GAAP provided is question. EPS. we or The guidance update

Kate Fitzsimons

Okay.

Michael Mullican

you'd yes, to pro on So, want $X.XX. to add basis, the you'd forma --

Kate Fitzsimons

relative Great. on the is there fear levels. in general there a demand. to that level, Ken, guess continue Thanks to when we view category, right durability see the comp higher and real clarification. a you're for pullforward can we some really Great. you has look the XXXX to seeing think category you're a comp going QX beyond? consistency the I that XXXX of when I the about on to just I remarkable and the your versus seen strength guess business that is think now in

categories as lower thinking Thank tickets you. you're durability some to about the category, of the just level, start particularly curious higher maybe how ongoing normalize. So, these of

Ken Hicks

back of the feel the very durability during see pandemic. to We with the and they started confident both in business. come continue the that long-term people before things We Yeah.

to at comped comps are forward. comps much we're driving the keep the comps, And headed the comps. a We and going higher to level. We've business

start. stated quarter to third the in a we is that. And our pleased As we're script off with that good

ahead accommodate. continues continues. We point of think really doing At but important people business this expectations that continue I what we're to got us, in is is customer hurdles and some because that have the quit have And that's future. some pretty to the is, understand to to asking, big long that legs it some and great for we're we've the got going expectations,

Michael Mullican

Sure. tag Yeah. just bit. that onto Kate, would little I a

We the all participate very, about where be people able difference have it. operationally. a in escape now this anniversary the frankly, and race we and they world of read to been do initiatives made They do. fun to help lot we're looking in during what a an And up the live put And absolutely, are We the very year, have And that markets, as people still and open have That's the difference we place, is in pandemic. made than these consumer largely that for more new time, activities. and that moment. the organization, a the demand strong. before leveled in pandemic a rat we

visit are to that new more they're more they or on return division, the our customers whether are frequently. the they're And categories more that first past. spending when more that in and spending hasn't they return they changed. existing that existing, customers are than did trying They're We back are coming new new seeing

demand. our organizationally we help on us lot So, a work all the right in business very are still now. have of I to trends think that to capture healthy And

Kate Fitzsimons

back Great. the Thanks. Best of luck half. for

Ken Hicks

you. Thank

Operator

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

Greg Melich

Thanks. of Hi. wanted I questions. the have on Thanks to SG&A. calling it. part out non-recurring two for I start

to can that get clean is Just about leverage, back we in compile back a should digits half there unique to if the year-over-year is the point we aware? single want should or we see, were something be showing of

Michael Mullican

certainly planning having If do no. we on to to lever, Good low sales. up single continue hope We will it digit No, we're plan that's that. sales we get to do. comp, what good

Ken Hicks

sure manage hard worked make to we that we expenses. And very the

And at, at. so capable of that we're frankly, we're quite sales level whatever leveraging

Greg Melich

question Perfect. was allocation. And capital then the the second on

think rate, the like $XXX I your If good take three to continue either buyback, flow the authorization building in or allocating cash years. I we it capital cash, what's thought to stores, around at with it's So years number, free for is use probably this that three buyback? will million that -- executing it mean, terms is looks your that, still but opening process the of or more

Ken Hicks

defining We point. are not are buyback at this million what the terms of $XXX the

to that foresee opening give we the grow expansion continued us are to in as We also they to opportunity very will to ensure successful do plan stores a continue year, XX growth. We're on stated. hard next being We and that the eight those stores there. successful. We're working

omnichannel to to continue invest and the in continue will to will improve our work field, operations. We we

priorities, are do security news able to all good that our the significant is for the provide ensure we So, our of financial growth. three

there's me that retailer omnichannel, say have, we the another You've growth store opportunities our that and then, organic, the recognize new the operational we can the I support think don't and before, has same that time. investors heard at

Greg Melich

Congrats That's good great. and luck.

Ken Hicks

much, a Have good very you Thank day. Greg.

Operator

proceed question Please Bank next our with of Robbie America. your of Ohmes question. is And from

Robert Ohmes

business us Ken, today good where what morning. great looking And versus just that we can e-commerce remind hoping can omnichannel you where profitability initiatives, is here? the you you're Hey, omnichannel and/or mentioning and that could XXXX. your on term? or should -- take you for think detail maybe another on was Congrats Academy -- you can I Ken maybe Michael, And on focusing Sports quarter. you give more on some from for

Ken Hicks

as as to approaching is quite regard omnichannel the profitable the With our not profitable Yeah. stores, level. it but that and profitability, is

in couldn't omnichannel through XXX% Our to have it the business. home, pickup profitability, the with allowed make if that work but ability dotcom serve has both We wasn't us online, we had store profitable two it our shipping customers profitable increase have over over profitable. a in to the to to their continue also to of we've increase in last and years buy

And so that's important.

introduced I think this improving omnichannel. second add good new payment off lot very of the -- with new month. capabilities, start. past about to like that. we part and continue we'll to question, thing things We've added That's within capabilities. your search second app We've of gotten payment our to The We doing things talked are a a a

app the supportive that use We and will of on be customers provide to capabilities I -- our will, it more customers. think it

are database to to communicate going customers, new dotcom stores are the between using continue with improve customer technology our we to omnichannel. and We our where

the to it. our business just One store do. XX% our percentage, have game be look So, ensure to connected things dotcom trying the profitable grow is that improve. got to grow. And should we how in would be working it see left. that big to it's it's one hard next year And of this or were year we're XXXX. going the We business. things But -- probably customers this over still two doubled with to but or include the penetration work of lot grow go to XX%, to our the over that will of the of we late I decide be. continue to to said of aren't customers omnichannel will all omnichannel, I two envision working continue We of it And it's the penetration haven't and hard our we we -- we a we're will of a to is customers. to and

Robert Ohmes

That sounds great. Thanks so Ken. much,

Ken Hicks

hit I your Robbie. Hopefully mouthful. a all was points, Thanks, Robbie. That

Operator

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

Daniel Imbro

Yeah. growth on guys. taking want unit Ken, the for questions. Good side. morning our to Thanks start

in capital I to remarks, your that think that. about being start you talked able with obviously accelerating here,

last you of year? cited unit think do how And really market. Is that small maybe economics those replicable the I into year, envision infill markets? you guys maybe How are the we more expansionary as smaller do you get think How you next it format viewing returns role, stores. be? some will with format, attractive kinds

Ken Hicks

likes a have stores profitable Michael out to, that's XX-month me an things. on is are One, call all Well, basis. trailing that point that two of important our

we that store. urban see formats as look in we an of the take backfilling we go as of existing locations of XX,XXX advantage a opportunity that have all that that into to to we've in foot may take areas to square we're some had fill opened so over. And time, the we markets We

So, because we larger our store. volume. it as as more more know profitable the that's it We and larger like format delivers simply profitable is

little That -- feet. square do where is the have store square will to that a we productive our to foot XX,XXX very that's but as we see store, preference there, our store a an can, a opportunity we store open. where over have XX,XXX as So capability standard larger open we in well

Michael Mullican

omnichannel Robbie's grow that the leaves, XX as basis. XX We're winning Yeah. remind per to larger like in our grow Daniel, and chance a our is the omnichannel, only of foot fulfilled Academy model best our I but we're And bring businesses experience productivity on would a look store. XX, to everybody our pleased earlier a fleet, with foot about grow XX,XXX magic to format, format from to square that at states plus square of per we back foot square on profitability outside square states foot the e-commerce way XX,XXX question a because is have that current the sales XX% XX, still our basis footprint. to to best-in-class

Ken Hicks

states, only And in, by stores. the way, have many two that we as we're or other one

but market own lot a Sports preserve fill-in our some and and of it's are want country within excellent Academy a that opportunities, big there have there's know and Outdoors. people we So, we --

Daniel Imbro

the talk the a I initiatives. comp? answer margin? color lowest Great. was when for mean We the on earnings can helpful earlier. question all that -- discussion of to follow-up one maybe chain fruit strong is then of still margin But about that and more didn't a That chain gross supply or Thanks. the margin, for provide Michael's you around about any ton on could it talked Are obviously outlook. initiatives, supply merchandise And Thanks today. what those Michael. hanging is side color. on hear And distribution drivers the on what you gross

Ken Hicks

boots whether so planning learning are service we're of markdown that more it's the a grilling, I each gross -- are all for take about Those store hard more factory, pellet guess it's working the gas whether part very -- more work field. it's and continued and the margin. work outdoor optimization. or in place, the continue it, has the middle the the develop or Well, opportunity are that initiatives have systems smoking the question with or that right assortment that -- in and for store oil that to do important boots significant We I'll store those allocation predominant we'll that's a a localization market, put and learn that we've

And hard for that which our to improve will so, reduce we the tailor stores, working systems margin our through and of markdowns. each really are assortment the

are we're things just some The there's and term fruit it is talk it's starting, as looking that time. we'll hanging deliver But work. longer chain And over continue so, literally initiatives initiative I'll there but we're those about -- let underway to too, deliver. of that to supply some that some Michael continue those a initiative, looking And to low at.

Michael Mullican

Yeah.

gross that really categories. think I the margin three builders

realize team initiative plus come is led. still XX XX, innings basis and first getting points in throughout stuff to have beginning this we'll middle all a frankly it's that And talked normalization, benefits product right deliver that right again, there. that that the just quantified chain that the some there, a some … time. yet, them haven't but low That's time. I The probably inventory at better last, about, We're mixed the year, And that multiyear Ken take clearance, will project that Steve We're place benefit to hanging right the you the but fruit the localization, probably supply is mentioned. that there's on.

Ken Hicks

we're last touching … that touching, optimization …

Michael Mullican

new multi-stop a and profitability that sexy your ribs sticks the rolling private delivery. maybe out stuff matters really brand, like from It's the more stuff label not to but it's a … standpoint.

Ken Hicks

Which develop. And sold those well. side area, customers. to well, new provide have Steve's presentation a a hits things done by label comment with the the away business way our that million that which And was in and our Magellan what label you Academy people mentioned another the support and is, it ideas, introduced we private out outdoor we important merchandise brands, type did Freely, brands improve done about has a apparel we that from and the to Pro just we very Whataburger, but has take in we private its number of in over that a ideas week, we and adds of can the strong profitability doesn't had that traffic, drive continue

Michael Mullican

points, up probably from and at So standpoint. XX walk you becomes knows there's supply change, give we'll That's promotional we're the say a where basis more XXX, from XX I think, it we have, mix still and who the environment today. back on is -- if XXX XX it still we what to I XX, think chain. maybe gain

I ultimately, as be spot. pretty good think, we'll So, we a mature, in

Daniel Imbro

guys. Great. Thanks That’s so color. really helpful luck and good all much

Ken Hicks

Daniel. Thanks

Operator

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

Christopher Horvers

at margin that front, seems obviously thinking line? can back the and year, you then the pretty to Can low an And half, also of X.X% on XQ implying provide you're the the were talk about about margin the pretty on Good the extent implying versus a that of how XQ the morning top conservative. about on an you about the Thanks. Michael, in midpoint? can color X% little EBIT you back bit half you comp cadence of everybody.

So, assuming promotion any you comes when And mix? back cadence into there. perhaps are the color

Michael Mullican

the to over there as a monster about There's let quarters we it being I'd some couple three as questions are say, looking lot of back pool tough very just challenged. us the ago, today. That be is year, of six said, strong a I'll talk going I'll the at half chain been supply a last go. today Steve. against and months labor The conservative And with of of still months and uncertainty was two much up a the still in comments We're -- give has look, brief I'll COVID it flip to I'll let relatively ago. is other for leader, to business looks left there. Steve has like year while.

Steve Lawrence

Yeah.

So, from perspective, what it's back-to-school at least markets XX seeing normalized out days. This last We more to back. moved is cadence right year. saw our XX in it's cadence move -- a now we're year

it’s us kind August back-to-school of late hard about at early So July, period. time

start a off we're really mention As strong Ken already to there.

we to of the a through. expect chain the that to normalized scarcity the of more continue do is, a We the one way we've rest have everybody going going a seen the brought far lot future. the so that of through, tailwinds us challenge and up and foreseeable forward We remain calendar, supply which for supply for that's of

our we with if up inventory we things year. the started you inventory us One about year, with to last quarter of up last excited XX% about the about ended we're is, inventory, talk pretty about X% quarter heard the

world scarcity chain in. of holiday. full position what's in which holiday. good against we're what We've -- going of dysfunctional we last good think summer earlier I in we think for doing to is for this marketplace. of as operating hopefully there mitigate pipeline we've And into well to really supply happen now. supply And means holiday that. where may the that at we're saw operating coming out holiday hopefully buy got there of a prioritizing we job think should inventory, So, kind people a in strong get need what We're we've And be promote pretty what deeper price, is demonstrated And to we disability that. this been XX months XX good

Michael Mullican

risks. provided The contemplates of guidance we've these couple points. A important all that Yeah. of

have the challenges. and goods to offset a got we that some of actually sales We targets inventory diverse achieve the base, provided, vendor the we've helps us which

more much is base others. vendor Our diverse than

with the very we challenges way manage we we through in that exceed of If certainly the feel as comfortable So, sit we today, and the guidance we're to think kind the past, we we provided. can it. able have

Ken Hicks

Yeah.

for stores while one that The of all we just impacted As a got plan done a hurricane you some contingencies has the that We're got are -- as job our there. look overcoming we and areas me recover. costs phenomenal We there team of who all a the at can markets. of of but and those impacted for open. major those for know COVID. continuation We've We've plan you occur. long a we -- the time,

uncertainty We the of consumer. have the

supply the have chain We challenges.

of that figured we challenges, that been continue strongly. the to quarter we've before hopefully and But this you have been said, all with and these able demonstrated that quarter what All I deliver able that and through past we're those to have perform the in is saw going And make got be with we good opportunity team as able the the capture sure have here, contingencies to we're that will we continue confident results. forward. that we to to and feel to we've go plan

Christopher Horvers

lot like second of And not then And outstanding. is the seeing that follow- the versus held Even I in did your here guess back-to-school. you point a That's that you're you as strongly CAGR quarter in to of consumer good through you're pretty Steve the up mentioned, what in two-year very first way portion a environment, this from retailers. quarter. a

Delta your have that is trends far not constant? to seeing and assume so So you're fair that from it any to relatively remained I -- impact

Ken Hicks

consumer we That I we back There at And will half. could a up, by growth and got growth come is lot -- to you performing continue continue things the thing well And good have. what because last and And quarter. at want strong quarter we growth. the spoiled but shop and it's have These at confident. I we we've and what my the comment you. the that But -- Steve true say, said, is we this everybody a good started little to inventory the the earth buy we've we see numbers, come got are that are said, are of -- a challenges. for off where from some but does was the bit. there what that mean? start as you has time -- some for that to to company, the think been huge numbers. level off, grief for have, biggest feel to And We again. I said, all continues like the and these -- back And see want Academy we positioned we same people point we've probably to to

Christopher Horvers

much. Best luck. of very Thanks

Ken Hicks

Chris. Thanks, Okay.

Operator

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

Lavesh Hemnani

Hi. and question question. the Thanks taking my congrats one strong for had quarter. on long-term I just

a at structural XXXX growth, look changes growth So, I right, showing trends for if XX just the are outlook, business strong unit that I mean, the eight the there is considering to consumer eight strong I could gains. cash possibility mean, XX the the than is it you to flow mean, position. stores, I to that highlighted, share accelerate accelerate you in those free you called that stronger lifestyle out store growth?

Ken Hicks

I the XX a because good number capability. think is eight for of next probably that to year

capability wherewithal. organizational the market to good I want beyond it a and We've we the to it we Beyond is will that that year, to opportunities developing and that do higher. number right and appropriate. but expand grow think, be XX But what the number more are stores, beyond we financial is, have, next the for we could eight add got

Michael Mullican

add sure could to is make up I'd add just to stores thing only XXX distribution clear, everybody The having Yeah. to we our networks. a expand without

can you we're existing with build capacity see So, there's fleet grow a profitable. it cost our a EBITDA is of to When network. and XXX% million to plenty you $X our of delivering, store the

more You stores. should build

put said, after cadence. infrastructure in And to Ken so, going and that we're place the as XXXX evaluate what

Ken Hicks

Yeah.

delay wait this first the I point flow one. their Michael year build cash another that one is, to And center, of won't to important, is our positive. And the past the have thing distribution a is has requirements second in so we think first stores and made is in be

So, we don't want it.

not will to it on As we continue be expand, ability our a drain expanding.

Lavesh Hemnani

Thank it. the you Got for color.

Michael Mullican

Thank you.

Ken Hicks

Thank you.

Operator

from with is Capital question Please your next Loop Adam with Markets. our question. And proceed Daniel

Daniel Adam

taking Hi, everyone. for the Thanks question.

was as do yielding cash to and now? buyback strength on just Thanks. the see one year generation, Just given me one versus behind a company, the dividend I'm balance allocation. from process flow And yourself thought say sheet curious the you a as for dividend. what capital strong free

Ken Hicks

for explore to the think stock makes options company is evaluate investors. and given now, continue valued, will sense, frankly shareholders buyback are we our that we giving and make the most the where the We quite Right to the their what for sure we return. best all will is a adequate

Daniel Adam

makes sense. That a Ken. of Thanks, lot

Ken Hicks

Thank you, Daniel.

Operator

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

John Heinbockel

path, the and we've lot strategic other when -- What what at capabilities you've look a which supply Are or talked these about think -- areas business areas. you pretty still Hey, capital, And have different of might on? use that, now. you in right I don't work to about do that would that you M&A? than need like chain, Ken, going what of you about, maybe capabilities improved when the down step you that have you interesting of think there back much be strategic

Ken Hicks

I you think continued on. -- talk is about got we opportunities in need things merchandising. improve that to our We've

have marketing. continue a to work lot of in We our

the supply said, We Omnichannel, talked doing have service our opportunities in Improving our and stores. our improve chain. to, as our about. -- and we've we're what you stores

may is may outside to of within we lot that something no looking and as for that We've or have to for don't will, having think opportunities can you the extra of company because take better. have we and of think take got I regard the and outside. risk the as do very new the shortage still if money we've a work. spending capability capability, and opportunities is trying or cost opposed nimble to is risk growth, weight, as things fast that opportunities work to that to we might grow, got So, important. This carry a just a of has what's fortunately a With in structure, bone And not our that be were, to for the company idea I to improvement. think we that

to a going -- is are know or As work? isn't work company you is do that sure they at versus to you're they that look pretty to it growing things of it going how

John Heinbockel

think to brand, about as the How out, talk I think do mean you to in think the Northeast, You way and to it's merchandising long -- building South, market for what you about right? pretty you adjustments, a or move -- follow-up more is of that you a as -- transition but Coast. maybe the to how maybe about make? Then a this Okay. Northern about that's a that, West -- to adjustments you national easy do part country how go Steven,

Ken Hicks

It's We're something that quite frankly, stores Missouri learning. we've … learned. We've got in and

Michael Mullican

Illinois.

Ken Hicks

to this Florida. … important is point they sports, foreign the about And cooking, North understand apparel. Illinois, different and are the market. I geez, have that which lacrosse us, different Carolina, I we -- when into and is whether way And new a earlier it's they -- those things it's Texas help markets localization, we go that's have than have I learning, And different to in we localization, for learning about will that seasons and made they different or gets we not think as talk us that, merchandising really operate. new and it's something what's that in --

Steve Lawrence

went say And we apply mistake I'd different we'd underperformed Texas with what we when there. into made it try that new why about I markets think, and and a past lot in was We're conversations that, not where in take anymore. works was. to that doing they talked a we this, of the Yeah.

the to a learned Back to muscle those point existing our structure. the DC a from new earlier, we've perspective exercise. So, of Michael's within that XXX stores that's future, from fit an most in assortment localization, were would

the keeps that So of somewhat part United States. geography us the Southern the still in of

we're start at skiing we point, the well think that's sports, into I going maybe north, some in like hockey, the to of yeah, if but winter to add into pushing some future. have the

lot they're more I is. how explaining local terms it. whether nuances smokers, when in of think think important understanding all be timing I frying better a the using we've back-to-school cooking, deep grillers, in the whether at it's turkeys, what's But propane, those it it's to gotten nuances, other all it's whether is whether

Ken Hicks

most process and something One parts that and helping we bait is things of that's to great it's apply store. the localized the most we've very And market's of one got because thought do localized team different of us the fishing. there that and other a

John Heinbockel

Thank you.

Ken Hicks

Thanks, John.

Steve Lawrence

Thanks.

Operator

question. we Zolidis question, proceed have that Capital. for And And Quo Please with with John do last one ladies generally only time question. go to more your Vadis

John Zolidis

line Good have morning. the and reasons for one I -- on the trends would cited Hi. But that have have do confidence question gross top I questions continue. many been margin about answered. you

for of you environment, bit sort if understand mortar example, to happened could drill secondly, I more demand And the equation, us think in specifically. the key of little side of talk standpoint? down about you what's and of on the a quantify from and difficult post-COVID distribution strategies vendors, brick competitive lot things are a that a mentioned, then Thanks. the some but of that

Steve Lawrence

I consumer I brought question. But you demand. to up you, will -- take think, mentioned I of growth back we'll a answering drivers, parts at we that already strong chance probably mean,

about. flattening to is been through us. anniversary, future. on were dotcom talked content already traditionally the of The a the inventory of first and us clearly is that brought tailwind dotcom it's but That's surges growth driver there. -- we that's half sales as traffic we our We some for be touched improving business back out We in We and marketing. a COVID going for that accelerating, the year a to up bit, force. levels obviously under coming So, little business penetrated and

business. a make strategies better shifting our from from us we retailer. the on we and broadcast were and put about one-on-one that more to perspective the marketing really efficient more print We a much have that the place We digital in to are targeted a that fueling traditional merchandising much talked going underlying basis that customer more to the talking spend pre-COVID a is

brought the better pulling allocation, ways. something different assortments, up the stores. that better. lot more of pull better distribution more are better on couple in optimization. income. that and happening definitely the price a the those back markdown vendors us where retailers the control making and funneling And protecting us the then, regular distribution, controlling helping market, is It's of brands Now localization, It's it. It's our That's allowing a It's customers you important. into is

a the brands drive leading differential of Some we're forward. those to that going into promotionality retailers, are way is to

category things the to consumer demand those addition we behind all So, think in driver our are growth.

Ken Hicks

Yeah.

of we're customers sudden think vendors, didn't the a You the John all cut dislike that brand they our -- they find they're and key it. And real several know that literally where have of been of by those outlets of a it of that they and of larger looking to it. thousands one get good the places can markets where can in they find selection

Steve Lawrence

relationship forward. can't volume We mortar our says of when is vendors see customers with key our these a reach. mean, noise around value moving you lot and think they still of stores, they're done I in going strengthen brick to and getting much a the And But there's -- our a partners just reach more to that really just partnership been lot about stronger. of digital a they that continuing how we that space.

John Zolidis

Thanks, Thanks. good luck. guys and

Steve Lawrence

you. Thank

Ken Hicks

you Thank much, John. very

Ken Hicks

your We team all Thank you day. we're of hope we've understanding you about participation. support. great working what for going, heard a interest on excited you you call have great that And the And we're Have on doing everybody. the a better and appreciate and your opportunities. and we're We got where it. a thank

Operator

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

Academy Sports and Outdoors (ASO) 9 Sep 212021 Q2 Earnings call transcript