Earnings call transcript Q4 2022

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Operator

Good morning, ladies and gentlemen and welcome to Academy Sports and Outdoor's Fourth Quarter and Fiscal Year-End 2022 Results Conference Call. At this time, this call is being recorded. [Operator Instructions]

I will now turn the call over to Matt Hodges, Vice President of Investor Relations for Academy Sports and Autos. Matt, please go ahead.

Matt Hodges

everyone. morning, Good joining and for Sports Outdoors & Thank XXXX the Financial Quarter Fiscal Results Fourth you Academy call. and President Participating on CEO; CFO, President Vice and Merchandising Officer. Chairman, Hicks, Executive and and and Chief the call Michael are Mullican, Ken Steve Vice Lawrence, President Executive

expectations a in and statements These release are results and limited to our risks These the earnings to today's As uncertainties differ that and by but could actual made statements. comments factors the reminder, considered this our during include, from forward-looking our and projections. statements materially in uncertainties SEC filings. in cause management risks call earnings the are may to, be release subject not and identified

forward-looking certain comparable earnings refer statements. Today's undertakes investors.academy.com. company in are available The remarks at non-GAAP the most measures. any to Reconciliations GAAP to measures which is today's included no obligation release, revise financial also to

benchmark where and the noted, in XXXX XXXX to XXXX. the comparisons are of pandemic impact appropriate, XXXX, Unless otherwise in the also performance comparisons provided given

I call our Hicks. Ken over the will CEO, to now turn

Ken Hicks

Matt. you, morning, Thank for you today. and joining us all Good thank

that reflect we out year As XXXX, and was challenging. we both and fiscal a rewarding closed wrap upon up

full the financial the periods of and results. quarter we environment our fourth and the faced pressure from strongest year, macroeconomic During uncertain comp

share flow, market earnings expectations. delivered team sales returned Our grew as despite And created a free effectively not executed our against generated stakeholders and solid cash our amount plan. result, we value our a meeting strategic significant for of and

X.X% negative reported fourth of our billion sales comparable and to results. sales. We net Turning quarter $X.XX

returning Friday of highest We week Cyber of of shopping our the the then of first by quarter, Black Christmas. saw we During sales strong day consumers return followed had Monday. December, ever weeks level the couple traditional the a the and on

and later recreation sales our sales call. footwear more in Steve results detail in while and outdoors sports experienced sales and will the apparel grew, Overall, declines. discuss

grew lower expansion income and towards or XX.X% diluted net sales share, margin shift a adjusted efficiently of adjusted costs, quarter per fourth profitability, earnings our from $X.XX million freight to goods managing gross of expenses. SG&A terms In soft mix $XXX.X by led

led year, of our of goals members, at operational strategic set we the many Academy the beginning and accomplished the year. the During team by dedicated

For of entered the example, since our markets unique we we openings. opening class existing our learning this year stores. store with markets of provided our Each of X by improve adding and customer new opening with This strengthened to new XXXX successful from features future pleased also new We overall and opening first omnichannel performance stores grew the new we're of are opportunities that experience. leveraging business to stores. and shopping was enhance

were X of e-commerce points goal XX% of achieve ahead XX.X% a rate. penetration XXX sales to In XXXX year total sales XXXX, up basis and from merchandising our

For the XX% full sales buy-online-pick-up-in-store of e-commerce year, sales stores. half were over and of through approximately our our fulfilled were e-commerce all

downloads mobile app to XXX% saw in addition, compared of our number the In XXXX. increase a

sales higher advantage a store drive is margins. for competitive utilizes us it base with conversion business our omnichannel as to healthy Our

We provided experience. a great customer

feel the stores. existing to We of XXXX, invest increase remodeled XX In look in and continue engagement. to the we stores

resulting to the and chain enjoyable checkout our store to to our manage and on to customer-facing store an throughout upgraded also fun improve customers. delivering labor, hours experience We technology times more focus in shopping

to These a December. We of ESG supplement year's emissions scores increase losing to efforts while followed and an as assortment We our value. exceeding come. and customer by our chain. to in ones and increased vendor invested publishing gas our planning report with reporting to stock results. strong practices meaningful by our for supply updated as operations, X with years record in In ESG We XXXX, our in efforts partners X merchandise efficiency allocation ensure completed in want well to and greenhouse not in preferred the customers product these on May, focus emission engagement our also led enhance dividends store continue our several inventory projects new service last will internal pay Scope we're

increase initiatives stability. generated in repurchases, and XXXX, in used debt solid and payouts through financial stakeholders return. million reduction allocation and profits dividend we worth We growth in $XXX cash cash also flow order In execute capital million strategy $XXX to our returned of Academy $XX share And million flow. to our comprehensive our shareholder million supporting while $XXX to total

has XXXX built in I'd have Academy positioned efforts for growth past XXXX. head accomplishments fiscal major like to Academy into a past team's several of all foundation the we the members phase team their over we strengthened the thank The year. the over for years and as

and we pressured remain XXXX, As fiscal anticipate due begin of consumers to we mindful will the spending current economy. that their

as appeal better, national important position having We is an at affordable value ever. good, of proposition a with more a best a consumers With of everyday as wide to private this fun meet brands broad to needs our leader than customers' our of assortment market price. demographic and value backdrop, and our

Our on as investing over long-term control plan operations grow we the few our by to the company business. improve last focus focusing a continuing things in and can to We will made continue be the for the to the growth. XXXX years progress

main markets our expanding a attracting future to more XX growth. our continuing The Academy scaling merchandising business, driving and of customers to engaging priorities by growth from improving to leveraging stores, and chain omnichannel support in opening growth existing the our in powerful and supply productivity, stores our and XX and store service assortment, strengthening with existing the build new new for and are: base XXXX

strong as These outdoors in priorities, along growth sports country, give service us XXXX Academy the us front we with in fun excellent are is The providing and for our of while in and value creating strive achieving for becoming best of differentiated with about vision value, the key our towards as runway retailer excited and all stakeholders. on our market position, relationships built opportunities an the and our that established well as team beyond. assortment vendors for

Finally, XXXX an extend to X introduce Texas, April to invitation X will company's on with into stores financial long-range targets. new and More I'll plan over soon. Michael? in now will provide details more Analyst Michael where I'd call and Day we be new Investor financial our fourth provide you the the Katy, quarter on upcoming like here turn to announced tune our Academy's results, to to initial guidance. and details

Michael Mullican

fewer on and I negative $X.XX were sales by XX.X%. Net transactions, with reviewing outlook by than billion of everyone. in discuss When start morning, partially comparable Sales offset increase fourth ticket full planned an by then quarter initial financial XXXX. compared to to for our sales the Good size. move due were Ken. fourth to our and sales for average lower will XXXX, increased year Thanks, X.X%. performance QX quarter

full above XXXX, in the year, the full XXXX For share for XX.X%. of with levels. increased our year net all market sales X.X%. sales full and gained by compared billion, $X.X to comparable product We well sales negative When share market is our divisions year, or were maintained

gross driven a a sales goods, primarily basis Switching costs by soft margin to year. gross XX.X%, $XXX.X improvement lower shift and XX was point QX partially a promotional rate improvement by freight the over quarter, last mix The of In fourth was million activity. towards with offset of margin. rate more

points of full than with of finished below gross second Academy fiscal the XXXX For sales. rate is fiscal $X.X rate XX year higher has was with annual points billion basis This XXX XX%. year, margin a This XX.X% rate the XXXX. margin above is an of basis consecutive

We upgrades including and thoughtful are over the greater made management, systems driven benefits changes realizing merchandising localization. by sustainable few inventory last years, more the

reported rate a In this double-digit eighth XX income quarter, basis rates. XX.X%, points the increased Academy to fourth our operating row income in operating the quarter by making has

grew income quarter earnings the share. increased increased fourth quarter $X.XX in share. diluted XXX%. per compared to earnings Fourth GAAP Fourth to net share together, quarter per to all to million. When net XX.X% income per QX per $XXX.X diluted XX.X% adjusted more than Taken increased XXXX, share $X.XX by XX.X%

of year, sales the of million X.X% full million, sales $XXX to For XXXX. income or X.X% compared or net in $XXX.X was

earnings diluted adjusted diluted $X.XX per per X.X% share. earnings share to XXXX increased record to a Fiscal increased $X.XX GAAP per share XXXX, Fiscal X.X% share. per

on Our borrowings billion balance end of no sheet remains facility very the at and our strong with outstanding $X $XXX in million year. fiscal cash credit the

positive the full Academy cash operating $XXX meaningful delivering continues cash to generate activities for net million in QX million during from year. flow and $XXX.X

term for we out to not to dividends is stakeholders our the the of loan, plan million $X $XXX returning due down continued following repurchasing X.X and million, execute in million, to cash approximately by paying allocation capital total $XXX million quarter, our $XXX XXXX. reducing fourth comprehensive our until manner: our in paying debt million shares During which

to Board share per April record March the recently XX, XX% addition, XXXX. In of of approved on dividend XX, as $X.XX stockholders XXXX, to increase a payable

a balance X%. billion, by XXXX. Our QX units year-end was inventory while compared XXXX, inventory X.X% up dollars increase were QX of When compared $X.X to declined to XX.X%

program. the Sales and foot to by store was than income measures increased pace great optimism When operating per productivity per grown foot operating These to has $X.X down per income Drilling XXXX store million. have and per store XXXX, level us give foot XX%, our per increase square compared we XXX%. industry-leading square square opening sales metrics. in foot more as $XXX were of

a XXXX new West scale as Virginia. opened year was as new to test-and-learn Virginia a stores open at again. markets the such built We up capability brand and we

new Academy durable To free second years XXXX produce XX%, XX% than summarize, margins business by flow capabilities operating through model consecutive various gross X%. implementing proven our new able has cash macroeconomic built and was last also takeover margins year We delivered layout. above to the and profits spaces that designing than is we greater store that margin environments. greater the and and have retrofitting several over

of has years. last free to repurchase million million flow Our more the enabled us of each than shares of $XXX pay and down in X $XXX debt cash

entered healthy and cash very financial in Turning inventory to the balance. XXXX. good a year with strong We levels position. a

while sales Our flow. expansion goal ability to increase the openings, stores, cash omnichannel our free and all profits long the and over new significant generating is through store improve of productivity term existing increasing to

to XX% from between million, income expected million billion which to $X.XX X% GAAP providing $XXX positive X% X.X% fiscal $XXX count $X.XX to diluted is estimated guidance of share, per and stock weighted range earnings taxes before share. is calculated per potential Gross expected XX.X earnings of us. XXXX. $X.X Net million. range diluted to Fiscal growth. $X.X sales $X and $X.XX share per to include initial of a are Adjusted rate as billion authorization. excludes The is negative are the Comparable to to from GAAP earnings margin from $XXX GAAP income following sales million diluted net X%. full share. repurchase do are million expected year Academy which $XXX estimates using between XX.X%. the per range of for share compensation, to on million outstanding remaining for certain activity any per share expenses, year to repurchase average for share is our XX-week per $XXX a XXXX not and such shares

this extra $XX week of year. sales approximately expect for to We million the add

This be Interest to additional be million our from fiscal result modeling in XXrd due guidance. additional are technology and the investments to of from levels. stores, basis XXXX. in support expense than the to increase assumptions new points our XXX digital marketing. expected reduced and higher is million, $XX expected in our in approximately SG&A an Here, reflected in week expenses 'XX debt to is $XX growth down

expenditures $XXX forecasted million. Capital $XXX to to million are range from

million $XXX expect We $XXX million flow. to free generate to cash of

call merchandising I will over for around turn performance. that, details Steve Steve? more With and operations the to our

Steve Lawrence

Thanks, Michael.

is at which XXXX. which and XXXX versus from XXXX, our was up was As our in you baseline versus decline XX% QX sales XX% and Michael heard a X.X% came versus fairly trend, up our it QX it comp was Ken, $X.XX to billion, similar

many did normalized pre-COVID the In quarter played terms patterns demand to that season. traffic We take calendar a in past return across seen anticipated there. of retailers years inventory would when the across levels wait to be they not forward in saw pull holiday of the couple customers categories. get to more most there scarcity is later we the same Improved of market of supply of we've the out, advantage the the in deals November out allow how in key

we Similar the turn expected, to Thanksgiving, Black we pre-COVID out the company's As large customers normal see return while holiday the holiday of up on ramping got Friday. season up with past weekend we've and Christmas. history shopping we and saw during day we kick challenges, in made on years. Overall, to that had low we back during the the shop to did shopping past last that off years, have the the its a traffic Thanksgiving the gains we leading the is of the are held once December week early the pleased majority couple

half big QX last brands X.X% Haydude. by sales with brands for continued was SKECHERS running footwear division, increase and the apparel goods the business, driven now of Brooks soft Breaking up as strength Nike, we by momentum saw such year footwear versus 'XX. new The in like on our business the a X.X% and along

products to our of We our partners benefit by also as also controlled key driving distribution consumers to more continue access it vendor to from us stores. some allows get while to more

much side, from apparel brands key side freely all the the weather us softwood and seasonal our across such inventory key private Nike of performance for benefited the better on enrolled. a such brands was national the as having Carhart, the and of position another BCG win of On categories gentleman from cold as we business

QX are packed X.X% hardwood side continue challenging to outdoor The engines be with with growth down These of a sales had down the brands X.X%. us. sales for and business sports and direct value more

business, of COVID bikes our in fitness products sports we as categories, direct strength surge such some sporting of terms in our and with In softness continued saw goods the equipment.

the down biggest versus XX% still which last hunting our front, X% while up year. was auto the XXXX remains versus On challenge business,

we ran prevalent year was to still quarter large ago. decline the of we're While as an over third we the scarcity demand in anniversary last for QX supply year, improvement that a continue a surges by of

margins. to Shifting

year down line Our with XXX basis rate a time up in this periods key was XX while that layered promotional point margin Knowing basis help was a it. gross traffic provide to year, at increase which XXXX. came to last normalized more planned our to and maintaining versus great QX offerings return around customers was where strategically points which points Merchandise versus strong we for in value be profitability. versus XXX XXXX is a holiday, we in basis to XX.X%, margin going discounts was drive

XXXX. quarter merchandise fourth points last still margins, year, down Our while basis to versus was up XXX

over the teams gross processes. buying the versus attribute margin improving XXXX of We disciplines and continue the years of the couple past majority the and planning around to work gain allocation to hard have done and

see guidance with We accounted margin expect this to more have gross promotions for initial in Michael shared you during XXXX that and earlier. our

Turning to inventory.

inventory. which that We lower increase more XX.X% XX.X% X.X% ended fourth discipline. against only are pleased last year XX.X% the year, quarter When to XXXX, our with. strong inventory our We inventory compare up entered management show teams is the we versus up with were you the than sales continue with

supply with may You last that that several still remember operating chain. we constrained we're businesses year, a had

stock the for and situation this in categories. most levels longer part, most no are across We we're healthy

terms disrupted of place our a chain much inventory The with surface, forward-facing not also the get level 'XX. better a supply QX needed. did a Beneath result, categories. we of on in that emphasis the we in much in product content of greater transitional And spring still was spring fairly as we're

XXXX a With in the we're running better much this place. more chain supply our normalized with inventories year,

shift the weather advantage several and us we just to content up. improved our categories page in warms focus have As I positioned the for in mentioned seasonal we many that optimism: when reasons our has First, turn the of XXXX, take well levels to inventory

such fishing while camping sports and our categories cleats, and continued investment where have also back. hot Second, pull to trending as after increased team we such competitors as going businesses in have

everyday one Googan, redoubling core tote and for the and value ideas, is sideline customer resonate brands and across expanded stores and brands our to we're as focus which you'll such we're all-purpose and basin apparel Fundamental all rolling must-have summer marketing. an equipment academy.com with categories, on in Third, list the customer. our that increased into coupled of with footwear see Beach. most our our of new initiatives value touch into our across online and spring continuing the items works on with ex stores all Fourth, lean that target points Birkenstock of in ideas extending and of out BoGbags, on worth well in launch includes fishing the popular new emphasis

our print. reducing new Finally, we are much focus on advertising much to while digital and constantly a digitally traditional this customer robust increasing to our strategies with targeted more customer by around year, broadcast including make and continue a effectiveness strides towards new allow having improving refining several improve platform enhancements reach and coming more coupled continue There our us reliance better of marketing and to overall tools, data should and combination marketing engagement. tactics

closing, position In share market continue the store in expansion, believe value our are grow the gravitate towards us we as well doing the carry to our reinforce and to that we're work gain to categories with we XXXX. positioned in leader we to positions the share. new coupled well pick Customers market sales up space, and

closing back Ken the Now Ken? to turn like to I'd for call some over comments.

Ken Hicks

on company an making we us profitability and shown calls, that began heard years X describe operationally the you, driven have business were phase. the growth Thank we making structural the the of Academy financially our over and improvements laid exciting made compared levels higher these have foundation past to to performance By operational and and you've for many them. the times transformed when changes we've Steve.

elevating continuing years and to leveraging existing our achieve over expect performance significant expand next of scaling a our number by chain. growth and this opening the base We business, supply omnichannel of several the the to store stores new

are best now assortments macroeconomic about to sports our our open outdoor the up plan our you strength plan and sharing have in to the retailer in offering We'll realistic with you. the we confident the be compelling there. fun Until position then, environment your ability we look April. country. forward in uncertain as strive navigate but our call and Thank new We We the of long-range times with for questions. financial presents, and out to challenges in value remain

Operator

first from of of the [Operator Instructions] from line America. Bank question Our Robert comes Ohmes

Alex Perry

Perry Alex is Robbie. This on for

gross So wanted bit little about to I just a ask margin. the

just business key promotional continues Maybe and under you more a year-over-year. a how mixed as play There right down the on into of characterize out the are commentary now? there. come contemplating a pressure? merch you remain to sort And environment tailwinds sounds expected it's help freight And that does like margins. It with seems us environment you're So pressure of the be overall components to how hunt then lot promotional apparel Is there. it this? would to mixed there? But

Michael Mullican

then Alex, pass respect Steve. higher it's starting mind, take rate, the XXX XXXX. to place. high everyone, gross over I'd we to like pretty than Michael. in it and We're margin basis question a we're I'll remind were With first in points to from keep

year some Steve degree, we will lower margin out top see everyday believe, will next on think to as That so to of time. tailwinds been All container our consistent takes gross savings positioning chain the we've the us, bit long they on value supply will relatively environment. gross question the And some a additional due I a we this hanging and offset some year, take supply right that and Mountain margins in with promotional maintain by allow maintain will margin puts side. apparel to our particularly from can customer next costs. in activity for be really other now be expect merchandise lower rate chain for some

Steve Lawrence

with XXXX. is. growth a we for better into very was actually happy categories and us one for to go QX, our We're Yes. apparel as that expect It our trending of business where be engine we

spring. of still chain, we in really we pretty year there post If you and level the got and constrained a supply we transition ago think go last about you with weren't back a Christmas setting year happy was the merchandise where were,

in for a said the comments, much to we do that a have tailwind we us with in that warm. we forward-facing on more with mix shared was as Michael are take today margin front place for the prepared advantage really that we're baked feel more the a we turns earlier. certainly or us, the is weather guidance QX win better you position, inventory As is into and forward when at And ready the that

Alex Perry

you And ticket thinking inventory the then stock remain would my expect basis, traffic follow-up versus Perfect. to this the of about that pressure. pressure year-over-year is better multi especially still positions you that? year, just under then still the question driving lapping on how from are from outs? transactions what a the AMO with And is Is trips

Steve Lawrence

Yes.

and obviously has the under pressure, have doing about challenged an the can is sports That I may pricing, with with us are believe traffic. though grow experience excited business transactions believe help will think the and even we're impact develop and we continue we people coming said, that the the consumers that year done the having while some still in-stocks and to that in on that we've consumer that they what assortment our challenged. we be what that with have, outdoors

Michael Mullican

that Alex. of Just additional one, bit color a little on

when got is the piece whether sales our down is lot We business. we've share over few of that We've the in demand and of in decline field traffic was And we've seeing that years. our corresponds and biggest the Ammunition some field of And division the miss share the running with that of that we or a stabilize. share took that. are challenged at quarter seen. the look taken challenge. our business of things biggest compartmentalized that portion are businesses was we in the down is One business really

think rebound. trends So Those we traffic the certainly improving. will are

stabilizing going forward forward. that look we to So business

Operator

of question comes from line Horvers JPMorgan. the next Christopher Our from

Megan Alexander

couple is Maybe for a top of on This line. Megan Chris. related questions Alexander on the

still you you us And at Ammo then of trend that? are 'XX, MO ex kind about how performed, for provided assuming the comps seasonality? business holds, so, excluding headwind over how you on think we So you similar that to Is kind are out think the planning broadly tell as year? how the assuming of about point -- XXXX? cadence And the looking strip of and if normal reference the the what and should so you're able business to

Steve Lawrence

I'll Yes, of part. first softwood Steve. our look in year. rent the for out the the both this we When you take is called at part where side business, increases strength

As the faced. Michael said, the was hunting biggest headwind we category probably

some pull couple We also like bikes the years challenges of had some in fitness last forward of in search of and categories that equipment. demand we a saw the

normalize. quarter progress the got past As start animal as kind go lot and in that a out. happening those up what QX. hunting starts really year, we and into to improve to better quarters We're look And start we get last one as things we we get of sequentially that surge see through diminish is headwind holiday, we to we them to headwind the even as through year. this But against and through as quarters, of the expect we

Ken Hicks

And we're We back. seeing a some are forward come in and things apparel look the like camping other just a talked about businesses. there of sports footwear, outdoor good of cooking. number not result seeing to team and areas Steve

historical think our not more be last of back the down some assortment to think pattern the fall of normalized, said, a that of will of XXXX, So bunch that And are. regard With higher this there's of off to company our is like I XXXX. the breadth seen is more years, XXXX. we're we to of and or the a where compete the not the prove the searches we're -- few to the get we years. in much to moving set of and we've X different ability to plateau, We one sales strengths enough That in that going classifications. that's

we're we improvement normalized first where at year. through Michael look anticipate the move bit part in guidance, that's look being of the This but as we We being we in challenged, the said to the through terms little forward year. moving So the more more from. sequential the year, a flow as business

Steve Lawrence

X to add just And to that. point

way at we we higher are a certain where more for categories still matter we in to But And these we're lot said, baseline, pacing it to be time when talk of fact, average categories expect I you company period. aggregate at ahead that look were Ken those a normal of up of about, cadence. As a that 'XX. as a of in mean, the

Megan Alexander

Got it. follow-up, been really of lot All about succession helpful. Ken, timing a speculation Maybe your investor the as announcing potentially a you you of plan. there’s

you how And your at to can and that today? over, you your about on share maybe the role thoughts next So that years? say, think X Academy like look what could X

A –Ken Hicks

enjoying demise rumors I the greatly fun, exaggerated. [indiscernible], Yes. having like has I’m of my it. Academy.

would What But a having love for like and that to envision I’m is with that the I to Board, has be right to it’s I And Our would see. now, some be – associated to enjoying Academy like I part come. fun. Board future. of – taken any and a with I’m it will thorough process. a very approach I we’ll thoughtful succession I’d planning. time Academy, as exactly, for for And

Operator

of from comes from question the next Our line Morgan Simeon Gutman Stanley.

Unidentified Analyst

Simeon. for on Jackie is This

be Is in honing of of business, the stability kind Just there of of what the that a level? higher in think would is driving the they're you this indicative generally sporting I level that? of on sensitive. XXXX? kind economically in they kind durables Or guess kind big-ticket question deterioration? versus trending those this which in holding a goods do holding, how On category is broader that higher are are growth water with the and basis, of And categories unit at as categories are a

Steve Lawrence

much definitely baseline we being mean being some year the I are than mentioned I tough one. are last average. in Those of still one, fitness those higher Yes. categories. company [Kayaks] declines the versus equipment seeing

where up well and versus XX% level category those big aggregate ahead some we in of back to category moving categories are start we back off, a XXXX, 'XX, a think So as competitors but last choppy, categories the for starting search we to surge we in that. can we're and little this growth. these of that as move see year pull into is year growth. is great expect Fishing we

Some that we've for it's ticket ones plans to we bigger those modeled of anticipate given Kayak, the with you be will a longer, like bit and guys. replacement but in longer guidance the fitness into that cycles our challenged continue little we've or

Ken Hicks

very it's within With We've other got that than thing ticket years good there amorphous important big said, -- parts is our base business. not big think that of some the other the categories like higher the outdoor that as some was things is That cooking it are this some X are much group. ticket said, ago. I and of

working look grow to from higher we're and so from And there. base forward a

Unidentified Analyst

And it. one quick Got just follow-up.

XX% margin terms about gross the about of key this to guys think kind should And XX.X% right the this over rate 'XX rate higher is levers of above should guess, the we guide that prior post the in maintaining long-term for range run 'XX, margin time? you have On that are forward? what think Is we that gross given. I going

Michael Mullican

Yes.

going higher. XX.X% look in initial few are expect years are have around guide. we I were we higher But at previously weeks. to be -- color to think And certainly, that rolled XX% certainly ago forward expectations -- providing than our Day we when and our said to more we our out a that few expectations they Investor a forward

Operator

comes Evercore Melich of question the from line from next ISI. Our Greg

Greg Melich

Two questions.

over is share frame gains traffic sort of the and the help last to first years. few The one

are of XXXX, is up comp X-year XXs to size? from comes the it ticket if that fair assume or transactions versus but XX%. still all now Is running high positive that almost So

Steve Lawrence

up well are 'XX. versus Transactions

an of increase a business seen as in percent bigger has ticket have hard the also goods the We size total. become

Greg Melich

Okay.

up both flat they're It's meaningfully. like X up still and So XX. not on

Steve Lawrence

Yes, yes.

Greg Melich

Okay. the that And SG&A the light? Got then second maybe manage the bit it. us you And you'd us as Could pressure the Michael, 'XX. in when coming the I with through bp the it tell did leverage guess, to you biggest in described, understand on fourth how XXX see help a sales quarter SG&A. was, year. investment in you

Michael Mullican

quarter, grow but supply the XX%, being managing what managing chain and distribution through allowances out in some tell team I'll and sales did proud we've [indiscernible]. management. container done thought in role good net we pursuing expenses, than softer centers, and the the And getting team little logistics a job did merchants a expense to costs, great by I'm were and sales things. and teams miss their there navigate income really aggressive, you adjusted the managing of largely certainly, kinds the of those vendor Greg,

the shareholders to challenges, proud lead team. capable bring it the proud in we the with back we've to up the ability that over into in sector XXXX free return got a a quarter most able I'm a for we've of a of margin. and model And lot durable were well business the way where I very I million business that that. we So capital flow we invested think business since year very despite our $XXX down shows future. ran invested us very the in, pretty generates to cash in cash, we're of. think, This a And sets

points relates points week. deleverage and would of XX customer we'll additional XX say, Those big, I'd With big some basis to tech and deleverage us, investments. sure chain, some is the respect related construction the themselves About to year, to XXrd investments tech for of next have is initiatives, start. they our get basis supply levers off basis points of growth a new of are make our they and new to initiatives. combination require marketing to the say stores omnichannel, store deploy data good the to XX that I a

got of stuff. comp kind is and small just little bit deleverage stock You rest of the a

that's So hope helpful. I

Greg Melich

last quarter, And the below I to want guess helpful. be is comps recycling? just one, presumably I the trending? we Are first just the in make sure given how could the it very range? Or That's it we

Ken Hicks

this They don't because question I I people. -- do, let every time me answer confuse

Michael. [indiscernible] let I'll So

Michael Mullican

Look, I'll what go to back Steve said.

can't year I whole we go. provide say as that. about expect year lot to more move And a improve the expect We that as will guidance, the we but improve we inter-quarter don't the We we along.

I start we a think we're off to that expected.

Steve Lawrence

business. say, mean that. business some I apparel think to business We had want there. of And and Inventory out value got categories there's opportunity surface, to I beneath I'd really this, sports for reiterate team our we've just our business, the on we've healthy the our some these a fishing in a in lot they position long of the start in, in in position trends. is like as best hunting time. it's cycle and been space.

to a reasons have lot of positive. We be

Greg Melich

see couple of in luck, a We'll weeks. great. it That's guys. Good

Operator

line the Fitzsimons Kate Fargo. from comes from of question Wells next Our

Kate Fitzsimons

gears to switch guess and speak of store wanted I the some to I openings.

to new markets and guys you are whether XX interesting last X is expand a new done mix can this existing the you had we And should year. noted about you stores of this guys learnings You how XX, that? and targeting year, think some from just

could you question just color And provide if the then some on I balance more have there. a sheet. So

Michael Mullican

you give overall. color little program I'll a the Sure. on bit of

which a test building year the tested multiyear We different a to lot, As for looked a learn spaces, We a about which a tested We ever capability of approaches. accelerated not learned a reminder, year layouts. at We new had. lot. company unit marketing We capability entered this frankly retrofit we is this different was as markets. tested existing new company, X and and the growth. phase really developed one is store

we spaces. X might think only in or I past the retrofitted have decade, X

program. So I progress pleased with overall, the would say, we're new the of store

ROIC As established. clear vintage XX% that hurdle will a we've current whole, the the

will try it adopt if say that. you want you to, exactly with mindset, where you comfortable feel I a probably test works didn't you We test-and-learn everything enough. when

them. stores, and to that single point. of applying had came instances, little and our well. expectations, a so some our others We have both that handful short bit learnings had rates mature and in in did Only mean digits. of want And critical the a I reemphasize handful a we we're we phenomenally EBIT a stores four-wall had I

double-digit the XXX of have, X-wall are XXX margin. stores stores doing EBIT So we

our profit a a dollar productivity standpoint. quartile competition standpoint outperform So on the bottom on stores

to more of forward. haven't speaking our to best we put our that though about toolkit even so look we And going forward, part this is forward a powerful

a shut company, because We've of with never we're tinkering issues model. and profitability fundamental this business in the store not

business to We works. scale a need have just model We that it.

away it. that. in can't our we I don't in tell to forward we about plan, talking few because give confident forward look accelerating learnings So all it you We're to want Day. game a the Investor but more look to weeks at

Kate Fitzsimons

free And switching Okay. the then just secondly, for gears some XXXX. That's to priorities cash flow helpful. of

certainly to in You am raise could you're the the curious the evaluating I guys the pretty if buyback, on sheet. aggressive speak you the have debt how on been dividend. appreciate balance

$XXX back $XXX I that XXXX bought believe later You note callable in million year. QX. is million of this

how the the am of I and year. balance So portion evaluating cash you're returns this debt curious sheet just

Michael Mullican

Sure.

in years, Over flow. generated we've free X the cash past billion $X over

market $X our things. free that's a extraordinary. approach of company pretty in our to billion in had. a can you And business, cash of to a For size, you take company for going we're of And the flow while cap lot when do generate we've investing the continue

years, take return. level from door good been which We continue beyond and don't at a the look invest spot. It's business, I we're We'll a buybacks, of take good capital $XX. that, debt pretty in around think in approach a stock a approach standpoint, and debt increasing price average the a million think pretty I to continue to those back got like we'll you the we'll question. rates. at the to And want journey. the we've to your look looking of rate, us, year. rate X% we've which things, if see the debt reached where and think of before our out from is to next with buying a over we ASO away the debt different callable point take keep After at I variable lot we'll get at we're back over few number I portfolio do past the that of the the runway stability $XXX why

So about we that's how it. think

One stores out get assortments I to We time business. less big stores do questions are all format. more thing are have that profitable, stores smaller of and broad the think that think want the that highly about big stores We the can on that well. highlight. put We exciting profitable the

lot. a heck so a And model going tinker with our of we're not to

to above range. As focus we we're stores go going that are the forward, that [XX,XXX] on and in

Ken Hicks

as your of markets that are And Atlanta. we've in also, part question to we fill first been Houston, continuing out

We areas. on Panama adjacent moving City, Lexington are like and to into adding new markets

where But some about. they're talking are do has X competition done we will way. do things powerful will the the that, We seeing, to of things that it the continue more in and we're working of a these all

to continue do stores Our well.

working. we As the said, big box in is Michael biggest believe box and the

Michael Mullican

is Last operations. self-funded thing, from about what if from talking hit of cash I XXX% didn't we're

that's talking that from generate. we we're is think I obvious, self-funded but what of about cash XXX% the

Operator

line from next from Our comes question Oppenheimer. Brian the Nagel of

Brian Nagel

I'm Congrats the I want on the to continued successfully. question, just to on sector backdrop focus the reposition business the or or My my back question, do first backdrop.

getting seeing same? the staying QX from operating more Are perspective competitively, Or As Academy, are at in it the and the what we're to then QX 'XX. even here you they environment is look guess, early or I dynamics for challenging consumer's for you?

Ken Hicks

bullish. a significant million] it's [$XXX who -- be that's I a still very nobody over our you industry the view and fragmented has is million,] the well very consumer industry Brian, [$XXX It's of to, could on depending think big share. talk

So it's from that open. degree,

I play discretionary of are discretionary believe, the kids as as other We baseball. still to The not, parts business. going

of going The to do patio. get camping. are together You're your the going on families to hobby still for still

kid as Now you a not spend get Marriott, they may may a Louisville Slugger. much get not the may

find to they the enthusiast this. You they rod. from afford managing because may value where little through a need trade less we we to fit price opening the said, our where and buy That with what can expensive is fishing that's in

that to I consumer think bit being The of to said, the make possibly least We at decisions. consumer having a of little That think we're for hobbies the longer. challenged. going first and to is the decisions want And And support see this year, X challenged to part interest look I'm things. my those will going provide and both for value, be, and to I'm we in stay make of to I continue going going healthy. sure I'm to

Michael Mullican

we than X share were the think softer things a businesses past one and point, respect back thought demand great And we job. about my the had challenged We were happened is the good your segmentation that there's And we frankly do I challenge. Brian, over have that question competition, to our channel. years that's they of not greater competition. in earlier But

clearly a I is our few defined than it's was and more little think lane wider a ago. so it bit And years

Steve Lawrence

Yes. a I around comment points Ken's wanted to just couple of around value. add

us an when down know the value provider on that us. that. sure some for definitely we some I gives customers we be die price the traveling the have on, at carry the think all that in home. our to bumpy. of price key of A we back making think that opportunity to there's position certainly even a the customers We one you confidence the these also space, things even focused to been we're items about on if think in But service cases, economies items. mean that's little lot of stop continues if categories they will We've trade holding really we that rolled

We've value to talked offering expanded promotions. about

more traffic we're about use And we even way that's the in drivers forward and those time we going thoughtful during then we've that. gotten So is clearance manage that's And what we're something what about value. a clearance, because periods. smarter doing happened certain deliver embedded lot that and being QX in certainly how

economy of feel value will the we're in well to carry, the them categories provide the be positioned we and bumpy, continues that diverse we little fine. actually we of terms if that the like we So even a do that nature

Brian Nagel

relatively bigger very with X can I just If question. That's just follow your also all helpful. pit up

price remain in inventories of to started work and and of these bloated So elevated retailers your about talk have they broader space manufacturers result then a out lot lot with promotion. a in at at

for speaking, Or how is this from is you see academy's do challenge perspective, it this opportunity? an challenge guess you? broadly a a this for is of So And more an -- I dynamic?

Steve Lawrence

managed think this. Yes. the -- things hallmark a That's job one we've our good we've been of the through would inventory. past has mean start of kind with I how managing I think I over of year really of I a done

on But you Our with X%, inventory more X at was XX.X% of up stores. were were sales and end time, at that's it where versus our XX%. was same up That the up in quarter. 'XX. a down X.X% unit look the if at was the it basis, we And

But some So categories. elevated and us impact certainly, we tried like we business like into out feel much. back clearance create most more mean in across clearance inventory haven't feel We we positioned and to that. promotions we've activity our is address seen it's as well for or seen stock our spring. increased I some that there really

Operator

question from from Stephens next Our Inc. comes line the of Daniel Imbro

Daniel Imbro

side. still the to going I SG&A the helpful Maybe to per stepping mentioned ability was SG&A on over recent on back drive from year, deleverage. quarters. guys what's store drive start your I you down -- about want Michael, have that this color the to But think

are the journey out today? guess, as per at per tech look taking investments, store SG&A are and I you store same-store so the improvement of at profit we the improvement And Where level. SG&A assets in you a looking

Michael Mullican

really great the job that add doing, managing a the tell them, cap tip stores work the the With customer. of respect out my of a to are I that tasks don't lot to to you, they've done I value stores

hours to overall out on while customer-facing been And so an hours we've customer to labor the able taking give the store of basis.

I that's for you work improvement that some overall, some to the read most things will over maturity think the always respect can of I that's think the most But its benefit supply with through curve. will part, is probably we there's the where with chain. think additional that -- there. journey There is stores, that I have but do, be of

Ken Hicks

in get more Yes. are supply are places. doing that -- time the the there. with right has have system labor the that labor journey job in stores things do of right helped and But chain, put done early we We past a a just year, the this [Kronos] new great at some in We the scheduling. us the

Daniel Imbro

into the way one, And management of you timing store years kind out of question benefit side. see initiatives software, we communicated your out on guess, you thought guys benefit and think that dovetails some warehouse well and but the this next to two, Great. to any up delivery expectation? some see get like? a was to a I about that what think, of as then I some more time size margin have actual I could That could going thinking help multi-store about, 'XX. be you be we delivery later the to rolled these follows the year, that these still would investments look 'XX, talked that chain the from about supply gross in

Michael Mullican

the will very this long-term end Investor more our systems talk in warehouse tail the from We're We'll on costs. benefits Day. year. coming management a we putting it benefit have get about freight it year. in the beginning But the The be put for to of lower not of we'll chain really the end going the in we're benefits to the that import the at supply are side from year, container

we a several supply next the more year can after with to So the years more that this lot chain. come a do approval. lot in for There's

Ken Hicks

management we're put some the system. year like Systematically, we this in system trailer past things a yard place management warehouse doing

years. And seeing like industry-wide that or costs be and talked we next improvements, we're occurring X larger things like benefits, going the about We multi-store but some racking over things early you to some things this and -- with benefit we doing couple lower year. trucking operational high-capacity that, the small that's of freight about, will are see are over on benefits the

Operator

Basham Securities. next from Seth line Wedbush comes from the question of Our

Nathan Friedman

Seth. This is Nathan Friedman on for

to follow Is XX is expectations being else? improvement in something it chain behind Maybe this just for and color supply promotions? there on sustainable wanted offset prior higher XX.X. margin the sustainability. you gross margin to sticky light could drive of a a -- larger or runway is to the that more Or gains the higher up more Just can share is versus merchandise

Steve Lawrence

prior But We back in going we margin during were the up back perspective. over components. that think much of fundamentals made ago from system promotions the expect time The that points level see It's how we we a all management margin, more we've certainly in think from thoughtful long-term improvements that a and where things also where and about merger merch the basis be strategy let much and in start than the going XXX a where that we've time perspective we're are I'll higher to we're other promotional intensity putting the we forward. mean, clear, period, XXXX about business. sticky. on good, do I'll during being don't creeping to that some to inventory a going clearance just manage of the perspective. that years we're an were lot talk MP&A I Michael how that done X think allocation to we're I process, I these period. from have running, be ever at benefits go

vast we But years more erosion the little picked bit to our there promotions. merch over next going may margin some think of So what relative in year be a to this the year to of last majority is of roads. up couple stick with we

Nathan Friedman

And just it. maybe Got question. a housekeeping

well Just there would growth where more for that positioned the for but great. the spring, inventory knowing your you're upcoming color expecting any be you're year curious

Steve Lawrence

back year, in halfway I progress think you're closer start normalize halfway was year. to about as see the started last to to where last stock inventory it we through through getting going We year. the

the So the into as I to deeper think inventory start we get see Y-o-Y you'll on basis year. a normalize

Operator

comes from from line of Heinbockel question John next Our the Guggenheim.

Unidentified Analyst

John. versus ticket out most from And expect call more you This A maybe bigger on question contract is casual the engaged. anything and quick for Julian from what items? and your do you consumers can

in improvements mentioned guys and analytics. You targeting data

quick can anything great. follow-up. be Then would call I out have So you there a

Steve Lawrence

weren't. numbers. only in up customers that and the year early us, the other with our would kind more engaged days, we're the past certainly spending more picked been during We of story when Yes. are say open a embedded shopping kind the and that's I over of has of people the best lot our with store customers pandemic onetime that us certainly particularly are

even news going the is that good XX% them. it's contact way over on down, better to terms we've a our of targeted is we've things new a customers, know coming We've outreach. We've talk seeing in got that's a being targeting. been and of targeted future. on We'll lapsed really one bit really little gotten high rates be We're the media really the also traditional surface reactivation in much about, excited It's how our about to to at platform is something now working there. we're beneath in the them. from data help going more board our The happening of it's us both marketing data increasing that Investor customer really Day. on taken currently which on keep and lot and We sharp spend

Unidentified Analyst

as especially and Great. our ever it's fuller on based stores clean been. apparel And as color. is about Appreciate that inventory, look

backdrop can units now? Our than you to low exciting -- the demand area. like if better And can chase is link chase to digits comp and what store upper close you single somewhat

Steve Lawrence

Once little that's versus still a last X%. Yes. are bit with say X store I comp would XXXX up units are stores. year more again, versus down

was could were of top We X turn could faster. pandemic, lot or in there goods. store. leaner nimble the ago learned was the learned we is be what So we're than years when we operating said, really being chasing That interesting terms X today how in a teams we throughout stock

haven't in we that. so That's our And memory muscle lost now.

accelerate both if got -- down, we've we it business inventory like management we've on the like And business in starts do sides. to going so we additional the chase we very slow to feel feel goods. see been and to if Conversely, nimble

Ken Hicks

Part things put Steve have that allow bed. and Yes. to in some his of the it us of also the place is flow merchandise team

inventory much to do the to volume So it we and the moves don't have system. as through carry

improve that able chain So and planning in putting handle to can more we it think and supply we it, future our for and will even inventory we're make place handle the to that's the but our better has -- flow, improvements slow the able been productivity.

Operator

from more Ladies the from time for and is question And gentlemen, we have Sachs. Goldman one Holanda Patrick question.

Unidentified Analyst

new in You stores guys X XXXX. net opened

there took or that wondering you during were share of from infill new markets? across there's from share around share data different categories or markets opened you any We you've Has customers you're that in in spend from customers? been ramp-up taking year categories. in can patterns new mentioned customers shopping the just at new kind new if new the stores new You

Steve Lawrence

expand you some think, like brand mean a I and we're new job as way to are about shoppers markets, and a candidly, our into great stores, gone new attracting assortment. us. of new short really Academy done, customers. pump, as see we the we've think new those better markets So to customers localizing the obviously, new we've for of all I in,

took in apply and didn't 'XX past prior things done we've was assortment the approach in and prior and a the and Texas-based tried of of vintages it we One kind to that broadly work.

and we're that here. going of said, So we've actually we those how a have we said, taking we we're about to play being going always smarter as this take localization and we're -- in seen manage there's to some and learnings But some we and to pretty learnings those Michael the place market, stores. 'XX, assort from reaction 'XX positive lot put how into how efforts to

Ken Hicks

All appreciate challenging attention. times. got so we challenging our team for why well new we're a day right on helped we're plan With ahead need we've that, excited was look quarter of you'll a accomplish and our right. hope what the our first Meeting, I think to of And and we everybody's positioned and us. of and Thank I that a and at It that, in achieve the be bullish better accomplish to April, got and time our said, we've hopefully, you you the But future future. Analyst understand there. has of to fun part goals. for and lot great seeing we the outlook all and We you. everybody forward what out

Operator

your conference participation. now for Thank Thank and concluded. you you. The of has Sports Outdoor Academy

You disconnect lines. may now your

Academy Sports and Outdoors (ASO) 16 Mar 232022 Q4 Earnings call transcript