Q3 2020 Academy Sports & Outdoors Inc Earnings Call
Good morning, ladies and gentlemen, thank you for standing by and welcome to be kept me sports plus outdoors third quarter towards your 20 earnings Conference call. Today is Thursday December touch and Twentytwenty and this call is being recorded and this time all participants are in a listen only mode fall and be prepared for works there will be a brief question and answer session questions.
Be limited to analysis and investors. Please limit yourself to one question and one follow up to ask a question for Nicole. Please press star one share require any operator assistance during the call. Please press star zero and I'd like to introduce your host Heather <unk> Senior Vice President of accounts and Treasury attacks and other please go ahead.
Good morning, everyone and thank you for going on calls per day on calls me, our Capex, Chairman and President and CEO, Michael and Executive Vice President and Chief Financial Officer and.
People aren't exactly and vice President and Chief merchandising officer, absorbing I'm, sorry, and I want to go over for standard administrators and [laughter].
Our earnings per week, and she was disappointing if a day that they're really and backs and other web sites, adding bankers nighttime dot com and.
A replay.
This call will be archived on the Investor Relations section of our website for.
30 day.
I probably line there so I think the base and I mean and stuff.
And finally I'm free during this call maybe considered forward looking statements. These statements for <unk>.
For Brett and I agree to that could cause our actual results could differ materially from our expectations and for Josh.
Right, but I'm eating.
And one of them, but are not looking for that you know the factors identified in today's earnings release and in our filings for the Securities Exchange Commission and we know how good profit.
Dated October 28, and our most recent quarterly report on form 10-Q.
Such forward looking statements are based on currently and they don't want somebody and I.
Right, Okay, and I know my Assembly line and.
And pretty upset and I wouldn't say I know and I Didnt mean for by the Safe Harbor provision under the federal Securities laws income.
<unk> has no obligation and data before they.
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And the current credit space personally 40 and crime.
For the P. Dugan.
Today's earnings release, and like cool, all Cogs and certain non-GAAP financial Nightmare right.
Okay, and I'm not here to the most directly comparable GAAP financial measure.
Good day studies on free and somebody did and the Investor Relations section of our website now I'd like to turn the call over to cash.
Thank you.
Good morning, everyone and thank you for joining us today.
Thank you much I didn't say, that's it and so.
[laughter].
And I'd, probably [laughter] price 20 Academy sports and.
For the new chapter.
And I wish.
For the entire change [laughter] about 250 non stop any true.
Three distribution centers.
[laughter].
Over the last week, and our Coke and that's not just sports products.
Oh, great experiences and.
We look forward to helping our customers and I haven't even more fun out there.
We hope and you and your family for safe and healthy.
I can try anything for out of our team members and their commitment to serve our customers and our communities during the cold and talk to standard.
Oh Academy sports distribution centers and the overall for US are currently open and have continued to operate and government tricky recommendations from requirements for the body and I say from BARDA.
For our customers and teen range.
We've worked hard over the past several years through and through our competitive position, that's really for two workers and being the best fortunate sports retailer and the country.
Our business has performed strongly during the past several quarters forgive me well before the call, but thanks, and Panda and <unk>.
Strategically investing and our key initiatives, including merchandise and omni channel and are focused on the cash.
Your job and truck, which continue to pay off in the third quarter of 2020.
Now moving to our financial results and.
We announced earlier this morning, we had a remarkable third quarter consecutive quarter.
Positive comparable sales and purchase.
We achieved a record 1.35 billion total net sales for the third quarter net.
The comparable sales increase of 16.5%.
Our comp sales were driven by increases and transactions and unity and average unit retail.
And the divisional perspective sports and recreation and.
Outdoor well performing businesses.
Sports and work the Asian Division had a strong double digit top and storage by sheepish outdoor Jamie outdoor cooking and that's for supporting a fortress is growth our sports from north creation diverse.
Oh outdoor and they also experienced a strong double digit copper and for years, which.
Which was the power price increases in our fishing camping and hunting categories and that's our customers continue to participate and more outdoor activities.
Comp sales for the full board, there's going to be pretty smart and simple digitally that's true. It's also good sales from both a bloody and work footwear.
We saw low single digit decrease and the apparel division due to the decline and license apparel as we anniversary and the strong sales from ASP growth 2019 World series for parents and.
Well as the impact from a change in back to school and Barb.
[noise] RB corridor from experience continues to drive significant revenue and profit growth as well as deeper customer relationships.
And it made our website easier to navigate and prove that concept.
And added new services, and all of which depends on who the customer experience.
Ecommerce and net sales increased 95.9 per share.
During the third quarter compared to the same period last year and achieved a 7.5 per cent penetration to total merchandise sales compared to a 4.5 per cent penetration for the same period last year.
Our buy online pickup and store and curbside pickup program comprised approximately half of our overall E commerce sales for both the quarter and and your today.
Including our ship from store buy online pick up and store and in store retail sales for our stores, one day and over 95 percentage of our total sales for the quarter.
Our third quarter sales for the results of our wad differentiated product offering, which lends itself well to the ongoing for EM.
At home fitness Staycation road trips and.
Outdoor activities like fishing camping hunting.
And outdoor cooking and gains.
And we offer a bottom for the whole family through a variety of products for many activities.
Every day value also resonates during times of economic uncertainty.
We offer customers for convenience and save shopping experience both in store and online.
Air for active family lots and they bought memories together, we also show up for our community during difficult times went from its harder to buy.
We are continuing to strengthen our balance sheet subsequent to the third quarter and November we reduced our debt by approximately $630 million.
And we find out.
And extended the remaining $800 million and that true 2027.
In addition, we.
Extended our Undrawn $1 billion, a deal revolving credit facility through 2025.
We believe these actions along with our continued strong performance. This year has positioned us for an ongoing for ongoing financial stability.
[laughter].
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[laughter].
So [laughter] results just true.
Our inventory position for the third quarter.
[laughter].
And almost all categories.
Firearms and ammunition will continue to be challenged for the foreseeable future.
However, inventories continued to flow and all of our divisions during the quarter, allowing us to experience strong sales.
We've been working collaboratively collaboratively as a burden retailer with all of our business partners and quoting our merchandise managers and logistics partners and to improve our and stop positions and merchandise flow.
While our third quarter performance was strong we continue to work on our key opportunities to pave the way for the future.
And our E commerce environment.
We've launched ship to store and advance of the holiday season, and continue to focus on search and checkout optimization opportunities.
And store for focused on leveraging our systematic capabilities to for their line team members schedule and responsibilities with the customers traffic patterns.
And the supply chain, we continue to focus on distribution center and logistics efficiencies by enhancing processes and system optimization.
And marketing, we continue to improve our targeted marketing capabilities to better communicate with our customers and a personalized fashion.
And Merck merchandising our focus remains on continued advancement and our planning and allocation systems as well as product placement within our store environments.
With respect to our future outlook due to the high level and uncertainty created by numerous external factors, including dependent and we will not be providing guidance at this time.
Before I turn it over to Michael I would like to thank all of our team members in our stores distribution centers and home office for all their hard work and dedication during this challenging year, which helped us to achieve these strong results.
And I'll turn it over to Michael to review, our financial results in more detail Michael.
Thanks, Ken and good morning, everyone. Overall net sales for the third quarter were 1.35 billion, which is an increase of 17.8 per cent compared to the same period, a year ago as Ken mentioned comparable sales for the third quarter and increased 16.5%.
Gross margin rate was 33.7% of net sales, which is a 110 basis points higher than the third quarter played 19.
It's 110 basis point increase was driven by strategic merchandising actions, such as lower markdown rate and lower clearance volume, but partially offset by sales increase and hard line categories, which generally carry lower merchandise margin rates, but to have a higher ticket.
Adjusted EBITDA increased 64.1% to a record third quarter performance of 145.7 million up from 88.8 million and the third quarter of 2019.
For the third quarter as your day was 359 million for 26.6% of net sales, which was 40 basis points lower than the third quarter of last year.
That's true neighborhood or approximately 33 million and non cash and extraordinary items associated with the October IPO.
Excluding these charges Sta for the third quarter would have been 326.8 million or 24.2 per cent of net sales of 280 basis point improvement from the prior year.
Now looking at our bottom line and net income increased to 109% to 59.6 million or 74 cents per diluted share versus net income of 28.6 million for 38 cents per diluted share and the third quarter of 2019.
Pro forma adjusted net income, which excludes the impact of certain extraordinary items from 73.7 million or 91 cents per diluted share and the third quarter.
So that increase at a 188% from 25.6 million for 34 cents per diluted share and the third quarter and 29 feet.
The increase and free cash flow for the third quarter was driven primarily by net income and the vendor terms changes we implemented in the first quarter of 40 point as a result, our adjusted free cash flow look and inflow of 83.7 million compared with an outflow of $30 million in the same period a year ago.
On the balance sheet, we ended the third quarter with 869.7 million in cash and cash equivalents and no borrowings under $1 billion ABL credit facility.
Net of 21.1 million and letters of credit available liquidity, including cash was 1.7 billion a quarter and what's the 730 million higher and the into the third quarter putting IP.
Yeah.
Most of the proceeds received in connection with our IPO and October are reflected in the quarter and balance sheet. However, subsequent to the third quarter on November 20 point, the company issued and sold an additional 1.8 million shares pursuant to the underwriters over allotment option developing and approximately 22.1 million and further net proceeds.
Also asking rents and subsequent to the third quarter on November six 2000 reported we completed a debt refinanced transactions, where we issued 400 million and senior secured notes and and then into a new 400 million per one facility both for literature and 40 27.
We utilized the net proceeds from the note for the new term loan as well and cash on hand, three examples for 1.4 billion dollar term loan facility, reducing our overall net debt.
Reducing our overall debt by approximately 630 million in.
In addition, we extended our billion dollar and deal facility reported 25.
Our merchandise inventory at the end of the third quarter was 1.1 billion, which was $249 million or 19% lower than at the end of the third quarter, putting Nike.
Production and inventory represents a significant sell for the towards and support our exceptional sales growth of 18.3% and year to date and moving towards a better ongoing inventory position for the pressure inventory.
For our current and its worth position reflects the trousers and staying its dominance Turkey categories have been and high demand for independent and we believe that our inventory position, well and those categories and elsewhere and a good position to make improvements into the future as our supply chain continued growth group to support our sales go up.
Net capital expenditures for property and equipment and were 8.1 million and the third quarter of 2014 compared to 20.8 million of third quarter of last year with the decline driven by their new stores and fewer store remodels.
Moving on to hear a day results.
Net sales increased 633.4 million for 18.3% to $4.1 billion, which included and 16.1% increase and year to date 20 clay comparable sales.
Year to date, and net income increased to 112.3% to 217.2 million or $2.82 per diluted share from net income of $102.3 million or $1.37 per diluted share in the prior year.
Year to date pro forma adjusted net income was 208.6 million up 257.6% from year to date 2019.
This resulted and pro forma adjusted earnings per diluted share up $2.70 compared to 78 cents per diluted share and for the year to day 20 and IP.
For our 20.8 year to date adjusted free cash flow increased significantly to $843.4 million compared to 42.2 billion last year.
To conclude we are pleased with our strong performance during the third quarter excited about our accomplishments and proud of power for universe of and nothing short of inspire and during these challenging conditions conditions I.
I would like to reiterate candidates through our extraordinary p. and liver for helping us achieve strong sales and earnings results.
This concludes our prepared remarks, we are very optimistic about our future is our key initiatives continue to drive drive strong results, we reported sharing our broader for new Didnt EPS quarter.
Now we'll take your questions.
Thank you feel free to ask a question for you signal by pressing star one on your telephone keypad.
Speakerphone. Please make sure your mute function is turned off to low signal to churn equipment and and star one to us partial pause for just a moment.
I'll take the first question is from Robbie Ohmes Bank.
Bank of America Securities. Please go ahead.
Hi, Good morning, guys and Ken and congrats on a great first quarter out of the box here.
Actually I have two questions for my question.
Just on non athletic.
Sort of footwear and apparel comps I was hoping you could give maybe a little more color on and.
How the outlook is there so where there are some things that happened this quarter that you think restrained for.
Were and also on the apparel side, how much of an impact was there from.
And the Astros.
Yes last year, and maybe some color on how apparel looked.
Moving that and and maybe just.
Some thoughts on.
Yes, the the team sports side of that business, as well and and how that looked and versus what you may think that could be next year.
Yeah.
The total gross which was not as strong as it had been and we were up against and big comps and.
And it was both.
You know from the license glass rose, but it was also from a strong back to school last year.
The ASP growth, we won't go into the details of what and how much exactly it was but and we would have had a positive profit we not had the astros.
And and I'm, just thinking increase and asked us over there. So it would have been a positive comp without that.
And also for back to school was it was a factor it was more spread out it was lighter and it wasn't as big as it had been and in the past.
Both of those actually puts and good opportunities for next year, because we would anticipate particularly with the vaccine and hopefully thanks for getting back more to normal there wouldn't be a regular back to school and we'd be able to take advantage of that and also licensed apparel will should.
It should be stronger because there will be change playing sports and more outside interest and so.
We had a couple of factors the increased or the good we're up against a good year, we're up against the the championship.
And as I say, it would've been positive without the incremental cash flow and the back to school, but no.
Yes, and thoughtful and we still had a good quarter, so that should be a good good plus for next year.
That's that's really helpful. Thanks, and then just a quick follow up actually maybe for Michael the on the E Commerce Penn.
Penetration could you just talk about the impact that had on gross margin year over year, and and maybe just related to that is I guess about four to five percentage sales.
Yes E commerce and that is not running through your stores.
Can you give us some color on what kind of margin pressure you got from that portion of the E Commerce business.
Yeah, I think we've done a lot of their particular profit standpoint that that helped us and at the margins I think again and the big thing that happened. This year and then the production above the per Academy we.
We get a bigger ticket with brokers, we get more repeat trips and.
Of course, we don't bear the Sip and cost of goods. So we're we're happy with that because that's their focus and I was growing will be a tailwind from gross margin to its customers.
At the top of that we are happy with the progress there and one of the thing I want to follow up on the question about the for trucks and sports business was positive for the quarter and the delay back to school moves and stuff, but we're very happy with how that performed and low through our categories within team sports will also positive.
Great. Thanks, very much and congrats again.
Thanks.
Well take our next question from Seth Sigman as credit Suisse. Please go ahead.
Hey, good morning, everybody. Thanks for taking the question and congrats on the quarter.
And thanks up about it.
Great and can you talk about some of the incremental merchandising initiatives as you look out into the fourth quarter, but more so into next year. Obviously, we all know that industry demand has been strong during this period, you're going have to lap that but there's also a lot of things in your control. So how are you thinking about some of the key drivers for.
For Academy, specifically as you look out over the next 12 months.
Yeah, I'll start and then I'll have Steve and comment on and so on.
Hello, Good morning.
The big items, and we've talked about this was our what we've done and planning and allocation and and and assistance to get the right merchandise gross store and Rightsizing the right quantity and those systems are learning systems. So they over time and continue to improve and enhance themselves and so.
You know and get smallest and extra smalls and I'll, let our border stores we.
Make sure we get the right.
No.
Type of grill, with oil and gas wells and the Midwest versions of wood pellet and.
The south and so those systems are very important and and we also continue.
Continue to work with our vendors and our.
Adding a.
Important merchandise to our assortment and broadening.
The particularly at our current.
Better and faster categories.
What we're doing there and there's nothing.
But I would say is what we're doing with our private labels.
And continuing to build on the private label programs that we have.
We've got some new ideas that will be coming there, but also strengthening the programs we have Steve you want to add.
Thanks to what Ken covered so you know in terms of planning and allocation flow is a big one which you mentioned.
And markdown optimization, there we've been spending a lot of time.
Getting our markdowns position and the right quarter, and taking more and markdowns and season versus proceeds and which ultimately speeding up sell through improving turn and pretty large and long term and other.
The thing we've talked about is how we're building out a true good better best assortment across all of our categories and we both and pretty good and the good end of it but.
And you take a category that somebody asked earlier in terms of team sports we've gone in and built out better best Assortments. There for that we can take that that kids from kind of a beginner too and intermediate traveling team.
True and advanced level until for that respect that's relatively new for US and you know we had a lot of that work that was.
In fact, this year and.
With all the week shutdown side and get all the benefit of that works for that should provide a tailwind for the future.
The improved store presentation, you know, we're working really hard to make our stores more engaging easy to shop.
Better presentations within vendors et cetera that are tied to their website as well so that would be another one and then Ken touched a little bit on localization getting a lot better localization. So all things I'd say, we're and early innings on yes, I think the localization is one of the things said that probably was one of our shortcomings.
And.
Well you know the we have great assortments and our people come to the store for product and product that's appropriate for them and making sure and it's not just size. It's a type of product that localization and something that our margins really are working hard on to the fit each of our markets and.
And one of the things as a result, we're saying up some of our and who won't know markets as weve implemented localization and our fastest growing borrows.
Okay. That's all very helpful. If I.
And just follow up quickly on the gross margin this quarter very strong up 110 basis points.
More importantly, there was stronger than prior quarters. So I'm guessing I'm curious what was different in the third quarter versus prior quarters. You know you did have a mixed after this quarter, but I think you had that earlier in the year as well so was mix less of a factor this quarter or are the positive offsets just greater this quarter and just give us a sense of what's going on within that.
Thank you.
Yes, I'm glad you asked that I think really what's happening is all the stuff at the interest talked about and the leap and had reported nice gross margin expansion over the past quarter over quarter for for the last a year and because of all the stuff. We're doing from a merchandising perspective, thats, allowing us to harvest volume and so I couldn't agree more we are very pleased with the mix shift that we've had a good.
Skewing more hard goods more outdoor das and Anniversarying those Astro sales have that gross margin expansion, we're really happy with it and it's really attributable all the merchandising interest that we talked about which by the way are still early today to Kens point, yes.
Yeah, the Astro sales that was all for margin stuff.
But really you.
Think about it.
And so that Weve mentioned, what we've done and Dot Com has has helped.
And and looking at that would approach that we've taken a low risk markdown optimization and and third thing is what we're doing with our private label, whereas historically, we were running our private label.
Really as a loss leader and not a margin enhancer and and we've improved the products and what we're doing there so that it can be margin accretive as opposed to margin dilutive.
As we look ahead, we do have a couple of businesses that have been challenged licenses one of them. Please.
Pass through back to school those businesses will be margin accretive next year as we expect them to return to more normal levels up a lot and look forward to I'll just add on that we are less promotional right now.
While back nationality, certainly and a lot of the really and demand categories.
It just doesn't make sense and particularly in the later back to school.
So as we go forward into next year that probably provides us an opportunity to put back from those promotions and pulled out and have the same time should have an offset from a mix perspective with apparel and better for simple Paul.
Okay. That's great. Thanks, again for all the color and best of luck ahead.
Thanks for that.
Well take our next question from Sean Salinas Covantas capital. Please go ahead.
Hi, good morning, and congratulations and thanks for taking my question.
Thanks, John.
And so cash.
Ken This is primarily a question for you, but I'd be interested and everyone else's thoughts as well and I think one challenge here is trying to separate out what's happening from a category demand perspective versus internal.
Internal initiatives at the business and maybe if you could provide some perspective about how you are thinking about it academy to for you you took the role.
The initiatives that were working.
To drive the positive inflection and same store sales prior to the pandemic.
And then now with the accelerated consumer demand.
Has that accelerated the.
Really.
The opportunities GAAP.
For maybe you could tell us what inning, perhaps you think we're in and in terms of what's left to do and what you see going forward and in terms of optimizing the business over the long term. Thanks.
Thanks, Jeff.
Yes, when I got here and other things and.
Ill.
I.
Right and I noted for the company I go and place, where I think there's a tremendous opportunity and I've been fortunate and having a very strong team sort of help capture that opportunity.
And the past and here and I.
I saw the opportunity here.
We built a strong team.
And the thing that really quite frankly.
We had started.
The turnaround and ill.
A year ago before co and head.
Seems like ancient history.
We started to see the results and.
I believe that.
No we would still be seen.
Above the average store for store growth without the.
Well you.
Tailwinds that we've got to some degree from the pandemic.
And the reason I believe that is because the strategy that we put in place we've seen the results that strategy actually really helped position us well for example.
Doing what we did with our dot com that lets you know that was very fortuitous and we had a really crappy dot com system.
And what we get with our system. So we could not just stay and stop the flow and merchandise because flow because of what's happened with inventories is so critical.
No, we got reduced inventories, but we're moving and through the system. So fast, but we're we're not seeing the impact of that.
As we probably would have before so I think you said that.
Right what their situation is done it's accelerated our learnings, but I still believe the strategy that we had worked before it's.
It's worth growth.
During Adam and positions us even well because it's like.
No.
Running and it's in line.
Okay, we're running and the bad right now, but our lights and stronger so we get to solve.
Solid ground will be and even better shape to move forward and take advantage of that and I think world. We will continue to have good solid growth good solid profit growth going into the future.
After after the pandemic.
Hopefully that answers your question.
Thanks, very much and happy holidays, everyone.
You too thank you.
Well take our next question from Chris Horvers that JP Morgan. Please go ahead.
Thanks, Good morning, everybody. So a couple of questions first you talked about a shift and timing of back to school and I know there are some big districts and and taxes that that push school back a few weeks or maybe even a month. So can you talk a bit about that the cadence for the quarter and you also have the benefit of having in a black.
Friday and cyber Monday behind you curious, what you're seeing so far and how do you think about the sort of risk and opportunity as you get and to sort of cooler weather patterns and.
And how that could impact the overall momentum and the business that you're seeing.
Yes. The thing was that there were three three issues with back to school and three things that happened with the environment one.
It was was lighter and you said and so.
So what normally would have happened probably in August and.
We started to see and.
September and October.
The second thing was there for spread out because historically the slogan states will use tax and since that's our largest state.
For Oh, and I would start by the third and finally.
In August and they actually spread out from the third non dated August all the way until the middle of October so spread out and the third part of that was there was still a lot of kids, who Didnt go back to school and many of the district share was lab for their parents option and and so.
Just for its less than half the children and went back to school. So they didnt have to buy all for us to the day would normally buy a for gold.
Back to school and they're also world team sports and start up so it was later more spread out and a smaller and whether it is.
Story for it would have been.
Without a doubt.
And all within normal back to school, which we would anticipate seeing next year.
What was the second part and question.
I touched on I touched on quarter and eight you have the big Black Friday, and Saturday and you and I were not well.
We're not going back to a low.
Yup.
Any direction and by the current quarter other than saying that the trends that we've seen and.
And and the.
Overall for and.
Which saw revenue in the third quarter EPS has continued and through the fourth quarter.
Understood.
And then on that and the balance sheet, obviously generate and attack kinda cash big de leveraging momentum here, Eric and early November which is great. How are you thinking about working capital into yearend.
And and how much a retail do you expect to be and 2021 and do you look at it inventory per store per foot and then related to that you know your your accounts payable to inventory ratio is two x. what had been historically, how are you thinking about where that settles out and.
And the ability to maintain and such and such.
Such a high APV inventory ratio, because clearly you're going to be sitting on and a lot of cash and generate a lot of cash and and we understand you're committed to continuing to de leverage the balance and just trying to think about the potential that next year and timing of that next year.
Yes from an inventory and stuff that I'd say, that's probably $150 million of inventory, we rather have right now that we're we've been chasing art and get like everybody else versus as you know worldwide shortages and some categories that have been better and.
We're still sales were still getting the product the Philly and we're just not getting back the minimum and presentation quantities that we.
I'd like to have so thats I think about inventory from an IP standpoint, and I think one of the really good things that came out of the pandemic was the strengthening of our vendor relationships and good results generally help with that as an official retailer. We never close we were able to place orders, we are able to pay our vendors relative to bear landlords and we were able to work with them on the strength of that relationship.
To to help extend our terms.
Really we were behind our peers for for a while there and.
Our goals and our fair treatment I think we're going a fair place and I wouldn't expect you know a lot of get back there going forward.
And that's how we're thinking about those what are the other comments and it relates to your first question is because we world and and we saw what was happening.
Steve and his team were able to place.
A lot of orders and merchandise for that.
And then other people weren't they were actually cash flowing goods and we were placing orders. So we feel you know.
Starting in the third quarter and going forward and on a number of categories would probably in a better position.
Some of the competition, because we get placed those orders and are flowing and and.
Now and for next year.
Got it and have a great holiday Christmas season.
Okay. Thanks, Chris.
Great and taken especially from from Toms and Nick Hi.
I'll start low please go ahead.
Hey, good morning, guys. Thanks for taking my question.
Thanks, I wanted to ask I know you've been trying to drive loyalty.
And your branded credit card.
Can you talk about.
And that you can imagine for instance.
Current quarter and I missed.
Anything sort of interest and committed to perspective would be helpful.
Yeah, we're really happy with these initiatives and how they progress we've added over 3 million and new customers. This year with specific it's doesn't want it but with the credit card program, which we'd really designed to have a loyalty feature to it and we're happy with it Vicki recall, we were 4% penetrated as of the end of Q2.
Number of running around 6% currently for very happy with the growth of customer shop before offer and we get a nice basket outlook with them and it's a great program that we pay and has a lot of rate rather than a customer gets financed and off their purchase every day that off way for coupon and a male that'll help accumulate points right and the bank funds that discount to a degree program for.
For us is growing nicely and we're happy with it.
But that had a quick follow up to and warm up some housekeeping items with the $630 million from adoption and debt.
Early in Q4 and.
Michael can you also I guess, what the interest expense savings and B.
From from that that for now.
Yes, but let me.
It's about yes for 30.
Okay.
Thanks.
And Jeff.
Yep.
Sounds good.
And that's it for me.
Happy holidays and now.
Yes and.
Okay lifestyle.
Oh and take a next question from credit notes at Evercore ISI. Please go ahead.
Hi, Thanks, and congrats on a nice the nice opening quarter as.
And they are.
And the comp breakdown, you list and transactions growth without making that that was a majority of accounts in the quarter and if you could give us a little insight on how the trend on transactions was for the quarter.
No we have all elements of.
The purchase money transactions the units per transaction.
And the.
Average ticket were all up for the quarter.
And then we don't have counters and dollar store and counters and some.
And the traffic that we saw was was out and it was well over a gross.
For the rest of the industry.
Got it so think of it as the flow rally of traffic and transactions was and was a key part of it but it wasn't a majority of the comp.
Yes.
And it was for me was that it was all the elements.
Got it and then when you're at 16% you need everything and quick.
[laughter], so really for work and so that on that front and being able to do that and then how how long can you keep growing like that with inventory is still missing that you and is down 18% year over year or I think Michael you mentioned you wish you had 150 million more and we think about that and how how long can you keep this up if you can't get day.
Inventory.
And now we're we're really tied for credit for right and as fast as we can.
And were really we've we've kept it up now for for a number of months and the reason is first of all we're catching up and a number of businesses. So it's not as extreme as a wild bird, what's what's happening and we are learning how to flow the merchandise much better.
Michael used the term properly the credit terms patients standard art and that's.
And secondly, what we would like but the sales have continued.
And because it literally.
And get a lot of our bikes and audits.
Delivery to a store and and a day or true. There also and then two days later, they get another low and and customer has learned.
Using online to find out what the inventory is and.
We think we're going to catch up with the customers coming just as rapidly as we are getting and then.
So were not able to present us the way, we like what we're able to sell it for the way, we like and it is steadily improving and we've been per week over week for the last several months here. So we are improving.
There's just.
The sales velocity intimates category for the club, but it's really it's really low it's what Steve mentioned earlier flow is really critical and.
Just to be quite Frank there's only about two or three businesses now that are really and issue.
Gods, and low and bicycles and some parts of exercise dumbbells.
Would be one but other than that and most of the others.
Neil.
Where we're not might not be exactly where we want but were acceptable level I'd just add to growth. What's really interesting is how long can we keep this up I mean, certainly as we went through this and we looked at certain categories and said well you know is this pull forward and what not.
And you know you have to put our best thinking cap on as we did that as we've gotten back and stock, we've actually and a lot of trends accelerate.
Because we had to happen towards some of these categories, where other people have itself.
It's not that we're not for carrying a lot of inventory and have been chasing it but it has not and bringing it and it's very hand to mouth and even accelerated some of these categories.
And if I could a cheat and sneak in one more price what the new customers I know that's been a focus and you get new customers are reengaged customers could you give us an update on the things you're doing to make those customers sticky.
Right and maybe haven't come back next month or next year.
Sure we have a really good grip on who they are we know how to reach and we've been marketing to them.
Digital some some print and deliver Biennale.
And have been talked and regularly and our goal is obviously keep all of them if it all humanly possible so and.
But longer term, what what really is going to keep these customers and other cost for shopping with US is moving away from traditional and kind of blast media traditional media. That's that's net block broadcast what Earth newsprint.
And our broadcast and more digital personalize messaging, so we've been evolving our marketing spend and how we communicate with the customer cross sales channel. We're doing a lot more of that today than we were doing a year or two years ago, and we're going to get more personalized going forward and talk about the things that they're they're purchasing.
And and make sure that we're speaking about things, they're interested in for Greg and $3 million per customer as a growth of academy credit are very exciting I think the most exciting thing that we have going on from a customer perspective is we have a number of customers, who and shopped us for a long time, the new the category existing customers is growing and greater than it has in the past.
And what we're seeing is those customers shopping that new category second and for a time more than we had in years past for that I think bodes very well for for kind of some of these trends moving forward.
That's great and I have a great holiday. Thanks.
Thanks, Greg.
Well take our next question from John.
And well go ahead.
Right and partners. Please go ahead.
Hey, guys, let me start with.
Better and best right people, having more money to spend it on better and best.
Selling.
Yep will flow through.
That vs. Good.
And stronger.
Lines for you and where our need and the build out of better and best and I don't know how you want to describe that.
But how much more could go is there on those low volumes.
Yeah, I'll I'll start with kind of the price for that Steve.
I'll talk about some of the specifics, but and principal.
While we had a low.
For a very strong position and good and so as a beginner or novice we were there.
And as people grow and develop we probably didnt have as good and offer and we have an hour and not as good as we would like and the better and best further.
For the enthusiast and the the ex first person it's been a sleep on all on a GAAP.
Non club.
You know and heightening, our camping trip, that's not us but.
But for a person who the GAAP non hobby and there is developing and that's what we want and so that was why we developed we got out of some categories, which provided the inventory and space for it but the idea was not to reduce what we had with the opening price for that and then.
From a customer because were strong there and we didn't want to want to really want to run away from them. We want to continue to support them and allow them to grow with us and I'll, let Steve talk about kind of where we are sure so well.
One thing I want to make sure I emphasize we said one of our key strength is our value position Mark. So I don't want anybody to mistake. The fact that we're kind of layer on a better best piece for offering that we're somehow moving weighted to go that is foundational who we are we really make sure that we address EPS endpoint.
It's really different by category. So you go through and think about category like growth for outdoor cooking, where we've had a pretty established business or for a while we're further along in terms of building out that better best piece and the assortment and what were finding it and our customers who came to us for it and opening price for our six for burn a grill and bar and now stepping up to that.
Trigger pellet growth. So we're seeing growth in those growth category not at the expense of good I'd say.
And there's another one and we're a little or a further on the journey in terms of having better best out there other categories. The Academy as Ken mentioned, we'll probably and early innings and camping building out and better about and so that will make us progress for next year, and I'd say sporting goods and certain categories wearable and little and earlier any there as well.
Great and then for them and secondly.
Think about and how well the business is doing the idea of maybe pulling forward.
Urea restart in store expansion is that could you do that and is that desirable and then maybe along with that thoughts on capital allocation.
Since the balance sheet as you know has strengthened so quickly.
Maybe for candidates thoughts on how you want to use free cash flow going forward.
Yes to the first part and your question the challenge with the new stores is just the time.
And it takes true.
Make sure we find the sites and we have we have.
And our preliminary work for the detailed work and then also get a lining up the construction and things that as you can imagine this is reasonably challenging.
During you know what's going on with co with so and if we buy and something that we can move quickly on next year, we will.
But we.
The challenge is just the time and takes to make sure. We have a really good site, because we don't want to compromise and build it up and that is why we said 2022, but if the right opportunity came up and we could do and we would do and and 21 and with regard to cash.
At all.
You know again, we're and I'm sure at times.
We probably will be a little more conservative now and.
What you might have seen in the past. So we'll we'll be we'll be conservative there and make sure that the run rate.
How we think about capital in terms of what we do with it.
Ill.
Dividends or buybacks.
And the weird and very solid position.
We will first make sure we were taking care of the business and our opportunities to grow and develop the business and then we do want to make sure that we recognize more and our investors, but at this time and I think that the prudent thing to do is to be more conservative.
Then last.
Thank you very much.
Thank you appreciate zone.
Well take our next question from Michael Lasser GBS. Please go ahead.
Hi, This is Mike Swartz on for Michael Lasser, Thanks for taking our question.
I just wanted a bit earlier, but do you have a sense and what portion and the growth that you're seeing has been from wallet share gains with existing customers versus attracting new customers and looking forward. How do you think academy and the sporting goods retail category more broadly is positioned to lapse and news wallet share gains and and normalizing environment.
Well again, I mean, we've really capture and 3 million accounts for system. The beginning of a pandemic, we are gaining share and many of our categories and and footwear apparel for that specifically beginning over the past few years.
I think there is a little bit of noise that we work.
We've got strong sustained results for the third the majority of the year.
Where others were shutdown so with respect to share I mean, there's a little bit of noise and there because we wrote them and others work and I think steel and if you want to add anything for the team sports and yeah. So in terms of.
The share conversation, we picked up a lot of share obviously and Q2.
We've looked at some categories and and and actually came up a little bit of share and Q3 based off of operating.
Operating out of stock and certain categories that we sold through Canada, and Q2 that other people were in stock and and closed down for back and stock there and we feel very good about our position.
For holiday and going forward.
And and Michael we are not.
At this time, we're not breaking down the amount of business, we do with the new customers versus.
Existing customers or for that matter, what for Michael Buck line, which is important existing customer shopping and other categories were growth say that they are all accretive it's.
It's kind of like what I said about threeq and problems.
Sales to get a 16% increase you need all of them getting and they're all heading I think I think what we found and this was we carry a very broad assortment and our stores and I think we found customers, who generally shop us for one category and thought it was growing category and discover and that we carry a lot.
For the extra categories and and so we've seen that definitely be.
Something that happened has and pandemic discontinued sense and where.
They are shopping more broadly across the store.
Thank you that's helpful and just a follow up are you seeing much variation and trends across different regions within your footprint. During the performance. So differentiations between some of the legacy markets and some of that and when Mark and I don't know up and Michael one of the things that.
Really good about what we're seeing as I mentioned earlier that you know our art and.
Non heritage markets are growing faster, but not that much faster than than our traditional.
Traditional we're seeing good growth across our entire footprint.
And that's.
That's impressive because some of the areas are having their own challenges for you.
Pandemic or you know and industry.
Issues and ER.
Like that but.
For some reason pretty consistent growth cost and capital arrangements.
Category level are there things adjusted for the newer market, particularly because markets are or out comping the chain and that's where we've seen the greater rate of new customer acquisition, so very very exciting.
Thank you.
That's true fence line will request.
Sure.
Some for one more question, we'll take our next question from Daniel and grow at Stephens. Please go ahead.
Good morning, everyone. This is Andrew and for Daniel I, just wasn't really impressive quarter and I kind of want to drill and on ex Judy and day, what's kind of driving your leverage and then.
And as to you.
<unk> expenses were up about 18 million this quarter over last year, excluding the nonrecurring cost so what's moving up this delta and you know what else is driving the breadth of leverages growth. Thanks.
Well good good sales self help to do that and that's the one day, we benefited from the other thing and probably halfway through to the point I. Just made is that the newer markets, they're achieving the scale that we expected to achieve.
We were able to lever for fixed cost and we have and the.
And so nothing is to recover that we learned is how to operate a little bit more efficiently across the board and we've got a lot from a labor standpoint of stores and making sure that we're we're not using the customer and on labor hours, but not doing things, we don't need to do from a past perspective, and then again and the other big one which was really a game changer growth piano perspective and focus that rebuild.
EBITDA for Dot Com business and now we're driving a bigger basket the true that store as opposed to specific product from a DCF from the store that's all accretive.
We also.
Good things from some actions to improve our expense structure.
As you know coming and coming on and off for through the through positive with sales.
Things that we felt that.
We could save a lot and and and that's also given us the opportunity to low and other areas, where we can save so we've.
We've got some more.
Do well and plays for free improvement, we've got some work to do and to continue to improve our SGN items.
[laughter].
Thanks, guys.
Thank you and your Andrew and.
Thank you, operator, and and everything all the participants on the call.
I hope that you all have a very safe and and happy holidays wish you all the best and you know.
I hope that you.
We all will stop and or go online to shop, and Academy and get a break and for.
And your family and yourself.
Happy holidays.
This concludes today's call. Thank you for your participation you may now disconnect.
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