Q3 2023 Academy Sports & Outdoors Inc Earnings Call

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Speaker 1: Good morning ladies and gentlemen and welcome to the Academy Sports and Outdoors 3rd quarter fiscal 2023 result conference.

Good morning, ladies and gentlemen, and welcome to the Academy Sports and outdoors third quarter fiscal 'twenty twenty-three results conference call.

Speaker 1: At this time, the skull is being recorded and all participants are on the list and all.

At this time this call is being recorded and all participants are in a listen only mode. Following the prepared remarks there'll be a brief question and answer session.

Speaker 1: Following the prepared remarks, there'll be a brief question and answer session. Questions will be limited to answer.

Questions will be limited to analysts and investors. We ask that you. Please limit yourself to one question and one follow up too.

Speaker 1: We ask that you please limit yourself to one question and one follow.

Speaker 1: To ask your question during the call, please press star one on your telephone.

To ask your question during the call. Please press star one on your telephone keypad. If you require any operator assistance during the call. Please press star zero on your telephone keypad.

Speaker 1: If you require any operator assistance during the call, please press star zero on your telecom.

I would now like to turn the call over to your host Matt Hodges, Our Vice President of Investor Relations for Academy Sports and outdoors, Matt. Please go ahead.

Speaker 2: Good morning, everyone. Thank you for joining me, Academy Sports and Outdoors, third quarter, 2023 Financial Results Call. Participating on the call or Steve Lawrence, Chief Executive Officer, Carl Ford, Chief Financial Officer. As a reminder, statements in today's earnings release and the comments made by management during this call may be considered forward-looking statement.

Good morning, everyone. Thank you for joining me Academy sports and outdoors third quarter 2023 financial results call.

On the call are Steve Lawrence Chief Executive Officer.

Ward Chief Financial Officer.

As a reminder, statements in today's earnings release, and the comments made by management. During this call maybe considered forward looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and protection.

Speaker 2: These statements are subject to risk and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the earnings release and in our SEC filing.

Risks and uncertainties include but are not limited to the factors identified in the earnings release and in our SEC filings.

Speaker 2: The company undertakes the obligation to provide any for looking for a patent.

Undertakes no obligation to revise any forward looking statements.

Speaker 2: Today's remarks also refer to certain non-GAAT financial measures. Recacillations to the most comparable GAAT measures are included in today's earnings release, which is available at investors.academy.com. I'll now turn the call over to Steve Lawrence for his remarks. Steve?

Today's remarks also refer to certain non-GAAP financial measures.

Reconciliations to the most comparable GAAP measures.

In today's earnings release, which is available at investors at Academy Dotcom.

I will now turn the call over to Steve Lawrence for his remarks, Dave.

Speaker 2: Thanks Matt. Good morning and thank you for joining us on our third quarter earnings call.

Thanks, Matt Good morning, and thank you for joining us on our third quarter earnings call.

Speaker 2: As you saw from the results we announced earlier this morning, we had a challenging quarter of sales coming in at $1.4 billion, which was down 6.4% in total and translated into a negative 8% comp.

As you saw from the results we announced earlier. This morning, we had a challenging quarter with sales coming in at $1 $4 billion, which was down six 4% in total translated into a negative 8% comp.

Speaker 2: Based on these sales, adjust the earnings per share for the third quarter for the $1.38.

Based on these sales adjusted earnings per share for the third quarter was $1 38.

Speaker 2: Several of the key themes we saw emerge in the first half of the year carried through into Q3.

Several of the key themes, we saw emerge in the first half of the year carrying through into Q3.

Speaker 2: The customer is clearly under pressure is being careful about when they decide to shop and how they want to spend their money.

The customer is clearly under pressure is being careful about when they decide to shop, how they want to spend their money.

Speaker 2: We've also seen a continuation of the trend that customers coming in during the key shopping all into the calendar, and then retreating during the walls.

We've also seen a continuation of the trend of customers coming in during the key shopping moments of a calendar mentor treating during the lulls.

Speaker 2: Another key scene continues to be customers looking to expand their buying power by focusing on the value offerings in our sort of them, which is a private brand merchandise, the promotions that we run or in clear events that take place with the end of each season.

Another key theme continues to be customers looking to expand their buying power.

Are you seeing on the value offerings in our assortment, which is our private brand merchandise promotions that we run or in clearance events that take place at the end of each season.

Speaker 2: So, in order to fire quarters this year, we also continue to see customers gravity towards new and innovative brands and items in our stores and online.

Similar to prior quarters. This year, we also continued to see customers gravitate towards new and innovative brands and items in our stores and online.

Speaker 2: All's website is just over in the

Breaking the quarter down by month.

Sales were down mid single digits.

Speaker 2: As we discussed in our Q2 call, we saw a good momentum early in the month given by our back to school business.

As we discussed on our Q2 call. We saw good momentum early in the month driven by a back to school business.

Speaker 2: Once we got past Labor Day and into September , we saw slowdown and fail. So last of the entire month, resulting in a low double-digit negative comp.

Once we got past Labor day and into September you saw a slowdown in sales that lasted the entire month, resulting in a low double digit negative comp.

Speaker 2: We attribute the softness in September to the lack of a natural shopping event on the calendar couple much warmer than average temperatures for stress early sales on fall seasonal category.

We attribute the softness in September for a lack of a natural shopping event on the calendar.

Much warmer than average temperatures.

Early sales in fall seasonal categories.

Speaker 2: This trend carried forward in the early October , but we did see an uptick and fail the later in the month that we believe was driven by a combination of some cooler temperatures. Couple of increased sales in our outdoor business.

This trend carried forward into early October, but we did see an uptick in sales later in the month that we believe was driven by a combination of some cooler temperatures.

With increased sales in our outdoor business.

Speaker 2: The end result was that we saw sales and prevent versus the September trend the October coming in at a negative mid-single budget cop.

The result was that we saw sales improvement.

Countertrend October coming in at a negative mid single digit comp.

Speaker 2: Looking at the results by division, our best-to-falling business for Q3 or to direct the train 2.7 percent decrease.

Looking at the results by Division, our best performing business for Q3 or to or I can try to call it 7% decrease.

Speaker 2: Carrying and fitness and bikes would partially offset by continued strength and out there cooking and furniture as well for team sports business.

Cranes in fitness and bikes were partially offset by continued strength in outdoor cooking and furniture as well as our team sports business.

Speaker 2: Our outdoor division ran down 6.9% for the quarter. As I mentioned earlier, you saw this business pick up towards the end of October as we approached hunting season, started the lap softer cons from last year.

Our outdoor division ran down six 9% for the quarter, but as I mentioned earlier, we saw this business pick up towards the end of October as we approached hunting season started to lap softer comps from last year.

Speaker 2: Our apparel and full of businesses started out stronger in back to school than tapered off as we moved into September . Apparel ran a 6.9% decrease for the quarter or slightly better than full-water, which was down 8.2%.

Our apparel and footwear business has started out strong during back to school and then tapered off as we moved into September.

Merrell ran a $6 nine per cent decrease for the quarter were slightly better than footwear, which was down eight 2%.

Speaker 2: We believe the primary driver of the soft business was caused by the above average temperatures we experienced in September and early October , which tamped down the man for policy for items.

We believe the primary driver of the slot business was paused.

Above average temperatures, we experienced hamburger in early October, which tamped down demand for policy for items.

Speaker 2: moving the growth margin, quarter came in at 34.5% which was a 50 base point of relation versus prior year.

Moving to gross margin quarter came in at 34, 5%, which was a 50 basis point erosion versus prior year.

Speaker 2: This was primarily driven by a merchandise market coming in 49 basics points for the last year.

This was primarily driven by a merchandise margin coming in at 49 basis points below last year.

Speaker 2: We believe that the warmer temperatures we experienced in the quarter resulted in softer sales versus last year than the high margin false seasonal products.

We believe that the warmer temperatures we experienced during the quarter resulted in softer sales versus last year and the high margin fall seasonal products.

Speaker 2: Customers instead, they're advocated towards a lower margin summer clearance, which makes our margin down.

As far as instead gravitated towards lower margin summer clearance, which makes our margin down.

Promotional activity for the quarter was in line with our expectations, our gross margin rate through three quarters. That's a 34, 7% which is above our annual guidance continues to remain roughly 500 basis points above our pre pandemic levels.

Speaker 2: Now I'd like to give you a couple of updates on our progress against some of our long range plant initiatives starting with new stores.

Now I'd like to give you a couple of updates on our progress against some of our long range plan initiatives, starting with new stores.

Speaker 2: During the third quarter, we opened five new stores, the locations in Virginia, Indiana, Missouri, and Texas.

During the third quarter, we opened five new stores locations in Virginia, Indiana, Missouri and Texas.

Speaker 2: During the Vemmer, we open up a final seven stores for the year, bring our toll before 14 for 2023.

During November we opened up our final set in stores for the year, bringing our total to 14 for 2020 three.

Speaker 2: In the November openings, represent the largest number of new stores that we've ever opened in a single month. It's five on a single weekend. This is a huge accomplishment for our company, and I want to take a moment to recognize all of our team members that help make this possible.

November openings represent the largest number of new stores, we've ever opened in a single month.

Five at a single weekend.

It is a huge accomplishment for our company and I want to take a moment to recognize all of our team members that helped make this possible.

Speaker 2: As we open locations, we continue to gain insight to what factors and shurries successful launch of a new store are getting better with each grand opening.

As we open new locations, we continue to gain insights into what factors to ensure a successful launch of a new store or getting better with each grand opening.

Speaker 2: All the sample size is still small as we analyze and learn more from our new store opening toys becoming clearer. If it stores open and legacy markets, we have a high brand awareness as a group will on track meet or surpass through your own sales target.

While the sample size is still small as we analyze and learn more from our new store openings, where it's becoming clearer is it stores opened in legacy markets, where we have a high brand awareness as a group are on track to meet or surpass through your own sales targets.

Speaker 2: There's also started to become apparent is its force open a newer market outside our current footprint in the additional time and investment to build brand awareness and therefore will likely take longer to ramped sales maturity.

But it's also started to become apparent as it stores open in newer markets outside our current footprint.

Real time and investment to build brand awareness, and therefore will likely take longer to ramp to maturity.

Speaker 2: After we get through this year, we'll have more data on the sales ramp and source that opened up in 2022, as well as additional data on traffic, ticket and conversion from both the 22 and the 2023 stores. We'll be used to refiner expectations for future store opening.

After we get through this year, we'll have more data on a sales ramp in the store should open up in 2022 as well as additional data on traffic ticket and conversion for both the 22 and 2023 stores will be used to refine our expectations for future store openings.

Speaker 2: As we look forward, we're excited about the pipeline that is identified. We'll have good guidance around the number of new stores that we plan to open in 2024 during our next earnings call.

As we look forward. We're excited about the pipeline that we've identified will have to give guidance around a number of new stores. We plan to open in 2024 during our next earnings call.

Speaker 2: Another one of our growth initiatives is to accelerate to growthware.com.

The other one of our growth initiatives is to accelerate the growth of our dotcom business.

Speaker 2: While this channel has faced similar challenges that have written more customers feeling this year, we've made some meaningful advancements in the third quarter that we believe will outgrade growth in the future.

While this channel is facing similar challenges that are brick and mortar customers feeling this year, we've made some meaningful advancements in the third quarter that we believe will help drive growth for the future.

Speaker 2: During last quarter's earnings call, we announced our new partnership with Phenatics.

During last quarter's earnings call, we announced our new partnership with fanatics.

Speaker 2: Well, it is early days that dramatically expanded our offering in NCAA with this partnership offering over two times the number of styles for customers when we started the quarter with just in time for the holiday gift-giving season.

While it is early days it dramatically expanded our offering and NCAA with this partnership offering over two times the number of styles for our customers. When we started the quarter with just in time for the holiday gift giving season.

Speaker 2: We will continue to leverage their extensive catalog and add more excuses to start each week's new season. Over time, our online offers significantly larger along as to greatly expand our reach and help us service a much wider fan base.

We will continue to leverage their extensive catalog and add more skus as we start each leaks new season.

Over time, our online offerings significantly larger longest to greatly expand our reach helps that service how much wider fan base.

Speaker 2: In addition to skew growth, we've also been working hard on expanded functionality, such as adding SESL, a new pay-in-for option that supports additional categories such as something.

In addition to SKU growth. We've also been working hard on expanded functionality such as adding sizzle in new paying for option. It supports additional categories such as something.

Speaker 2: As we head into the holidays, we believe with this expanded assortment and additional capabilities, it will well position the capture of the search in the man from all the key online shopping events within Cyber Weekend Green Monday.

As we head into the holidays, we believe with this expanded assortment and additional capabilities, we're well positioned to capture the search in demand from all the key online shopping bags, putting aside where we can green Monday.

Speaker 2: A third of mention is that I'd like to update you on is our new customer data platform. Here in our last call, we discussed adding this new tool to our tool box in the key to.

A third initiative, but I'd like to update you on is our new customer data platform.

In our last call we discussed adding this new tool to our toolbox in Q2.

Speaker 2: We must spend the last quarter fine tuning our customer segmentation work, along with developing playbooks to help track greater traffic, increase spend from our various customer segments. We have two main folks.

He has spent the last quarter fine tuning our customer segmentation work.

With developing playbooks to help drive greater traffic and increased spend from our various customer segments.

We have two main focuses in our CDP work.

Speaker 2: improving customer identification, and increasing engagement. Both of which will help us build a deeper connection with our customers and drive from LCL's revenue.

Improving customer identification and increasing engagement, both of which will help us build a deeper connection with our customers and drive incremental sales revenue.

Speaker 2: Well, we just began to leverage some of our new capabilities for this tool. Our initial marketing test deal with promising results.

Well, we've just begun to leverage some of our new capabilities for this tool our initial marketing tests to deal with promising results.

Speaker 2: First task was to grow our addressable customer file in order to help expand the reach of a various marketing channels.

First half supposed to grow our addressable customer trial in order to help expand the reach of our various marketing channels.

Speaker 2: During Q3, the monitoring reactivation campaign it helped us increase number of customers reaching with our emails by 25%.

During Q3 amounted to reactivation campaign. It helps us increase the number of customers, reaching with our emails by 25%.

Speaker 2: Another example of how we're leveraging our CUSPER data platform, the small tests that we ran with a focus on increasing both frequency of shop and spend the subset of our best customers.

Another example of how we're leveraging our customer data platform. The small tests that we ran with a focus on increasing both frequency of shop and spend the subset of our best customers.

Speaker 2: We sent targeted offers to this group. Man should drive an incremental trip at a higher basket size.

We have targeted offers to this group and should drive an incremental trip at a higher basket size.

Speaker 2: What was exciting about this use case was that we saw continued growth with this group after the initial discount we offered it last.

What's exciting about this use case was that we saw continued growth with this group after the initial discount we offered had lapsed.

Speaker 2: We don't expect all the tests we're running to have a huge impact on four results. We do believe that we'll be able to start scaling these learnings and they will start moving the needle in 2024 and beyond.

Well, we don't expect all the tests, we're wanting to have a huge impact on our results. We do believe there'll be able to start scaling these learnings and they will start moving the needle in 2024 and beyond.

Speaker 2: The final initial of all touch on is the work of doing around improving our supply chain. The team has been working hard on getting ready to install and roll out our new warehouse management system. Finding to go live with our Georgia DCM.

The final initiative I'll touch on is the work, we're doing around improving our supply chain.

He has been working hard on getting ready to install a rollout our new warehouse management system.

I need to go live with our Georgia do see in the spring of next year.

Speaker 2: This implementation is a key enabler of many supply chain-afaceants that were anticipating a long-range plan as we continue to open new stores. Now, I'd like to turn it over to Carl Ford or CFO to walk you through a deeper down over Q3 financial performance, along with an update for 2023 guidance. Carl?

This implementation is a key enabler of many of the supply chain efficiency, we're anticipating a long range plan is to continue to open new stores.

Now I'd like to turn it over to Carl Florida, Our CFO to walk you through a deeper dive of our Q3 financial performance along with an update for 2023 guidance Carl.

Speaker 2: Thank you, Steve. Good morning, everyone. We appreciate you joining the call. Let me walk you through the details of our third quarter result.

Thank you Steve.

Everyone. We appreciate you joining our call let me walk you through the details of our third quarter results.

Speaker 2: Net sales were $1.4 billion, a 6.4% decline compared to the third quarter of 2022, with comparable sales of negative 8%. The decline in sales was driven by an 8.1% decline in transactions, partially offset by a slight increase in ticket size.

Net sales were $1 $4 billion, a six 4% decline compared to the third quarter of 2022 with comparable sales of negative 8%.

Klein in sales was driven by an eight 1% decline in transactions, partially offset by a slight increase in ticket size.

Speaker 2: Consistent with overall sales performance, we experience pressure in our e-commerce channel. e-commerce sales represent a 9.4% of total merchandise sales compared to 9.5% in the prior year quarter.

With overall sales performance, we experienced pressure in our ecommerce channel.

E Commerce sales represented nine 4% of total merchandise sales compared to nine 5% in the prior year quarter.

Speaker 2: As Steve mentioned, our gross margin rate for the third quarter was 34.5% compared to 35.0% last year. The margin decline was due to a 49 basis point decline in merchandise margins, driven by an increase in planned promotions and a higher mix of clearance sales.

Steve mentioned, our gross margin rate for the third quarter was 34, 5% compared to 35.1% last year.

Margin decline was due to a 49 basis point decline in merchandise margins driven by an increase in planned promotions and a higher mix of clearance sales.

Speaker 2: higher overhead costs, lower vendor allowances and a slight increase in shrink were offset with freight saving.

Higher overhead cost lower vendor allowances and a slight increase in shrink were offset with freight savings.

Speaker 2: As a company, we continue to operate at substantially higher gross margin rates than pre-pandemic, demonstrating that the operational changes made to the business over the past few years are structural.

As a company we continue to operate at substantially higher gross margin rates in pre pandemic.

Demonstrating that the operational changes made to the business over the past few years are structural.

During the quarter SG&A expenses were $345 $9 million or 24, 7% of net sales an increase of 170 basis points compared to the third quarter of 2022.

Speaker 2: As consumer demand remains challenging, we are focused on optimizing profitability through expense control and investing in our future. We reduced our variable operating expenses versus last year, while more than 100% of the increase in S-T-N-A was driven by the investments we were making in areas that support our long-term growth initiatives, such as new stores, common channel, supply chain, and customer data.

As consumer demand remains challenging we are focused on optimizing profitability through expense control and investing in our future.

Reduce our variable operating expenses versus last year, well more than 100% of the increase in SG&A was driven by the investments, we're making in areas that support our long term growth initiatives such as new stores.

The channel supply chain and customer data.

Speaker 2: Net income for the quarter was $100 million, or 7.2% of net sales, resulting in gap deluded earnings per share of $1.31. Adjusted deluded earnings per share were $1.38.

Net income for the quarter was $100 million or seven 2% of net sales, resulting in GAAP diluted earnings per share of $1 31.

Adjusted diluted earnings per share were $1 38.

Speaker 2: Our balance sheet remains strong with 275 million in cash and no outstanding borrowings are a $1 billion credit facility at the end of the quarter.

Our balance sheet remains strong with $275 million in cash and no outstanding borrowings on our $1 billion credit facility at the ended the quarter.

Speaker 2: Our inventory balance was 1.49 billion, which was flat compared to last year in both dollars and units. On a per store basis, units declined 4%.

Our inventory balance was 149 billion, which was flat compared to last year in both dollars and units.

On a per store basis units declined 4%.

Speaker 2: Getting into the remainder of the holiday season, we believe that our current assortment and level of inventory is appropriate to support the business.

Heading into the remainder of the holiday season, we believe that our current assortment and level of inventory is appropriate to support the business.

Speaker 2: During the third quarter, a Academy generated 57.5 million in net cash from operating activities. This is a 13% increase compared to last year. We continue to execute our capital allocation strategy by self funding our growth initiatives and returning cash to shareholders. During the quarter, we repurchased approximately 864,000 shares for $44 million and paid out 6.7 million in dividends.

During the third quarter Academy generated $57 5 million in net cash from operating activities.

This is a 13% increase compared to last year.

We continue to execute our capital allocation strategy by self funding our growth initiatives and returning cash to shareholders.

During the quarter, we repurchased approximately 864000 shares for $44 million and paid out $6 7 million in dividends.

Speaker 2: As a band of the quarter, we got approximately 100 million available on the current share we purchased authorization.

As at the end of the quarter, we had approximately $100 million available on the current share repurchase authorization.

Speaker 2: On November 29, 2023, the board approved a dividend of 9 cents per share, payable on January 10, 2024, the stockholders of record as of December 13, 2023.

On November 29, 2023, the board approved a dividend of nine cents per share payable on January 10th 2024 to stockholders of record as of December 13th 2023.

Speaker 2: demonstrating the commitment to our capital allocation strategy. The board also approved a new three-year, 600 million share repurchase authorization. Together with our remaining 100 million, the company now has 700 million of share repurchase authorization available for the next three years.

Demonstrating the commitment to our capital allocation strategy. Our board also approved a new three year 600 million share repurchase authorization.

Together with our remaining 100 million the company now has $700 million of share repurchase authorization available for the next three years.

Speaker 2: Your date, the company has spent 152 million on capital expenditures. For the full year, we expect to spend between 175 and 225 million.

Year to date the company has spent 152 million on capital expenditures.

Full year, we expect to spend between 175 and $225 million.

Speaker 2: Shifting out the guidance based on our year-to-date results and current expectations for the fourth quarter. We are narrowing our fiscal 2023 net sales guidance from the previous range of 6.17 to 6.36 billion to 6.10 to 6.17 billion. This translates to a revised comparable sales range of negative 7.5% to negative 6.5%.

Shifting now the guidance based on our year to date results and current expectations for the fourth quarter. We are narrowing our fiscal 'twenty two 'twenty three net sales guidance from our previous range of $6 1763 6 billion.

$6 1061 7 billion.

This translates to a revised comparable sales range of negative seven 5% to negative six 5%.

Speaker 2: Our four-year gross margin rate is expected to finish between 34.0% to 34.2%.

Our full year gross margin rate is expected to finish between 34.0% to 34, 2%.

Speaker 2: GAP income before taxes is now expected to range from 670 to 680 million and GAP net income between 520 and 530 million.

GAAP income before taxes is now expected to range from 670 $680 million and GAAP net income between 520 and $530 million.

Speaker 2: Yeah, deluded earnings per share are now expected to be $6.70 per share, the $6.85 per share, and adjusted deluded earnings per share are expected to range from $7.05 per share, the $7.20 per share.

Yeah diluted earnings per share are now expected to be $6 70 per share to $6.85 per share.

And adjusted diluted earnings per share are expected to range from $7.05 per share.

$1 20 per share.

Speaker 2: We now expect to generate 300 to 350 million of adjusted free cash flow in fiscal 2023. The earnings per share estimates are calculated on a sharecare of 77.3 million diluted weighted average shares outstanding for the full year and do not include any potential Q4 repurchase activity.

We now expect to generate $300 million to $350 million of adjusted free cash flow in fiscal 2023.

Earnings per share estimates are calculated on a share count of $77 3 million diluted weighted average shares outstanding for the full year and do not include any potential Q4 repurchase activity.

Speaker 2: As far as providing guidance beyond fiscal 2023, we plan to get fiscal 2024 guidance and march on our year end call.

As far as providing guidance beyond fiscal 2023, we plan to give fiscal 2024 guidance in March on our year end call.

Speaker 2: I will now turn the call back over to Steve and closing remarks. Steve.

I'll now turn the call back over to Steve Some closing remarks, Steve.

Speaker 2: As you can tell from our commentary today, the third quarter was challenging for us. That being said, we've seen the customer come out and shop during the key moments of the calendar. And there is no bigger moment in the upcoming holiday season.

As you can tell from our commentary today, the third quarter was challenging for us that being said.

The customer come out and shop here and it came on the calendar. So there is no bigger moment for the upcoming holiday season.

Speaker 2: It's been preparing for Q4 all year for office solid starting of November .

He has been preparing for Q4, all year or off to a solid start in November.

Speaker 2: As we expected, we saw traffic patterns were turned to a more normalized, pre-pandemic pattern with both forward of demand during the early part of the month.

As we expected we saw traffic patterns return to a more normalized pre pandemic pattern.

Pull forward of demand during the early part of the month.

Speaker 2: We put together a strong set of promotions for Thanksgiving. We can see our strong reactions and the customer, you're doing one of our biggest black Friday events ever. We still have a lot of business ahead of us. Good stuff for Thanksgiving promotions. Help generate some momentum as we head into December .

We put together a strong set of promotions for Thanksgiving week, we saw strong reaction from the customer one of our biggest black Friday events ever.

Well, we still have a lot of business ahead of us.

Successful Thanksgiving promotion helped generate some momentum as we head into December.

Speaker 2: Looking forward in the remainder of holiday, we have a strong promotional cable ordered by an aggressive marketing spend, which should help us pull over cost-fitting value our customers.

Looking forward into the remainder of holiday and a strong promotional cadence or to buy an aggressive marketing spend which should help us deliver outstanding value to our customers.

Speaker 2: our inventories in the best position we've been in over the past three years to the focus on the key giftable categories along with new brands and innovative items that have been voting for all year.

Our inventories in the best position, we've been in over the past three years with a focus on the key giftable categories.

Along with new brands and innovative items customers doesn't voting for all year.

Speaker 2: I've been in all three of our DCs in a lot of our stores are the past quarter and I can tell you the teams are ready, excited for customers as Christmas. With that, we will now...

I've been in all three of our D season, a lot of our stores over the past quarter and I can tell you. The teams are ready and excited for.

So this Christmas with.

With that we'll now open it up for questions.

Yeah.

Speaker 1: The company will now open the call up for your questions. To ask your question, please press star one. We will pause for a minute to wait.

The company will now open the call up for your questions to ask your question. Please press star one we will pause for a minute to wait for the queue to Phil.

Speaker 1: Our first question comes from Brian Nagel with Oppenheimer. Please proceed with your question.

Our first question comes from Brian Nagel with Oppenheimer. Please proceed with your question.

Hi, good morning.

Good morning.

Speaker 3: My first question, you know, look at the results here and over the last few.

My first question.

Looking at the results here over the last few quarters I mean, when we talk about you know kind of at the top of mind that topline weakness and.

Speaker 3: Recognizing you you're you haven't given guidance for 24

Recognizing you haven't given guidance for 24 and you plan to do so early next year, but I guess the question I have is as we think about this comp trajectory kind of moving pieces. What are the what are the puts and takes as you look at the business to get back to.

Speaker 3: But I guess the course I have is we think about this when all ghostsimcastRelief is a kingdom.

Speaker 3: What are the puts and takes if you look at the business to get back to?

Positive comps for the company.

Speaker 2: Yeah, I'll start and Carl may jump in, but you know, when we thought about this year, I think we should have this in our last call.

Yeah, I'll start and Carl May jump in but you know what when we thought about this year I think we shared this on our last call.

You're cutting off the pandemic, having two back to back double.

Speaker 2: Coming off the pandemic, having two back to back, you know, double digit confiers.

Double digit comp years, we anticipated 22 is going to be kind of a Europe reset thought we'd get back to growth. This year clearly the thing that has challenged US here is the customer is under pressure. So we feel like we don't have a challenge strategy, we've got a challenge customer.

Speaker 2: We anticipated 22 is going to be kind of a year of reset. Thought we'd get back to growth this year. Clearly the thing that is challenging this year is the customers that are pressure. So we feel like we don't have a challenge strategy. We've got a challenge.

Speaker 2: So the things that we've been focusing on as we move forward, as managing through the short term, making sure we're delivering against things the customer's looking for, customers voting for value. So we're delivering value a couple of different ways. First or everyday value proposition. Second, promotions that run during key time periods during the year and third, the clearance.

So the things that we've been focusing on as we move forward.

For the short term, making sure we're delivering against the things customers looking for customers voting for value. So we're delivering value a couple of different ways first our everyday value proposition second promotions with Ron during key time periods during the year and third the clearance.

Speaker 2: events that we run at the end of each season and now on the other end of the spectrum seeing customers gravitate towards newness.

And that's what we run at the end of each season, and then on the other end of the spectrum, we're seeing customers gravitate towards newness.

Speaker 2: So we're also focused on delivering a steady diet of new brands and new ideas.

So we're also focused on delivering a steady diet of new brands and new ideas.

Speaker 2: That being said, another drag in our comp is then our outdoor business, which through the first couple of quarters was down, double digits. And we've seen that business start to get better as we started laughing soccer comps. And so I think as we move into next year, and we're you're right, we're not ready to give guidance for next year. I think the focus on value, NUNES, leaning into our NUNES.

That being said you know another drag on our comp has been our outdoor business, which through the first couple of quarters was down double digits and we've seen that business start to get better as we started lapping softer comps and so I think as we move into next year, and where you're right. We're not ready to give guidance for next year I think the focus on value newness waiting into our initiatives.

Speaker 2: You know longer term in terms of opening new stores growth we think in that we have in comm

You know longer term in terms of opening new stores. The growth, we're thinking that we havent dotcom and getting more productivity out of existing base of stores. We think all of those things are the key ingredients to returning back to positive comps you know that being said one of the customers.

Speaker 2: And getting more predictability over existing basis stores, we think all of those things...

Speaker 2: are the key ingredients to returning back to Oz and Combs. You know, that being said, when the customers...

Speaker 2: tells turns around a little bit that that we can't determine what we can focus on are the things that are within our control method of look.

If it turns around a little bit that we can't determine what we can focus on other things that are within our control and that's what we're focused on.

Speaker 2: Brian , the only thing I would add there, to the initiatives that Steve walked through, there's a big consoles waterfall embedded within them. He mentioned new stores and Army Channel. I would also say the customer data platform, we got it up and running in July . We're running a lot of tests associated with it. They're positive out of the gate. I think as we ramp, I'm sure he working with the tool and getting more customer data. I think that's a tailwind for a long time.

Brian the only thing I would add there.

So the initiatives that Steve walked through there's a big comp sales waterfall embedded within them. He mentioned new stores and omni channel I would also say our customer data platform.

We got it up and running in July we're running a lot of tasks associated with it and their positive out of the gate I think as we ramp our maturity working but that's all in and getting more customer data I think that's a.

A tailwind for for a long time.

Speaker 3: now that's it look at this very helpful that the second question again i know we're dealing with it you know very fluid demand backdrop and you know in relatively short amount of time that you know you

No. That's it that's very helpful. Then the second question again, I know, we're dealing with it you know very fluid demand backdrop in relatively short amount time, but.

You know as you look at your business, but you know, particularly relative to all the you know the internal initiatives you've done with merchandising or are you capturing do you think you're generally capturing share across the board or are there are there parts, where you potentially could be losing share here.

Speaker 3: Are you capturing, you think you're generally capturing share across the board or are there other parts where you potentially could be losing share?

Speaker 2: Yeah, you know, I mean, listen, we've looked at market share first on a broad basis, and we look at it over a longer horizon than just a month or a quarter. You know, we look at it on a yearly basis, we know we're picking up a little bit of share, and we look at it a longer term basis. We're very happy with that.

Yeah, I mean listen we look at market share first on a broad basis, when we look at it over a longer horizon than just a month or a quarter.

When we look at it on a yearly basis, we know we're picking up a little bit of share when we look at a longer term basis, we're very happy with that if you look at our sales versus 2019, you know were still up about 25%. So broadly we believe we picked up a lot of share over the past four years and were holding on to that share beneath the surface. There's always puts and takes here and there.

Speaker 2: If you look at our sales versus 2019, we're still up about 25%. So broadly, we believe we picked up a lot of share over the past four years and we're holding onto that share. Beneath the surface, there's always puts and takes here and there, but we believe we picked up share and are holding onto it.

But we believe we picked up share and are holding onto it.

Hey, guys I appreciate all the color. Thank you.

Thank you.

Speaker 1: Our next question comes from Michael Lather with UBS. Please proceed with your question.

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

Speaker 4: Good morning. Thank you so much for taking my question with your gross margin down 44 basis points. How are you looking at the need to continue to make these types of discounting and other promotional investments in order to drive the top line.

Good morning. Thank you so much for taking my question with your gross margin down 44 basis points. How are you looking at the need to continue to make these types of discounting and other promotional investments in order to drive the topline.

Speaker 2: Yeah, from address margin standpoint, you reference the 44 basis points. You know, I would harken back to kind of some of the structural improvements that we've made. We're up about 500 basis points to F119.

Yeah, Yeah from a gross margin standpoint, you you referenced the 44 basis points, you know I would harken back to kind of some of the structural improvements that we've made we're up about 500 basis points to FY 19.

Speaker 2: I think about the early initiatives that we talked to you about around power merchandising and the things that we've done there. I have a lot of lasting power and I just want to run through some of them. We exited a bunch of categories that work really synonymous with sports and outdoors, toys, luggage, electronics.

Think about the early initiatives that we talked to you about around power merchandising and the things that we've done there I have a lot of lasting power and I just want to run through some of them. We exited a bunch of categories that that work really synonymous with sports and outdoors toys luggage electronics, we implemented season.

Speaker 2: We implemented season codes, systemically driven clearance life cycle management. We really optimized by an overall inventory management with a pretty upgraded open to buy process.

Systemically driven clearance lifecycle management, we really optimize by an overall inventory management with a with a pretty upgraded open to buy process. We've made allocation replenishment system enhancements and those are learning they continue to get better and better pricing system updates with with Reg price optimization I really feel.

Speaker 2: We made allocation replenishment, system enhancements, and those are learning to continue to get better and better pricing system updates. With Reg price optimization, I really feel like we've done a good job there. And then to your last point, just managing promotions, but managing them from a position of inventory strength.

We've done a good job there and then to your last point, you know just managing promotions, but managing them from a position of inventory strength and so the 50 basis point decline was really driven by a planned promotions and our customer gravity gravitating towards that value side of our offering it was include.

Speaker 2: And so the 50 basis point decline was really driven by planned promotions and our customer gravity gravitating towards that value side of our offering.

Speaker 2: It was included in our guidance. We are going to continue, like we're in everyday value provider. So you're going to see every value every day. We're really only going to promote during those key shopping moments.

In our guidance, we are going to continue like we are an everyday value provider. So youre going to see every value every day, we're really only going to promote during those key shopping moments and and and we've embedded that within the guidance.

Speaker 2: and we've embedded that within the guidance. And so I do wanna reiterate, our fourth quarter gross margin last year in the fourth quarter was 32.8%. The high and the low range that we put out there in this guidance on the low, it's a little bit worse than that. On the high, it's a little bit higher than that. We're planning on promotionality and we've got some tailwinds with the supply chain cost.

And so I do want to reiterate our fourth quarter gross margin last year in the fourth quarter was 32, 8% the high and low range that we put out there and this guidance on the low it's a little bit worse than that on the high it's a little bit higher than that we're planning on promotion allergy and we've got some tailwind.

With with the supply chain costs.

Speaker 4: My final question is, as you looked at next year, how much more room is there to reduce SNA without impacting the customer experience? And how are you thinking about that in the fourth quarter?

My follow up question is.

You look to next year, how much more room is there to reduce SG&A without impacting the customer experience and how are you thinking about that in the fourth quarter. Thank you.

Speaker 2: Yeah, I won't get into next year's guidance, but I will say from an expense standpoint, you know, this third quarter, SGNA, what was up about $3 million to last year, that was more than that was our strategic investments around new stores on each channel, customer data supply.

Yeah, I won't I won't get into next year's guidance, but I will say from an expense standpoint, you know this third quarter SG&A was up about $3 million to last year that was.

More than that was our strategic investments around new stores omnichannel customer data supply chain.

Speaker 2: We're flexing our variable costs really well, and we kinda keep a gauge on that by looking at our customer satisfaction scores, and we continue to be really proud of those. So if you think about the long range plan that we put out there, we had about 200 basis points of the leverage in S-GNA along the span of this. Now that was offset by gross margin improvements, largely driven by supply chain.

We're flexing our variable costs really well and we kind of keep up a gauge on that by looking at our customer satisfaction scores and we continue to be really proud of those so if you think about the long range plan that we put out there we had about 200 basis points of deleverage in SG&A.

Along the span of this now that was offset by gross margin improvements largely driven by supply chain.

Speaker 2: The guidance applies about 200 basis points of SG&I due leverage in this year. The fixed cost, due leverage associated with the sales is the issue right now. We remain committed to those strategic investments and we're flexing in a healthy way in our variable and our customers is telling us they're still happy with our performance. Okay.

The guidance implies about 200 basis points of SG&A deleverage in this year.

Fixed cost deleverage associated with the sales.

The issue right now we remain committed to those strategic investments and we're flexing in a healthy way and our variable and our customers is telling us they're still happy with our performance.

Okay.

Have a good holiday. Thank you so much.

Thank you.

Okay.

Speaker 1: Our next question is from Will Gartner with Wells Fargo. Please proceed with your question.

Our next question is from well Gartner with Wells Fargo. Please proceed with your question.

Speaker 2: Okay guys, thanks for taking my question. Just wanted to catch on first, the lower free cash flow assumption looks like you've cut it by $100 million, you know, reduced cap X by 25 million, reduced the T by 38 million. Can you just elaborate on that production?

Hey, guys. Thanks for thanks for taking my question just wanted to touch on first the loan.

Third free cash flow assumption it looks like you've cut it by $100 million reduced capex by 25 million reviews.

By 38 nine can you just elaborate on that production.

Speaker 2: Yeah, absolutely. From a free cash flow standpoint, your $100 million at the lowest correct, the bulk of that is the reduction in the overall that sales on the low end. There are some timing things that come into play associated with year end, and that made up the balance of it. Will, I do just want to reinforce. If you look at our Q3 cash flow from operations, we're up 13% to last year on down six four sales, year to date.

Yeah, absolutely from a free cash flow standpoint are you $100 million in the wireless correct. You know the bulk of that is the reduction in the overall net sales on the low end there are some timing things that come into play associated with year end and that made up the balance of it.

Well I just want to reinforce if you look at our Q3 cash flow from operations you know, we're up 13% to last year on down six four sales.

Year to date.

Speaker 2: on sales down six. Cash flow from operations is down 2.6%. We really feel good about our cash flows or rate of sales.

On sales down six <unk>.

Hello from operations is down two 6%, we really feel good about our cash flow as a rate to sales.

Speaker 2: You know, on the investing side, on what we're committed to, it's new stores, it's Army Channel, it's customer data and it's supply chain. We think, done well, we will have no regrets investing into those four initiatives. So inventory management stays really good. You cannot manage your cash flow without that. We're really proud of our merchants in the open to buy process. But the leading causes for the decline are really sales, top line in nature, and then just some year in timing.

On the investing side on the on the what we're committed to its new stores its omni channel its customer data and its supply chain. We think done well, we will have no regrets investing into those four initiatives.

So inventory management stays really good you cannot manage your cashflow without that we're really proud of our merchants and the open to buy process with the leading causes for the decline are really sales top line in nature and just some year end timing stuff.

Speaker 2: It's great. And just one more for me. Can you, I know you hit on this a little bit, but this customer data platform, even what benefits are you beginning to see, what benefits are you expecting to see? And how does this, I know you talked about a benefit in COMS, but will this also benefit MerchMarge and if so, how? Yeah.

That's great and just one more for me.

I know you hit on this a little bit, but this customer data platform.

What benefits are you beginning to see what what benefits are you expecting to see and how does this I know you talked about benefiting comps, but well. This also benefit merch margins and if so how.

Yeah, I'll take that one.

Speaker 2: So, you know, how we like this before is in the past, we had pretty blunt instruments that understand what was going on with our customer file. We had data in a bunch of different places. You know, we couldn't always tell same customer shopping as online and in store. So we installed our new customer data platform in the second quarter. And now we have the holistic view of our customer. We started doing some preliminary work around segmentation. And so.

So how.

We like this before as in the past, we had pretty blunt instruments to understand what was going on with your customer file.

Data and a bunch of different places.

Now we couldn't always tell same customer shopping online and in store. So we installed our new customer data platform in the second quarter and now what we have is a holistic view of our customer we started doing some preliminary work around segmentation and so now what we can actually see as we're looking at it on a weekly monthly quarterly basis Theres movement.

Speaker 2: Now what we can actually see is we're looking at it on a weekly, monthly, quarterly basis to move, and even within segment. So in some cases, we can see certain cohorts within a certain segment may be spending a little bit less per trip, or we can see other cohorts maybe shopping less frequent.

Even within segments. So in some cases, we can see certain cohorts within a certain segment, maybe spending a little bit less per trip, where we can see other other cohorts, maybe shopping less frequently and so what we started testing is different triggers to get them to react differently. So what I talked about on the call was we had one test with one of our best customers, who maybe their spend was down a little bit year.

Speaker 2: So what we started testing is different triggers to get them to react differently. So what I talked about on the call was we had one test with some of our best customers. So maybe their spend was down a little bit here today to try to send them to upstand.

To date to try to incent them to up spend.

Speaker 2: In another case, we had some customers who were shopping a little less frequently. And the goal was to get them to make one extra trip and in both those cases, you know, there's small cases, use cases at first to their test.

In another case, we had some customers are shopping a little less frequently and the goal was to get them to make one extra trucking in both those cases, you know they're small cases use cases that person to their test, but we saw.

Speaker 2: But we saw an uplift in sales and we saw the behavior that we triggered with the promotion continued after the promotion. So longer term.

An uplift in sales and we saw the behavior that we triggered with ocean continue after the promotion so longer term, what we would see as this can be a much more robust tool for us to use across all of our different customer segments from a margin perspective, I think what it's going to do is it's going to make us a lot more precise and targeted with our markdowns versus having brought.

Speaker 2: What we would see is this can be a much more robust tool for us to use across all of our different customer segments.

Speaker 2: From a margin perspective, I think what it's going to do is it's going to make us a lot more precise and targeted with our markdowns versus having broad based promotion. I think you're going to see, you know, continue pullback on that and more focused target of promotions that are in the individualized customer. So I'm not sure there's a huge margin up with from it, but we do think there's no step by pulling back on company life promotions to fund those target of promotions.

Based promotions I think youre going to see.

You pull back on that and more focused targeted promotions that are enterprise individualize the customer so I'm not sure. There's a huge margin uplift from it but we do think there is an offset by pulling back on company wide promotions to fund those those targeted promotions.

Got it. Thank you good luck during holiday guys.

Thank you.

Okay.

Speaker 1: Our next question is from Robbie Holmes with Bank of America. Please proceed with your question.

Yeah.

Our next question is from Robby <unk> with Bank of America. Please proceed with your question.

Speaker 5: Hi, this is Maddie Check on for Rob Yombs. Thanks for taking our questions.

Hi, This is matti check on for Robbie Thanks for taking our questions.

Speaker 5: Just first, can you talk about how Black Friday looked compared to your expectations? You said one of your strongest ever. Are there any categories to call out that perform well for Black Friday? And are you expecting holiday to be concentrated around the big buying events like Black Friday cyber months?

Just first can you talk about how black Friday left compared to your expectation you said one of your strongest ever.

Any categories to call out that performed well for Black Friday and are you expecting holiday to be concentrated around the big buying events like Black Friday cyber Monday.

Speaker 2: Yeah, so I'm not going to get too granular in terms of category performance, what I will tell you and I said this on in prepare remarks is, you know, what this year feels like is kind of a return to kind of pre-pandemic shopping patterns.

Yeah, so I'm not going to get too granular in terms of category performance, what I will tell you and I said this on the in the prepared remarks is what this year feels like it's kind of a return to kind of pre pandemic shopping patterns.

Speaker 2: You know, we saw the customer, you know, as he came in October and early November , moderate spending and, you know, wait for the discounts and then as I, if I said I'm a call, the event was one of our best events we've ever run. So that can give you a sense of how good it was.

The customer came in October.

October and early November moderate spending in and wait for the discounts and then as I as I said on the call that was one of our best events. We've ever run so that can give you a sense of how good it was.

Speaker 2: You know that being said there's still a lot of time before Christmas and so we're excited about a momentum that that came out of that event

You know that being said, there's still a lot of time before Christmas and so we're excited about the momentum that came out of that event and.

Speaker 2: You know, and that we see continue into the early part of this week, but it's it's way too early to make the call. We still got about three weeks before Christmas.

We've seen continue into the early part of this week, but it's way too early to make the call. We still got about three weeks before Christmas.

Speaker 2: And as you know this year there's one extra day between Thanksgiving and Christmas, that gives us one extra weekend. And so we do expect at some point to be a little bit of a wall to crease in after we get past this week. And we expect that last week to be really strong. So yes, we think the behavior we've seen happen while you're the customer aggregating their shopping around these key moments will continue.

As you know this year Theres, one extra day between Thanksgiving and Christmas and that gives us an extra weekend and so we do expect at some point it would be a little bit of a lull decrease then after we get past this week.

And we expect that last week to be really strong. So yes, we think that the behavior, we've seen happen all year the customer aggregating their shopping around these key moments will continue.

Speaker 2: You know, fortunately we got the biggest moment of the year ahead of us and I think we've really prepared ourselves for this. Our inventory is the best shape it's been in all year. We've really been thoughtful about how we've constructed our promotional cadence and our marketing cadence.

Fortunately, we got the biggest moment of a year ahead of us and I think we've really compare ourselves to this our inventories in the best shape, it's been in all year.

We've really been thoughtful about how we've constructed our promotional cadence and our marketing cadence.

Speaker 2: And I think we're really well-prapped to have a great holiday season and to take advantage the customer who's willing to be out there and shop.

And I think we're really well prep so have a great holiday season and to take advantage of the customer who's going to be out there in shops.

Speaker 5: Thank you, that's helpful. And I also wanted to ask a question on the Hunt business. What were the trends you saw on 3Q? Are you seeing any stock up or surge behavior? And do you expect the Hunt and Amal momentum to continue through four?

Thank you that's helpful and.

I just also wanted to ask a question on the hunt business.

What were the trends you saw in three Q are you seeing any stock up our search behavior and do you expect the heightened ammo momentum to continue through <unk>.

Speaker 2: Yeah, I mean, we talked a little bit about this in the prepare-to-go marks. Definitely, that business has been one of our more challenging businesses. You know, through the first half of the year, it was down in the mid-team.

Yeah, I mean, we.

Talk a little bit about this in the prepared remarks, you know definitely that business has been one of our more challenged businesses.

Through the first half of the year it was down in the mid teens.

Speaker 2: We certainly, it was kind of a profound down in the mid to high single digits in Q3, which would imply it got better than the first half trend. And as you track it through the quarter, it definitely got better towards the end of the quarter. Both in, you know, the major category is the Farms and Amel. It feels like, you know, we're starting to laugh some softer counts. If you remember, we talked a lot about different surge activities.

We certainly it was kind of it performed down in the mid to high single digits in Q3, which would imply a got better than the first half trend and if you track it through the quarter it definitely got better towards the end of the quarter.

Both in you know the major categories of firearms and ammo.

Feels like we're starting to lap some softer comps if you remember we talked a lot about different search activities that happened last year and certainly through the pandemic. It feels like we're lapping a lot of those in the business is starting to get more normalized.

Speaker 2: And our belief and hope is that this will start to stabilize from this.

And our belief and hope is that that business will start to stabilize from this point forward now the one thing I'd add there is it was a little bit little bit warmer than average and so that that hunter that likes to get outside in a mess with this lease prep activities and and get ready for deer season.

Speaker 2: Now, the one thing I'd add there is it was a little bit warmer than average and so that hunter that likes to get outside and mess with his least prep activities and get ready for deer season, get and see that amplification. And now that it's got a little cooler here, we're starting to see that turn on a little more.

Didn't see that amplification and with now that it's gotten a little cooler here, where we're starting to see that turn or more.

Okay, great. Thank you best of luck this holiday season. Thank.

Thank you.

Speaker 1: Our next question comes to Math and H. Okamba with Loop Capital Markets. Please proceed with your...

Our next question comes from Anthony check number with loop capital markets. Please proceed with your question.

Speaker 6: Good morning. Thank you so much for taking my question. We just wanted to get an update on some of the product newness. I know you guys have been excited about some of the new products that have come in recently and have been expanded.

Good morning. Thank you so much for taking my questions.

To get an update on some of the product newness I know you guys had been excited about some of the new products that have come in recently and have been expanded.

Mike.

Speaker 6: recovery sandals and bog bags and broken stocks and shadow systems. So I just wouldn't see if you had any update there.

Recovery sandals, and bug bags and broken stocks in Santos system. So I just wanted to see if you have any any update there. Thanks.

Speaker 2: Well, you listed a couple of, yeah, I have a new name here.

Well you listed a couple of years ago.

Speaker 2: You know, certainly what we've seen this year and we talked a little bit about if that the customers gravitating towards newness.

Certainly what we've seen this year and we talked a little bit about it that the customers gravitating towards newness.

Speaker 2: You know, so the categories you talked about are all categories that we were well positioned in for this holiday. We've seen them continue into holiday. Other areas, you know, we talked about our outdoor grilling, this is being really strong. There's certainly a trend being fueled there by blacks down in that flat grilling.

Hum.

The categories you talked about are all categories that we were well positioned for this holiday we've seen them continue into holiday. Other areas. You know, we talked about our outdoor grilling business being really strong there is certainly a trend being fueled thereby blackstone in that flat drilling that continues to be a great category for us we talked on our last call about.

Speaker 2: That continues to be a great category for us. We talked in our last call about

Speaker 2: edition of L.O. Bean. So we're really excited about that in the addition to that to our Sortness for this holiday and when you think about it, I mean that product is really strong and kind of fall, you know, heavier weight products so the weather's getting right for that right now just in time.

The addition of L L bean.

So we're really excited about that and the addition to that to our Assortments for this holiday and when you think about it I mean that that product is really strong and kind of fall a heavier weight products. So the weather's getting right for that right now just in time so.

Speaker 2: We're excited about that. But yeah, generally across the board, Nunes working force, you call out several old brands, and there's other brands out there that are also.

So we're excited about that.

But yeah generally across the board newness working for US you can call out several of the brands and Theres other brands out there that are also working.

Got it and just one quick follow up on newness any update in terms of potentially getting on her hope Gov.

Speaker 6: gotta and just one quick follow up on newness. Any update in terms of potentially getting on or hope for the footwear business.

For the footwear business.

Speaker 2: At this point, you know, it is not in our plans in the next year. We continue to talk to them and work with them.

At this point it is not in our plans are in the next year, we continue to talk to them and work with them on getting access to those brands, but at this point, it's not a you know on a roadmap that being said, we've got a lineup with the best brands in footwear.

Speaker 2: on getting access to those grants, but at this point, it's not, you know, on a road map. That being said...

Speaker 2: We've got a lineup for the best brands and footwear. You know, we've got a premier position with Nike, who's our biggest brand across the total company as well as in footwear, strong businesses, with brands like Adidas and Under Armour, new brands like Berkins Stock that you mentioned. He, dude, doing really well for us, Crocs doing really well for us, Berks doing really well for us. So, you know, our goal and what we're focused on is winning with the brands that we have and being very successful with those. And that's his incredible performance ever available artists. The

Got a premier position with Nike Who's our biggest brand across the total company as well as in footwear strong businesses with brands like Adidas and under armour, New brands like Birkenstock that you mentioned <unk> doing really well for us crocs doing really well for us Brooks doing really well for us. So you know our goal and what we're focused on is winning.

With the brands that we have in and being very successful with those.

Got it thank you.

Yeah.

Speaker 1: Our next question comes from Chris Horvors with JP Morgan. Please proceed with your question.

Our next question comes from Chris Harvest with J P. Morgan. Please proceed with your question.

Speaker 7: Thanks, good morning guys. So my question is on the strength that you saw at the end of October and quarter to the eight. I guess how much of that do you think was helped by the Rangers Astros World Series?

Thanks. Good morning, guys. So my question is on the strength that you saw at the end of October.

And quarter to date I guess, how much of that do you think was helped by the Rangers Astros World series.

Speaker 7: Is that something that we need to contemplate as we look to the back half of 2024? And as you think about the guidance for the fourth quarter, can you share anything about what's going on quarter to day? It seems like you're bracketing about a down six. Are you trending in line with that? Are you expecting that extra day and that late surge to get you to that level? Anything there would be really helpful.

Is that something that you know we need to contemplate as we look to the back half of 2024 and you know as you think about the guidance for the fourth quarter can you share anything about what's going on quarter to date. It seems like you're bracketing about it down six.

Are you trending in line with that are you expecting that extra day in that late surge to get you to that level you know anything there would be really helpful.

Speaker 2: Yeah, I'll answer the second part first. You know, the performance we've seen quarter to day is embedded in the guidance that we gave.

Yeah I'll answer the second part first the performance we've seen quarter to date is embedded in the guidance that we gave.

Speaker 2: And I'll refer you back to the commentary I gave you around November and Black Friday and you can make inferences from that. In terms of the astros versus rangers believe it or not, it actually was more of a negative to us and a positive to us. If you look at our store count and what the astros mean as a percentage of our business and license roll to the rangers, the rangers this smaller. So laughing the astros world series last year with the rangers was actually a negative to our sales trend early.

And I'll and I'll refer you back to the commentary I gave you around November and Black Friday, and you can make inferences from that in terms of the Astros versus Rangers believe it or not.

It actually was more of a negative to us in a positive to us and if you look at our store count and what the astra's mean as a as a percentage of our business and license relative the Ranger three interest is smaller.

So lapping.

Astros World series last year with the Rangers.

It was actually a negative to our sales trend early in the month.

Speaker 7: Got it. And as you think about, you know, the hunt businesses has really been such an indicator of the overall trend in the business. You think about the start of rifle season for deer in November 1st in Texas. Obviously a big event. Carl, you talked about, you know, some shift of the weather. As you peel back, you know, what you saw over, let's say the past two months.

Got it and then as you think about.

You know the hunt business has really been such an indicator of the overall trend in the business.

You think about the start of rifle season for Deere in November 1st in Texas, Obviously, a big event.

Carl you talked about some shift in the weather as you Peel back into what you saw over let's say the past two months.

Speaker 7: you know how confident are you that that business is actually bottoming because it's you know sort of easy to focus on like hey here's what just happened when i got cold and the season started and and blame the weather earlier like which degree of confidence and how is it different from the last time you spoke to us in all case

How confident are you that that business is actually bought I mean, because it's sort of easy to focus on like hey, Here's what just happened when it got cold and disease and started and blame the weather earlier like I guess, what's your degree of confidence in how is that different from the last time you spoke to us in August yeah.

Speaker 2: Yeah, I think what I would tell you is this is a cyclical business that always has been. And it is sometimes driven by external events and in fact it, you know, by those maybe more so some of the other businesses we had. But we shared with you in the last call which, you know, we also believe we're seeing right now is, but just as confidence that it's starting to kind of level out a little bit is, that the volume is becoming fairly predictable on a weekly basis.

I think what I would tell you is this business is a cyclical business. It always has been.

And it is sometimes driven by external events and impacted by those maybe more so some of the other businesses. We had what we shared with you in the last call, which we also believe as we're seeing right. Now is what gives us confidence that it's starting to kind of level out a little bit is that the volume is becoming a fairly predictable on a weekly basis.

Speaker 2: you know, if you go back, there were huge spikes in the last year driven by external events. And as we got through this year, Amel on a weekly basis is settled into a pretty normal cadence, the firearms business is settled into a pretty normal cadence. So really the negative toss we're experiencing wasn't as much of a fluctuation in this year's business was in fluctuation last year.

If you go back there were huge spikes in the last year.

Driven by external events and as we got through this year ammo on a weekly basis has settled into a pretty normal cadence. The firearms business has settled into a pretty normal cadence. So really the negative costs, we're experiencing wasn't as much about the fluctuation in this year's business isn't a fluctuation of last year's business as we get into Q4 and beyond that starts to level out quite a bit and that's what gives us.

Speaker 2: As we get into Q4 and beyond, that starts full of a lot of the bit. And that's what gives us confidence that it's stabilized. And that being said, it's going to have ups and downs, right? I mean, it's like any business that's driven by some external factors. But the kind of the noise in the last year is starting to die down a little bit. Got it.

Since that it's stabilizing and that being said, it's going to have ups and downs right. I mean, it's like any business, that's driven by some external factors, but the kind of the noise in the last year is starting to die down a little bit.

Got it and have a great holiday and Christmas season. Thanks. Thank you.

Yes.

Speaker 1: Our next question is from Oliver Wintermanthal with Evercore ISI. Please proceed with your question.

Our next question is from Oliver Winter mental with Evercore ISI. Please proceed with your question.

Speaker 8: Yeah, thanks. Good morning. I had a question. You mentioned new markets and legacy markets in your preparture marks. Could you maybe a little bit expand on what you learned there about the cadence of when you open into stores until maturity and then maybe add a little bit on the four-wall EBITDA.

Yeah, Thanks, and good morning.

I had a question you mentioned, a new markets and legacy markets in your prepared remarks.

Maybe a little bit expand on what you what you learned there about the cadence of when you open into stores until maturity and then.

Maybe a little bit on four wall EBITDA. Thank you.

Speaker 2: Yeah, I'll tackle the first part of it, Carl, tackle the track. And, you know, so we're now two years in our new store opening. So we opened up nine stores last year, 14 this year. I would tell you, last year a lot of the stores were weighted more heavily to new markets and we tested a lot of different ideas. You know, we were testing how do we do in a more urban dense population versus a more suburban population. We were testing some different new markets.

Yes, I'll tackle the first part of what Carl tackle tracking you know so.

We're now two years in our new store openings, we opened up nine stores last year 2014. This year I would tell you last year a lot of the stores were weighted more heavily to new markets and we tested a lot of different ideas.

Were testing how do we do in a more urban dense population versus a more suburban population. We were testing some different new markets. This year, we applied a lot of those learnings that we had from last year to this years new stores things. When you look at the two years of vintages that were seeing.

Speaker 2: This year we applied a lot of those learnings that we had from last year to this year's new stores.

Speaker 2: things when you look at the two years of the images that we're seeing, and we call this out on the, on the call, the stores that are within, you know, kind of our core geography.

And we called this out on the call the stores that are within kind of our core geography.

Speaker 2: or footprint where we've had existing stores for a while, get off to a much faster start. And they're beating or surpassing the plans that we put out there. On the flip side, as we go into a newer market, maybe in the north, northern Midwest, and in Indiana, or maybe in Illinois, starting out a little bit slower. But when we go back and we look at historical ramps,

Footprint, where we've had existing stores for a while get off to a much faster start and they're beating or surpassing the plans that we put out there on the flip side as we go into a newer market maybe in the north.

Northern Midwest in Indiana, or maybe even Illinois, starting out a little bit slower, but when we go back and we look at historical ramps and you know one of the things. That's also a tricky as some of the new stores opened from 15 at Pryor has some effects of the pandemic in them right. In the later years, we're trying to go back and look at ramps before that to see what that curve looks like youre seeing those probably.

Speaker 2: see what that curve looks like. You're seeing those probably have a slower ramp. So we wanted to call that out and just to give you guys some color around that. And certainly as we get into 2024 and give guidance, we'll give you a hopefully a better idea.

I had a slower ramp and so we wanted to call that out and just to give you guys. Some color around that and certainly as we get into 2024 and give guidance. We'll give you a hopefully a better idea of how we're seeing these new stores ramp in and give you a little better guidance around that yeah, and I'll take the EBITDA you know I think similar to what Steve talked about.

Speaker 5: how we're seeing these new stores ramp and and and give you a little better guidance around that. Yeah, and I'll think that EBITDA, you know, I think similar to what Steve talked about within our markets for this high brand awareness. EBITDA rates are higher even in year one versus in your in the other markets that where the brand awareness is in this high. We've had to invest a little bit more from a marketing perspective for that local customer to get to know us.

Within our markets, where there's high brand awareness.

EBITDA rates are higher even in year one versus in your in.

In the other markets, where the brand awareness isn't as high we've had to invest a little bit more from a marketing perspective for that local customer to get to know us.

Speaker 7: You know, the things that we talked about, positive evitdyes, the cohort in year one, we saw that still committed to a Roy hurdle of 20% learned a lot. Coming out with F-like 22, I'll just reiterate some of the commentary that we talked about. Tested a lot of new things, went into two new states.

Things the things that we talked about positive EBITDA as a cohort.

Year, one we saw that.

Still committed to our ROIC hurdle of 20% learned a lot coming out with FY 'twenty two I'll just reiterate some of the commentary that we talked about.

<unk> tested a lot of new things went into two new states.

Speaker 2: Get our first retrofits as a company. We had done build the suits, you know, historically for as long, even before Steven and I were here. You know, tried some new things, learned a lot, feel like the FY23s are benefiting from those learnings and we'll update you more and more. Yeah, DeCartel's point, one of the things I left out at the end is we're actually seeing the 23 vintage get off to the faster certain 22 because we apply those learnings. So what was really interesting is...

Our first retrofits as a company we've done build to suits historically for us long, even before Steve and I were here trying some new things learned a lot and feel like the FY2023s are benefiting from those learnings and we'll update you more in March to Karl's 0.1 of the things I E.

I left out at the end as we're actually seeing the 'twenty three vintage get off to a fast for certain 'twenty two because we apply those learnings. So what's really interesting is some of these newer markets actually ever Black Friday, where some of our best markets. So that gives us a lot of confidence that people are trying the brand who maybe haven't tried it before and that is starting to break through a little bit.

Speaker 2: Some of these newer markets, actually over Black Friday, were some of our best markets. So that gives us a lot of confidence that people are trying, you know, the brand, who maybe hadn't tried it before, and that it started very through.

Speaker 8: Thanks for all the color. I just had one follow-up. There was a previous question about the reduction in cap-ax.

Thanks for all the color I just have one follow up there was a previous question about the reduction in Capex too.

Speaker 8: to 175 to 225. Looks like the cadence of store openings in the fourth quarter stays the same. Is that capex reduction, are you signaling something about the next year store opening skin?

To 175 to 120.

$2 25.

It looks like that the cadence of store openings in the fourth quarter stays the same is that Capex reduction are you signaling something about next year still openings gains.

Speaker 9: Oh, no, not at all. This has more to do with when we are advised our guidance, any discretionary expense, we pulled out, any discretionary capital, we pulled out, we've been efficient. I'm gonna reiterate our commitment to the four, those four kind of initiatives that we talked about from the news stores, Army Channel customer data supply chain standpoint. There's been the

Oh, no not not at all and this has more to do with them. When we revised our guidance any discretionary expense, we pulled out any discretionary capital we pulled out we've been efficient Oh I'm going to reiterate.

Our commitment to the floor for kind of initiatives that we talked about from our new stores Omnichannel customer data supply chain standpoint, there has been.

Speaker 9: None of that capex pull down has anything to do with that. It's just, you know, we're getting closer towards the end of the year. I'm willing to refine kind of our guidance range, just like we did on the top line in NETS. It's just coming in a little bit lower.

None of that Capex pull down has anything to do with that it's just that we're getting closer towards the end of the year I'm I'm willing to refine kind of our guidance range. Just like we did on the topline and EPS is just coming in and a little bit lower.

Speaker 8: Perfect. Thanks for the clarification. Thank you.

Perfect. Thanks for the clarification. Thank you.

Yeah.

Speaker 1: Our next question comes from Daniel Embro with Stevens. Please proceed with your question.

Our next question comes from Daniel <unk> with Stephens. Please proceed with your question.

Speaker 7: Hey guys, this is Joe and Irland on for Daniel. Thanks for taking the question. Just kind of piggybacking on the last question there. Could you give any additional color on what early learnings you're taking from the 222 vintage to the 2331 that you think are driving the most improvement within those stores?

Hey, guys. This is Joe <unk> on for Daniel Thanks for taking the question I'm just kind of piggybacking on the last question. There could you give any additional color on what early learnings you're taking from the 2022 vintage to the twin 23, one that you think are driving the most improvement within the stores.

Speaker 2: Yeah, I would say there's several. Carl had on one. We went in with a marketing plan in terms of how we're looking at the new stores that were both in Heritage and new markets. And there's probably more distortion that we need to make. We probably can spend a little bit less in the Heritage markets, a little bit more in the new markets to drive a little more brand-aware.

Yes, I would say there is there are several Carl hit on one you know we went in with a marketing plan.

In terms of how we're looking at the new stores that we're both in heritage and a.

New markets and there's probably more distortion that we need to make we probably could spend a little bit less in the heritage markets a little bit more in the new markets to drive a little more brand awareness.

Speaker 2: You know, the last two vignages have been more back half loaded. We're seeing stronger performance in stores that open up in spring. So we think moving more to the first half of the year is the right thing to do. So you're going to see a start slowly moving to have a better balance across the years. Having a better balance between new markets and existing markets.

The last two vintages have been more back half loaded.

We're seeing stronger performance of the stores that open up this spring. So we think moving more to the first half of the year.

It's the right thing to do so you're going to see us start slowly moving to have a better balance across the years, having a better balance between new markets and existing markets, having a better.

Speaker 2: Having a better, you know, improve localization strategy, we, you know, I think we've done a lot of work over the past four or five years in terms of being smarter.

Prove localization strategy. We you know I think we've done a lot of work over the past four or five years in terms of being smarter about our localization strategy, but even as we're opening up some of these new markets, where we're having even more learnings we opened a store in Florida. When we gave it our best assortment of saltwater fishing and we thought we were getting it.

Speaker 2: our localization strategy, but even as we're opening up some of these new markets, we're having even more learnings. We open the store and floor it up.

Speaker 2: We gave it our best assortment of saltwater fishing. And we thought we were giving it an A plus assortment and then as we were down in the market, looking at it found that we probably need to do even more than we're doing. So now we built an A plus plus assortment and then we're gonna use that to apply it all before it starts that we open on the Gulf Coast, going forward. So it's an iterative process. It's, you know, we're taking blurnips from each one of the blinds of the next.

Plus assortment and then as we were down in the market.

Looking at it found that we probably need to do even more than we're doing so now we built an a plus plus assortment and then we're going to use that to apply to all of the Florida stores that we open on the Gulf coast going forward. So it's an iterative process.

We're taking the learnings from each one and apply them to the next.

Speaker 2: It's broad-based across merchandising, across marketing, across operations, across how we inventory the store. I can just tell you that each one is getting better and better and that's our expectation.

Broad based across merchandising across marketing across operations across how we inventory the store I can just tell you that each one is getting better and better and that that's our expectation as we go forward.

Speaker 10: God, that's helpful. Thank you. Just as a follow-up, warmer fall weather seemed to influence sales across the industry. Does this influence how you look at the sale of opportunity and for you at all? Do you think that initial deferral of cold weather items and 3Q could be made up in for you to any extent?

Got it that's helpful. Thank you.

Just as a follow up warmer fall weather seem to influence sales across the industry.

Does this influence how you look at the sales opportunity in <unk> at all do you think that initial deferral of cold weather items in <unk> could be made up in <unk> <unk> to any extent. Thank you yeah I you know.

Speaker 2: Yeah, you know, that's the big question is, if it gets cold, how long it's faced cold, et cetera. I think one of the things that we're happy about is that our inventories are under control, right? And Canada feels like the industry is in a better place today than maybe it was.

That's the big question is.

If it gets cold how long it stays cold et cetera.

I think one of the things that were happy about is that our inventories are under control right and candidly it feels like the industry is in a better place today than maybe it was.

Speaker 2: a year ago at this time and so you know we saw promotions Elevate a little bit over black Friday, but still seem well within the troll and lower them where they were You know pre pandemic we've got obviously increased promotions built into our forecast moving forward But I don't I don't think we're counting on a big return of business that was missed but I also don't think we have an overhang of inventory That was gonna have to dress

A year ago at this time and so we saw promotions.

Elevate a little bit over black Friday, but still seem well within control and lower than where they were pre pandemic. We've got obviously increased promotions built into our forecast moving forward, but I don't I don't think we're counting on a big return of business that was missed but I also don't think we have an overhang of inventory that we're gonna have a dresser deal with either yeah, and the only thing I.

Speaker 9: The only thing I would add there is that supply chain normalization. It might not be between Q3 and Q4, but it might be intra-quarter.

Would add there is that supply chain normalization it might not be between Q3, and Q4, but it might be intra quarter, where parents might've been buying a holiday gift and they bought it early because they were worried about it being there I think the consumers confidence that at least looking at our inventory position, we're gonna be in stock.

Speaker 9: where parents might have been buying a holiday gift and they bought it early, because they were worried about it being there. I think the consumer's confident that

Speaker 9: you know, at least looking at our inventory position, we're gonna be in stock more frequently. And so I think some of that stuff that may have occurred in the third quarter in the extra year, a parent or someone will have more confidence buying that closer in. I think when you look at our business, you know, Candid-

<unk> more frequently and so I think some of that that stuff that may have occurred in the third quarter in yesteryear parent or in some of them will have more confidence buying that closer in I think I think when you look at our business you know candidly Q.

Speaker 2: Q3 is usually a wild card, right? I mean, it's in our geography, it can be warm.

Q3 is usually a wildcard right I mean, it's in our geography, it can be warm occasionally get a cold snap in October it helps out a little bit generally our geography gets colder in Q4.

Speaker 2: occasionally get a cold snap and October health out a little bit. Generally our geography gets colder in Q4 and it's been fairly consistent year over year and that's where we sell the bulk of our season product. And so I think we're going to see that same pattern hold true this year.

And it's been fairly consistent year over year, and that's where we sell the bulk of our seasonal product and so I think we're going to see that same pattern holds true this year.

Got it that's super helpful. Thank you guys.

Thanks, Jeff.

Yeah.

Speaker 1: Our next question comes from Simeon Gutman with Morgan Stanley . Please proceed with your question.

Our next question comes from Simeon Gutman with Morgan Stanley. Please proceed with your question.

Speaker 11: Hey guys, this is Jackie Sussan on Persona and thank you so much for taking our question. Just on the 34.5% growth margin for the quarter, I think you mentioned in your prepare for marks shrink. How are you handling shrink relative to prior quarters? How is it evolved throughout the quarter or are things getting sequentially better and anything to call out in terms of Q4 did on that would be really helpful. Thanks.

Hey, guys. This is Jackie Stefan on for Simeon. Thank you so much for taking our question.

On the 34, 5% gross margin for the quarter I think you mentioned in your prepared remarks shrink.

How are you handling shrink relative to prior quarters, how is it evolved throughout the quarter our thanks.

Getting sequentially better and all that.

Thank you call out in terms of Q4 again on that would be really helpful. Thanks.

Speaker 9: Yeah, Jackie, that's a good question. You know, Shrink was a big topic of discussion in the second quarter. We still see it as an issue. Our Shrink rate was at 12 basis points to last year in the third quarter. And we're not talked about some of the muting of the tailwinds from freight. You know, Shrink's in place.

Yeah, Jackie that's a good question shrink was a big topic of discussion in the second quarter, we still see it as an issue our shrink rate was up 12 basis points to last year in the third quarter and when I talked about some of the muting of the tail winds from freight you know shrinks and play look I don't.

Speaker 9: Look, I don't think, you know, we do year round, we talked a little bit about this at the last quarter. We do year round physical inventory. So we started to see shrink top in the third quarter of last year. We were up 36 basis points in shrink in the third quarter of last year. So this is 12 on top of that.

Thank you know, we do year round, we talked a little bit about this at the last quarter, we do year round physical inventories. So we started to see shrink pop in the third quarter of last year, we were up 36 basis points and shrink in the third quarter of last year. So this is 12 on top of that.

Speaker 9: It's better than the second quarter and way better than the first quarter trajectory, but I do think it's because we got an earlier read on this and began to react to it. Maybe just a little bit quicker. I'll walk through some of the things that we're doing without getting into...

Better than the second quarter and way better than the first quarter trajectory, but I do think it's because we got an earlier read on this and began to react to it maybe just a little bit quicker I'll walk through some of the things that we're doing without getting into too much detail associated with what we're doing we've made.

Speaker 9: kind of too much detail associated with what we're doing. We've made investments in the team.

Investments in the team we've made investments in internal analytics to help us see patterns, both internally and externally quicker. We've done a number of technology solution tests and subsequent Rollouts really began beginning in the third quarter of last year that AIDS on the prevention side.

Speaker 9: We've made investments in internal analytics to help us see patterns.

Speaker 9: both internally and externally quicker. We've done a number of technology solution tests and subsequent rollouts really begin, beginning in the third quarter of last year, that aids on the prevention side, as well as on the detection side.

As well as on the detection side, we've got really strong partnerships with local law enforcement so on the detection side.

Speaker 9: We've got really strong partnerships with local law enforcement so on the detection side.

Speaker 9: the things that we can do to aid them, like they don't like seeing this happen and the tools that we can help them with. They appreciate, you know, we've seen sort of from a federal standpoint over COVID, you know, there wasn't as much federal participation and kind of like these local.

The things that we can do to aid them like they they don't like seeing this happen and the tools that we can help them with they appreciate we've seen sort of from a federal standpoint over Covid you know there wasn't as much a federal participation and kind of like these low.

Speaker 9: organized crime rings that we were seeing. I feel really good about what we're doing. We've let a couple of those discussions here and we talked about one of the ORC bus that we saw in the Houston area that was a long running thing earlier. And lastly, you know, we don't want to lock up all of our products. We don't want our customer to have...

<unk> organized crime range that we were seeing I feel really good about what we're doing we've let a couple of those discussions here, we talked about one of the OFC bump that we saw in the Houston area that was a long running thing earlier and lastly, you know we don't want to lock up all of our product we don't want.

Our customer to have.

Speaker 9: a negative experience, but we test and we learn a lot. So we've done some testing learns with some baseball equipment that made a lot of sense and we put the customer call button right next to where we might use a peg lock for an expensive glove, the $8000 specifically. And some of the bats that business is turning on so well associated with those premium baseball bats. that inventory is there for the customer when they come in. So that big mix of things is what we're doing, but it's a retail wide. Yeah.

Negative experience, but we test and we learn a lot. So we've done some tests and learns with some baseball equipment that made a lot of sense and we put the customer call button right next to where we might use a pad a peg locked for expensive glove, the a 2000 and specifically in some of the bank.

That business is turning on so well associated with those premium baseball bats, we want to make sure that that inventories there from the customer when they come in so that that big mix of things is what we're doing.

But it's a it's a retail wide.

Speaker 9: Problem, it's a nationwide problem and our our shrink rate was up 12 basis points this

Problem, it's a nationwide problem and our our shrink rate was up 12 basis points. This quarter I'll just I'll just emphasize one point that I think was embedded what Carl said.

Speaker 2: Yeah, I'll just, I'll just emphasize one point that I think was embedded with Carl's Fad.

Speaker 2: You know, probably one of the best things that we can do to help combat this, because he's right, it is a problem that everybody says.

Probably one of the best things, we can do to help combat this because he's right. It is a problem that everybody is facing is to staff our stores make sure. We've got people there who are helping out to customers who are around and that's something we've been committed to and I think that's been a help as we have been navigating some of these these shrink trends that people have been.

Speaker 2: is to staff our stores and make sure we've got people there who are helping out the customers who are around. And that's something we've been committed to and I think that's been a help as we've been navigating some of these shrink trends that people have been fighting.

Going against.

Speaker 11: God, it's super helpful. And speaking of staffing stores, as you start the holiday season, are you seeing, if any pressure on wages or labor hours, how are we thinking about that in terms of potential else you may spend in the quarter relative to your pre-COVID trends? Thanks.

Got it Super helpful and then speaking of staffing stores.

You started the holiday season.

Any pressure on wages or labor hours and how do you how are we thinking about that.

Potential SG&A spend in the quarter relative to <unk>.

Kona trends. Thanks, so much yeah, I mean, certainly if you look at our hourly wages versus pre COVID-19 pre pandemic I mean, they are up they're up for everybody.

Speaker 8: Yeah, I mean, certainly if you look at our hourly wages versus pre-COVID pre-pandemic, I mean, they're up there for everybody. We feel like we've done a really good job of keeping pace if not maybe doing a little better in terms of the increases. We're not having any trouble getting help candidly. We've got a really good energized team of people that are out there. We feel like we're perfectly staffed. But yeah, definitely wages are up versus where they work with the pandemic. Thanks.

Feel like we've done a really good job of keeping pace, if not maybe doing a little better in terms of the increases.

We're not having any trouble getting help candidly we've got a really good energized team of people that are out there we feel like we're appropriately staffed but yeah definitely wages are up versus where they worked with pandemic.

Great. Thanks, so much thank you.

Thanks Jackie.

Speaker 1: Our next question is from Seth Bosham with Woodbush Securities. Please proceed with your question.

Our next question is from Seth Basham with Wedbush Securities. Please proceed with your question.

Speaker 4: Yeah, hi there, this is Nathan Friedman on ForSets. Thanks so much for taking my questions. I think you mentioned that your average ticket was trending higher year of year in this quarter. And I know that you mentioned being more promotional and having some higher clearance, but just curious what kind of trends you're seeing. Is there like any evidence of trade down within your categories? Any color here would be appreciated. So I'll-

Yeah, Hi, there this is Nathan Friedman on for Seth. Thanks, So much for taking my questions.

I think you mentioned that your average ticket was trending higher year over year in this quarter and I know that you mentioned being more promotional and having some higher clearance, but just curious what kind of trends youre seeing.

Is there like any evidence of trade down within your category categories any color here would be appreciated.

I'll start with the trade down question, we haven't seen that as one of the things we talked a little bit about on the last quarter's call was.

Speaker 2: You know, we haven't seen that's one of the things we talked a little bit about in the last quarter's call.

Speaker 2: was, you know, last year or last quarter we thought we saw a little bit of trade down from our lower and consumer into maybe, you know, lower end retailer in terms of control day. So we haven't seen that.

Last year last quarter, we thought we saw a little bit of trade down from our lower end consumer.

Maybe you know lower end retailer in terms of trip consolidation, we haven't seen that this quarter. Conversely, we also haven't seen any trade down we think from other retailers into us. So I don't think we're losing customers I don't think we're necessarily gaining any trade down that being said one of the things that I think is helping us with that is we've done a really good job over the past four or five years.

Speaker 2: Conversely, we also haven't seen any trade down. We think from other retailers into us. So I don't think we're losing customers. I don't think we're necessarily gaining any trade down. That being said, one of the things that I think helping us with that is we've done a really good job over the past four or five years.

Speaker 2: in regards to building out our better best end of Earth's orbit. So what that really allows the customer to do is to trade that within our store. So building out the higher end, batching gloves, the car was just talking about if the customer doesn't want to spend $300 or $400 for a emergency that we have other options for them to trade two versus adding to another retailer. So we think that's helping us from that front.

In regards to building out our better best none of our Assortments. So what that really allows the customer to do is to trade down within our store. So building out you know the higher end bats, and gloves that Carl was just talking about the customer doesn't want to spend three or $400 for Hershey that we have other options for them to trade University out and go to another retailer. So we think that that's helping us on that front.

Speaker 2: In terms of AUR average ticket, our biggest challenge was more traffic. The average ticket was basically flatish up slightly for the quarter. We continue to see AUR growth year over year and over a multi year period. We anticipate that's going to continue. It's not huge. It's low single digits. We think that'll continue into Q4. And the promotional activity that we think is going to impact that we have baked into our guidance. Thank you.

In terms of AUR average ticket and our biggest challenge.

More traffic the average ticket was basically flattish up slightly.

For the quarter.

We continue to see AUR growth year over year and over a multiyear period.

We anticipate that that's going to continue its not huge its low single digits. We think that'll continue into Q4 and the promotional activity that we think is going to impact that we have baked into our guidance.

And.

My second question is.

Speaker 2: You mentioned some things associated with supply chain and vendor allowances that offset.

Mentioned, some things associated with supply chain and vendor allowances that offset themselves.

Speaker 4: I guess that would suggest that your supply chain tailwind benefits may be slowing down as you start to laugh these tougher comparisons. One is that true and second, how are you thinking about the puts and takes here in fourth quarter with supply chain and as your tougher sort of tougher merchandise.

During this quarter.

That would suggest that your supply chain tailwind benefits may be slowing down as you start to lap tougher comparisons one is that true and second how are you thinking about the puts and takes here.

In fourth quarter with supply chain and.

Youre tougher sort of tougher merchandize margin comparisons as well thanks very much.

Speaker 9: Yeah, it's a good question, Nathan. So first and second quarter, freight benefit was on the round about 90 base.

That's a good question Nathan So first and second quarter, a freight benefit was on the round about 90 basis points each each each quarter and we'll have more detail in our 10-Q, but in the third quarter and it's about an 80 basis point.

Speaker 9: each quarter and we'll have more detail in our Kent Q. But in the third quarter, it's about an 80 basis point tailwind for us. So a little bit of lessening there. You know, we talked about, we didn't really start to see that benefit.

And for us so a little bit of lessening there we talked about we didn't really start to see that benefits from a freight standpoint until the first quarter of this year. So we're expecting tail wins within the forecast that we are the guidance that we've put out there we're expecting tailwind from a freight standpoint.

Speaker 9: from a freight standpoint until the first quarter of this year. So we're expecting tailwinds within the forecast that we are, the guidance that we put out there. We're expecting tailwinds from a freight standpoint in the fourth quarter. But I think what you're starting to see just beginning in the third quarter with that 10 basis point kind of drop off going from 90s in first and second quarter to 80 in the third quarter. It's a tailwind, but it's beginning to less than, but we really didn't start to see the full weight of freight savings until first quarter of this year.

In the fourth quarter, but I think what you're starting to see just beginning in the third quarter with that 10 basis point kind of drop off going from 90 <unk>.

And first and second quarter to 80 in the third quarter, it's a tailwind, but it's beginning to lessen but we really didn't start to see the full weight of freight savings until first quarter of this year.

Okay.

Okay.

Appreciate the time and happy.

Speaker 12: and happy, happy all of this.

Got it.

Thank you.

Speaker 1: We have time for one more question. Our next question comes from Christina Fernandez with Kelsey Group. Please proceed with your question.

We have time for one more question. Our next question comes from Cristina Fernandez with Telsey Group. Please proceed with your question.

Speaker 2: Good morning and thank you for taking my question. I wanted to say if you can clarify on the sales guidance, you kept the comp range within the prior range below the total sales outlook. So is that performance of new stores, the timing or the 50th or week, can you clarify why that's lower? It was primarily a reflection of what we're seeing happening with the new store open.

Good morning, and thank you for taking my question.

Wanted to see if you can clarify on the.

On the sales guidance you kept the comp range within the prior range below total sales outlook is sad.

The performance of your stores, the timing or the 50 <unk> week can you clarify why that's lower.

It was it was primarily a reflection of what we're seeing happening with the new store openings.

Speaker 2: You know, we've had some, we've lost some sales where they've split out a week or two here and there, so that's certainly impacts a little bit. Also, what we discussed in the call in terms of the performance of the legacy heritage markets, new stores versus kind of the newer markets.

We've had some we've lost some sales where they split out a week or two here or there so that certainly impacts a little bit also.

So what we discussed on the call in terms of the performance of the kind of the legacy heritage markets, our new stores versus kind of the newer markets.

Speaker 9: So that's the combination of those two things which drove that Delta. But Christina, I will I saw some of the early print that came out associated with comparing our fourth quarter of this year to the fourth quarter of last year. I know all of you are aware of that. This is a 53rd week fourth quarter. There are 14 weeks of sales in it. That has always been in our guidance.

So that's the combination of those two things, which drove that delta, but Kristina I will I saw some of the early print that came out associated with comparing our fourth quarter of this year to the fourth quarter of last year. I know all of you are aware of that this is a 50 <unk> week fourth quarter. There are 14 weeks of sales in it that has always been in our guidance.

Speaker 9: But I saw some early reads that I just looked at quickly, associated with the amplification to last year's fourth quarter. I do want to remind you there's a 53.

But I saw some early reads that I just looked at quickly associated with like the amplification to to last year's fourth quarter I do want to remind you. There's a there's a 53 week.

Speaker 13: Yeah. And then the second question I had, what would the sales coming a little bit lower? How are you thinking about inventory for the year in and related to that? What would the consumer shifting more to value to make you change? You know, the buys you have leaning more towards that lower price and lower ticket or so and then focusing more on clear and activity. Any color there inventory it and buy it would be helpful.

Yes, and then the second question I had what would the sales coming a little bit lower how are you thinking about inventory for the year in <unk> related to bad what would the consumer shifting more to value does it make you change.

Goodbye to have leaning more towards that lower price ticket assortments.

Have you seen more clearance activity.

Their inventory and thought it would be helpful. Thanks.

Speaker 2: Yeah, I would say one of the strengths that we've shown, I think, over the past four years is strong inventory management. There's one that I think that's continued through the past quarter. Inventories are flat. On a total basis, down about 4% on a store for store basis, from a unit perspective.

Yeah, I would say one of the kind of the strengths that we've shown I think over the past four years as strong inventory management disciplines, I think thats continue through to the past quarter inventories were flat on a total basis down about 4% on a store per store basis from a unit perspective so.

Speaker 2: So we feel like the inventory is in a good position on a TYL-life basis, but we also feel like the content beneath the surfaces is much better than where it was a year ago, and stocks are, you know, the highest events since the pandemic started. So we don't anticipate any sort of overhang of inventory coming out of the holiday. In terms of how we're stressing our bodies, yeah, I mean the customers' gratitude towards value. You see that expressed?

So we feel like the inventories in a good position on a T Y O Y basis, but we also feel like the content beneath the surface is much better than where it was a year ago. Our in stocks are.

The highest had been since the pandemic started so.

So we don't anticipate any sort of overhang of inventory coming out of the holiday.

In terms of how we structure our buys yeah, I mean, the customers gravitate towards values had expressed.

Speaker 2: Shuttle different ways, you know, we talk a little bit about sometimes a private label mix

Several different ways, you know, we talk a little bit about sometimes a private label mix.

Speaker 2: private label business was a little better than some of our national brand business, which we infer as a flight to value there. So certainly that's a growth initiative. We talked about how over time we want to grow that business.

Private label business was a little better than than.

Some of our National brand business, which we and first flight to value. There. So certainly that's a growth initiative, we talked about how over time, we want to grow that business around 20, or 21% of the business, 25% Youll see us continue to lean into that and grow that business, you'll see us continue to lean into our everyday value proposition.

Speaker 2: From around 20 or 21% of the business to 25%, you'll see us continue to lean into that and grow that business. You'll see us continue to lean into our everyday value.

Speaker 2: and really highlight those and feature those in marketing. And you'll see us, you know, youth promotions around the key, you know, must win shopping moments on the calendar to make sure that we're driving traffic and to our store and winning that driveway decision. And then at the end of the season's clearance is another way to deliver value. So all those things are parts of our playbook, we're definitely leaning into them at the appropriate time, but to deliver value to the customer, we think our position is a value leader in the space.

And really highlight those in future those in marketing and Youll see us use promotions around the key must win shopping on what's on the calendar to make sure that we're driving traffic into our store and winning that driveway decision and then at the end of the season clearance as another way to deliver value. So all those things are parts of our playbook, we're definitely leaning into them at the appropriate time to do.

All of our value to the customer and we think our position as the value leader in the space. You know gives us a really good position to be in as customers under pressure.

Speaker 8: You know, gives us a really good position to be in as a customer's under pressure.

Okay.

Thank you and good luck the rest of the holiday season.

Well thank you.

Speaker 2: Okay, so that was our last question. I just want to say from a recap perspective, our approach over the remainder of the year, it's going to take the appropriate actions to navigate the short-term softness and customer demand. You know, really a focus on delivering new and innovative products, offering compelling value in order to help our customer stress or holiday budgets, while also thoughtfully managing these expense and inventories. On a longer-term basis, we believe we've got a unique concept that resonates with active young families.

Okay. So that was our last.

Question I just wanted to say.

From a recap perspective, our approach over the remainder of the year, it's going to take the appropriate actions to navigate the short term softness in customer demand.

It's really a focus on delivering new and innovative products offer compelling value.

In order to help our customers stretch your holiday budgets, while also thoughtfully managing expense in inventories on a longer term basis. We believe we got a unique concept that reference that resonates with active young families.

Speaker 2: We believe our model is scalable and transportable. And we're going to continue to make investments in our future growth so that we can enable more people to have fun outside by shopping academy.

We believe our model is scalable and transportable and we're going to continue to make investments in our future growth that we can enable more people have found out through about shopping Academy.

Speaker 2: closing a thank all 22,000 of our Academy associates for all the hard work and effort they put in and we'll still put in this holiday. You know, our employees are kind of a key ingredient of our secret sauce and I know that every one of our team members is gonna give it their best during a key four in the future. So thanks for joining us today and have a great holiday everybody.

Closing I want to thank all 22000 of our Academy associates for all the hard work and effort they put in and we will still put in this holiday.

Our employees are kind of a key agreed of our secret sauce and I know that every one of our team members is going to give us our best Q4 and in the future. So thanks for joining us today and have a great holiday everybody.

Yeah.

Speaker 1: Ladies and gentlemen, this call is now concluded. Thank you for your participation. You may now disconnect.

Ladies and gentlemen, this call is now concluded. Thank you for your participation you may now disconnect your line.

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