Q4 2023 Academy Sports & Outdoors Inc Earnings Call

Speaker Change: [music].

Good morning, ladies and gentlemen, and welcome to the Academy sports and outdoors fourth quarter.

Unknown Executive: Outdoors, 4th Quarter, Good morning, ladies and gentlemen, and welcome to the Academy Sports & Outdoors fourth quarter and fiscal year and 2023 results conference. At this time, this call is being recorded, and all participants are on a listen-only basis. Family, and following the prepared remarks, there'll be a brief question and answer session. College, and many more. Please limit yourself to one question and one thought. To ask your question during the call, please press star 1. If you require operator assistance during the call, please press star zero.

Yeah.

Good morning, ladies and gentlemen, and welcome to the Academy sports and outdoors fourth quarter and fiscal year and 2023 results conference call.

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

Questions will be limited to analysts and investors. Please limit yourself to one question and one follow up to ask a question during the call. Please press star one.

If you require operator assistance during the call. Please press star zero.

Matt Hodges: I would now like to turn the conference over to Matt Hodges, Vice President of Investor Relations for Academy Sports & Outdoors. Matt, please go ahead. Good morning, everyone, and thank you for joining the Academy Sports & Outdoors fourth quarter and fiscal 2023 financial results call. Participating on the call are Steve Lawrence, Chief Executive Officer, and 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 statements. 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 relief and in our SEC filings. Company, and the company undertakes no obligation to revise any forward-looking claims.

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

Matt Hodges: Good morning, everyone and thank you for joining me Academy sports and outdoors fourth quarter and fiscal 2023 financial results call.

Matt Hodges: Participating on the call are Steve Lawrence, Chief Executive Officer, and Carl Ford Chief Financial Officer.

Matt Hodges: 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.

Matt Hodges: Expectations or projections these.

Matt Hodges: These risks and uncertainties include but are not limited to the factors identified in the earnings release and in our SEC filings.

Matt Hodges: The company undertakes no obligation to revise any forward looking statements.

Matt Hodges: Today's remarks also refer to certain non-GAAP financial measures by Contributions to the Most Comparable Gap Measures are included in today's earnings release, which is available at investors.academy.com. Please note that we have posted a supplemental slide presentation on our website to accompany today's earnings release. I will now turn the call over to Steve Lawrence for his remarks. Peace.

Matt Hodges: Days remarks also refer to certain non-GAAP financial measures.

Matt Hodges: Variations to the most comparable GAAP measures are included in today's earnings release, which is available at investors start Academy Dot com.

Matt Hodges: Note that we have posted a supplemental slide presentation on our website to accompany today's earnings release.

Matt Hodges: I will now turn the call over to Steve Lawrence for his remarks.

Matt Hodges: Steve.

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

Steven Paul Lawrence: Thanks, Matt. Good morning to everyone, and thank you for joining us on our fourth quarter earnings call. Our call today will provide details on the results for both Q4 and the 2023 full year. We'll also share a progress update on achieving our long-range goals and our thoughts on additional guidance for 2024. First, I'd like to start with our Q4 performance. As you saw from the results we announced earlier this morning, we had an improvement in our trend during the fourth quarter, with sales coming in at $1.8 billion, which was up 2.8% in total and translated into a negative 3.6% comp. This is a 400 basis point improvement in comp sales versus the negative 7.6% we ran during the first three quarters of the year. Our adjusted earnings per share for the fourth quarter came in at $2.21, an increase of 8% versus last year. We would characterize the cadence of the quarter as reverting back to the traffic patterns and volume progression that we traditionally saw pre-pandemic.

Steven Paul Lawrence: During our call today, we will provide details on our results for both Q4 and 2023 full year.

Steven Paul Lawrence: He will also share a progress update on achieving our long range goals and our thoughts on initial guidance for 2024.

Speaker Change: First I'd like to start with our Q4 performance as you saw from the results we announced earlier. This morning, we had an improvement in our trend during the fourth quarter sales coming in at $1 $8 billion, which was up two 8% in total and translated into a negative three 6% comp.

This was a 400 basis point improvement in comp sales trend versus a negative seven 6%. We ran during the first three quarters of the year.

Speaker Change: Our adjusted earnings per share for the fourth quarter came in at $2 21, an increase of 8% versus last year.

We would characterize the cadence of the quarter is reverting back to the traffic patterns and volume progression that we traditionally saw pre pandemic.

Steven Paul Lawrence: There was less pull-forward of demand in early November than we'd experienced over the last couple years when customers shopped early based on scarcity of supply. We then saw the traditional acceleration of business during Thanksgiving and Cyber Week, followed by a lull in traffic during the middle part of December. We finished the holiday with a strong surge of sales and traffic. The week leading up to Christmas is sustained into the post-Christmas time period and early January.

Speaker Change: There was less pull forward of demand in early November and we had experienced over the last couple of years when customer shopped early based on scarcity of supply.

We then saw the traditional acceleration in business during Thanksgiving and cyber week, followed by a law in traffic during the middle part of December.

Speaker Change: We finished holiday with a strong surge of sales and traffic week, leading up to Christmas the sustained into the post Christmas time period and early January.

Speaker Change: The sales increase who ran in December made it the strongest month for both the quarter and the past year.

Steven Paul Lawrence: The sales increase we ran in December made it the strongest month of both the quarter and the past year. Based on these results, when you pull back and look at the full-year 2023 sales, we came in at $6.2 billion, or negative 6.5% comp. These results were at the high end of our annual guidance and, on a 52-week basis, remain roughly up 25% versus pre-pandemic levels. Moving on to gross margin, the quarter came in at 33.3%, which is a 50 basis point improvement over last year. This increase was primarily driven by inventory and freight savings, partially offset by our merchandise margin. The holiday season played out as we anticipated.

Speaker Change: Based on these results when you pull back and look at the full year 2023 sales.

Speaker Change: We came in at $6 $2 billion or negative six 5% comp.

Speaker Change: These results were at the high end of our annual guidance and on a 52 week basis.

Speaker Change: <unk> roughly up 25% versus pre pandemic levels.

Speaker Change: Moving onto gross margin the quarter came in at 33, 3%, which is a 50 basis point improvement above last year.

Speaker Change: This increase was primarily driven by inventory and freight savings, partially offset by our merchandise margins.

Speaker Change: Holiday season played out as we anticipated it was more promotional in the past couple of Christmases, it's still not back to the discount levels that were kind of pre pandemic.

Steven Paul Lawrence: It was more promotional than the past couple of Christmases, but still not back to the discount levels that were common pre-pandemic. For the full year, our gross margin rate came in at 34.3%, or 30 basis points below last year, which was at the high end of our guidance, and remains roughly 500 basis points higher than the margins we ran pre-pandemic. A combination of sales and margin performance allowed us to generate adjusted earnings per share for the full year of $6.96.

Speaker Change: For the full year, our gross margin rate came in at 34, 3% or 30 basis points below last year, which was at the high end of our guidance remains roughly 500 basis points higher than the margins we ran pre pandemic.

Speaker Change: Combination of sales and margin performance allowed us to generate adjusted earnings per share for the full year of $6.96.

Speaker Change: Now I'd like to give you an update on our progress against the long range plan goals, we issued in April of 2023, and our path towards achieving them as we move forward.

Steven Paul Lawrence: Now I'd like to give you an update on our progress against the long-range plan goals we issued in April of 2023 and our path towards achieving them as we move forward. 2023 was a busy year for us, and we made progress across multiple fronts. We opened 14 new stores, which is five more stores than we opened in 2022. The team is applying learnings from the prior year's openings, and as a result, these stores are projected to have higher year-one volume than the 22nd vintage. We also installed our new customer data platform, which is going to be a huge asset for us moving forward as we gain greater insights into our customer shopping patterns. This new tool allows us to increase our targeted marketing capabilities, which we believe will drive more store visits and greater sales through our conversions. The team also laid the groundwork for the launch of our new Warehouse Management System, or WMS for short, which will be rolling out to all of our distribution centers over the next 18 to 24 months. We're also proud to give back to the communities we serve.

Speaker Change: 2023 was a busy year for us and we made progress across multiple fronts.

Speaker Change: We opened 14, new stores, which is five more stores than we opened in 2022.

Speaker Change: The team is applying learnings from the prior year's openings and as a result, he starts are projected to have a higher year, one volume than the 22 vintage.

Speaker Change: We also installed our new customer data platform, which is going to be a huge unlock for us moving forward as we gain greater insight to our customer shopping patterns.

Speaker Change: This new tool allows us to increase our targeted marketing capabilities, which we believe will drive more store visits and greater sales through our conversion rates.

Speaker Change: The team also laid the groundwork for the launch of our new warehouse management system for WNS for short, which will be rolling out to all of our distribution centers over the next 18 to 24 months.

Speaker Change: We're also proud to get back to the communities we serve.

Steven Paul Lawrence: In 2023, through direct giving, partnership support, merchandise discounts, and various organizations, Academy distributed over $30 million to our customers and local and national charities. Another important accomplishment for us was the strengthening of our executive team, with the addition of Chad Fox as our new Chief Customer Officer and Rob Howell as our Chief Supply Chain Officer. The addition of these two talented and experienced executives, coupled with combining supply chain and stores under our president, Sam Johnson, provides the right structure and team to help accelerate our progress against our long-range goals. Well, we made good headway across multiple fronts. One place we failed to make progress was growing our top-line sales. We believe that the primary driver of our sales decline is underlying weakness in consumer spending on durable goods due to a weakening in overall consumer health.

Speaker Change: 2023 through direct getting partnership support merchandise discounts various organizations academy distributed over $30 million of our customers and local and national charities.

Speaker Change: Another important accomplishment for US was the strengthening of our executive team with the addition of Chad Fox as our new Chief customer Officer, and Rob how is our chief supply chain officer.

Speaker Change: The addition of these two talented and experienced executives coupled with combining supply chain of stores under our President Sam Johnson provides the right structure and team to help accelerate our progress against our long range goals.

Speaker Change: While we made good headway across multiple fronts, one place we failed to make progress growing our topline sales.

Speaker Change: We believe that the primary driver of our sales decline was underlying weakness in our consumer spending on durable goods due to a weakening in overall consumer health.

Speaker Change: Matt This we're increasing our focus around delivering an outstanding value proposition of our customers in order to help them stretch their wallet is to outfit their family for all of their sports and outdoor activities.

Steven Paul Lawrence: In Baptist, we're increasing our focus around delivering an outstanding value proposition to our customers in order to help them stretch their wallets as they outfit their families for all of their sports and outdoor activities. A great example of this is a promotion we just ran to kick off baseball in early March. The team created a package where we provided a parent with all the gear their child would need to start t-ball, including a glove, hat, helmet, pants, and bag, all for under $100.

Speaker Change: A great example of this is a promotion we just ran to kick off baseball in early March.

Speaker Change: The team created a package where he provided apparent all the gear their child would need to start tee ball.

Speaker Change: Our glove Cat Talbot canton bag offer under $100.

Steven Paul Lawrence: In other cases, we'll be lowering prices in key categories such as bikes and grills as we head into the summer months. Turning to slide five of the supplemental deck, while we continue to manage through the short-term choppiness in the business, we remain focused on delivering against the long-range goals that we articulated last spring. To reiterate a few of the key metrics, our plan is to grow top line sales to $10 billion, generate earnings of 10% or greater, and achieve a 13.5% adjusted EBIT margin rate. Forever.com penetration to 15% of total revenue or greater.

Speaker Change: In other cases, we'll be lowering prices in key categories, such as bikes and grills as we head into the summer months.

Speaker Change: Turning to slide five of the supplemental deck, while we continue to manage through the short term choppiness in the business.

Speaker Change: <unk> focused on delivering against our long range goals that we articulated last spring.

Speaker Change: To reiterate a few of the key metrics. Our plan is to grow top line sales to $10 billion plus.

Speaker Change: Generate earnings at 10% or greater.

Speaker Change: She's a 13, 5% adjusted EBIT margin rate.

Speaker Change: However, dotcom penetration of 15% of total revenue or greater.

Speaker Change: Not fully investing our cash flows into initiatives to drive a 30% Oh I see.

Steven Paul Lawrence: The The The The The The, We've learned a lot over the past year, and as we move forward, we will continue to refine the tactics that support us achieving our long-range goals. We did a deep dive on the 23 stores that we opened up in 2022 and 2023. They're applying the lessons we've learned from these two vintages for our new store opening plans moving forward. Page 7 of the supplemental deck details how we're fine-tuning our forecast for new store openings. Initially, we modeled 120 to 140 stores with a year one volume target of $18 million that would mature over five years. The majority of the stores that we've opened up over the past few years have been in Newark. As we've discussed previously, we're seeing faster ramps in stores opening in existing markets.

Speaker Change: We've learned a lot over the past year and as we move forward, we will continue to refine the tactics for us achieving our long range goals.

Speaker Change: We've done a deep dive on the 23 stores will be opened up in 2022 and 2023.

Speaker Change: We're applying the lessons we've learned from these two vintages for a new store opening plans moving forward.

Speaker Change: Page seven of the supplemental deck details, how we're fine tuning our forecast for new store openings.

Speaker Change: Initially the modeled 120 to 140 stores a year, one volume target of $18 million that will mature over five years.

Speaker Change: The majority of the stores that we've opened up over the past few years have been in newer markets.

Speaker Change: As we've discussed previously we're seeing faster ramps in stores opened in existing markets, we have higher brand awareness and slower ramps of stores opened in newer markets.

Steven Paul Lawrence: We have higher brand awareness and slower ramp-up in stores open in newer markets, so customers are less familiar with Academy. Based on this, we're revising our new store forecast for year-one sales volume to be between $12 to $16 million with a five-year ramp to maturity. A second change is how we're building out and sequencing our new store pipelines. Moving forward, we'll strive for a better balance each year, with roughly half the new stores being opened in existing markets and the other half in new or adjacent markets. It's also important for us to balance our openings by time of year.

Speaker Change: Customers are less familiar with academy.

Speaker Change: Based on this revising our new store forecast for year, one sales volume to be between $12 million to $16 million with a five year ramp to maturity.

The second change is how we're building out and sequencing our new store pipeline.

Speaker Change: Going forward, we will strive for a better balance each year, it's roughly half the new stores being opened in existing markets and the other half in new or adjacent markets.

Speaker Change: It's also important for us to balance our openings by time of year.

Steven Paul Lawrence: We've learned that stores open in the first half of the year get out of the gate faster than stores open in Q3 and Q4. Based on this, starting in 2025 and forward, we're building our new store pipeline to support roughly 50% of the stores for each year to open in the first and second quarters. Another win is that we've seen strong results in smaller and mid-sized markets. However, these stores may have slightly lower volume potential.

We've learned at stores opened in the first half of the year and get out of the gate faster than stores open up in Q3 and Q4.

Based on this starting in 2025 and forward for building, our new store pipeline to support roughly 50% of the stores for each year to open up the first and second quarters.

Another win is it we've seen strong results in smaller and mid sized markets.

Speaker Change: While these stores may have slightly lower volume potential and favorable expense structure. It tastes Romney stores helps ensure the profitable investments and clear Oh I see hurdles.

Steven Paul Lawrence: The favorable expense structure it takes to run these stores helps ensure profitable investments and clear our ROIC hurdles. As we build out our future pipeline, we're opening the aperture of our consideration set to include more single or two-store markets versus focusing primarily on large multi-store markets. Once again, it will be a balanced approach between various market sizes. Finally, over the past 18 months, we've opened up four new stores in southern and central Indiana. Well, they did not all open on the same weekend.

Speaker Change: As we build out our future pipeline.

Speaker Change: We're opening the aperture of our consideration set including board single or two store markets.

Speaker Change: Focusing primarily on large multi store markets.

Speaker Change: Once again will be a balanced approach between various market sizes.

Speaker Change: Finally over the past 18 months, we've opened up four new stores in southern and Central Indiana.

Speaker Change: Well they did not all opened in the same weekend, having a cluster of stores that opened in a relative close time proximity to each other helps us gain greater efficiencies across multiple fronts.

Steven Paul Lawrence: Having a cluster of stores that opened in a relatively close proximity to each other helps us gain greater efficiencies across multiple fronts with the clear wind being and driving greater marketing synergy. As we move into 2025 and beyond, our goal will be to go into new markets with a greater density of new store openings around the same time. The end result of all this work is that we believe we have an opportunity to open up even more stores than we initially modeled in our long-range plan. As you can see on slide number seven, our revised new store growth plan now projects 160 to 180 stores over the next five years with a target of 15 to 17 of them opening up in 2024.

Speaker Change: Clear when being in driving greater marketing synergy.

Speaker Change: As we move into 2025 and beyond our goal will be to go into new markets with a greater density of new store openings around the same time.

Speaker Change: The end result of all this work is that we believe we have an opportunity to open up even more stores than we initially modeled in our long range plan.

As you can see on slide number seven our revised new store growth plan not projects of 160 to 180 stores over the next five years with a target of 15 to 17 of them opening up in 2024.

Speaker Change: The second pillar of our growth strategy is to drive our dot com penetration of 15% of total revenue.

Steven Paul Lawrence: The second pillar of our growth strategy is driver.com penetration of 15% of total revenue. On the surface, this doesn't seem like an overly audacious goal when you consider that many other retailers are already at or above this level of penetration. However, when you consider that we're expanding our store base by greater than 50% during the same time period, it means that we'll have to double our dot-com sales over the next five years in order to hit this goal, which we would characterize as challenging but achievable. The major driver of this strategy will be to have a laser focus on the customer with a mission to seamlessly streamline the shopping experience across all touch points.

Speaker Change: On the surface. This doesn't seem like an overly audacious goal when you consider that many other retailers are already at or above this level of penetration.

Speaker Change: However, when you consider that we're expanding our store base by greater than 50%. During the same time period. It means that we'll have to double our dotcom sales over the next five years in order to hit this goal, which we would characterize as challenging but achievable.

Speaker Change: The major driver of this strategy will be to have a laser focus on the customer with a mission to seamlessly streamline the shopping experience across all touch points.

Steven Paul Lawrence: This was the primary reason we recently created our new Chief Customer Officer position and hired Chad Fox to fill this role. We combine our marketing, customer analytics, and e-commerce teams into one organization to make us more nimble while also driving greater synergies across the organization. Chad is a seasoned executive who has helped other large retailers such as Walmart and Dollar General accomplish these same goals.

Speaker Change: This was the primary reason, we recently created a new chief customer officer position and higher Chad Chad Fox to fill this role.

Speaker Change: You combine our marketing customer analytics and e-commerce teams into one organization make us more nimble, while also driving greater synergies across the organization.

Speaker Change: That is a seasoned executive who has helped other large retailers such as Walmart and dollar general accomplish the same goals.

Speaker Change: He is a data driven merchant who's going to help us lever, our new customer data platform drive greater customer engagement and new customer acquisition.

Steven Paul Lawrence: She's a data-driven merchant who's going to help us leverage our new customer data platform, drive greater consumer engagement, and new customer acquisition. Key focuses for Chad over the next year will be driving increased traffic to our physical and digital stores, dramatically improving the site experience on both academy.com and our mobile app, and improving customer identification and engagement with the rollout of an expanded loyalty program.

Speaker Change: He focuses for chat over the next year will be driving increased traffic to our physical and digital stores.

Speaker Change: Dramatically improving the site experience on both Academy Dot Com and our mobile App and.

Speaker Change: And improving customer identification engagement with the rollout of an expanded loyalty program.

Speaker Change: The third leg of our growth plan is to drive greater productivity out of our existing businesses and assets.

Steven Paul Lawrence: The third leg of our growth plan is to drive greater productivity out of our existing businesses and assets. We've made a lot of progress in upgrading our merchandising processes and procedures along with our store execution over the past several years, which has resulted in the volume and margin gains that we've made. While these initiatives are in the middle to later innings, we believe there's still opportunity for improvement on both these fronts. The work that Chad and his team are focused on will also help accelerate growth from these initiatives.

Speaker Change: We've made a lot of progress in upgrading our merchandising processes and procedures, along with our store execution over the past several years, which has resulted in the volume and margin gains that we've made.

Speaker Change: While these initiatives are in the middle to later earnings we believe that there is still opportunity for improvement on both these fronts.

Speaker Change: So with that Chad and his team are focused on will also help accelerate growth from these initiatives.

Steven Paul Lawrence: Where we believe we have the most untapped opportunity to improve efficiency is the work we're undertaking to strengthen our supply chain infrastructure and capabilities. Hiring Rob Howell as our new Chief Supply Chain Officer will be a huge unlock for us as we build out our supply chain capabilities. He is a skilled strategist who helped develop a world-class supply chain for Cisco. His deep experience of working with Manhattan could also help us ensure that the WMS rollout we're embarking on over the next 18 to 24 months goes as smoothly as possible.

Chad Fox: What do we believe we have the most untapped opportunity to improve efficiency.

Chad Fox: The work, we are undertaking to strengthen our supply chain infrastructure and capabilities.

Chad Fox: Hiring Rob how is our new chief supply chain officer will be a huge unlock for us as we build out our supply chain capabilities.

Chad Fox: As a skilled strategist well develop a world class supply chain for Cisco.

Chad Fox: His deep experience in working with Manhattan. It also help us ensure that the WNS rollout we're embarking on over the next 18 to 24 months was as smooth as possible.

Steven Paul Lawrence: In the short term, we'll focus on improving our cross-stock receipt flow and speeding up the pace at which receipts move out to the store. This will allow us to reduce the average inventory we carry, resulting in increased turnover while also freeing up cash flow. Rob will also be reviewing the current assumptions in our long-range plan to identify ways to drive greater efficiencies across all of our existing assets.

In the short term with.

Chad Fox: Our focus on improving our cross dock with people and speeding up the pace at which we speak to move out to the stores.

Chad Fox: This will allow us to reduce the average inventory we carry resulting in increased turnover also freeing up cash flow.

Chad Fox: Rob will also be reviewing the current assumptions in our long range plan and identify ways to drive greater efficiencies across all of our existing assets.

Steven Paul Lawrence: One preliminary outcome from this review is that we now believe we can deliver improved utilization out of our existing DC network. The result of this is that our forecasted need for a fourth distribution center will move from a 2026 go-live to 2027 or 2028. As you can see, we're making solid progress across multiple fronts. That being said, as we turn our focus to 2024 guidance, the short-term economic outlook remains cloudy. The customer continues to be under pressure and is being very thoughtful about when and how they will spend their money. The upcoming election, coupled with a compressed holiday calendar, also adds a degree of uncertainty to the outlook for the year.

Chad Fox: Preliminary outcome from this review we now.

I believe we can deliver improved utilization of our existing D C network.

Chad Fox: Walter This is that our forecasted need of a fourth distribution center will move May 2026 go lives 2027 or 2028.

Chad Fox: As you can see we're making solid progress across multiple fronts.

Chad Fox: That being said as we turn our focus to 'twenty to 'twenty four guidance the short term economic outlook remains cloudy.

Customer continues to be under pressure and is being very thoughtful around when and how they will spend their money.

Chad Fox: Yeah coming election, coupled with a compressed holiday calendar also adds a degree of uncertainty to the outlook for the year.

Chad Fox: Based on these factors, we are conservatively modeling a negative four to plus one comp for next year, which would translate into a negative one and a half plus 3% total sales growth for the year.

Earl Carlton Ford: Based on these factors, we're conservatively modeling a negative four plus one comp for next year, which would translate into a negative one and a half plus three percent total sales growth for the year. We believe this is a prudent base to build our expense and receipt plans off of, knowing that we can chase the business. If we see the headwinds abate, they'll start trending upwards. I'm now going to turn it over to Carl Ford, our CFO, to walk you through a deeper dive on our Q4 and full-year financial performance, along with an expanded look at our 2024 guidance. Carl?

Chad Fox: We believe this is a prudent base to build our expense mercy plans off of knowing that we can chase the business. If we see the headwinds abate they'll start trending upward.

Chad Fox: I'm now going to turn it over to Carl for her CFO walk you through a deeper dive on our Q4 and full year financial performance along with an expanded look at our 2024 guidance Carl.

Earl Carlton Ford: Thanks, Steve Good morning, everyone, while our topline in Q4 and full year was impacted by our customer being financially pressured we diligently controlled inventory and operating costs, which enabled us to generate healthy cash flows and profits as well as invest in future growth drivers I will now walk you through.

Earl Carlton Ford: Thanks, Steve. Good morning, everyone. While our top-line Q4 and full year results were impacted by our customer being financially pressured, we diligently controlled inventory and operating costs, which enabled us to generate healthy cash flows and profits, as well as invest in future growth drivers. I will now walk you through the details of our fourth quarter and full year results. Our fourth quarter net sales came in at $1.8 billion with a comp of negative 3.6%.

Earl Carlton Ford: The details of our fourth quarter and full year results.

Earl Carlton Ford: Our fourth quarter net sales came in at $1 8 billion with a comp of negative three 6%.

Earl Carlton Ford: This was at the upper end of our expectations, led by December sales that were higher than last year. So we were pleased with the trajectory change from prior quarters. While customers were financially stressed, they responded to our strong value message across a broad assortment of products. For the quarter, ticket size increased by 1% while transactions declined by 5%.

Earl Carlton Ford: This was at the upper end of our expectations.

Led by December sales that were higher than last year. So we were pleased with the trajectory change from prior quarters, while customers were financially stressed they've responded to a strong value message across a broad assortment of products for.

Earl Carlton Ford: For the quarter ticket size increased by 1% while transactions declined by 5%.

Earl Carlton Ford: E-commerce sales were 14.7% of total merchandise sales compared to 13.5% in the fourth quarter of 2022. Our fourth quarter of 2023 had an extra week of sales. So when discussing divisional sales compared to last year, we are providing comparable sales by division instead of total sales for a more accurate comparison. The best performing division was Outdoor, whose sales increased 6.3% compared to Q4 of last year. Driven by Strength in Hunting and Camping. Within camping, the standouts were Stanley and Yeti.

Earl Carlton Ford: E Commerce sales were 14, 7% of total merchandise sales compared to 13, 5% in the fourth quarter of 2022.

Earl Carlton Ford: Our fourth quarter 2023 had an extra week of sales so when discussing divisional sales to last year, we are providing comparable sales by division instead of total sales for a more accurate comparison.

Earl Carlton Ford: The best performing Division was outdoor sales increased six 3% compared to Q4 of last year.

Earl Carlton Ford: Driven by strength in hunting and camping.

Earl Carlton Ford: Within camping, the standouts for Stanley and Yeti.

Earl Carlton Ford: Both brands did an outstanding job of driving newness through color and product extensions, such as the barware collection that Yeti rolled out prior to the holiday. Apparel was our second-best division with a 6% sales decrease. We saw growth in work apparel and fleece driven by Carhartt and Nike, offset by declines in outdoor and athletic apparel. Footwear sales declined 8.8%.

Earl Carlton Ford: Our brands did an outstanding job of driving newness through color and product extensions such as the Barware collection, but yet he rolled out prior to holiday.

Apparel was our second best Division with a 6% sales decrease.

Earl Carlton Ford: We saw growth in work apparel, and police driven by carhartt, and Nike offset by declines in outdoor and athletic apparel.

Earl Carlton Ford: Footwear sales declined eight 8%, we continue to see outperformance in key brands such as Brooks.

Earl Carlton Ford: We continue to see outperformance in key brands such as Brooks, A-Dude, and Nike. One area that struggled was our cleated business. Cleats were one of our last businesses to fully get back in stock, and we faced strong sales in Q4 of last year that were still being driven by some scarcity in the marketplace and the World Cup. Recreation sales decreased 8.9%.

Earl Carlton Ford: Jude and Nike one area, that's struggled was our Cleveland business.

Earl Carlton Ford: We used to have one of our last business is to fully get back in stock and we faced strong sales from Q4 of last year that were still being driven by some scarcity in the marketplace and the World Cup.

Earl Carlton Ford: Last sports and recreation sales decreased eight 9%.

Earl Carlton Ford: Growth in outdoor cooking and games was offset by continued weakness in fitness and bikes. For the full year, net sales were $6.2 billion, with comparable sales of negative 6.5%. E-commerce sales were 10.7% of total merchandise sales, which was the same as last year. Looking at gross margins, the gross margin rate in the fourth quarter was 33.3%, a 50 basis point increase compared to Q4 of last year. Merchandise margins declined by 40 basis points, and shrink was 37 basis points worse than Q4 of last year. However, these declines were offset by inventory and freight savings. For the full year, our gross margin rate was 34.3%. Freight savings were offset by merchandise margin and shrink declines, leading to a 30 basis point decline compared to last year.

Earl Carlton Ford: Growth in outdoor cooking and games was offset by continued weakness in fitness and bikes.

Earl Carlton Ford: For the full year net sales were $6 2 billion with comparable sales of negative six 5%.

E Commerce sales were 10, 7% of total merchandize sales, which was the same as last year.

Earl Carlton Ford: Looking at gross margins the gross margin rate in the fourth quarter was 33, 3%, a 50 basis point increase compared to Q4 of last year.

Earl Carlton Ford: Merchandise margins declined by 40 basis points and shrink was 37 basis points worse than Q4 of last year.

Earl Carlton Ford: These declines were offset by inventory and freight savings for.

For the full year, our gross margin rate was 34, 3% freight.

Freight savings were offset by merchandise margin and shrink declines leading to a 30 basis point decline compared to last year.

Earl Carlton Ford: This is the third consecutive year that our gross margin rate has exceeded 34%.

Earl Carlton Ford: This is the third consecutive year that our gross margin rate has exceeded 34%. This demonstrates that the merchandising and operational changes made over the last few years, such as the investments made in price optimization and planning and allocation, as well as better clearance and promotion management, and disciplined inventory management, are now reflected in the long-term margin structure of Academy. We continue to find opportunities in these areas to drive margin improvement through technology enhancements and stronger processes. During the fourth quarter, our SG&A delevered by 80 basis points.

Earl Carlton Ford: This demonstrates that the merchandising and operational changes made over the last few years, such as the investments made and price optimization and planning and allocation as well as better clearance and promotions management and disciplined inventory management are now reflected in the long term margin structure of the Academy.

Earl Carlton Ford: We continue to find opportunities in these areas to drive margin improvement through technology enhancements and stronger processes.

Earl Carlton Ford: During the fourth quarter, our SG&A deleveraged by 80 basis points, we are focused on managing our cost structure, while investing in the pillars of our long term growth strategy.

Earl Carlton Ford: We are focused on managing our cost structure while investing in the pillars of our long-term growth strategy. More than 75% of the dollars spent above last year were for investments in our growth initiatives, new stores, omni-channel, customer data, and supply chain. For the full year, over 90% of the SG&A dollar growth was spent on our growth initiatives. Overall, we controlled inventory, promotions, and expense to deliver net income during the fourth quarter of $168.2 million, a 6.7% increase over last year. Gap's Diluted Earnings Per Share was $2.21 for the fourth quarter and $6.70 for fiscal 2023.

Earl Carlton Ford: More than 75% of the dollar spent above last year were for investments in our growth initiatives new stores.

Earl Carlton Ford: Army channel customer data and supply chain.

Earl Carlton Ford: For the full year over 90% of the SG&A dollar growth was spent on our growth initiatives.

Earl Carlton Ford: Overall, we controlled inventory promotions and expense to deliver net income during the fourth quarter of $168 2 million, a six 7% increase over last year.

Earl Carlton Ford: GAAP diluted earnings per share was $2.21 for the fourth quarter and $6 70 for fiscal 2023.

Earl Carlton Ford: Adjusted Diluted Earnings per Share was also $2.21 for Q4 and $6.96 for fiscal 2023. Looking at the balance sheet, our inventory at year end was $1.2 billion, a decrease of 7% compared to fiscal 2022. Total inventory units were down 7.2%, and this includes having an additional 14 stores compared to fiscal 2022. On a per store basis, inventory units were down 11.8%.

Earl Carlton Ford: Adjusted diluted earnings per share was also $2.21 for Q4 at $6 96 for fiscal 2023.

Earl Carlton Ford: Looking at the balance sheet, our inventory at year end was $1 2 billion, a decrease of 7% compared to fiscal 2022.

Earl Carlton Ford: Total inventory units were down seven 2% and this includes having an additional 14 stores compared to fiscal 2022 on.

On a per store basis inventory units were down 11, 8%.

Earl Carlton Ford: We've had a balanced approach to capital allocation since going public in October of 2020.

Earl Carlton Ford: We have had a balanced approach to capital allocation since going public in October of 2020. The three pillars of our strategy are maintaining adequate liquidity for financial stability, Self-Funding Our Growth Initiatives, and Increasing Shareholder Returns. Our cumulative shareholder return over this time period is more than 500%, driven by operational execution and more than $1 Billion of share repurchases. We have also reduced our debt by almost $1 billion and paid more than $50 million in dividends. As a result of these actions, Academy is one of the highest returning stocks from the class of 2020 IPOs. During Q4 and fiscal 2023, Academy continued to generate positive net cash from operations. In Q4, we generated approximately $235 million, and $536 million for the full year. We utilize the cash to pay down $100 million of the company's term loan, reducing the outstanding balance to $91.8 million.

Earl Carlton Ford: The three pillars of our strategy are maintaining adequate liquidity for financial stability.

Earl Carlton Ford: Self funding our growth initiatives and increasing shareholder return.

Earl Carlton Ford: Our cumulative shareholder return over this time period is more than 500%.

Earl Carlton Ford: Driven by operational execution and more than $1 billion of share repurchases.

Earl Carlton Ford: We have also reduced our debt by almost $1 billion and paid more than $50 million in dividends.

Earl Carlton Ford: As a result of these actions Academy is one of the highest returning stocks from the class of 2020 Ipos.

Earl Carlton Ford: During Q4 and fiscal 2023 Academy continues to generate positive net cash from operations.

Earl Carlton Ford: In Q4, we generated approximately $235 million and 536 million for the full year.

Earl Carlton Ford: We utilize the cash to pay down 100 million of the company's term loan reducing the outstanding balance to $91 8 million.

Earl Carlton Ford: After the paydown, we have $348 million in cash, $484.6 million of total debt, and no outstanding borrowings on our $1 billion credit facility, which was recently amended and extended through March of 2029. During Q4, we repurchased approximately $3 million worth of shares. For all of fiscal 2023, we decreased our net share count by $3.7 million through $204 million in share repurchases. As of the end of the fiscal year, Academy has $697 million remaining on its share repurchase authorization.

Earl Carlton Ford: After the pay down we have $348 million in cash for.

Earl Carlton Ford: $484 6 million of total debt and no outstanding borrowings on our $1 billion credit facility, which was recently amended and extended through March of 2029.

Earl Carlton Ford: During Q4, we repurchased approximately $3 million worth of shares.

Earl Carlton Ford: For all of fiscal 2023, we decreased our net share count by $3 7 million.

Earl Carlton Ford: Through $204 million in share repurchases.

Earl Carlton Ford: As of the end of the fiscal year Academy has $697 million remaining on its share repurchase authorization.

Earl Carlton Ford: In addition, the Board recently approved a 22% dividend increase to $0.11 per share payable on April 18, 2024 to stockholders of record as of March 26, 2024. Heading into 2024, we have the cash to fund our growth initiatives and to continue to execute our capital allocation plans. Turning to 2024 guidance and slide eight of the deck, we expect to operate in a challenging economic environment as the current macro dynamics are still impacting our customers. We are going to run the business as efficiently as possible while also making investments that support our long-term strategic opportunities as outlined on slide six. Opening new stores and growing our omni-channel business. Leveraging our customer data platform and modernizing and scaling our supply chain. Based on this, Academy is providing the following initial guidance for fiscal 2024.

Earl Carlton Ford: In addition, the board recently approved a 22% dividend increase to 11 cents per share payable on April 18th 2024 to stockholders of record as of March 'twenty six 'twenty 'twenty four.

Earl Carlton Ford: Heading into 2024, we have the cash to fund our growth initiatives and to continue to execute our capital allocation plan.

Earl Carlton Ford: Turning to 2020 for guidance and slide eight of the deck, we expect to operate in a challenging economic environment as the current macro dynamics are still impacting our customers.

Earl Carlton Ford: We are going to run the business as efficiently as possible, while also making investments that support our long term strategic opportunities.

Earl Carlton Ford: As outlined on slide six opening new stores.

Earl Carlton Ford: Growing our omni channel business.

Leveraging our customer data platform, and modernizing and scaling our supply chain base.

Earl Carlton Ford: Based on this academy is providing the following initial guidance for fiscal 2024.

Earl Carlton Ford: Net sales ranged from $6.07 billion to $6.35 billion. At the midpoint, this is 2% growth compared to fiscal 2023 when excluding the $73 million in sales related to the 53rd week. Comparable sales of negative 4% to positive 1%; Gross Margin Rate between 34.3% and 34.7%. Gap Net Income between $455 million and $530 million, resulting in gap diluted earnings ranging from $5.90 per share to $6.90 per share. The earnings per share estimates are calculated on a share count of approximately 77 million diluted weighted average shares outstanding for the full year and do not include any potential repurchase activity.

Earl Carlton Ford: Net sales ranging from six 7 billion to $6 three 5 billion.

At the midpoint. This is 2% growth compared to fiscal 2023, when excluding the $73 million in sales related to the 50 <unk> week.

Earl Carlton Ford: Comparable sales of negative 4% to positive 1%.

Earl Carlton Ford: Gross margin rate between a 34, 3% and 34, 7%.

GAAP net income between $455 million and $530 million, resulting in GAAP diluted earnings ranging from $5 90 per share to $6 90 per share.

Earl Carlton Ford: The earnings per share estimates are calculated on a share count of approximately 77 million diluted weighted average shares outstanding for the full year and do not include any potential repurchase activity.

Earl Carlton Ford: In 2024, we will no longer be guiding to adjusted net income or adjusted earnings per share.

Earl Carlton Ford: In 2024, we will no longer be guiding to adjusted net income or adjusted earnings per share. Instead, any adjustments, such as stock compensation, will be provided in the quarterly results. S.G.N.A. expenses, which include stock-based compensation expense of 30 million, or approximately 30 cents of earnings per share, are expected to be approximately 100 basis points higher than in 2023. Interest expense is expected to be $38 million, down from $46 million in fiscal 23 due to our reduced debt levels.

Earl Carlton Ford: The adjustments such as stock compensation will be provided in the quarterly results.

Earl Carlton Ford: SG&A expenses, which include stock based compensation expense of $30 million or approximately 30 cents of earnings per share are expected to be approximately 100 basis points higher than in 2023.

Interest expense is expected to be $38 million down from 46 million in fiscal 'twenty three due to our reduced debt levels.

Earl Carlton Ford: We expect to generate $290 million to $375 million of free cash flow, including $225 million to $275 million of capital expenditures. As we begin a new year, we are focused on addressing our opportunities to return to growth and delivering long-term value to our customers and stakeholders. I will now turn the call back over to Steve. Thanks, Carl.

Earl Carlton Ford: We expect to generate 290 million to 375 million of free cash flow, including 225 million to 275 million of capital expenditures.

Earl Carlton Ford: As we begin a new year, we are focused on addressing our opportunities to return to growth and delivering long term value to our customers and stakeholders.

Earl Carlton Ford: I will now turn the call back over to Steve.

Steven Paul Lawrence: Thanks, Carl as we turn our focus to 2024 and beyond we remain committed to our long range targets.

Steven Paul Lawrence: As we turn our focus to 2024 and beyond, we remain committed to our long-range target. We've taken the lessons we've learned over the past year and have leveraged them to help improve our go-forward strategy. We believe that this refined approach to new store openings, coupled with an increased focus on improving the customer experience and driving more productivity in our supply chain, will be the key to driving growth and unlocking value for our shareholders. We have put in place a strong, talented team to help guide the company through our next phase of growth, and we're energized and optimistic about the future of our academy. Academy Sports & Academy Sports & Thank you.

Steven Paul Lawrence: We've taken the lessons we've learned over the past year, and if leverage them to help improve our go forward strategies.

Steven Paul Lawrence: We believe that this refined approach to new store openings, coupled with an increased focus on improving customer experience.

Steven Paul Lawrence: Having more productivity out of our supply chain with the keys to driving growth and unlocking value for our shareholders.

Steven Paul Lawrence: We've put in place a strong talented team helped guide the company through our next phase of growth and we're energized and optimistic about the future for Academy.

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

Speaker Change: Thank you.

Unknown Executive: The company will now open the call up for your questions. To ask your question, please press star 1. As a reminder, we ask that you please limit your questions to one and one follow-up. We will pause for a moment. My first question comes from Simeon Gutman with Morgan Stanley. Please proceed with your question. Hey guys, thanks for the question. My first question is about thinking about the normalized comp rate for the business. It's, you know, three years sort of post-COVID, and the business did really well, but it is still comping negative. And I don't know if it's taking longer in your mind to turn the corner or not, but because it is, does that affect the normalized comp rate going forward, especially since you're adding more stores? Yeah, thanks for the question.

Speaker Change: The company will now open the call up for your questions to ask your question. Please press star one.

Speaker Change: As a reminder, we ask that you please limit to one question and one follow up we.

Speaker Change: We will pause for a moment to let the Q Phil.

Speaker Change: Okay.

Speaker Change: My first question comes from Simeon Gutman with Morgan Stanley. Please proceed with your question.

Simeon Gutman: Hey, guys.

Simeon Gutman: Thanks for the question My first question is on.

Simeon Gutman: Thinking about the normalized comp rate for the business. It's you know three years sort of post COVID-19 and the business did really well, but it is still comping negative.

Simeon Gutman: I don't know if it's taking longer in your mind to turned the corner or not but because it is does that affect the normalized comp rate going forward, especially since you're adding more stores.

Speaker Change: Yeah. Thanks for the question so how we would characterize it as we.

Steven Paul Lawrence: So how we would characterize it is we have a challenged customer, not necessarily a challenged strategy. We really believe in the long-range goals that we put forward out there. If you go back, as you pointed out, we obviously had pretty strong growth in 2020 and 2021, and then we saw a pullback in 22.

Speaker Change: We have a challenge customer not necessarily a challenge strategy, we really believe and obviously the long range goals that we put forward out there.

Speaker Change: If you go back as you pointed out we obviously had a pretty strong growth in 2000 2000 22020 in 2021, and then we saw a pullback in 'twenty. Two we think that was startup rebase lining coming out of Covid that continued into 'twenty three I think as we got through 'twenty. Three that's why we put some commentary in there around we're starting to see that kind of builds on a weekly monthly basis.

Steven Paul Lawrence: We think that was the start of a rebase line coming out of COVID that continued into 23. I think as we got through 23, that's why we put some commentary in there around we're starting to see the kind of builds on a weekly, monthly basis return to the pre-COVID time period. So we feel like we're past a lot of that rebase lining. What we're dealing with right now is primarily a challenged customer. And I think that's pretty well documented.

Speaker Change: Returned to pre Covid.

Time periods. So we feel like we're past a lot of that re baseline what we're dealing with right. Now is primarily a challenged customer and I think that's pretty well documented them. Obviously inflation continues to be pretty high consumer debt is pretty high and what that's really translating into as a customer whose is behaving.

Steven Paul Lawrence: Obviously, inflation continues to be pretty high, and consumer debt's pretty high. And what that's really translating into is a customer who's behaving in a specific way. They're shopping for newness, they're shopping for value, and they're coming out and shopping at key time periods during the year when they need to shop, whether it's a replacement cycle, as a kid starts a new sports season, or gift

Speaker Change: In a specific way there they're shopping for newness, they're shopping for value and they are coming out and shopping at key time periods during the year when they need to shop, whether it's a replacement cycle as a kid starts a new sports season, or a gift, giving time and so that's really how we've modeled our business and built it moving forward.

Steven Paul Lawrence: And so that's really how we've modeled our business and built it moving forward. The one follow-up related question is, I think just to clarify what you said, the stores that you're opening in the existing market are performing better relative to either new space productivity or a comp order fall second, third year than you thought. It's the stores that are in markets in which you don't have a presence that are ramping more slowly. Is that a fair characterization?

Speaker Change: And then one follow up related is I think just.

Speaker Change: Clarify what you said the stores that you're opening in existing markets. Those are performing better relative to either new space productivity or a comp waterfall second third year than you thought at the stores that are in markets in which you don't have a presence that had been ramping slow more slowly.

Speaker Change: Is that a fair characterization.

Steven Paul Lawrence: Yeah, that's correct. And that's why we went into some pretty good detail on that. I mean, it stands to reason where we've got high brand awareness. You know, we're seeing those stores start out very, very strong. And some of these smaller markets where we're going in with one or two stores at a time, it's taking a little longer to build brand awareness.

Speaker Change: Yeah, that's correct I mean, and that's why I went into some pretty good detail on that I mean, it stands to reason, where we've got high brand awareness.

Speaker Change: You know, we're seeing those stores start out very very strong.

Speaker Change: And some of these smaller markets, where we're going in with one or two stores at a time, it's taking a little longer to build brand awareness.

Steven Paul Lawrence: We're changing kind of how we think about modeling these new stores going forward and building performance, which we detailed in the call as well as in the supplemental material that we provided. But over time, I mean, the expectation is that these stores are going to have a five-year ramp with outsized growth in the first five years. Over the next five to ten years beyond that, we would accept them to continue to grow, maybe slightly, maybe faster than the chain and settle in around the average of what an average store volume does for us. But new stores, new markets, and low brand awareness are definitely a little slower to start out than stores in existing markets with high brand awareness. Makes sense.

Speaker Change: Changing kind of how we think about modeling these new stores going forward and building performance, which we detailed in the call as well as on the supplemental material that we've provided.

Speaker Change: But over time I mean, the expectation is that these stores are going to have a five year ramp with outsized growth in the first five years over.

Speaker Change: Over the next five to 10 years beyond that we would accept them to continue to grow maybe slightly faster than the chain and settle in around the average of what are an average store volume does for us, but new stores new markets low brand awareness are definitely a little more slow to start out in stores in existing markets with high brand awareness.

Speaker Change: Yeah makes sense okay. Thanks, good luck.

Steven Paul Lawrence: Okay, thanks. Good luck. Thanks.

Thanks.

Our next question comes from Kate Mcshane with Goldman Sachs. Please proceed with your question.

Steven Paul Lawrence: Our next question comes from Kate McShane with Goldman Sachs. Please proceed with your questions. Hi, good morning.

Katharine Amanda McShane: Hi, Good morning. Thanks for taking my question you mentioned in the prepared comments that you're going to focus on value and price and I know that's pretty much always where he has been focused on but do you think that you've got a little bit away from where you've been historically and that could be part of the reason why.

Steven Paul Lawrence: Thanks for taking our question. You mentioned in the prepared comments that you're going to focus on value and price, and I know that's pretty much always where you've been focused. But do you think that you have strayed a little bit away from where you've been historically?

Steven Paul Lawrence: And that could be part of the reason why you've seen some pressure on the comps. And how should we think about just this renewed emphasis on value going forward in 24? I think you said it best in your question, Kate.

Katharine Amanda McShane: <unk> seen some pressure on the comps and how should we think about.

Katharine Amanda McShane: Our renewed emphasis on value coming forward in 'twenty four.

Speaker Change: I think you said it best in your question Kate it's not a renewed focus it's always a focus for us we see ourselves and our customers see us as the value provider in our space.

Steven Paul Lawrence: It's not a renewed focus. It's always a focus for us. We see ourselves, and our customers see us, as a value provider in our space, and we deliver value on a multitude of fronts. You know, a lot of that's driven by our private label, which is about 22% of our total business. We have strong, strong values in those items. And they're priced every day at really low prices compared to like items in the marketplace.

Speaker Change: And we deliver value on a multitude of fronts.

Speaker Change: A lot of that is driven by our private label, which was about 22% of our total business.

Speaker Change: We have strong strong value in those items and they're priced every day at really low prices compared to like items in the marketplace at the same time.

Steven Paul Lawrence: At the same time, we also deliver value on a lot of well-known national brands where we provide a price, a split ticket price on there where we're selling that at a slightly lower price than competitors are selling it at an MSRP. And then the third way we develop or deliver value is through promotions, right? And so we generally aren't a promotional retailer, but we certainly do promote during key time periods during the year, certainly holidays being one of the biggest ones of those. And, you know, I think we lean into those three different ways.

Speaker Change: We also deliver value on a lot of well known national brands, where we are.

Speaker Change: Provide a price a split ticket price on there were selling that at a slightly lower price than competitors are selling at an MSRP and then the third way, we develop or deliver a value as promotions right and so we generally aren't a promotional retailer, but we certainly do promote during key time periods. During the year certainly holiday being one of the biggest one of them.

Speaker Change: And I think we leaned into those three a.

Steven Paul Lawrence: We used to deliver value for holiday, and we think that's what we saw in inflection during Q4. We saw, you know, a negative 3.6 comp versus a negative 7.6 that we were running through the first three quarters of the year. So we think that that really kind of broke through during that time period.

Speaker Change: Different ways to deliver value for holiday and we think that's why we saw an inflection by during Q4, we saw a negative three six comp versus a negative 76, it running through the first three quarters a year. So we think that that really kind of broke through during that time period. So I wouldn't say, it's as much of a renewed focus. It's just the continued focus and then looking for ways to expand it I mean, that's what the customers telling us they're voting on so you're going to look at.

Steven Paul Lawrence: So I wouldn't say it's as much of a renewed focus. It's just a continued focus. And then looking for ways to expand it. I mean, that's what the customer is telling us they're voting on. So you're going to look at ways that we're going to add some more. We call them key value items.

Speaker Change: Ways that we're going to add some more we call them key value items, so really.

Speaker Change: Sharp items on on well known categories like bikes and grills really sharp prices, we're expanding some of the offerings, there and I think youre going to see us continue to lean into promotions during those key moments on the calendar and the customers really shopping.

Steven Paul Lawrence: So really, you know, sharp items in well-known categories like bikes and grills at really sharp prices. We're expanding some of the offerings there, and I think you're going to see us continue to lean into promotions during those key moments on the calendar when the customer is really sharp. If I could just ask a quick follow-up on the promotions,

Speaker Change: If I could just ask a quick follow up on the promotions I know there's been a lot of vendor support for promotions over the last year or so are you expecting the same level of vendor support in 'twenty towards what you saw in 'twenty three.

Steven Paul Lawrence: I know there's been a lot of vendor support for promotions over the last year or so. Are you expecting the same level of vendor support in 24 as you saw in 23? Yeah, I mean, obviously, we have really strong partnerships with our vendors. I don't see any reason why they wouldn't support us to the degree that they supported us in 23 and beyond.

Speaker Change: I mean, obviously, we had really strong partnerships with our vendors I don't see any reason why they wouldn't support us to the degree that they've supported us in 'twenty three and beyond you know I think that candidly, we're seeing more vendor support on a multitude of fronts not just obviously margin of price support on marketing and other initiatives because they look at us as a growth partner.

Steven Paul Lawrence: You know, I think that, candidly, we're seeing more vendor support on a multitude of fronts, not just obviously margin of price support but on marketing and other initiatives, you know, because they look at us as a growth partner. And that means we're getting access to more products, newer products, more innovative products, which means better support on the marketing front. So we actually see our vendor support growing in the future, not declining or stagnant. Thank you.

Speaker Change: And that means we're getting access to more products newer products more innovative products. It means better support on the marketing front.

Speaker Change: So we actually see our vendor support growing in the future not not declining or maintaining.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question is from Greg Melick with Evercore ISI. Please proceed with your question.

Steven Paul Lawrence: Our next question is from Greg Melich with Evercore ISI. Please proceed with your question. Thanks. Maybe just to help us understand what's driving the growth or that inflection you talked about, Steve. In the fourth quarter, ticket revenue was still positive, and transactions running down five. If you look at the guide this year, would you expect all the improvement to be on transactions and transaction growth if we get back to a zero comp actually being positive this year? Yeah, I'll take it, Greg. This is Carl.

Gregory Scott Melich: Hi, Thanks, maybe just to help.

Gregory Scott Melich: Help us on the the what's driving the growth of that that inflection you're talking about Steve V. In the fourth quarter ticket was still positive in transactions running down five if if you look at the guide this year.

Gregory Scott Melich: Would you expect that all of the improvement to be on transactions and transaction growth. If we get back to a zero comp actually being positive this year.

Gregory Scott Melich: Yeah I'll take it Greg this is Carl.

Earl Carlton Ford: Embedded within the 24 guidance, if you just kind of look at the midpoint, how we see it is tickets slightly up and traffic slightly down. We're very aware that the consumer is challenged. We're going to monitor it throughout the year. But at the midpoint, that's how we would model it.

Earl Carlton Ford: Embedded within the 24 guidance. If you just kind of look at the midpoint, how we see it is ticket slightly up and and traffic slightly down.

Gregory Scott Melich: Well, we're we're very aware that the consumer is challenged we're going to monitor it throughout the year, but at the midpoint, that's how we would model it.

Speaker Change: Got it and in terms of a progression just given how it sounds like it's the first quarter would be the weakest and then will get slightly better over time or do the comparisons get harder by the end of the year given how December was strong.

Earl Carlton Ford: In terms of a progression, just given how it sounds like the first quarter would be the weakest and then we'll get slowly better over time, or do the comparisons get harder by the end of the year given how December was strong? I think you stated it correctly the first way you said it. The way we see the quarter progressing or the year progressing is, you know, obviously, customers still under pressure. That didn't change as we turned the page to 2024. So we think that's going to continue into the first part of 2024. So we do expect Q1 to be the softest quarter, and that's how we've modeled it. We expect Q2 to build upon that. We expect the second half of the year to be better than the first half of the year. Got it. And just to clarify that the SG&A, now including the stock, Comp, and thanks for that. It's nice to make it clean.

Speaker Change: I think you stated it correctly the first way you said it the way we see the quarter progressing are the year progressing is obviously customer is still under pressure that didn't change as we turn the page 2024. So we think that's going to continue into the first part.

Speaker Change: 2024, so we do expect Q1 to be the softest quarter and that's how we've modeled it we expect Q2 to build upon that we expect the back half of the year to be better than the first half of the year.

Speaker Change: Got it and just to clarify that the SG&A that now including the stock.

Speaker Change: And thanks for that it's nice to make a clean it.

Earl Carlton Ford: Is that 100 bps increase that you flagged, is that a new run rate that we should think of in terms of stock-based comp, or was there something about this year that sort of steps it up versus last? No, I think the $30 million is fair to use going forward. But I do want to kind of speak to what's embedded within FY24 in the overall SG&A. It's about, at the midpoint, it's about 100 basis points of deleverage and expense.

Speaker Change: Is that that 100 bps increase that you flagged was that a new run rate that we should think of in terms of stock based comp or was there something about this year that sort of stepped it up versus last year.

Speaker Change: No. The I think the $30 million is it fair to as fair to use going forward, but.

Speaker Change: But I do want to kind of speak to what's embedded within FY 'twenty, four and a holistic S. D N a.

Speaker Change: It's about at the midpoint, it's about 100 basis points of deleverage in expense and I want to take you back to our long range plan, where we said, we anticipate 200 basis points of expense deleverage offset by about 150 basis points of supply chain and the overall like gross.

Earl Carlton Ford: And I want to take you back to our long-range plan where we said we anticipated 200 basis points of expense deleverage offset by about 150 basis points of supply chain and overall gross margin benefits, which is inclusive of private brands and whatnot. So the deleverage that we're seeing is, from a dollar perspective, what we anticipated. What is causing the deleverage from a rate perspective is running a negative 6.5% comp.

Speaker Change: Margin benefits, which is inclusive of private brands and whatnot. So the deleverage that that we're seeing is from a dollar perspective, what we anticipated what is causing the deleverage from a rate perspective is running a negative $6 five per cent com.

Earl Carlton Ford: To Steve's earlier point, and I think it's been very well discussed in the retail industry this year, the consumer is under pressure. So that is what we are experiencing. But that does not make us second-guess the strategy.

Speaker Change: To Steve's earlier point and I think it's been very well are discussed in the retail industry. This year.

Under pressure so that is what we are experiencing that does not make a second gas the strategies that we're building. This long range plan on we're going to continue to open stores, we're going to continue to invest in omni channel, we're going to continue to invest.

Earl Carlton Ford: We're going to continue to invest in the technologies that we're building this long-range plan on. We're going to continue to open stores. We're going to continue to invest in omni-channel. We're going to continue to invest in customer data and supply chain. But specific to stock compensation, $30 million in the next year is a fine run rate to think about. That's great. Thanks and good luck.

Speaker Change: Invest in customer data and supply chain.

Speaker Change: But specific to stock compensation of $30 million in the next year is a fine run rate to think about but we'll obviously update you you know year by year.

Speaker Change: That's great Thanks, and good luck.

Speaker Change: Okay. Thanks I appreciate it.

Speaker Change: Our next question is from Chris <unk> with J P. Morgan. Please proceed with your question.

Earl Carlton Ford: Our next question is from Chris Horvers with J.P. Morgan. Please proceed with your question. Thanks and good morning, guys.

Chris: Thanks, and good morning, guys. So a couple of follow ups here. So first on the comp do you expect the first quarter to be within the range of the year and sort of are you are you essentially expecting one kilo look like.

Earl Carlton Ford: So a couple of follow-ups there. First, on the comp, do you expect the first quarter to be within the range of the year? And sort of, are you essentially expecting one key to look like the quarter-to-date trend?

Chris: The quarter to date trend and then.

Earl Carlton Ford: And then, you know, as you think about it, can you talk about the gross margin puts and takes? You mentioned rolling out WMS over the next 18 months. You talked about some efficiencies that the new head of supply chain has seen. How are you thinking about the gross margin good guys in 2024? And what are the offsets?

Chris: As you think about it can you can you talk about like the gross margin puts and takes you. You mentioned you know rolling out W. M asks over the next 18 months you talked about some efficiencies that the new head of supply chain has seen how are you thinking about the gross margin good guys and in 2024 and what.

Chris: Are the offsets.

Earl Carlton Ford: Yeah, so we'll probably tag team this one. In terms of the comp progression, I think it plays out exactly as I said before, where we see the first quarter being the weakest. You know, certainly, we came out of Q4 last year with a down 3-6 trend. If you look at the line for our guidance, it's negative 4, which is basically in line with that. And as you progress forward through the year, we expect Q2 to be better, and then obviously, the fall will be better than that. So you can kind of model it based on that feedback. In terms of margin, puts, and takes, you know, there are several, right? And Carl's got a long list here.

Speaker Change: Yeah, So we'll probably tag team this one.

Speaker Change: In terms of the comp progression I think it plays out exactly as I said before where we see the first quarter being the weakest. It's certainly we're coming out of Q4 last year with the down three six trend. If you look at our below end of our guidance, it's negative for which is basically in line with that and then as you progress forward through the year, we expect the Q2 to be better and then obviously the.

Speaker Change: It will be better than that so you can kind of model. It based off of that feedback in terms of margin puts and takes there.

Speaker Change: Several right and Karl has got a long list here a couple I just hit on is you know private brand continues to be a tailwind for us they're mixing into it into a higher margin mix and private brand is a big tailwind for us promotional.

Steven Paul Lawrence: A couple I just hit on is, you know, private brand continues to be a tailwind for us. They're mixing into a higher margin mix, and private brand is a big tailwind for us. Promotional intensity is kind of, you know, settling into a more normalized state moving forward. So I don't expect that we're going to see a tremendous uptick in promotions. Carl, I know you've got a couple you want to hit on as well.

Speaker Change: Intensity is kind of settling into a more normalized state moving forward. So I don't expect that you know, we're gonna see a tremendous uptick in promotions Karl I know you've got a couple of you want to hit on as well yeah from a gross margin going forward standpoint, we're seeing what's going on with international shipping, we don't put quite as much through the Reds.

Earl Carlton Ford: Yeah, from a gross margin standpoint, you know, we're seeing what's going on with international shipping. We don't put quite as much through the Red Sea as perhaps others do, but there is a delay coming around Africa in the kind of equipment that's being used.

Karl: She is perhaps others do but there is a delay coming around Africa kind of equipment, that's being used and so there there might be modest deleverage there, but we've got we've talked about like outbound transportation and how we run our trucks between our distribution centers and our stores, we've got opportunity there.

Earl Carlton Ford: And so there might be modest deleverage there, but we've got – we've talked about, like, outbound transportation and how we run our trucks between our distribution centers and our stores. We've got an opportunity there associated with WMSU, just keeping out the trucks and doing multi-stop shuttles, which we don't really do in any large way now.

Karl: There are associated with W. M bass, just keeping up with trucks and doing multi stop shuttles, which we don't really do in any large way now the second would be just in that broader supply chain space. If you think about kind of a labor management aspect associated with what we're doing within the distribution centers, yeah, we get a new tool.

Earl Carlton Ford: The second would be just in that broader supply chain space; if you think about kind of the labor management aspect associated with what we're doing within the distribution centers, yeah, we get a new tool in WMS that is efficient and a lot more sophisticated than the almost 30-year Exeter system that we're using now. And just from an overall labor management standpoint, I would say the merchants are really leaning into this as well. As we think about cross-doc penetration or how much stuff doesn't need to be put away and separately repicked, that's a big opportunity at the company. And Matt McCabe, the chief merchant, and Rob Howell, the new chief supply chain officer, are in lockstep on this.

Karl: A N W en masse that is a that is.

Karl: A lot more sophisticated than the almost 30 year accident or system that we're using now and just from an overall labor management standpoint, I would say the merchants are really leaning into this as well as we think about cross dock penetration or how much stuff doesn't need to be put away and separately reflect.

Karl: That's a big opportunity at the company and not in the play the chief merchant and and Rob and Rob how the new Chief supply chain officer are in lock step on this we see that there's better met there and we started executing on that yeah, I won't reiterate kind of the merchandising stuff I am excited about our price.

Earl Carlton Ford: We've seen that there's betterment there, and we started executing on that. Yeah, I won't reiterate the kind of merchandising stuff, but I am excited about our private brands offering. Freely and Row are doing well, and we're seeing customers resonate with that value opportunity. The last thing I would say as it relates to, you know, specific to FY24, I want to be clear: we did not make our sales plan for FY23. Although we ended with an inventory that was down 7%, and we feel it was well-managed, and the merchants really did a Herculean effort at bringing that in where they wanted to, there was some promotional activity associated with pockets of inventory, where when you're planning on something a little bit higher and it comes in after we re-guided in Q1, they took it out of the box. So we've had some actions, and We like our inventory position, and so we don't think that we'll have to, you know, kind of execute in that manner for FY24.

Karl: But brands offering freely and ROE are doing are doing well and we're seeing customers resonate with that value opportunity. The last thing I would say as it relates to specific to FY 'twenty four I wanted to be clear, we did not make our sales plan for FY2023 although we ended with an inventory that was.

Karl: <unk>, 7% and we feel is well managed and our merchants really did a herculean effort.

Karl: At bringing that in where they wanted to there was some promotional activity associated with pockets of inventory or when you're planning on something a little bit higher and it comes in after we re guided in Q1. They took some actions and we're ending clean now we like our inventory position and so we don't think that we'll have to.

Karl: You know kind of execute in that manner are for FY 'twenty four.

Got it and then my follow up just on the new store maturity ramp are you lowered the year one given the the new market.

Steven Paul Lawrence: And then my follow-up, just on the new store maturity ramp, you lowered the year one, given the new market mix. But as you think about it, can you remind us what you said about where they would get in year five? Because it sounds like you said there's this very steep ramp to year five, and in that over the next five years, it'll get to the average of the chain 10 years out. So can you maybe just provide some more color?

Karl: Mix, but as you as you think about like where where can you remind us what you said about where do they get in year five because it sounds like you said, there's this very steep ramp to year five and that over the next five years that will get to the.

Karl: Average.

Karl: You know the average of the chain 10 years out. So can you maybe just provide some more color because typically we think of you know double digit comps in year, one and then by year five your you know your your floating with the overall business.

Steven Paul Lawrence: Because typically, we think of double-digit comps in year one, and then by year five, you're floating with the overall business. Yeah, so we, you know, in our long-range plan, when we initially modeled this, we said 18 million in year one and then ramped five years from there; we didn't put an endpoint associated with where we think they matured over time; we said it would come in close to where the average store volume is, and we don't think that necessarily changes, it's starting from a lower pace, right? So obviously, you know, the 12 to 16 million is meant to encompass a couple of different types of stores, right? Smaller stores and smaller markets where we have less brand awareness probably would be towards the low end of that 12 to 16 million, versus new stores in the existing geography, where you have high brand awareness, probably to the high end of that range. We would expect them to grow at a faster rate, you know, at least two times faster than the company's growth during the first five years, but that wouldn't get them all the way to the average for the new store That's why, over a 10 to 15 year time horizon, we expect them to get there.

Karl: Yeah. So we you know in our long range plan. When we initially modeled this we said $18 million in year, one and then the brand five years from now we didn't put an endpoint associated with where we think they matured over time, we said it would.

Karl: Come in close to where the average store volume is we don't think that that necessarily changes, it's starting from a lower base right. So obviously you know the $12 million to $16 million is meant to encompass.

Karl: A couple of different types of stores right.

Karl: Smaller stores in smaller markets, where we have less brand awareness probably would be towards the low end of that 12 versus new stores in the.

Karl: No existing geography, where you have high brand awareness probably to the high end of that range we.

Karl: We would expect them to grow at a faster rate you know at least two times faster than the company growth.

Karl: In the first five years that wouldn't get them all the way to the average for the new store. That's why when you look at it over 10 to 15 year time horizon, we expect them to get there and we've really seen this play out over time, if you go back 10.

Steven Paul Lawrence: And we've really seen this play out over time. If you go back, you know, 10, 15 years, northern Florida was a new market for us. And when we looked at those stores, initially, they started off with lower volumes because it was a new market. And as we look at them today, you know, we've been in that market now for over 10 years; those stores are doing average store volume. So that's, that's how we're looking at it over time. But it's a five-year faster ramp, and then, you know, five to 10 years after that, but they settle in at the company average. Thank you very much.

Karl: 10, 15 years, Northern Florida was a new market for us and when we looked at those stores initially, but they started off.

Karl: With lower volumes, because it was a new market.

Karl: And as we look at them today, you know we've been in that market now over 10 years.

Karl: Those stores are doing on an average store volumes. So that's how we're looking at it over time, but it's a five year faster ramp and then you know five to 10 year after that where they settle in at the at the company average.

Speaker Change: Thank you very much.

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

Steven Paul Lawrence: Our next question is from Robbie Ohmes with Bank of America. Please proceed with your question. Hey, good morning, guys. Can you talk a little more about, you've mentioned how well the private label is doing, you know, how are you thinking about getting, you know, the athletic apparel, the outdoor apparel, some of the branded athletic footwear, you know? Are there things you can do to get those businesses to be a little stronger or any initiatives underway? You know, how are things like LL Bean doing? I'd love to get some color on that.

Robby: Hey, good morning, guys.

Robby: Could you talk a little more about you know you've mentioned how well the private label Who's doing you know how are you thinking about getting the analytic apparel the outdoor apparel.

Robby: Some of the branded athletic footwear, you know are there things you can do to get those businesses to be a little stronger or any initiatives underway how were things like L. L. L. L Bean doing I'd love to get some some color on that.

Steven Paul Lawrence: Yeah, so I would say, in general, a theme we've seen happen over the past couple years is that new ideas have done very well. So a lot of the new brands you've heard us mention, like L.L. Bean or Bog Bags continue to do very well, and we're expanding a lot of these categories. You think last year we had Birkenstocks in a small number of doors, or UFOs in a small number of doors?

Robby: Yeah. So I would say in general are a theme we've seen happened over the past couple of years as new ideas have done very well. So a lot of new brands, you've heard us mention like L L bean or bought bags.

Robby: Continue to do very well and we're expanding a lot of these categories. You think last year, we had broken stocks at a small number of doors close in a small number of doors, we're expanding those very rapidly we've got new brands. We're introducing this year like crush city base, that's already off to a fast start so new brands are working for us and.

Steven Paul Lawrence: We're expanding those very rapidly. We've got new brands we're introducing this year, like Crush City Baits, that are already off to a fast start. So new brands are working for us, and we're scaling them up. We're scaling them out very rapidly. You know, in terms of some of these larger legacy brands, they're a little more challenged.

Robby: And we're scaling them out very rapidly.

In terms of some of these larger legacy brands, where they were a little more challenge, we're partnering with them around making sure. We've got a strong pipeline of innovation.

Steven Paul Lawrence: We're partnering with them to make sure we've got a strong pipeline of innovation flowing out to our stores. And we're optimistic as we partner with our large brands that we're going to start seeing that turn the tide as we move through 2024. We've got great partnerships. I think Carl called out on the call, Nike, you know, that's been one of our stronger businesses. That's certainly our largest business, having that work. It has been a really good thing for us. And where we've got some brands that are a little softer, I think we've got good plans in place with those teams to turn them around and get them moving in the right direction. Thanks.

Robby: Flowing out to our stores.

Robby: And we're optimistic as we partner with our large brands that we're gonna start seeing that turn the tide as we move through 2024, we've got great partnerships I think Carl called out on the call Nike that's been one of our stronger businesses that certainly our largest business having that work.

Robby: Has been a really good thing for us and where we've got some brands that are a little softer I think we've got good plans in place.

With those teams to turn them around and get it moving in the right direction.

Thanks, and then my follow up is I actually want to follow up on on Kate's question are when you look at the vendor community are you seeing prices coming down.

Steven Paul Lawrence: And then my follow-up is, actually, I want to follow up on Kate's question. When you look at the vendor community, are you seeing prices coming down? I wouldn't say we've seen prices coming down, but certainly there are places where, you know, we've negotiated better deals on things. But, you know, we haven't seen freight settled in that necessarily translates through a ton of cost reduction so far. But we continue to work and negotiate with vendors on that front. I got it.

Speaker Change: I wouldn't say, we've seen prices coming down certainly there are places where we.

We've negotiated better deals on things, but we haven't seen is as freight settle in that necessarily translate through a ton of cost reduction so far, but we continue to work and negotiate with vendors on that front.

Speaker Change: Got it thanks.

Steven Paul Lawrence: Thanks. Thank you. Our next question comes from Michael Lasser with UBS. Please proceed with your question. Good morning.

Speaker Change: Thank you.

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

Michael Lasser: Good morning, Thanks, a lot for taking my question so Steve when we compare academies result.

Steven Paul Lawrence: Thanks a lot for taking my question. So Steve, when we compare Academy's results, especially in the footwear and apparel categories, to several other retailers, especially those retailers that also index the lower income segments, the footwear and apparel categories, in particular, seem to be doing worse at Academy than many other players out there, suggesting it's feeding more. So I'm going to ask you, Steve, why do you think that is the case?

Michael Lasser: Q, especially in the footwear and apparel category. He several other retailers, especially those retailers that also index.

Michael Lasser: Sure income segment.

Speaker Change: The the footwear and apparel categories in particular need to be.

Michael Lasser: Doing worse at academy than many other players out there, suggesting it's eating market here.

Speaker Change: A why do you think that is the key.

Steven Paul Lawrence: And B, outside of some of the factors that you pointed out, what do you think is the principal strategy that's going to allow Academy to stabilize its market share? Because if it's simply a function of its core customer base getting healthier, that might prove to be elusive. Thank you.

Speaker Change: N D.

Speaker Change: I'd of some of the factors that you pointed to.

Speaker Change: What do you think is the principle.

Speaker Change: Strategy, it's going to allow the academy to stabilize market share because is it simply a function of <unk>.

Speaker Change: Customer b getting healthier that that might prove to be elusive. Thanks a lot.

Speaker Change: Yeah, I'd start with I'm not sure I agree with the premise of the question.

Steven Paul Lawrence: Yeah, I'd start with, I'm not sure I agree with the premise of the question. We can tell you that we look at market share on a monthly, quarterly, and annual basis. We use CERCANA as the primary source for that.

Speaker Change: We can tell you we look at market share on a monthly quarterly annual basis. We use second is primary source of that and if you look at Circon of data. They will tell you that we picked up market share.

Steven Paul Lawrence: And if you look at CERCANA data, it will tell you that we picked up market share broadly across the business in 2023. It would also say that we picked up market share over a four-year period pretty aggressively, considering the fact we're still up about 25% versus where we were in 2019. And I would also say when we look at our comparison in footwear and apparel to other retailers in general, the results I've seen, as others have called out and gone through the earnings cycle for the most part, are at or maybe a little better than broad-based retail. I mean, we do have a competitor who is outperforming us right now. I think we have a different customer than they do. I think we've got a more middle-income consumer versus a high-end consumer. We've certainly seen the high-end consumer continue to spend a little bit more than the middle. But our lower-income consumer is a little more pressured.

Speaker Change: Broadly across the business and in 2023, we'd also say that we picked up market share over a four year stack pretty aggressively considering the fact were still up about 25% versus where we were in 2019.

And I would also say when we look at our comparison in footwear and apparel to other.

Speaker Change: Retailers in general the results I've seen.

Speaker Change: As others have called out and gone through the earnings cycle for the most part are at or maybe a little better.

Speaker Change: Than broad based retail I mean, we do have a competitor who is outperforming its right now.

Speaker Change: I think we have a different customer than they have I think we've got a more middle income consumer versus the high end consumer we certainly seen the high end consumer continued to spend a little bit more.

Speaker Change: You know than the middle or lower income consumers a little more pressured so one of the ways. We combat that is continuing to build out the better best end of our assortment.

Steven Paul Lawrence: So one of the ways we combat that is continuing to build out the better, best end of our assortment and get access to more premium products from our existing vendor base, like Nike, like New Balance. And we've had some really good success on those fronts. We continue to bring in new brands so that we're ahead of the curve there and have them, in some cases, first to market. And it's going to be a journey for us as we move forward, but we are not losing market share. The data doesn't really support this.

Speaker Change: And get access to you know more premium product from our existing vendor base like a Nike like a new balance and we've had some really good success on those fronts. We continue to bring in new brands. So that we're ahead of the curve there and have them in some cases first to market and you know it's gonna be a journey for us as we move forward.

Speaker Change: But we are not losing market share.

Speaker Change: The data doesn't really support that.

Steven Paul Lawrence: And we actually feel like we're picking up market share from every data point we see. My follow-up question is on the gross margin and the elasticity you're seeing to any investment that you might be making in either promotions or price. How much would you see an improvement in sales if you were willing to sacrifice some of the gross margin gains that you've achieved? And as a quick housekeeping note, how much will SG&A grow this year due to investments that you might be making in wages or labor within the store? Thank you very much. Carl and I are going to tag team this one.

Speaker Change: And we actually feel like we're picking up market share from every data point, we see.

Speaker Change: My follow up question is on the gross margin in the Atlanta is the key.

Speaker Change: Key to any investments you might be making either promotions or price.

Speaker Change: Would you would you see.

Speaker Change: How much will you be.

Speaker Change: An improvement in deal if you were willing to sacrifice some of the gross margin gains that you've achieved in a quick housekeeping note how.

Speaker Change: How much will SG&A grew.

Speaker Change: <unk> dollars grew this year.

Speaker Change: Due to investments that you might be making in wages or labor within the store. Thank you very much.

Speaker Change: We are going to tag team. This one I'll start on the margin front. It's it's a it's a question that I think every retailer ask themselves on a regular basis, if I promoted more wood I, you know what I see a higher sales trend and.

Steven Paul Lawrence: I'll start on the margin front. It's a question that I think every retailer should ask himself on a regular basis. If I promoted more, would I see a higher sales trend? And you certainly understand the math, Michael, that if you sell a discount of 25% off, you've got to sell 33% more units to offset that. So what we've seen candidly throughout the course of 2023 and part of 22 is when we've leaned into promotions during kind of non-peak time periods, when the customer's not willing to shop, we've seen a trade down in AUR, and we haven't seen an offset in terms of unit growth, you know, to offset the sales decline. So we've been very thoughtful about where we plan our promotions. As we've talked about, we plan them around the big market share moments on the calendar, like Mother's Day, like Father's Day, like Easter, like back-to-school, like a holiday.

Speaker Change: You certainly understand that the math is Michael that you know if you sell.

Speaker Change: You know a discount of 25 off you go to sell 33% more units to offset that and so what we've seen candidly.

Speaker Change: Throughout the course of 2023 and part of 'twenty two is when.

Speaker Change: When we've leaned into promotions during kind of non peak time periods when the customers not willing to shop, we've seen a trade down in AUR and we haven't seen an offset in terms of unit growth to offset the sales decline. So we've been very thoughtful about where we plan on promotions as we've talked about we plan around the big market share moments on the calendar.

Speaker Change: <unk> like a mother's day like a father's day like an Easter like our back to school like a holiday and that strategy has worked for US I mean, if you look at our margin our merch margin for Q4, it was down about 50 basis points.

Steven Paul Lawrence: And that strategy has worked for us. I mean, if you look at our margin, our retail margin for Q4, it was down about 50 basis points. We had offsets on other lines to help pull the total gross profit up. But, you know, we certainly lean into promotion a little bit during Q4. And I think that that definitely helped. So I think you'll see us continue to run those plays as we move forward. But broadly promoting all the time, we don't think is the pathway to success.

Speaker Change: Had offsets in other lines to help pull the total gross profit up but we did certainly lean into promotion a little bit during Q4, and I think that that definitely helped us. So I think youll see us continue to run those plays as we move forward, but broadly promoting all the time, we don't think is the pathway to success.

Steven Paul Lawrence: From an SG&A standpoint, Michael, I said 90% of what we invested in this year from an SG&A rate standpoint was the investments. I also said, you know, expect at the midpoint 100% growth in SG&A rate next year. It's really all investments. Like 100% of it.

I'll take a from an SG&A standpoint, Michael.

Speaker Change: I said, 90% of what we invested in this year from a SG&A rate standpoint was the investments also said you now expect at the midpoint, 100% growth in SG&A.

Right next year, it's really all investments like the 100% of it is I'm actually pretty proud of the team win anything incremental that was over and above launching new stores investing in omni channel, making investments on the customer data platform.

Earl Carlton Ford: I'm actually pretty proud of the team when anything incremental that was over and above launching new stores, investing in Omnichannel, making investments in the customer data platform that we implemented last year was all really offset dollar for dollar with incremental savings. So if you think about how that is going to manifest itself on a more detailed P&L, you know, 15 to 17 stores versus 14 this year, we'd like to start a little bit earlier in the year. So there's a little bit of capital investment late in 24 that'll get us out of the gate good in FY25. That represents the wages that we pay to our associates and managers in those facilities, the rent, and property taxes.

Speaker Change: That we implemented last year were all really offset dollar for dollar with with incremental savings. So if you think about how that is going to manifest itself on a more detailed P&L <unk> 15.

Speaker Change: <unk> 15 to 17 stores versus 14 this year, we'd like to start a little bit earlier in the year. So there's a little bit of capital investment a late in 'twenty four that'll that'll get us out of the gate. Good in FY 'twenty five that represents the the wages that we pay to our associates and managers in those facilities the rent.

Property taxes are the seeding of the market you know Steve talked a lot where there's low brand awareness and now we've got a new tool with our with the customer database platform and some other tactics investing in advertising associated with those new markets.

Earl Carlton Ford: The seeding of the market, you know, Steve talked about where there's low brand awareness, and now we've got a new tool with the customer database platform and some other tactics, investing in advertising associated with those new markets. And the other thing would be just the technology cost associated with, you know, the WMS is a SaaS-based system. There's going to be tech expenses associated with that. The treasure data, customer data platform, you know, has a cost to it. And obviously, omnichannel from the user experience investments that we're making there. So in short, the 100 basis points of expense deleverage that you should expect for next year and that was embedded within our long-range plan is all of the investment. That's the totality of the investment cost. Thank you very much. Spidey.

Speaker Change: And the other thing would be just the technology of car cost associated with you know the WNS as a SaaS based system, there's gonna be tech expense associated with that the treasure data customer data platform. You know has a cost to it and and obviously omni channel from the from the user experience investments that we're making there so in.

Speaker Change: Sure the 100 basis points of expense deleverage that you should expect for next year and that was embedded within our long range plan is all of the investment that's the totality of the investment cost.

Speaker Change: Thank you very much.

Speaker Change: That's my view.

Speaker Change: Our next question is from Anthony Trachoma with loop capital markets. Please proceed with your question.

Earl Carlton Ford: Our next question is from Anthony Chukumba with Loop Capital Markets. Please proceed with your question. Good morning, and thanks for taking my question.

Anthony Chinonye Chukumba: Good morning, and thanks for taking my question. So just wanted to kind of tie a couple of things together in terms of my question you talked about you know the outperformance in certain footwear brands. If we brought up Brooks you also talked about the <unk>.

Steven Paul Lawrence: So I just want to kind of tie a couple things together in terms of my question. You talked about, you know, the outperformance of certain footwear brands. You specifically brought up Brooks.

Steven Paul Lawrence: You also talked about, you know, the fact that you're definitely counting on some new products to drive growth in 2024 and to help in 2024. So, you know, kind of tying those two together. Any insights in terms of some of the, you know, sort of hot running brands, specifically Hoka and On?

Anthony Chinonye Chukumba: Fact that you're definitely counting on some new products to drive growth in 2024 to help in 2024, so kind of tying those two together.

Any insights in terms of some of the you know sort of hot running brands, specifically Hogan on any any insights in terms of whether you know what are your expectations in terms of whether you can get one or both of those brands, particularly giving you. The fact, you've had success with broker which is a relatively sort.

Steven Paul Lawrence: Any insights in terms of whether, you know, what your expectation is in terms of whether you can get one or both of those brands, particularly given the fact you've had success with Brooks, which is a relatively, you know, sort of high-ticket footwear brand? Thank you. Yeah, no. I think he asked us this question last time, too.

Anthony Chinonye Chukumba: At a high ticket footwear brand. Thank you.

Yeah, No I think asked this question last time too.

Speaker Change: [laughter], we we don't have any updates on that front I mean is as you know you're right. Those are two of the hottest brands that are out there are.

Steven Paul Lawrence: We don't have any updates on that front. I mean, as you know, you're right. Those are two of the hottest brands that are out there.

Steven Paul Lawrence: We would love to have access to those. And as I've said before, I don't think it's a matter of, you know, if it's when. You know, we continue to have dialogue, and we'll continue to put our ass out there. Right now, we don't have access to those.

Speaker Change: We would love to have access to those and as I've said before I don't think it's a matter of.

Speaker Change: If it's win.

Speaker Change: We continue to have dialogue and we'll continue to put our apps out there.

Speaker Change: Right now we don't have access those into our mission and our plan is to win with the brands, we have access to and I think you're seeing that play out in some of the.

Steven Paul Lawrence: And so our mission and our plan is to win with the brands we have access to. And I think you're seeing that play out in some of the successes Carl mentioned with Nike, particularly in some of the higher-end running shoes that we've gotten from them. Brooks, great call out there. Brooks has been absolutely on fire for us.

Speaker Change: Successes, Carl called out with Nike.

Speaker Change: Particularly in some of the higher end running shoes that we've gotten from them Brooks great call out there Brooks as they've been.

Speaker Change: Absolutely on fire for US you know, we're seeing great success in brands like new balance and other running brands. So we're going to win with the brands. We currently have we're going to continue to try to get.

Steven Paul Lawrence: You know, we're seeing great success with brands like New Balance and other running brands. So we're going to win with the brands we currently have. We're going to continue to try to get the brands we don't have access to that the customer's telling us they want, and we're going to continue to seek out more, you know, brands and incubate new brands. Earlier in the cycle so that we're not trying to catch them when they're hot.

The brands, we don't have access to that the customer is telling us they want and we're going to continue to seek out more brands and incubate new brands earlier in the cycle. So that we're.

Speaker Change: We're not trying to catch them when they're hot we're going to have them at the moment. They started to turn so you'll see that and that's not just footwear conversation I think that's broadly across the store. We've got it we've got to get better at getting newness in the stores and I think the teams really rallied around that and you see that and you know a lot of the new brand initiatives, we've called out.

Steven Paul Lawrence: We're going to have them at the moment they start to turn, so you'll see that. And that's not just a footwork conversation.

Steven Paul Lawrence: I think that's broadly across the store. We've got to get better at getting newness in the stores, and I think the team's really rallied around that.

Steven Paul Lawrence: And you see that in a lot of the new brand initiatives we called out. And we're going to scale them very quickly and make them big and important so that we don't have to, you know, have a conversation about why we don't have access to a Hulk and a non-Hulk going forward. Yeah. At the risk of double dipping, I will.

Speaker Change: And we're going to we're going to scale them very quickly and make them big and important.

Speaker Change: So that we don't have to have a conversation about why we don't have access to a whole can it ongoing forward yeah at the risk of double dip and I will so we've got 282 stores in 18 states and when we talk with our vendors about what's on the horizon and we talk to them a lot of 160 to 180 stores over the next.

Earl Carlton Ford: So we've got 282 stores in 18 states. And when we talk with our vendors about what's on the horizon, we talk about 160 to 180 stores over the next five years, but longer term, you know, we see the runway to be an 800 plus store location that's nationwide and partnering with us and what has the unitary growth. And we've got a lot of potential for an academy.

Speaker Change: Five years, but longer term you know, we see runway to be an 800 plus store location its nationwide and in partnering with us and what has the unitary growth potential oven Academy. So we definitely talk to them about the here and now.

Earl Carlton Ford: So we definitely talk to them about the here and now and how we're happy about 25% sales growth from pre-pandemic and all the things that we talk about here. But we talk with them more about the future, what's over the midterm and the longer term horizon. And I think it really resonates with the growth potential associated with the company. Got it. And apologies for asking the same question two quarters in a row. Nothing is consistent.

Speaker Change: Now in how we're happy about 25% sales growth from pre pandemic and all the things that we talk about here, but we talk with them more about the future what's over the mid term and a longer term horizon and I think it really resonates of the growth potential associated with the company.

Speaker Change: Got it.

Speaker Change: All of these for asking the same question.

Speaker Change: Nothing if not consistent I'm just you are one quick quick follow up.

Steven Paul Lawrence: Just one quick follow-up. So you talked about stock-based compensation. That's like 30 cents.

Speaker Change: So you talked about the stock based compensation. That's like 30. So you know when you know what do they look at this initial guidance. So on a kind of an apples to apples like adjusted basis that would say the guidance was really more like kind of 622 to two 7%.

Steven Paul Lawrence: So when they look at this initial guidance, so on a kind of apples-to-apples, like adjusted basis, that would say the guidance was really more like kind of 620 to 720 on an adjusted basis. Is there also the potential for there to be other add-backs over the course? I mean, I know it's obviously hard to say, and then you want to stick with the gap.

Speaker Change: 720 on an adjusted basis is it is there also the potential for there to be other add backs over the course, I mean, I know, it's obviously hard to hard to say and then you want to stick with the with the gap, but I'm just I'm just trying to make sure I'm thinking about this apples to apples and could there be other potential add backs to gap as the year progresses. Thanks.

Earl Carlton Ford: But I'm just trying to make sure I'm thinking about this apples-to-apples. I mean, could there be other potential add-backs to the gap as the year progresses? So I'm going to take that.

Speaker Change: So I'm gonna take that as we think about add backs, we actually pride ourselves on the simplicity of our P&L. So stock based comp is the one and for the last three years, there's been a small add back for you know early extinguishment of debt, which we think is the right thing to do for our business.

Earl Carlton Ford: As we think about ad backs, we actually pride ourselves on the simplicity of our P&L. So stock-based comp is the one, and for the last three years, there's been a small ad back for early extinguishment of debt, which we think is the right thing to do for our business. We're not going to, you know, we disclose to you in the 10K what pre-opening store costs are, but the SEC frowns upon a lot of add-backs, and so we're really vanilla because our business makes sense without the add-backs. If you think about the guidance for next year, you know, from an adjusted EBIT standpoint at the midpoint, it's about a negative 70 basis point decline. At the pre-tax income standpoint, it's about negative 60 basis points to FY23.

Speaker Change: We're not gonna we disclosed to you in the in the in the 10-K, what pre opening store costs are but the FCC frowns upon a lot of add backs and so we're really vanilla because our our business just makes sense without the add backs. If you think about the guidance for <unk>.

Speaker Change: Next year are you know from an adjusted EBIT standpoint at the midpoint, it's about a negative 70 basis point decline at the pre tax income standpoint, it's about negative 60 basis points to FY <unk> to FY2023 and net income is about 50 basis points of degradation.

Earl Carlton Ford: And net income is about 50 basis points of degradation at the midpoint, and literally all of it is related to our strategic initiatives that we have confidence in and that are getting better with each vintage. And so, yeah, we're not, there's probably, I mean, who knows what comes, but we're not thinking about any new adjusting items. And Anthony, I just, I want to say you don't have to apologize for asking the same questions.

At the midpoint and literally all of it is related to our strategic initiatives that we have confidence in that are getting better with each vintage and and and so yeah. We're not there's there's probably I mean, who knows what comes but we're not thinking about any new adjusting item.

Speaker Change: And Anthony I, just don't want to say you don't have to apologize for asking the same question. It's a fair question. We always look forward to the challenging questions you pose to us.

Steven Paul Lawrence: It's a fair question. We always look forward to the challenging questions you pose to us. Thanks for the kind words. Good luck with that. Thank you. We have time for two more questions. Our next question comes from John Heinbockel with Guggenheim Securities. Please proceed with your questions.

Speaker Change: Thanks for the kind words, good luck with the fiscal 2024.

Speaker Change: Thank you.

Speaker Change: We have time for two more questions. Our next question comes from John <unk> with Guggenheim Securities. Please proceed with your question.

Steven Paul Lawrence: Steve, can you just walk through CRM initiatives this year, right now that you've set that up? You know, whether it's reactivating customers' wallet share, and how are you going to lean into that? And then the thought about personalized promotions, right? You talk about this, pricing, bikes, and fitness, and stuff like that. Do you see an opportunity to do personalized promotions where you're not blasting that out to the marketplace but being very surgical in how you attack that? Yeah, it's a great question. So I would say a couple of things.

John: Hey, Steve can you just walk through a CRM.

John: Initiatives. This year right now that you've stood that up you know what.

John: Other it's reactivating customers wallet share.

John: And how you're going to lean into that and then the thought about personalized promotions right you're talking about this.

John: Pricing.

John: Bikes in fitness and stuff like that.

John: Do you see an opportunity to do personalized promotions, where youre not blasting that out to the marketplace, but being very surgical in how you attack that.

Speaker Change: Yeah. It's a great question. So I would say a couple of things first we installed the new CDP.

Steven Paul Lawrence: First, you know, we installed the new CDP last summer. We spent the back half of last year testing a lot of different use cases in terms of customer reacquisition and customer acquisition. I think as you move forward, you're going to see us lean into a couple of focuses. First, traffic is a challenge. I mean, you know, the traffic for transactions in Q4 was down mid-single digits.

Speaker Change: Last summer.

Speaker Change: We spent the back half of last year testing a lot of different use cases in terms of customer react position customer acquisition I think as you move forward, you're going to see us lean into a couple of focuses first traffic is a challenge I mean, you know the the Traffics were in transactions for Q4 were down mid single digits. Our goal is to.

Steven Paul Lawrence: Our goal is to drive more customers into our store and drive traffic. So I think you're going to see us use the CDP and work with our various agencies and partners to generate more lookalike audiences and really start filling the top of the funnel. That's going to be a big focus for us. I think you're also going to see us look at our high-value customers and look at ways to get them to shop with us more frequently and move people up the identity ladder and have them become, you know, have some customers who are more occasional shoppers become more loyal shoppers and move them up. So I think you're going to see a multi-pronged focus there.

Speaker Change: To drive more customers coming into our store and drive traffic. So I think youre going to see us use the CDP and working with our various agencies and partners to generate more lookalike audiences and it really start filling the top of the funnel up that's going to be a big focus for us I think youre going to also see us then.

Speaker Change: Look at our high value customers and look at ways to get them to shop with us more frequently and move people up the identity ladder and have them become you know add some some customers who are more occasional shoppers become more loyal shoppers and move them up so I think youre going to see a multi pronged focus there, but new customer acquisition and driving traffic is number one and then moving customers up.

Steven Paul Lawrence: But new customer acquisition and driving traffic is number one, and then moving customers up that identity ladder to shop with us more would be the second focus. In terms of more personalized promotions, I think you're dead on. I mean, that is the future.

Speaker Change: Identity letter to shop with us more would be the second focus in terms of more personalized promotions I think you're dead on I mean that is the future and that's where I think we're ultimately headed we're probably a little behind on this one.

Steven Paul Lawrence: And that's where I think we're ultimately headed. We're probably a little behind on this one. You know, that being said, it's an opportunity for us, and I think you'll see us as we learn more about our customers, do more one-to-one marketing, and have more targeted promotions. I think that will allow us to pull back on some of the more global promotions that we do run. And that will be a journey to move forward. But there's definitely an opportunity for that.

Speaker Change: That being said, it's an opportunity for us and I think youre going to see is as.

Speaker Change: As we learn more about our customers have more one to one marketing.

Speaker Change: Have more targeted promotions I think that will allow us to pull back on some of the more global promotions that we do run.

Speaker Change: And that will be a journey as we move forward, but there's definitely an opportunity for that and it's something we're looking at very closely.

Steven Paul Lawrence: And it's something we're looking at very closely. And just quickly, last thing. When do you think you will launch the new loyalty program? Is that, you know, pre-holiday?

Speaker Change: Can you just quickly last thing what when do you think when do you launch the new loyalty program is that you know pretty holiday.

Steven Paul Lawrence: Our goal is to have it in place sometime this year, so pre-holiday, definitely, for sure. You know, if we can get it in place before back to school, we'd like to, but, you know, we want to make sure whatever we roll out is fully vetted and we're very comfortable with. That being said, you know, what I want to make sure you understand is we see this loyalty program as being a long-term build over time. You know, this is not something we don't want to come out with a bunch of benefits the customer may or may not want. We want to make sure whatever we include in the initial rollout is something the customer has told us that they value.

Our goal is to have it in place sometime this year, so pretty holiday definitely for sure. If we can get it in place before back to school, we'd like to but I. You know we want to make sure whatever we rollout is fully vetted and we're very comfortable with that being said you know what I want to make sure. You understand is we see this loyalty program as being a long term build.

Speaker Change: Over time this is not something we don't want to come out with a bunch of.

Speaker Change: Benefits the customer may or may not want we want to make sure. Whatever we include in the initial rollout is something the customers told us that they value and so you'll probably see us take some things that have resonated well with our credit card customer, which is kind of the basis of our loyalty program and extend that more broadly to a broader range of customers and then test into new capabilities.

Steven Paul Lawrence: And so you'll probably see us take some things that have resonated well with our credit card customers, which is kind of the basis of our loyalty program, and extend that more broadly to a broader range of customers, and then test new capabilities as we progress forward. So it'll be a slow burn and an add over time, but we definitely want to get something out in the marketplace before the holiday. Thank you. The next question comes from Will Gartner with Wells Fargo. Please proceed with your questions. Hey guys, thanks for squeezing me in here. The New Stores, and then what gives you confidence in increasing your store footprint, you know, particularly as comps remain negative? Yeah, so I'd go back and answer probably the last question first.

Speaker Change: As we progress forward, so it'll be a slow burn in and add over time, but we definitely want to get something out in the marketplace before holiday. Thank.

Thank you.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Our next question comes from will Gardner with Wells Fargo. Please proceed with your question.

Will Gardner: Hey, guys. Thanks for squeezing me in here so.

If we just talk about the new stores can you just talk a little bit about lowering the guide for the new stores I mean, where's the drag coming from and then secondly are all those are all the new stores that you're opening or are they all EBITDA positive or does it vary by you know news new store in a new market versus the versus existing.

Will Gardner: And then what gives you confidence in increasing your store footprint, you know, particularly as comps remain negative.

Steven Paul Lawrence: I mean, we're investing in opening new stores because it's critical to our future. And so, you know, we are going to keep pushing forward at this pace. Now, that being said, we're moderating it a little bit, right?

Yeah. So I'd go back to the to answer I'd, probably the last question first I mean, we're investing in opening new stores, because it's critical to our future and so we are going to keep pushing forward on this pace now that being said, where we're moderating it a little bit right. So.

Steven Paul Lawrence: So, you know, this year, candidly, we opened 15 to 17 new stores. We probably could have opened up a few more stores this year. But we pushed some out of Q4 into Q1 of next year so that we could get more densities and wouldn't go into a new market. So we're trying to be very deliberate and thoughtful about how we pace out these new stores. It's kind of going slow so you can go fast in the future.

Will Gardner: This year candidly, we guided 15 to 17, new stores, we probably could have opened up a few more stores this year.

Will Gardner: We push some out of Q4 into Q1 of next year. So that we could get more density that will go into a new market.

Will Gardner: So we're trying to be very deliberate and thoughtful about how we pay south east new stores is kind of going slow. So you can go fast in the future.

Steven Paul Lawrence: In terms of volume expectation, I think it's really driven by what we described in the call. You know, obviously, the stores that are in newer markets are taking a little longer to build brand awareness. So those would be at the lower end of that $12 million range, you know, versus stores in existing markets being in or in larger markets being at the higher end of that volume range at $16 million. I think the key is in terms of the number of stores. Looking at more mid-range.

So the volume expectation I think it's really driven by what we described in the call. You know obviously the stores that are in newer markets, it's taking a little longer to build brand awareness. So those would be at the lower end of that $12 million.

Will Gardner: <unk>, you know versus stores in existing markets being in or in larger markets being in the higher end of that volume range at $16 million I think the key is in terms of the number of stores are looking at more mid size markets. I would say initially we were focused primarily on going into large metro markets and I think as we've had some stores in more mid sized markets be very successful.

Steven Paul Lawrence: Mid-size markets. I would say initially we were focused primarily on going into large metro markets. And I think as we've had some stores in more mid-size markets be very successful; we have, you know, a store in Christiansburg, Virginia that's done very well for us, or Harlingen, Texas. And so I think we look at those stores and say, okay, there's an appetite for sporting goods stores such as ours, sports and outdoor stores such as ours, to go into those markets and really take care of an underserv So you see us kind of opening the window a little bit in terms of our consideration of customers. And that's what's really driving more stores. So it'll be, you know, more stores, maybe a slightly lower volume. But because they're in smaller markets, the operating costs to run those stores are very favorable and more than offset the slightly lower volume target.

Will Gardner: Got you know store in Christiansburg, Virginia that has done very well for us are cartilage in Texas, and so I think we look at those stores and say, okay Theres there.

Will Gardner: There's an appetite for a sporting goods store, such as ours sports and outdoor stores such as ours to go into those markets and really take care of and underserved customers. He or she is kind of opening the window a little bit in terms of our consideration set and that's what's really driving more stores. So it'll be.

Will Gardner: More stores, maybe a slightly lower volume, but because they're in smaller markets. The operating cost to run those stores are very favorable and more than offset the slightly lower volume targets and well I'll I'll hit the last kind of two parts of your question as you think about I think he said like slowing new store growth.

Will Gardner: The headwinds of negative comps.

Steven Paul Lawrence: And, Will, I'll hit the last kind of two parts of your question. As you think about, I think you said, like slowing new store growth and headwinds of negative comps, college, and many more.

Will Gardner:

Will Gardner: On a negative six five comp this year.

Will Gardner: We generated $536 million in cash flow from operations.

Will Gardner: We invested that $208 million into capital.

Will Gardner: $203 million into share repurchases $103 million into that service and $27 million into dividends and ended with $10 million more in cash than we did the year before and that's on a negative six five comp. So I give all the credit to the merchants for their inventory management, but.

Earl Carlton Ford: We generated $536 million in cash flow from operations, and we invested that $208 million in capital. 203 million dollars into Sherry purchases. [inaudible] Cause us to come off of this strategy? We have so much white space. We want to open great stores, and we're going to methodically do that in our long-range plan. As it relates to EBITDA, you know, by vintage, they're all positive. I would tell you at $12 million, we're EBITDA positive, depending upon the location, you know, if it's in the city or something like that, below that, it gets tough to be EBITDA positive.

Will Gardner: Negative comps are not going to cause us to come off of this strategy. We have so much white space, we want to open great stores, and we're gonna methodically do that over our long range plan.

Will Gardner: As it relates to ebitdas and or by vintage they're all positive I would tell you at $12 million you know, we're EBITDA positive depending upon the location that you know if it's in the city or something like that below that it gets tough to be EBITDA positive and that's why we're just being really discerning specifically with these.

Earl Carlton Ford: And that's why we're just being really discerning, specifically with these new markets that we're going into. Okay, so with that, oh, sorry. I didn't know if you had another question. No, that's it, Steve.

Will Gardner: New markets that we're going into.

Speaker Change: Okay, so with that.

Speaker Change: Sorry.

Speaker Change: I don't know if you have right now.

That's it. Thank you appreciate it okay.

Steven Paul Lawrence: Thank you. I appreciate it. Okay. No, I appreciate it.

Speaker Change: Appreciate it I appreciate everybody joining us on the call today.

Steven Paul Lawrence: I appreciate everybody joining us on the call today. Just in closing, our goal over the next year is to move back to top-line growth. We'll continue to make investments that will drive returns in future years and allow us to achieve our long-term objectives. We believe that we have a unique concept that resonates with a wide range of consumers and is scalable and transportable. While our long-range plan encompasses targets that we plan to achieve over the next five years, our ultimate long-term goal is to be the best sports and outdoor retailer in the country, with stores stretching across the continent, and that is what we will remain focused on. In closing, I want to thank all 22,000 of our Academy associates for all the hard work and effort they've put in over the past year. We continue to believe that our employees are the key ingredient in our secret sauce, and I know that every one of our team members is going to give it their best out there and help more people have fun out there in 2024.

Speaker Change: In closing our goal over the next year is to move back to top line growth, while continuing to make investments will drive returns in future years allow us cheaper long term objectives we.

Speaker Change: We believe that we have a unique concept that resonates with a wide range of consumers and a scalable and transportable.

Speaker Change: While our long range plan encompasses targets, we plan to achieve over the next five years, our ultimate long term goal is to be the best sports and outdoor retailer in the country the store stretching across the continent and that is what we remain focused on.

Speaker Change: In closing I want to thank all 22000 of our Academy associates for all the hard work and effort. They put in over the past year. We continue to believe that our employees are the key ingredient of our secret sauce and I know that every one of our team members is going to give us their best effort out there and help more people have fun out there in 'twenty 'twenty four thanks for joining us today and have a great rest of your day.

Thanks for joining us today, and have a great rest of your day. Ladies and gentlemen, the call is now concluded. Thank you for your participation. You may now disconnect.

Speaker Change: Ladies and gentlemen, the call has now concluded. Thank you for your participation you may now disconnect your line.