Q3 2024 Academy Sports & Outdoors Inc Earnings Call

December 10, 2024

There'll be a brief question and answer session questions will be limited to analysts and investors. We ask that you. Please limit yourself to one question and one follow up.

To answer your question during the Q&A portion. Please press star one on your telephone keypad. If you require operator assistance during the call. Please press star zero.

Speaker Change: I'd now like to turn the call over to your host Brad Mars Director of strategic initiatives for Academy Sports and outdoors.

Speaker Change: Thank you you may begin.

Speaker Change: Good morning, everyone and thank you for joining the Academy sports and outdoors third quarter 2024 financial results call participating on today's call are Steve Lawrence Chief Executive Officer, and Carl <unk>, Chief Financial Officer, as a reminder.

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

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

Company undertakes no obligation to revise any forward looking statements.

Speaker Change: Days remarks also refer to certain non-GAAP financial measures.

Speaker Change: Reconciliations to the most comparable GAAP measures are included in today's earnings release.

Speaker Change: The earnings release, and an investor presentation are available on our website at investors Dot Academy Dot com.

Steve Lawrence: News and events I'll now turn the call over to Steve for his remarks.

Steve Lawrence: Thanks, Brad Hello, and thanks to all of you for joining us today.

Steve Lawrence: As we look at our third quarter and year to date performance, we remain confident in our long range plan and the business strategies that support it.

Steve Lawrence: In my prepared remarks today I will cover three topics with a focus on how we're making progress towards our long range goals with updates on our third quarter results and a view of our near term macroeconomic environment, along with an update on how we're continuing to advance our strategic initiatives and make progress towards reaching all of our long term goals.

Steve Lawrence: Carl will then provide additional details on our financial results and outlook and we'll then open up the line for questions.

Steve Lawrence: To start with a few highlights our comp sales results for the third quarter were in line with our previous guidance and an improvement in trend versus the first half of the year.

Steve Lawrence: We delivered positive adjusted free cash flow for the quarter, our <unk> consecutive quarter. We have had a strong start to the holiday season, although as we look at our third quarter and year to date performance and a consumer environment, we're taking a prudent approach to our outlook and have narrowed the guidance for the full year.

Steve Lawrence: Finally, we're pleased to announce last week, the board's authorization of a new $700 million share repurchase program, reflecting our confidence in the business.

Steve Lawrence: We view returning capital directly to the shareholders as an integral to our capital allocation strategy, along with ongoing investments in our strategic initiatives to drive long term growth.

Diving into our results in the third quarter comp sales declined four 9%, which was in line with our previous guidance.

Steve Lawrence: As we discussed on our Q2 call. We are encouraged by our positive comp performance during August and we carried a lot of this momentum deep into the quarter with costs remaining positive most of the way through September.

Steve Lawrence: The decline we ran for the quarter was the result of October which was a challenging month for us.

Steve Lawrence: During October we experienced some unseasonably warm temperatures, which persisted throughout the entire month across our footprint negatively impacting our seasonal businesses and having roughly a 140 basis point drag on our comps.

Steve Lawrence: In addition, we lapped the Rangers World series run from last year, which also negatively impacted our comp by roughly 120 basis points.

Steve Lawrence: We also saw a continued very active storm season during Q3 with Hurricane Helene and Milton hitting in October.

Steve Lawrence: I'm incredibly impressed by the resilience of our team members and commend them on their tireless efforts navigating these challenging circumstances Academy.

Steve Lawrence: Academy takes pride in serving our communities during natural disasters, and I'm, especially proud that we make sure to get back in times of need for our communities with donations of clean water and other disaster recovery supplies.

Looking at the results by Division on a shifted calendar basis, which is how we manage our business outdoor was our best performing category posting total sales growth of 4% versus last year led by continued strength in our camping and hunting businesses.

Steve Lawrence: Footwear was our second best performing category at down 2% driven by strength in key brands, such as Nike Brooks Skechers and crocs.

Steve Lawrence: Sports and recreation sales were down 3% we.

We saw strength in team sports driven by football and baseball.

Steve Lawrence: Conversely, a lot of this all seasonal categories in this division such as fire pits and patio heaters saw sluggish sales caused by the aforementioned much warmer than average temperatures across our geography.

Steve Lawrence: These much warmer temps also undoubtedly had a major impact on our apparel business, which ran down 9% for the quarter.

Steve Lawrence: While we saw solid increases in warm weather categories, such as shorts and Tees. These businesses are not large enough in Q3 to offset the softness we saw in the key fall seasonal categories, such as fleece and outerwear as well as the ranges World series in fact, I mentioned earlier.

Steve Lawrence: Pulling back and looking at the results across the entire company you can see that our sales performance is not entirely reflective of the strong momentum we saw with our most popular brands in our non seasonal businesses.

Steve Lawrence: These pockets of outperformance within each division are proof of our ability to resonate with consumers by offering a compelling assortment featuring new in demand products across a wide range of price points.

Pulling back and looking at the results across the entire company you can see that our sales performance is not entirely reflective of the strong momentum we saw with our most popular brands in our non seasonal businesses. These pockets of outperformance within each division are proof of our ability to resonate with consumers by offering a compelling assortment featuring new.

Steve Lawrence: We remain focused on leveraging our advantage is the value provider in our space by protecting our everyday value messaging, while also offering targeted promotions in key time periods during the year.

Steve Lawrence: We remain true to this strategy in Q3, which enabled each division to hold margins versus last year.

Steve Lawrence: We did end up with merchandise margins down slightly to last year at negative 30 basis points during the quarter, but this was a result of the outperformance in our outdoor division, which makes us down from a rate perspective.

In demand products across a wide range of price points.

We remain focused on leveraging our advantage is the value provider in our space by protecting our everyday value messaging, while also offering targeted promotions in key time periods during the year.

Gross margin during the quarter declined 50 basis points versus last year.

Steve Lawrence: The primary reason for the decline in gross margin was driven by some extra supply chain costs associated with the go live of our warehouse management system in our Georgia distribution facility along with some additional freight cost we incurred as we rerouted key elements of our holiday assortment to coming through the west coast in order to avoid any potential delays from the east coast Port strike.

We remained true to this strategy in Q3, which enabled each division to hold margins versus last year we.

We did end up with merchandise margins down slightly to last year at negative 30 basis points during the quarter, but this was a result of the outperformance in our outdoor division, which makes us down from a rate perspective.

Gross margin during the quarter declined 50 basis points versus last year.

Steve Lawrence: Through the first three quarters of the year, our margins are down slightly to last year at negative 10 basis points. So we believe it is prudent that for our full year guidance. We are holding the low end of our range of $34 three were flat to last year, but narrowing the top end of the guide to 34, 5% from $34 seven previously.

The primary reason for the decline in gross margin was driven by some extra supply chain costs associated with the go live of our warehouse management system in our Georgia distribution facility along with some additional freight costs, we incurred as we rerouted key elements of our holiday assortment, it's coming through the west coast in order to avoid any potential delays from east coast Port strike.

Steve Lawrence: Turning to the economy in the third quarter, we continue to see broad based consumer backdrop that was characterized by episodic shopping demonstrated by consumers waiting until major events, such as back to school or holiday, we're pulling back spending during the lulls in the calendar.

Through the first three quarters of the year, our margins are down slightly to last year at negative 10 basis points. So we believe it is prudent for our full year guidance. We are holding the low end of our range of $34 three were flat to last year, but narrowing the top end of the guide to 34, 5% from $34 seven previously.

We continue to see strong results during key event periods as evidenced by our positive comps during the first half of the quarter.

Steve Lawrence: This gives us optimism as we head into the fourth quarter, which has one of the largest shopping pizza in the entire year.

Turning to the economy in the third quarter, we continue to see broad based consumer backdrop that was characterized by episodic shopping demonstrated by consumers waiting until major events, such as back to school or holiday, we're pulling back spending during the lulls in the calendar.

Steve Lawrence: Customers also continue to gravitate towards the value offerings in our assortment, which was reflected in the strength we saw during the promotional back to school season.

Steve Lawrence: Our large private brands, which are one of the best articulations of our everyday value proposition also continued to perform well during the quarter.

We continue to see strong results during key event periods as evidenced by our positive comps during the first half of the quarter.

This gives us optimism as we head into the fourth quarter, which has one of the largest shopping pizza in the entire year.

Steve Lawrence: To capitalize on our customers' focus on value during the holiday peak, we're supplementing our strong slate of everyday values, some compelling promotions, which range from 499 sleep pants to 39 99 kids bikes all the way up to 90 999 gas in charcoal grills.

Customers also continue to gravitate towards the value offerings in our assortment, which was reflected in the strength we saw during the promotional back to school season.

Our large private brands, which are one of the best articulations of our everyday value proposition also continued to perform well during the quarter.

Steve Lawrence: Newness continues to resonate with customers as we navigated through 2024.

To capitalize on the customers focus on value during the holiday peak, we're supplementing our strong slate of everyday values, some compelling promotions, which ranged from 499 sleep pants to 39 99 kids bikes all the way up to 90 999 gas in charcoal grills.

Steve Lawrence: For Q4, we've dramatically expanded our offering of new must have products with strong statements from brands, such as Yeti Stanley and a wall and drink ware cooler, whereby UGG boots, and slippers and reintroducing comverse back in our Assortments in all doors.

Steve Lawrence: At this point, we're past the traditional kickoff to the holiday season, and we're pleased with our Thanksgiving weekend results, where we had the largest day in the company's history on Black Friday.

Newness continues to resonate with customers as we navigated through 2024.

For Q4, we dramatically expanded our offering of new must have products with strong statements from brands, such as Yeti Stanley and a wall and drink ware cooler, whereby agg in boots, and slippers and reintroducing comverse back in our Assortments in all doors.

Steve Lawrence: As most of you are aware, we do have a compressed holiday calendar. This year with five fewer days between Thanksgiving and Christmas, which means we will have to maintain a high level of momentum to help offset this truncated shopping calendar.

At this point, we're past the traditional kickoff to the holiday season, and we're pleased with our Thanksgiving weekend results, where we had the largest day in the company's history on Black Friday.

Turning to our long range initiatives Academy has a strong foundation with multiple growth engines to continue to add value and will drive our performance in the long term.

As most of you are aware, we do have a compressed holiday calendar. This year with five fewer days between Thanksgiving and Christmas, which means we will have to maintain a high level of momentum to help offset this truncated shopping calendar.

Steve Lawrence: To provide further context on some of the green shoots we continue to see in our business, which had been driven by investments in our strategic initiatives.

Steve Lawrence: We remain encouraged by the improvement of our comps versus the first half of the year and by the fact that we've held on to most of the market share gains we've made since pre pandemic.

Turning to our long range initiatives Academy as a strong foundation with multiple growth engines that continue to add value and will drive our performance in the long term I'd like to provide further context on some of the green shoots we continue to see in our business, which had been driven by investments in our strategic initiatives.

Steve Lawrence: As you might remember we have three strategic growth pillars and as we look ahead, we have several exciting new initiatives that we've been working on which should help drive our business moving forward now.

Steve Lawrence: Now I'd like to give you a quick update on each growth initiative.

Opening new stores and expanding our footprint remains our largest opportunity for growth and is one of our top priorities as we execute against our long range plan.

We remain encouraged by the improvement of our comps versus the first half of the year and by the fact that we've held on to most of the market share gains we've made since pre pandemic.

Steve Lawrence: During 2024, we successfully opened up 16 stores, which equates to roughly 6% unit growth, bringing our total count to 39, new stores opened since we began this journey in fiscal 2022.

As you might remember we have three strategic growth pillars and as we look ahead, we have several exciting new initiatives that we've been working on which should help drive our business moving forward.

Now I'd like to give you a quick update on each growth initiative.

Steve Lawrence: And it takes our total store count to 298.

Opening new stores and expanding our footprint remains our largest opportunity for growth and is one of our top priorities as we execute against our long range plan.

Steve Lawrence: Our strategic expansion has yielded strong results, which is a testament to our team's dedication ingenuity and hard work.

During 2024, we successfully opened up 16 stores, which equates to roughly 6% unit growth, bringing our total count to 39, new stores opened since we began this journey in fiscal 2022.

Steve Lawrence: This achievement continues to propel us from a regional retailer, becoming a national brand delivering key milestones such as an expansion into our 19th and in Ohio, When we look forward to serving local communities.

And it takes our total store count to 298.

Steve Lawrence: We continue to see positive comps out of our 22 vintage of stores and have been very encouraged by our 2024 vintage of stores, which have gotten out of the gates with a fast start and our over achieving their plans.

Our strategic expansion has yielded strong results, which is a testament to our team's dedication ingenuity and hard work.

Steve Lawrence: Our commitment to new store growth remains fundamental to academies long term success and we will continue to refine our approach as we gain additional learnings as we move into new markets.

This achievement continues to propel us from a regional retailer, becoming a national brand delivering key milestones such as an expansion into our 19th and in Ohio, where we look forward to serving local communities.

Steve Lawrence: Our real estate team is continually analyzing and including additional data points, such as mobility traffic data and improve demographic profiling into our site selection model.

We continue to see positive comps out of our 22 vintage of stores and have been very encouraged by our 2024 vintage of stores, which have gotten out of the gates with a fast start and our over achieving their plans.

Steve Lawrence: The end result is that we have dramatically improved our hit rate on new locations as we've gotten deeper into this journey.

Our commitment to new store growth remains fundamental to academies long term success and we will continue to refine our approach as we gain additional learnings as we move into new markets.

Steve Lawrence: In prior calls we've discussed focusing more on the suburbs exurbs and underserved medium sized markets.

Our real estate team is continually analyzing and including additional data points, such as mobility traffic data and improve demographic profiling into our site selection model.

Steve Lawrence: The reasoning behind this is simple.

Steve Lawrence: After analyzing the data these types of markets, our target rich with our core customer demographic.

Steve Lawrence: Our plan is to continue to position new stores in these locations and to steadily build critical density and brand awareness over time.

The end result is that we have dramatically improved our hit rate on new locations as we've gotten deeper into this journey.

Steve Lawrence: Based on the results of the recent new stores in these types of markets. We're excited by the range of new store expansion possibilities in front of us.

In prior calls we've discussed focusing more on the suburbs exurbs and underserved medium sized markets.

The reasoning behind this is simple.

Steve Lawrence: <unk> at this point, we built out our new store pipeline utilizing our improved modeling.

After analyzing the data these types of markets, our target rich with our core customer demographic.

Steve Lawrence: Our plan is to open up 20 to 25, new stores in 2025, which will increase our unit count by approximately seven 5% with our 300 stores slated to open up in Q1.

Our plan is to continue to position new stores in these locations and to steadily build critical density and brand awareness over time.

Based on the results of the recent new stores in these types of markets. We're excited by the range of new store expansion possibilities in front of us.

Steve Lawrence: While our long term goal of opening up a 160 to 180 stores over the next five years remains unchanged reacting thoughtfully and prudently to achieve these goals as we continue to navigate a challenging short term macroeconomic backdrop.

<unk> at this point, we built out our new store pipeline utilizing our improved modeling.

Our plan is to open up 20 to 25, new stores in 2025, which will increase our unit count by approximately seven 5% with our 300 stores slated to open up in Q1.

Steve Lawrence: Illustrate this point, we're moderating the slope of the new store growth curve in the short term with the $20 to 25, new stores next year being below the original model, we built back in 2022, which call for 30% to 35 stores in 2025.

While our long term goal of opening up a 160 to 180 stores over the next five years remains unchanged, we're acting thoughtfully and prudently to achieve these goals as we continue to navigate a challenging short term macroeconomic backdrop.

Steve Lawrence: We're also excited that in 2025, we are starting to achieve the balanced approach. We have discussed on previous calls with roughly half of these stores currently slated to open in spring with the remainder opening up in the back half of the year.

Illustrate this point, we're moderating slope of the new store growth curve in the short term with the 20% to 25, new stores next year being below the original model, we built back in 2022, which call for 30% to 35 stores in 2025.

Steve Lawrence: We're also on track to open up five new stores in Q1, which is more stores than we've ever opened up in the first quarter. Since we began this journey.

Steve Lawrence: This is further evidenced that we are improving execution of our new stores. We're excited about expanding our store footprint into new markets in states as we start to fill in Ohio and open up our 20th state with Pennsylvania.

We're also excited that in 2025, we are starting to achieve the balanced approach. We have discussed on previous calls with roughly half of these stores currently slated to open in spring with the remainder opening up in the back half of the year.

Steve Lawrence: The remaining source will help us infill underserved markets in core geographies, such as Texas, Oklahoma, Louisiana, Arkansas and Tennessee.

We're also on track to open up five new stores in Q1, which is more stores than we've ever opened up in the first quarter. Since we began this journey.

Steve Lawrence: As a reminder, we expect new stores to generate between 12 and $16 million in year, one sales depending upon whether it is a new or existing market as well as other factors such as size of market and population demographics. Additionally.

This is further evidenced that we are improving execution of our new stores are excited about expanding our store footprint into new markets in states as we start to fill in Ohio and open up our 20th state with Pennsylvania.

Steve Lawrence: Additionally, we hold all of our new stores to positive four wall EBITDA contribution in year, one leading to returns on invested capital in excess of 20% over the life of these investments.

The remaining source will help us infill underserved markets in core geographies, such as Texas, Oklahoma, Louisiana, Arkansas and Tennessee.

As a reminder, we expect new stores to generate between 12 and $16 million in year, one sales depending upon whether it is a new or existing market as well as other factors such as size of the market and population demographics. Additionally.

Steve Lawrence: Now I'd like to move to our second growth initiative building, even more powerful omnichannel business.

We found that the number one way for us to build our dotcom business is through store growth, particularly in new markets.

Additionally, we hold all of our new stores to positive four wall EBITDA contribution in year, one leading to returns on invested capital in excess of 20% over the life of these investments.

Steve Lawrence: The first reason for this is that the new store openings and the associated marketing campaigns helped build brand awareness for Academy.

Second roughly 50% of our dotcom business is filled through both this customers have consistently demonstrated over time that the preferred method of filament for many of the bulky big ticket categories. We carry such as kayaks gun saves our fitness equipment is for them to pick it up themselves.

Now I'd like to move to our second growth initiative building, a more powerful omnichannel business.

We found that the number one way for us to build our dotcom business is through store growth, particularly in new markets.

The first reason for this is that the new store openings and the associated marketing campaigns helped build brand awareness for Academy.

Steve Lawrence: The need to have a physical store to act as a distribution hub and extra bluelinx, our dot com growth to our new store expansions.

Second roughly 50% of our dotcom business is filled through both this customers have consistently demonstrated over time that the preferred method of filament for many of the bulky big ticket categories. We carry such as kayaks gun safes are fitness equipment is for them to pick it up themselves.

Steve Lawrence: As mentioned during our last quarterly call. We continue to look for ways to eliminate friction and make it seamless for customers to shop between our website and physical stores.

Steve Lawrence: We've seen positive results from our partnership with door Dash during our first full quarter with the service in place.

The need to have a physical store to act as a distribution hub and extra really links our dotcom growth to our new store expansions.

Steve Lawrence: Phase one of our door dash partnership with fulfillment through their App and we saw strong growth in unique customers as well as omnichannel sales from this new service.

As mentioned during our last quarterly call. We continue to look for ways to eliminate friction and make it seamless for customers to shop between our website and physical stores.

Steve Lawrence: As we head into holiday, we have expanded our partnership to allow for same day delivery options on Academy Dot Com, which is also powered by door Dash. We expect this to be a big unlock the last four to five days leading up to Christmas.

We've seen positive results from our partnership with door Dash during our first full quarter with the service in place.

Steve Lawrence: Our commitment to our customers clear.

As one of our door dash partnership with fulfillment through their App and we saw strong growth in unique customers as well as omnichannel sales from this new service.

Steve Lawrence: We want to democratize access to sports and outdoor activities for all customers by providing the gear they need a great prices however, they choose to shop.

As we head into holiday, we've expanded our partnership to allow for same day delivery options on Academy Dot Com, which is also powered by door Dash. We expect this to be a big unlock the last four to five days leading up to Christmas.

Steve Lawrence: We look forward to the benefits. This approach will drive during the fourth quarter holiday season and into 2025 and beyond.

Steve Lawrence: Now.

Steve Lawrence: I'd like to touch on our third growth initiative, which is driving comp growth in our core business across our existing store base.

Our commitment to our customers clear, we want to democratize access to sports and outdoor activities for all customers by providing the gear they need a great prices however, they choose to shop.

Steve Lawrence: While opening new stores and rapidly expanding our dot com business are huge growth drivers for us our number one focus is to move our base business back to positive comp growth moving forward.

We look forward to the benefits. This approach will drive during the fourth quarter holiday season and into 2025 and beyond.

Steve Lawrence: We believe that many of the initiatives we've been working on over the past year are the keys to moving back to comp growth and unlocking long term value for our shareholders.

Now.

I'd like to touch on our third growth initiative, which is driving comp growth in our core business across our existing store base.

Steve Lawrence: As mentioned earlier, our customer continues to vote for newness in our assortment and we have a lot of new items and brands coming this holiday.

While opening new stores and rapidly expanding our dotcom business are huge growth drivers for us our number one focus is to move our base business back to positive comp growth moving forward.

Steve Lawrence: With that in mind I'm excited to announce that in Q1 of 2025, we will have one of the most meaningful launches in academies history with the addition of an expanded offering of Nike product and 140 plus stores.

We believe that many of the initiatives we've been working on over the past year are the keys to moving back to comp growth and unlocking long term value for our shareholders.

Steve Lawrence: Our plan is to launch in April with full Assortments in men's women's and kids across footwear apparel and accessories, along with a strong statement of sporting goods.

As mentioned earlier, our customer continues to vote for newness in our assortment, we have a lot of new items and brands coming this holiday.

Steve Lawrence: We plan to follow up with more details on this exciting addition, during our Q4 call in March.

With that in mind I'm excited to announce that in Q1 of 2025, we will have one of the most meaningful launches in academies history with the addition of an expanded offering of Nike product and 140 plus stores.

Steve Lawrence: Our second major initiative for us under this growth pillar is all of the work we've done over the past year around our customer file and gaining a deeper understanding of their shopping behavior.

Plan is to launch in April with full assortment in men's women's and kids across footwear apparel and accessories, along with a strong statement of sporting goods.

Steve Lawrence: During the third quarter, we completed an IV resolution process, which is an important step as we continue to develop and refine our targeted marketing capabilities.

We plan to follow up with more details on this exciting addition, during our Q4 call in March.

The end result of all this work is that we have nearly doubled our identified addressable customer count, which unlocks new opportunities for us to reengage with customers, who might have lapsed over recent years with improved targeted marketing efforts.

Our second major initiative for us under this growth pillar is all of the work we've done over the past year around our customer file and gaining a deeper understanding of their shopping behavior.

During the third quarter, we completed an IV resolution process, which is an important step as we continue to develop and refine our targeted marketing capabilities. The.

Steve Lawrence: You can see some of the benefits of this working the Q3 customer traffic data that Karl will share with you shortly.

Steve Lawrence: Another key element of our work on this front as the roll out of My Academy Awards.

Steve Lawrence: In our last call, we decided that our goal was to get 10 million customers signed up by the end of the year.

At this point, we're tracking to beat this number and expect to head into 2025 with over 11 million customers in this program.

You can see some of the benefits of this working the Q3 customer traffic data that Karl will share with you shortly.

Steve Lawrence: We expect this number will only grow moving forward and it gives us a powerful tool to build a deeper connection and understanding of our customers.

Another key element of our work on this front is the roll out of My Academy Awards.

Steve Lawrence: I'd like to add that none of the work we've been doing would be possible without our stores Dcs and home office team members, who continue to embody our values and deliver a positive experience for our customers. We're proud of their efforts and want to acknowledge our appreciation for the critical role they play in our success.

In our last call, we decided that our goal was to get 10 million customers signed up by the end of the year.

At this point, we're tracking to beat this number and expect to head into 2025 with over 11 million customers in this program.

We expect this number will only grow moving forward and it gives us a powerful tool to build a deeper connection and understanding of our customers.

Steve Lawrence: Karl will now walk you through a deeper dive into our third quarter financials and updated guidance for the full year Carl.

I'd like to add that none of the work we've been doing would be possible without our stores Dcs and home office team members, who continue to embody our values and deliver a positive experience for our customers. We're proud of their efforts and want to acknowledge our appreciation for the critical role they play in our success.

Karl: Thank you Steve.

Karl: Third quarter sales of $1 34 billion and comparable sales of negative four 9% fell in line with our expectations our comp transactions declined by seven 1% while comp ticket increased by two 4% compared to last year.

Karl will now walk you through a deeper dive into our third quarter financials and updated guidance for the full year Carl.

Karl: Our gross margin rate in the third quarter was 34% a 50 basis point decrease compared to the third quarter of last year, primarily driven by increased supply chain costs associated with international freight and labor expenses in our Georgia distribution facility, coupled with a mix shift in our outdoor.

Thank you Steve.

Karl: Third quarter sales of 134 billion and comparable sales of negative four 9% fell in line with our expectations our comp transactions declined by seven 1% while comp ticket increased by two 4% compared to last year.

Karl: Merchandise penetration.

Karl: Overall in the third quarter, we generated GAAP net income of $65 8 million and GAAP diluted earnings per share of <unk> 92.

Karl: Adjusted net income, which excludes stock based compensation of $6 3 million was $75 million or <unk> 98, and adjusted earnings per share.

Karl: Merchandise penetration.

Despite negative comparable sales in the third quarter, we were pleased to see favorable traffic trends, which drove the sequential improvement in our comp sales trajectory, reflecting the strengthening of our core business as we head into the holiday season.

Overall in the third quarter, we generated GAAP net income of $65 8 million and GAAP diluted earnings per share of <unk> 92.

Karl: Adjusted net income, which excludes stock based compensation of $6 3 million was $70 5 million or <unk> 98, and adjusted earnings per share.

Karl: We experienced an increase of 250 basis points in store foot traffic versus the first half of the year.

Karl: Despite negative comparable sales in the third quarter, we were pleased to see favorable traffic trends, which drove the sequential improvement in our comp sales trajectory, reflecting the strengthening of our core business as we head into the holiday season.

Karl: Additionally foot traffic during key shopping events in the third quarter increased three 8% versus last year. Both of these data points as well as our start to the holiday season give us confidence in our stabilizing consumer environment as we enter the fourth quarter.

We experienced an increase of 250 basis points in store foot traffic versus the first half of the year. Additionally.

Karl: As we exited the labor day, selling period or quarter to date comparable sales were positive which were offset in the back half of the quarter due to lapping the Texas Rangers World series sales as well as a decline in fleece and outerwear sales due to warmer than normal weather patterns. As a result, these drove approximately two <unk>.

Karl: <unk> hundred 60 basis points of combined impact on the overall comp for the quarter.

Karl: Our comparable sales improvement during the first half of the quarter was attributable to all of our divisions with outdoor leading the way primarily driven by strong fishing camping and hunting sales, while overall comp sales for the quarter were negative four 9%. We were encouraged by the performance of our business and.

<unk> hundred 60 basis points of combined impact on the overall comp for the quarter.

Karl: August and September and the October decline in sales was atypical to historical builds.

Karl: Gross margin of 34, 8% in the third quarter was down 50 basis points versus last year, driven by several factors, including lower merchandise margins as well as higher costs associated with freight and distribution center labor costs.

Karl: August and September and the October decline in sales was atypical to historical builds.

Karl: Furthermore, the decline in margins were driven by two key factors during the quarter first headwinds associated with the backlog cleanup of our Georgia distribution Center, which we discussed on our second quarter call drove inefficiencies in our productivity as we increase the resources needed to ensure we were prepared for the holiday shopping season.

Karl: Of which the majority of these costs were recognized in the third quarter. Additionally.

Additionally costs increase in the international freight associated with accelerating merchandise ahead of the October port strike.

Karl: Our merchandise margins were down 30 basis points versus last year. The primary driver of this was outperformance in our outdoor division, which was up 7% versus last year.

Karl: Of which the majority of these costs were recognized in the third quarter. Additionally.

Karl: We're now fully caught up in the Georgia distribution center in time for the holiday shopping season, and we will continue to leverage the scale of our supply chain throughout our business, especially as we scale operations in our Georgia facility.

Karl: Additionally, cost increase in the international freight associated with accelerating merchandise ahead of the October port strike.

Karl: Our merchandise margins were down 30 basis points versus last year. The primary driver of this was outperformance in our outdoor division, which was up 7% versus last year.

Karl: In the third quarter SG&A increased by $19 3 million versus last year, which was primarily driven by our investments in our growing store base as we increased our footprint by 18, new stores versus the third quarter of last year.

We're now fully caught up in the Georgia distribution center in time for the holiday shopping season, and we will continue to leverage the scale of our supply chain throughout our business, especially as we scale operations in our Georgia facility.

Karl: Unpacking that further over 90% of the increase was driven by our investments in strategic initiatives related to new stores, our omnichannel improvements and our customer data platform. We remain confident in our continued investment in these areas as part of our long range plan and are essential to positioning.

Karl: Our business for sustainable long term growth.

Karl: Unpacking that further over 90% of the increase was driven by our investments in strategic initiatives related to new stores Omni channel improvements and our customer data platform.

Karl: Looking at the balance sheet, we ended the quarter with $296 million in cash.

Karl: Our inventory balance was $1 $5 2 billion, an increase of two 2% compared to last year.

We remain confident in our continued investment in these areas as part of our long range plan and are essential to positioning our business for sustainable long term growth.

Karl: Total inventory units were flat. This includes an additional 18 stores compared to the end of Q3 2023.

Karl: On a per store basis inventory units were down 7% and inventory dollars were down 4% our inventory management remains a focus, especially as we grow the store base.

Looking at the balance sheet, we ended the quarter with $296 million in cash.

Our inventory balance was $1 $5 2 billion, an increase of two 2% compared to last year.

Karl: Total inventory units were flat. This includes an additional 18 stores compared to the end of Q3 2023.

In the third quarter, we generated approximately $97 million in cash from operations, we invested $63 million in our growth initiatives repurchased approximately 1 million shares for $53 million and paid out $8 million in dividends.

Karl: On a per store basis inventory units were down 7% and inventory dollars were down 4% our inventory management remains a focus, especially as we grow the store base.

Karl: Year to date Academy has generated approximately $252 million of adjusted free cash flow compared to $150 million year to date 2023.

Karl: On a per share basis. This represents a third quarter year over year increase of 140% and an increase of 76% versus year to date 2023.

Karl: Year to date Academy has generated approximately $252 million of adjusted free cash flow compared to $150 million year to date 2023.

Karl: In terms of capital allocation, our strategy remains focused on executing against three pillars, which are one financial stability.

Karl: <unk> self funding growth initiatives and three increasing shareholder returns through share repurchases and dividends. We believe these priorities will help drive future sales and earnings growth as well as increased shareholder value.

Karl: On a per share basis. This represents a third quarter year over year increase of 140% and an increase of 76% versus year to date 2023.

Karl: In terms of capital allocation, our strategy remains focused on executing against three pillars, which are one financial stability.

Third quarter dividends paid of $7 7 million or <unk> 11 per share resulted in a quarterly dividend yield of 22 basis points and share repurchases in the third quarter represented a total of one 5% of our market cap.

Combined we have returned a total of one 7% to our shareholders in the third quarter and a total of eight 2% year to date.

Karl: Third quarter dividends paid of $7 7 million or <unk> 11 per share resulted in a quarterly dividend yield of 22 basis points and share repurchases in the third quarter represented a total of one 5% of our market cap.

Karl: On that note earlier this month, our board of directors authorized a new share repurchase program of $700 million over the next three years, increasing our prior remaining authorization by approximately $300 million.

Karl: Combined we have returned a total of one 7% to our shareholders in the third quarter and a total of eight 2% year to date.

Karl: At current pricing our available authorization represents over 20% of our market cap and is currently one of the largest remaining share repurchase authorizations amongst sporting goods retailers as a percentage of market capitalization.

On that note earlier this month, our board of directors authorized a new share repurchase program of $700 million over the next three years, increasing our prior remaining authorization by approximately $300 million.

Additionally, the board recently approved a dividend of <unk> 11 per share payable on January 15th 2025 to stockholders of record as of December 18th 2024.

At current pricing our available authorization represents over 20% of our market cap and is currently one of the largest remaining share repurchase authorization amongst sporting goods retailers as a percentage of market capitalization.

Karl: We are excited by the long term growth potential of our business driven by continued investment in new stores. We opened a total of eight new stores in the third quarter and five new stores in November, bringing our total new store openings to 16 year to date.

Karl: Additionally, the board recently approved a dividend of <unk> 11 per share payable on January 15th 2025 to stockholders of record as of December 18th 2024.

Karl: We continue to leverage our value engineering capabilities, including cost optimization of raw materials construction services and landlord participation.

Karl: Currently in academies, New store pipeline there are over 80 sites in various stages of the new store site selection process, which will support our 20% to 25 planned new store openings in fiscal 2025.

Karl: We continue to leverage our value engineering capabilities, including cost optimization of raw materials construction services and landlord participation.

We are excited about the learnings and insights from previous new store openings and look forward to the 2025 vintage being the best yet.

Karl: Now turning to our outlook for the remainder of the year, we are narrowing our previous guidance for fiscal 2020 for our revised guidance is as follows net sales are expected to range from $5 89 billion to $5 94 billion with comparable sales of negative 6% to <unk>.

Karl: We are excited about the learnings and insights from previous new store openings and look forward to the 2025 vintage being the best yet.

Karl: <unk>, 5%.

Now turning to our outlook for the remainder of the year, we are narrowing our previous guidance for fiscal 2020 for our revised guidance is as follows net sales are expected to range from $5 89 billion to $5 94 billion with comparable sales of negative 6% to <unk>.

Our gross margin rate is expected to range from 34, 3% to 34, 5%.

Karl: GAAP net income is expected to be between $400 million and $425 million.

Karl: Adjusted net income, which excludes certain estimated expenses primarily stock based compensation of approximately $27 million is forecasted to range from $420 million to $445 million.

Karl: <unk>, 5%.

Karl: Our gross margin rate is expected to range from 34, 3% to 34, 5%.

Karl: GAAP diluted earnings per share is expected to be $5 50 to $5 80.

Karl: GAAP net income is expected to be between $400 million and $425 million.

Karl: And adjusted diluted earnings per share is forecasted to range from $5 80 to.

Karl: Adjusted net income, which excludes certain estimated expenses primarily stock based compensation of approximately $27 million is forecasted to range from $420 million to $445 million.

Karl: To $6 10.

Karl: The earnings per share estimates are based on our revised share count of $73 1 million diluted weighted average shares outstanding for the full year.

Karl: GAAP diluted earnings per share is expected to be $5 50 to $5 80.

Karl: This amount does not include any potential future repurchase activity using our new 700 million authorization.

Karl: And adjusted diluted earnings per share is forecasted to range from $5 80.

We also remain confident in the strength of our cash flows and expect to generate between $310 million and $350 million of adjusted free cash flow, which includes 185 million to $210 million of capital expenditures.

Karl: To $6 10.

Karl: The earnings per share estimates are based on our revised share count of $73 1 million diluted weighted average shares outstanding for the full year.

Karl: This amount does not include any potential future repurchase activity using our new 700 million authorization.

Additionally, we would like to discuss potential impacts to our business from the outcome of the recent election and the potential increase in tariffs.

Karl: We also remain confident in the strength of our cash flows and expect to generate between $310 million and $350 million of adjusted free cash flow, which includes 185 million to $210 million of capital expenditures.

Karl: While the magnitude and timing of impacts are uncertain. We are actively monitoring news surrounding potential trade policy and corporate tax changes from the next administration.

Karl: Over the last several years as part of our normal course of business, we have taken proactive steps diversifying our sourcing base to reduce our direct import exposure from a single country, which we believe best positions our business in 2025 and beyond.

Karl: Additionally, we would like to discuss potential impacts to our business from the outcome of the recent election and the potential increase in tariffs.

Karl: While the magnitude and timing of impacts are uncertain. We are actively monitoring news surrounding potential trade policy and corporate tax changes from the next administration.

Karl: First sales of our private brands represent roughly 21% of our total business as I mentioned earlier, we have steadily been diversifying our supplier base over the past several years and have moved the percentage of goods, we directly source from out of China from over 70% in 2019, so roughly.

Karl: 50% today, and we have no exposure to Mexico or Canada.

Karl: This translates to approximately 10% of exposure to potential elevated tariffs on which we are the importer of record.

Karl: We will continue this diversification strategy moving forward and continue to look for ways to further mitigate any risk.

Karl: Similar to other companies, who import goods. We have also accelerated some spring receipts to ship pre Chinese new year.

Karl: 50% today, and we have no exposure to Mexico or Canada.

Karl: This translates to approximately 10% of exposure to potential elevated tariffs on which we are the importer of record.

Karl: This should have a twofold benefit and that it could help avoid any increase in tariffs while at the same time avoiding key elements of our spring set getting caught up in a potential east coast Port strike.

Karl: We will continue this diversification strategy moving forward and continue to look for ways to further mitigate any risk.

Karl: Similar to other companies, who import goods. We have also accelerated some spring receipts to ship pre Chinese new year. This should have a twofold benefit and that it could help avoid any increase in tariffs while at the same time avoiding key elements of our spring set getting caught up in a potential.

Third the large national brands that partner with us have been on a similar journey to diversify their sourcing basis and our exposure to potential price increases with these brands is similar to what other retailers who share the same brand portfolio would be one exception to this is that a large portion of fireeye.

Karl: East Coast Port strike.

Karl: Arms and ammunition business is manufactured domestically, which could help insulate this important category from price disruptions.

Karl: Third the large national brands that partner with us have been on a similar journey to diversify their sourcing basis and our exposure to potential price increases with these brands is similar to what other retailers who share the same brand portfolio would be one exception to this is that a large portion of fireeye.

Karl: If and when changes occur we will take the appropriate actions to serve our customers and preserve the profitability of the company, while continuing to deliver everyday value.

Karl: In closing I would like to address three important points that are central to our forward business outlook first.

Karl: Arms and ammunition business is manufactured domestically, which could help insulate this important category from price disruptions.

Karl: <unk> Academy is positioned to capitalize on our growth opportunities second our continued investment in our strategic initiatives given recent performance and third our expectation of generating strong operating profits and cash flow. Following these investments.

If and when changes occur we will take the appropriate actions to serve our customers and preserve the profitability of the company, while continuing to deliver everyday value.

Karl: In closing I would like to address three important points that are central to our forward business outlook first.

Karl: Today, approximately 80% of Americans do not live within a 10 mile radius of an academy, implying a large untapped white space for growth.

Karl: We've demonstrated our right to win in the category by offering customers compelling value coupled with industry, leading assortment and we remain confident in our ability to deliver academies unique value proposition on a national scale.

Karl: Today, approximately 80% of Americans do not live within a 10 mile radius of an academy, implying a large untapped white space for growth, we've demonstrated our right to win in the category by offering customers compelling value coupled with industry, leading assortment and we remain confident in our ability to.

Karl: As such our strategic investments reflect our long term vision for the business recognizing short term business headwinds as seen in recent quarters could change the trajectory and pace at which we achieve these goals.

Karl: These investments are Paramount to long term success driving growth in new markets via geographic expansion and penetration as well as growth within our existing business through powerful organic growth initiatives.

Karl: Liver Academy has unique value proposition on a national scale.

Karl: As one of the key tenants of our capital allocation strategy, we have never sacrifice our ability to return capital directly to our shareholders at the cost of investing in growth.

Karl: Academy has generated positive free cash flow for the last 20 consecutive quarters alongside our strategic investments in the business, allowing us to consistently pursue share repurchases and issued dividends to amplify shareholder value.

Karl: As one of the key tenants of our capital allocation strategy, we have never sacrifice our ability to return capital directly to our shareholders at the cost of investing in growth.

Karl: Since our IPO in October of 2020, we have consistently deployed our free cash flow into share repurchases, resulting in the repurchase of 35% of the company, while paying down debt by $945 million to derisk the balance sheet.

Karl: We plan to operate under the same paradigm moving forward generating ample free cash to facilitate our capital allocation strategy, while simultaneously investing in the business to plant seeds that will generate sustainable growth over the long term.

Karl: With that we will now open it up for any questions you might have operator, please open the line for questions.

Speaker Change: Thank you the company will now open the call up for your questions to ask a question. Please press star one on your telephone keypad, we will pause for a moment to wait for the queue to Phil.

Speaker Change: With that we will now open it up for any questions you might have operator, please open the line for questions.

Christopher <unk>: Our first question comes from Christopher <unk> with Jpmorgan. Please proceed with your question.

Speaker Change: Hi, This is joey on for Chris.

Speaker Change: Since you mentioned that Black Friday was the largest selling day ever this year. So it was there any quarter to date commentary you can provide on black Friday holiday and cyber week overall and how this compares to the down 5% midpoint guide and how you're modeling the balance of the quarter and also just kind of piggybacking off of that.

Speaker Change: Our first question comes from Christopher Harvest with J P. Morgan. Please proceed with your question.

Speaker Change: Hi, This is joey on for Chris.

With the five fewer selling days. This year can you just remind us what you saw the last time the calendar turn this way.

Speaker Change: Mentioned that Black Friday was the largest selling day ever. This year. So was there any quarter to date commentary you can provide on black Friday holiday and just cyber week overall and how this compares to the down 5% midpoint guide and how you're modeling the balance of the quarter and also just kind of piggybacking off of that with the <unk>.

Speaker Change: Yes, Theres a law.

I'll wrap up on that question, Carl and I will probably tag team that what I would tell you is that if you see how the quarter played out.

Speaker Change: A lot of the trends we saw that that kind of continued out at the end of October bled into the first part of November weather was continuing to be warm.

Speaker Change: Suppressing early seasonal selling on fleece outerwear things like that but.

Speaker Change: Five fewer selling days. This year can you just remind us what you saw the last time the calendar turn this way.

Speaker Change: But from about the third week forward, we definitely saw an acceleration in the business.

Speaker Change: Yes, Theres a lot wrapped up in that question, Carl and I will probably tag team that what I would tell you is that if you see how the quarter played out.

Speaker Change: With our Black Friday event, what was really exciting as we also got a burst of cold weather. So not only was black Friday.

Speaker Change: A lot of the trends we saw that kind of continued out at the end of October bled into the first part of November weather was continuing to be warm.

Speaker Change: <unk> itself the largest in the company's history. The weekend was largest weekend in our history as well.

Speaker Change: Suppressing early seasonal selling on fleece outerwear things like that but.

When you think about the shifted calendar that you brought up theres five fewer days on the calendar this year.

Speaker Change: But from about the third week forward, we definitely saw an acceleration in the business.

Speaker Change: Giving moved from the 20 <unk> of November last year to the 28th of November this year. So a whole compression at five fewer days is really felt in November you basically trade out cyber week, which this year fell in December last year would have fallen in the November calendar for pre Thanksgiving week. So it puts a little pressure on November that being said as we move into December.

Speaker Change: With our Black Friday event, what was really exciting as we also got a burst of cold weather. So not only was black Friday.

Speaker Change: <unk> itself the largest in the company's history. The weekend was largest weekend in our history as well.

Speaker Change: When you think about the shifted calendar that you brought up theres five fewer days in the calendar this year.

Speaker Change: Flips in our favor and there is actually two extra days of shopping in December before Christmas. So we've got some momentum we're making our forecast we use the 2019 builds to your point as a way to kind of model out. How this year is playing out we're tracking at or ahead of our forecast on a daily basis, we're excited about that.

Speaker Change: Giving moved from the 20 <unk> of November last year to the 28th of November this year. So a whole compression at five fewer days is really felt in November you basically trade out cyber week, which this year fell in December last year would have fallen into November calendar for pre Thanksgiving weeks. It puts a little pressure on November that being said as we move into December.

Speaker Change: We want to be mindful, though that there is still a lot of business ahead of us. The next three weeks or three of the four largest weeks the entire year for us. So we've got a lot of business to do but we're really pleased with the momentum we saw coming out of black Friday that carried into cyber week, yes.

Speaker Change: Clips in our favor and there is actually two extra days of shopping in December before Christmas. So we've got some momentum we're making our forecast we use the 2019 builds to your point as a way to kind of model out. How this year is playing out we're tracking at or ahead of our forecast on a daily basis, we're excited about that.

Yes, Joe I'll speak to kind of Q4 guidance at the midpoint since about negative four 5% comp.

Speaker Change: Gross margin rate of about 33, 8% Thats up 50 basis points to last year I don't want to give you a little bit of color on that one is we're really clean from an inventory perspective units per store down seven cost down four.

Speaker Change: We want to be mindful, though that there is still a kind of business ahead of us. The next three weeks or three of the four largest weeks the entire year for us. So we've got a lot of business to do but we're really pleased with the momentum we saw coming out of black Friday that carried into cyber week, yes.

Speaker Change: Yes, Joe I'll speak to kind of Q4 guidance at the midpoint. So it's about negative four 5% comp.

Speaker Change: And so I don't think we're going to need to promote due to.

Speaker Change: And excess buildup of inventory, we feel good about the inventory position.

Speaker Change: Gross margin rate of about 33, 8%, that's up 50 basis points to last year I don't want to give you a little bit of color on that one is we're really clean from an inventory perspective units per store down seven cost about four.

Speaker Change: <unk>.

Speaker Change: I told you that third quarter mix down from a margin rate because of outdoor penetration, we were proud of the plus 7% and outdoor but the fourth quarter kind of pivot a little bit more to apparel and thats what were seeing at the start of holiday.

Speaker Change: And so I don't think we're going to need to promote due to.

Speaker Change: And then last with a lot five less promotional days between Thanksgiving and Christmas.

Speaker Change: And excess buildup of inventory, we feel good about the inventory position too.

Speaker Change: We're an everyday kind of value retailer, we do play with promotions, we play in the promotion game during key holidays definitely between Thanksgiving and Christmas is a time period, where we do that with fewer days to kind of penetrate a little bit lower so.

Speaker Change: I told you that third quarter mix down from a larger rate because of outdoor penetration, we were proud of the plus 7% and outdoor but the fourth quarter kind of pivot a little bit more to apparel and that's what we're seeing at the start of holiday.

Speaker Change: And then lasse with five less promotional days between Thanksgiving and Christmas.

Yes.

Speaker Change: SG&A pretty much flat Q4 over Q4.

Speaker Change: That's we're an everyday kind of value retailer, we do play with promotions, we play in the promotion game during key holidays definitely between Thanksgiving and Christmas is a time period, where we do that with fewer days to kind of penetrate a little bit lower so yes.

Speaker Change: Then that is call it $130 million, that's kind of how the midpoint of that guidance plays out that was embedded between updated and narrowed guidance that we put out there.

Speaker Change: Got it thank you and follow up question.

Speaker Change: Yes.

Speaker Change: SG&A pretty much flat Q4 over Q4.

Speaker Change: Switching to the gross margin side, if you could list the drivers of gross margin decline in order. So like the Georgia distribution center free higher outdoor Maxim quantify them and looking to <unk>, how the free impact is expected to differ from what we just saw in the third quarter. Thank you.

Speaker Change: Then that is call it $130 million.

Speaker Change: That's kind of how the midpoint of that guidance plays out that was embedded between updated or the narrowed guidance that we put out there.

Yes, So 50 basis point decline in gross margin rate in the third quarter up 30 basis points of that was merchandise margin.

Speaker Change: Got it thank you and our follow up question.

Speaker Change: Switching to the gross margin side, if you could list the drivers of gross margin decline in order. So like the Georgia distribution center freight higher outdoor Maxim quantify them and looking to <unk>, how the free impact is expected to differ from what we just saw in the third quarter. Thank you.

Speaker Change: More than all of that 30 basis points was due to a mix shift associated with outdoor up 7% all of the other categories actually grew their margin rate year over year.

Speaker Change: To round out.

Speaker Change: The 20 basis points and this is the color of that you'll see in the 10-Q later on today. It was really a combination of a little bit of international freight associated with we just didn't know what was going to happen in October with that East coast.

Speaker Change: Yeah, So 50 basis point decline in gross margin rate in the third quarter up 30 basis points of that was merchandise margin.

Speaker Change: More than all of that 30 basis points was due to a mix shift associated with outdoor up 7% all of the other categories actually grew their margin rate year over year.

Speaker Change: Port strike. So we made the decision proactively to reroute that stuff to the West coast, we spent a little bit of extra money. There. We don't have regrets associated with it and then from the Georgia facility standpoint, we threw a lot of getting caught up we wanted to make sure that we were ready for holiday and so when you spend that.

Speaker Change: To round out.

Speaker Change: The 20 basis points and this is the color of that Youll see in the 10-Q later on today. It was really a combination of a little bit of international freight associated with we just didn't know what was going to happen in October with the east coast.

Speaker Change: <unk> you basically recognize those costs when you sell the product. So we sold a lot of that product in the third quarter.

Speaker Change: Port strike. So we made the decision proactively to reroute that stuff to the West coast, we spent a little bit of extra money. There. We don't have regrets associated with it and then from the Georgia facility standpoint, we threw a lot at getting caught up we wanted to make sure that we were ready for holiday and so when you spend that.

Speaker Change: It out basically the additional 20 basis points that got to an overall 50 basis point decline year over year just to build on one thing Carl said, we feel like we're caught up now in the store serviced out of the Georgia facility.

Speaker Change: This is certainly a headwind for us in Q2, we called that out on our Q2 call. We had mentioned in our Q2 call that it impact. This hold in Q3 early on but that the strength of the business in other categories offset that.

Speaker Change: You basically recognize those costs when you sell the product. So we sold a lot of that product in the third quarter and that rounded out basically the additional 20 basis points that got to an overall 50 basis point decline year over year just to build on one thing Carl said, we feel like we're caught up now in the store serviced out of the Georgia facility.

Speaker Change: We flipped where those stores that were serviced out of the Georgia facility, where actually some of the best performing stores over Black Friday weekend. So hopefully we're past the pain there and from here forward. It's at least neutral if not a tailwind moving forward and jelly first for the fourth quarter I already gave you a little bit of a color of why we think gross margins are going to be up 50 basis points.

Speaker Change: It's certainly a headwind for us in Q2, we called that out on our Q2 call. We had mentioned in our Q2 call that it impact. This hold in Q3 early on but that the strength of the business in other categories offset that.

Speaker Change: At the midpoint 33 eight.

Speaker Change: It actually flipped where those stores that were serviced out of the Georgia facility, where actually some of the best performing stores over Black Friday weekend. So hopefully we're past the pain there and from here forward. It's at least neutral if not a tailwind moving forward and Joey first for the fourth quarter I already gave you a little bit of a color of why we think gross margins are going to be up 50 basis.

Speaker Change: Inventory is clean apparel mix and higher less promising days as it relates to some of the supply chain headwinds don't.

Speaker Change: I expect that level in the fourth quarter. Some of that was just to catch up to get right before holiday.

Speaker Change: Got it thank you happy holidays.

Happy holidays.

Speaker Change: Points at the midpoint $33 eight.

Speaker Change: Our next question is from Kate Mcshane with Goldman Sachs. Please proceed with your question.

Speaker Change: Inventory is clean apparel mix and higher less promotion days as it relates to some of the supply chain headwinds.

Speaker Change: Hi, This is Emily <unk> on for Keith.

Speaker Change: I expect that level in the fourth quarter. Some of that was just a catch up to get right before holiday.

Speaker Change: Wondering on consumer trends were there any behavioral differences in the third quarter versus the first half of the year that you would call out and then also you had mentioned an increase in credit card and buy now pay later usage earlier. This year is that something that you saw in the third quarter as well. Thank you.

Speaker Change: Got it. Thank you happy holidays, Thank you happy holidays.

Speaker Change: Our next question is from Kate Mcshane with Goldman Sachs. Please proceed with your question.

Yes. This is Steve I'll take the first part in terms of changing credit earned on certain change in customer behavior. We did see a couple of changes one of the most notable ones as we've gotten questions in the past on these calls have we seen.

Speaker Change: Hi, This is Emily <unk> on for Keith We were wondering on consumer trends were there any behavioral differences in the third quarter versus the first half of the year that you would call out and then also you had mentioned an increase in credit card and buy now pay later usage earlier. This year is that something that you saw in the third quarter as well. Thank you.

Speaker Change: Trade down in terms of customer and we haven't really seen that I would tell you in Q3, we actually started to see that when we looked at it.

Speaker Change: Market share gains or losses within customers, making over $100000, we actually picked up share. There. So we are starting to see some evidence and trade down so I would say that would be a new behavior.

Speaker Change: Yes. This is Steve I'll take the first part in terms of changing credit earned on certain change in customer behavior. We did see a couple of changes one of the most notable ones as we've gotten questions in the past.

Speaker Change: I would say we also saw a continuation of the behavior of the episodic shopping in terms of the customer coming out during those key moments on the calendar. We certainly saw that for back to school that continued into September.

Speaker Change: On these calls have we seen.

Speaker Change: Trade down in terms of customer and we haven't really seen that I would tell you in Q3, we actually started to see that when we looked at.

Speaker Change: Market share gains or losses within customers, making over $100000, we actually picked up share. There. So we're starting to see some evidence and trade down so I would say that would be in their behavior.

Speaker Change: As we entered hunting season, and tailgating season, you get in that October time period. There is really not a reason for the customer cannot shop, unless it's a change in weather or in our case, sometimes we have a hot market in baseball that certain health, we didn't have either of those but we've seen that customer come back as we got into holiday. So we're pretty excited about.

Speaker Change: The resilience that we're seeing and how they are coming out are in these key moments and certainly shopping aggressively with holiday.

As we entered hunting season, and tailgating season, you're getting in that October time period. There is really not a reason for the customer cannot shop, unless it's a change in weather or in our case, sometimes we have a hot market in baseball that certainly helps we didn't have either of those but we've seen that customer come back as we got into holiday. So we're pretty excited about kind of the resiliency, we are seeing and how they're coming.

Speaker Change: In terms of buy now pay later Carl.

Speaker Change: I would tell you we're still seeing people funding their lifestyle on credit and credit products, we're continuing to see.

Speaker Change: Credit card penetration paired with buy now pay later as a percentage of our overall tender up year over year and that is amplified at those kind of lower three quintiles. If you if you will and for buy now pay later, specifically, yes. We are seeing more of that we have a couple of different options. It really over indexes on Lee.

Speaker Change: During these key moments in certain shopping aggressively for holiday.

Speaker Change: Terms of buy now pay later, Carl Emily I would tell you we're still seeing people funding their lifestyle on credit and credit products, we're continuing to see credit card penetration paired with buy now pay later as a percentage of our overall tender up year over year and that's amplify.

<unk>, our online average order value was up healthily in the third quarter and it was really all from buy now pay later transactions, where people are basically financing that over a couple of months to afford.

Speaker Change: It does kind of lower three quintiles. If you if you will and for buy now pay later, specifically, yes. We are seeing more of that we have a couple of different options. It really over indexes online our online average order value was up healthily in the third quarter and it was really all from buy now pay later transat.

Speaker Change: Wants right now so a little bit of a continuation of the same.

Speaker Change: And that's the color.

Speaker Change: Thank you.

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

Speaker Change: Actions, where people are basically financing that over a couple of months to afford.

Speaker Change: Good morning, guys. My first question is can you give us a little more color on the Nike product that's going to be coming in in April is it.

Speaker Change: Theyre wants right now so a little bit of a continuation of the same.

Speaker Change: <unk>.

Speaker Change: That's the color.

Speaker Change: A lot more $100 plus sneakers is it a lot more premium apparel any any more color you can give on.

Speaker Change: Thank you.

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

Speaker Change: What's happening there it would be my first question.

Speaker Change: Thanks, Ravi I honest, we'd love to give you more color I've got to stick with what we shared in the prepared remarks, it's going.

Robbie: Hey, Good morning, guys. My first question is can you give us a little more color on the Nike product that's going to be coming in in April is it you know a lot more $100 plus sneakers is it a lot more premium apparel any any more color you can give on.

Speaker Change: Going to be the most meaningful launch in our company's history 140, plus stores broad based across men's women's and kids apparel footwear sporting goods, we're really excited about it and we're going to share more details when we can but just can't give you more details at this moment in time.

Robbie: What's happening there it would be my first question.

Speaker Change: Gotcha, and then just in terms of what you've seen playing out.

Thanks, Ravi I honest, we'd love to give you more color I've got to stick with what we shared in the prepared remarks it's.

Speaker Change: Versus last year.

Speaker Change: We're going to be the most meaningful launch in our company's history 140, plus stores broad based across men's women's and kids apparel footwear sporting goods, we're really excited about it and we're going to share more details from what we can but just can't give you more details at this moment in time.

Speaker Change: The.

Speaker Change: And how would you say the competitive pressures versus Walmart or dicks.

Speaker Change: Our this year compared to last year as you go into holiday here.

Speaker Change: And also would be curious how digital is playing out.

Speaker Change: Gotcha, and then just in terms of what you've seen playing out.

Speaker Change: Versus in store compared to last year.

Speaker Change: Yes, I would say that.

Versus last year.

Speaker Change: The promotional environment.

The.

Seems at least we're early days still on the holiday.

Speaker Change: And how would you say the competitive pressures versus Walmart or dicks are this year compared to last year as you go into holiday here.

Speaker Change: A little more elevated in the last year, but in line with where we thought it was going to be we're seeing competitors probably include a few more items or categories and their promotions in a couple places maybe taking down one click.

Speaker Change: And also would be curious how digital is playing out.

Speaker Change: But I would say, it's right, where we kind of expected to be in as a characterized before it's more than last year, but it's certainly not back to where it was pre pandemic I'd also say, we've seen maybe a pullback a little bit from some of the brand's direct sites direct to consumer sites, where those were very promotional year ago at this time.

Speaker Change: Versus in store compared to last year.

Speaker Change: Yes, I would say that.

Speaker Change: The promotional environment.

It seems at least we're early days still on the holiday.

Speaker Change: So I would say, it's kind of where we expected it to be.

Speaker Change: But I would say, it's right, where we kind of expected it to be and as I've characterized before it's more than last year, but it's certainly not back to where it was pre pandemic I'd also say, we've seen maybe a pullback a little bit from some of the brand's direct sites direct to consumer sites, where those were very promotional year ago at this time.

And then just digital versus in store versus your expectations, yes, So digital's performing at our expectations. It's hard to read because obviously, we had a shift in cyber week moving out a week, but it's performing in line with our expectations and kind of the trends in the stores.

Speaker Change: So.

Speaker Change: It's it's right, where we thought it would be.

Speaker Change: So I would say, it's kind of where we expected it to be.

Speaker Change: Got you. Thanks, good luck for the rest of the holidays.

And then just digital versus in store versus your expectations. So.

Speaker Change: Thank you.

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

Speaker Change: So digital is performing at our expectations you know, it's hard to read because obviously, we had a shift in cyber week moving out a week, but it's performing in line with our expectations and kind of the trends in the stores.

Michael Lasser: Good morning. Thank you so much for taking my question.

Speaker Change: You start to see your sales and flat same store sales inflect.

Speaker Change: So.

Speaker Change: It's right, where we thought it would be.

Speaker Change: Is your SG&A going to flex as well will you have to add back.

Speaker Change: Got you. Thanks, good luck for the rest of the holidays. Thank you.

Speaker Change: Yeah.

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

Speaker Change: <unk>.

Speaker Change: <unk>. Thank you in order to sustain that.

Speaker Change: Customer experience, so if you're at a comp of two to three next year.

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

Speaker Change: You start to see your sales and slack you've seen store sales inflect.

Speaker Change: <unk>.

Speaker Change: Yes.

Inventory management is one of our strong skills I think expense management I would also put in that same category.

Speaker Change: Is your SG&A going to flex as well will you have to add back.

Speaker Change: So just to recap in the third quarter.

Speaker Change: Lavery. Thank you in order to sustain the cup.

Speaker Change: Of the $19 million growth in SG&A, 17, and a half of it basically a little over 90% was on these these initiatives that we speak about and that we have a lot of conviction around as it relates to when we can flex from a comp sales standpoint, youll see us be very judicious associated with.

Speaker Change: Our experience. So if you were to comp up two to three next year.

Speaker Change: SG&A.

Speaker Change: Yeah, I think inventory management is one of our strong skills I think expense management I would also put in that same category. So just to recap in the third quarter.

Speaker Change: Getting some leverage out of that and we're going to continue to spend the dollars on.

Speaker Change: Of the $19 million growth in SG&A in 2017, and a half of it basically a little over 90% was on these.

On the initiatives.

Speaker Change: Biggest.

Speaker Change: Consumer of those dollars. If you will is the new stores, we had 18 new stores. If you compare Q3 of this year to Q3 of last year. We went ahead and gave you guidance on 'twenty to 'twenty five next year, I think youre going to continue to see elevated SG&A spend it.

Initiatives that we speak about and that we have a lot of conviction around as it relates to when we had flat from a comp sales standpoint, youll see us be very judicious associated with.

Speaker Change:

Speaker Change: Getting some leverage out of that and we're going to continue to spend the dollars.

It will deleverage because of the initiatives and it will leverage when we positive comp and flex on that kind of that base spend if you will.

Speaker Change: On the initiatives the biggest.

Speaker Change: Consumer of those dollars. If you will is the new stores, we had 18 new stores. If you compared Q3 of this year to Q3 of last year.

Speaker Change: Thank you for that.

Speaker Change: Understanding your guidance.

Speaker Change: <unk> for 20% to 25, new stores next year, if we if we play out the other scenario, where your same store sales do not and slack how would that influence your willingness and ability to continue to open stores at this current pace not only next year, but.

Speaker Change: Went ahead and gave you guidance on 'twenty to 'twenty five next year, I think youre going to continue to see elevated SG&A spend.

Speaker Change: It will deleverage because of the initiatives and it will leverage when we positive comp and flex on that kind of that base spend if you will.

Speaker Change: Thank you for that.

Speaker Change: Over the next few years, thank you very much.

Speaker Change: Understanding your guidance.

Speaker Change: Guidance is for 20% to 25, new stores next year, if we if we play out the other scenario, where your same store sales do not in slack.

Speaker Change: Yes, so Michael Thanks for the question I would I would share with you that as we talked about in the script.

Speaker Change: The biggest and best way, we can grow the company is through new store growth and it has impact on both our brick and mortar sales as well as the influence it has on our dot com business and so it's a core part of our strategy and as we share all the time.

Speaker Change: Influence your willingness and ability to continue to open stores at this current pace not only in next year.

Speaker Change: Over the next few years, thank you very much.

Speaker Change: There's a lot of white space, we're right now in 19 States 298 stores.

Yeah. So Michael Thanks for the question I would I would share with you that as we talked about in the script.

Speaker Change: Lots of lots of white space for us to put new stores. So we're committed to that as a growth engine.

Speaker Change: The biggest and best way, we can grow the company is through new store growth and it has impact on both our brick and mortar sales as well as the influence it has on our dot com business and so it's it's a core part of our strategy and as we share all the time.

Speaker Change: We did want to give some color around next year generally we don't give guidance at this point in time or on what our next year growth counted but we thought it was important to share the $20 to 25 as we mentioned in the prepared remarks. It is a little bit of a slowdown or we change kind of the ramp of the curve versus what we initially.

Speaker Change: There's a lot of white space, we're right now in 19 States 298 stores.

Speaker Change: Lots of lots of white space for us to put new stores. So we're committed to that as a growth engine.

Speaker Change: Put forward when we did our initial plan back in 2022, just to acknowledge that we're operating in a tough environment and I think youre going to see us continue to be very thoughtful and judicious about when and how we open up these stores, we're making sure that all of these stores are hitting the profit targets hitting the productivity targets.

Speaker Change: We did want to give some color around next year generally we don't give guidance at this point in time around what our next year growth counters that we thought it was important to share the 'twenty to 'twenty five as we mentioned in the prepared remarks. It is a little bit of a slowdown or we change kind of the ramp of the curve versus what we initially.

Speaker Change: I've said it in the prepared remarks as well, but we're really excited we made this pivot.

Speaker Change: Put forward when we did our initial plan back in 2020 to just acknowledge that we're operating in a tough environment and I think youre going to see us continue to be very thoughtful and judicious about when and how we open up these stores.

Speaker Change: And we talked about in our in our Q4 call at the start of the year around how we've changed kind of the dynamics of the new store opening in and we're looking for these stores in more mid sized markets that are underserved and those stores are off to a really fast start so it's giving us more confidence that we've really zeroed in on what the right mix is so I can't give you guidance beyond 2025, we will acknowledge.

Speaker Change: We're making sure that all of these stores are hitting the profit targets hitting the productivity targets.

Speaker Change: I said it in the prepared remarks as well, but we're really excited we made this pivot.

Speaker Change: That's a little bit slower ramp than we initially planned but it's something we're continuing to focus on moving forward because it is our number one growth engine and Michael I'll share that we cash flow well you guys see that we've talked about the 20 consecutive quarters of positive comps sneezing positive cash flow and that's what the last 11 quarters of negative.

Speaker Change: And we talked about in our in our Q4 call at the start of the year around how we've changed kind of the dynamics of the new store opening in and we're looking for these stores in more mid sized markets that are underserved and those stores are off to a really fast start so that's giving us more confidence that we've really zeroed in on what the right mixes. So I can't give you guidance beyond 2025, while acknowledging.

Speaker Change: So we positive cash flow and good topline environment as well as bad.

Speaker Change: That's a little bit slower ramp than we initially planned but it's something we're continuing to focus on moving forward because it is our number one growth engine and Michael I'll share that we cash flow well you guys see that we talked about the 20 consecutive quarters of positive comps sneezing positive cash flow and that's what the last 11 quarters of negative.

Speaker Change: In terms of the capital allocation philosophy stability, you should expect that with us still a $1 billion of untapped ABL and almost $300 million of cash on the balance sheet invest into ourselves.

Speaker Change: And then the capital allocation that we talked about with share repurchases at a pretty nominal dividend look I don't think anything is going to change that commitments are planting seeds in the future and as long as were cash flowing like we are in good and bad times.

Speaker Change: So we positive cash flow and good topline environments as well as bad.

Speaker Change: We're very committed to that and these projects are getting better and better.

Speaker Change: Thank you very much and have good holiday. Thanks.

Michael Lasser: Thanks, Michael.

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

Anthony Cucumber: Good morning, Thanks for taking my question.

Speaker Change: As long as we're cash flowing like we are in good and bad times. We're we're very committed to that and these projects are getting better and better.

Anthony Cucumber: So just wanted to kind of circle back on Nike sounds like there's a lot of excitement around this launch I understand there is somewhat limited in terms, what you can say, but I guess my question is.

Speaker Change: Thank you very much and have a good holiday. Thank.

Anthony Cucumber: Are you envisioning that would do that product would just be in line or do you you're planning on doing any sort of like.

Michael Lasser: Thanks, Michael.

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

Incrementals special kind of Nike fixed during our displays for that product.

Speaker Change: Good morning, Thanks for taking my question.

Speaker Change: So just wanted to kind of circle back on Nike sounds like there's a lot of excitement around this launch I understand there is somewhat limited in terms, what you can say, but I guess my question is.

Anthony Cucumber: It's not going to just be mixed in with the current Nike product will merchandize that is kind of a separate statement and it will.

Anthony Cucumber: Be very visible and there will be some investment made in terms of how we how we bring this to life in store.

Speaker Change: Are you envisioning that would do that product would just be in line or do you you're planning on doing any sort of like.

Anthony Cucumber: We're pretty excited about it but we also want to be sensitive to we committed to how much we're going to share on this call and I don't want to go much beyond what I said.

Speaker Change: Incrementals special kind of Nike fixed during our displays for that product.

Speaker Change: Got it okay. So my follow up question.

Speaker Change: It's not going to just be mixed in with the current Nike product will merchandize that is kind of a separate statement.

Anthony Cucumber: It's sort of an oblique question.

Speaker Change: Be very visible and there will be some investment made in terms of how we how we bring this to life in store.

Anthony Cucumber: So I guess I always ask about companies that Brian with non and broker and I guess my question is do you think that.

We're pretty excited about it but we also want to be sensitive to we committed to how much we're going to share on this call and I don't want to go much beyond what I've said.

Anthony Cucumber: In any way shape or form getting this incremental Nike product.

Anthony Cucumber: Help to get other brands that are currently not in your stores that might rhyme with non and broker.

Speaker Change: Got it okay. So my follow up question.

Speaker Change: Sort of an oblique question.

Speaker Change: Well, that's a pretty subtle code you got there Anthony.

Speaker Change: <unk>.

So I guess I always ask about companies that Ryan with non and broker and I guess my question is do you think that.

Speaker Change: Yeah listen I think the more we continue to upgrade our assortments and bring in.

Speaker Change: New brands.

Speaker Change: And any way she perform getting this incremental Nike product could help to get other brands that are currently not in your stores that might Ryan with non and roka.

Speaker Change: Opens the door for complementary brands to want to come in as well. So it's certainly a step in the right direction.

Speaker Change: We continue to have dialogue with those two brands that you are mentioning nothing.

Speaker Change: Well, that's a pretty subtle code you got there Anthony.

Speaker Change: Nothing to share at this moment in time, but obviously our goal would be to get access to them because our customer wants access to them and it's a way for us to better serve our customers. So.

Speaker Change: Yeah listen I think the more we continue to upgrade our assortments and bring in.

Speaker Change: New brands.

Speaker Change: I think it could be a step in the right direction, but we will have to Seattle plays out.

Opens the door for complementary brands to want to come in as well. So it is certainly a step in the right direction.

Speaker Change: Got it thanks, so much.

Speaker Change: We continue to have dialogue with those two brands that you are mentioning nothing.

Anthony Cucumber: Thanks Anthony.

Speaker Change: Okay.

Speaker Change: Our next question is from Simeon Gutman with Morgan Stanley. Please proceed with your question.

Nothing to share at this moment in time, but obviously our goal would be to get access to them because our customer wants access to them and it's a way for us to better serve our customers. So.

Simeon Gutman: Good morning, everyone.

Simeon Gutman: My first question is a follow up on the.

Simeon Gutman: Quarter to date commentary you talked about being pleased and then the shape of the holiday season.

I think it could be a step in the right direction, but we'll have to Seattle plays out.

Simeon Gutman: Can I ask is how you set the guide for the fourth quarter.

Speaker Change: Got it thanks, so much.

Anthony Cucumber: Thanks Anthony.

Simeon Gutman: Were you pleased are you do you have enough sort of runway or please.

Anthony Cucumber: Okay.

Speaker Change: Our next question is from Simeon Gutman with Morgan Stanley. Please proceed with your question.

Please please enough where even accounting for the calendar you can end up hitting either middle or better than the range or certain events have to take place I know theres a lot of important weeks left but just curious how you set it up whether you said hey.

Speaker Change: Good morning, everyone.

Speaker Change: My first question is a follow up on the quarter to date commentary you talked about being pleased and then the shape of the holiday season.

Can I ask how you set the guide for the fourth quarter.

Good first start, but then we still have to account for the fewer days in order to get back to that guidance.

Speaker Change: Were you pleased are you do you have enough sort of runway or.

Simeon Gutman: We're highly aware of the fewer days.

Please enough, where even accounting for the calendar year.

Steve Lawrence: Provided within our forecast our Q4 guidance from Ned is negative four and a half the way we set that as we come up with actually a definitive forecast and then we set some guardrails around that from high to low if we solve this on this end or if we saw that on that end and as Steve said in his earlier reply to one of them.

Speaker Change: You can end up hitting either middle or better than the range or certain events have to take place I know theres a lot of important weeks left but just curious how you set it up whether you said hey.

Speaker Change: First good first start, but then we still have to account for the fewer days in order to get back to that guidance.

Speaker Change: We're highly aware of the fewer days, it's contemplated within our forecast our Q4 guidance for net is negative four and a half the way we set that as we come up with actually a definitive forecast and then we should have.

Simeon Gutman: We're kind of tracking what kind of tracking in line with that forecast.

Simeon Gutman: I'm really really proud of the team on where they are the way that they operated on Black Friday.

Simeon Gutman: Things were working well on all fronts.

Speaker Change: Guardrails around that from high to low if we saw this on this and if we saw that on that end and as Steve said in his earlier.

Simeon Gutman: It's a continuation of what we see with our customers, where they're under financial pressure, but when it comes time for that shopping occasion, they turned to academy and we saw that from a foot traffic acceleration looking at place are kind of looking more broadly across our footprint using placer and specific to that.

Speaker Change: Apply to one of them, we're kind of tracking what kind of tracking in line with that forecast I'm really really proud of the team all the way at the way that they operated on Black Friday.

Speaker Change: Things were working well on all fronts.

Simeon Gutman: Those holidays that really show up and it was it was more of the same.

Speaker Change: I think it's a continuation of what we see with our customers, where they're under financial pressure, but when it comes time for that shopping occasion, they turned to academy and we saw that from a foot traffic acceleration looking at placer kind of looking more broadly across our footprint using placer at specific.

Thanks for that and then following up on stores and new stores. You May have mentioned this in the prepared and I missed it you gave us some commentary on prior quarters on the stores that are just entering into comp base and then I think the two year old like the two stores that are now two years into the comp base can you.

Those holidays, they really show up and it was it was more of the same.

Simeon Gutman: Talk about their spread relative to the rest of the chain, where they should be are they.

Speaker Change: Thanks for that and then following up on stores and new stores. You May have mentioned this in the prepared and I missed it you gave us some commentary on prior quarters on the stores that are just entering into comp base and then I think the two year old like the.

Simeon Gutman: Ending and flowing with the comp or are they still saying they are keeping the spread that they had I think over the last couple of quarters.

Simeon Gutman: I would tell you that as we shared in previous quarters in the commentary we shared was that.

Simeon Gutman: <unk> 22 vintage of stores and we really tried to talk about these entirely as a vintage.

The stores that are now two years into the comp base can you talk about their spread relative to the rest of the chain where they should be are they.

Simeon Gutman: That's the only group of stores, it's wholly in the comp continue to comp positive and I would say that the delta or the spread between their performance and the total is about the same where it's been so the belief and hope is that as we start to inflect the comp base that we'd see these stores hold that spread and bubble up at a faster rate of growth. So.

Speaker Change: And flowing with the comp or are they still saying, what they're keeping the spread that they had I think the last couple of quarters.

Speaker Change: I would tell you that as we shared in previous quarters. The commentary we shared was that <unk>.

Speaker Change: 22 vintage of stores and we really try to talk about these entirely as a vintage.

Simeon Gutman: That's our current plan and just to reiterate something I said earlier.

Speaker Change: That's the only group of stores, it's wholly in the comp continue to comp positive and I would say that the delta or the spread between their performance and the total is about the same where it spend so the belief and hope is that as we start to inflect the comp base that we'd see these stores hold that spread and bubble up at a faster rate of growth. So.

The revised forecasting and tools and how we've picking locations going forward that we shared with you guys is it really starting to pay dividends. We are pretty excited about the six or seven new stores that opened in the back half of the year there.

Theyre doing very well versus our initial forecast.

Speaker Change: Thanks, guys. Good luck happy holidays. Thanks, Amy.

That's our current plan and just to reiterate something I said earlier.

Speaker Change: The revised forecasting and tools and how we're picking locations going forward that we shared with you guys is it really starting to pay dividends. We are pretty excited about the six or seven new stores that opened in the back half of the year.

Speaker Change: Our next question comes from Anna <unk> with B Riley. Please proceed with your question.

Anna: Hi, good morning, guys.

Speaker Change: A question.

Speaker Change: I'd like to start with another follow up on the quarter to date trend.

They are doing very well versus our initial forecast.

Speaker Change: Thank you.

Speaker Change: Part of that difference.

Yeah.

Speaker Change: Thanks, guys. Good luck happy holidays. Thanks, Amy.

Speaker Change: Apparel was impacted during the most recent quarter.

Speaker Change: Okay.

Speaker Change: Notably.

Our next question comes from Anna Gladstone with B Riley. Please proceed with your question.

Speaker Change: Seasonable weather.

Speaker Change: It moved into this quarter on the weather turned about have you seen an improvement in apparel.

Speaker Change: Hi, good morning, guys.

All my questions.

Speaker Change: Yeah, absolutely so.

Speaker Change: I'd like to start with another follow up on the quarter to date trend.

Speaker Change: As we said a little bit earlier.

Speaker Change: The trend in apparel was pretty tough in October that was where the majority of the decline for the quarter came out of and it was two fold. It was the weather and the Rangers obviously as we got past October and got into November Rangers became less of an issue that was purely weather. We saw that continue into the first week or two but we got to weather snap right as the Black Friday promotions started kicking in.

Speaker Change: Little bit of a different model.

Speaker Change: Apparel was impacted during the most recent quarter.

Speaker Change: Notably the unseasonable weather.

We've moved into this quarter on the weather turned about have you seen an improvement in apparel.

Speaker Change: Yeah, absolutely so as we said a little bit earlier.

Speaker Change: And we saw apparel really take off.

Speaker Change: Apparel led the way for Black Friday.

Speaker Change: It also was very strong last week for cyber week. So.

Speaker Change: It gives us confidence that our assortments are right. It's what the customer's looking forward we've invested in the right things and that the softness we saw in late October maybe early part of November is more just weather based.

Speaker Change: So apparel right now is leading.

Speaker Change: And we saw apparel really takeoff apparel led the way for Black Friday.

Speaker Change: Great.

Speaker Change: Thanks, Gary.

It also was very strong last week for cyber week. So.

Speaker Change: And I guess, Tom you guys have been running a lot of attention.

Speaker Change: It gives us confidence that our assortments are right. It's what the customer's looking forward, we invest in the right things and that the softness we saw in late October maybe early part of November is more just weather based.

Speaker Change: The larger public peer.

Speaker Change: I think.

Speaker Change: The conversation is.

Speaker Change: Absolutely players are.

Speaker Change: Unlikely running below the comp that you guys have been putting up.

Speaker Change: So apparel right now is leading.

Speaker Change: A little bit of consolidation in the space.

Speaker Change: Great. Thanks.

Speaker Change: Do you what's your outlook for the potential share opportunity as you look to 'twenty five and beyond.

Speaker Change: Gary.

And I guess, Tom you guys have been running a lot of attention to the larger public peer, but I think.

Speaker Change: Well I think our goal as we've stated it multiple times is to be the best sports and outdoor retailer in the country. So growing our store base and growing our footprint is key to our growth implied in that is gaining market share and I think you're dead on in your question and your comment that I think sometimes we get wrapped up in that Mike.

Speaker Change: And the conversation is smaller specialty players are likely running below the comp that you guys have been putting up.

Speaker Change: As you've seen a little bit of consolidation in the space.

Speaker Change: What's your outlook for the potential share opportunity.

Speaker Change: 25 and beyond.

Speaker Change: Market share is binary it's really not right I mean, when you look at who we are in.

Speaker Change: Well I think our goal as we've stated multiple times is to be the best sports and outdoor retailer in the country. So.

Speaker Change: Different companies, we compete against I mean, it really varies by category you take a category like outdoor grilling it's.

Speaker Change: Our store base and growing our footprint is key to our growth implied in that is gaining market share and I think you're dead on in your question and your comment that I think sometimes we get wrapped up in that market share is binary it's really not right. I mean, when you look at who we are in.

Speaker Change: It's probably the home improvement guys. We compete against you take a category like fishing, maybe a company like bass pro or hunting, maybe like a cabela's <unk> sportsman's warehouse, so depending upon the category.

Speaker Change: We have a different competitive set we look at market share.

Speaker Change: The different companies, we compete against I mean, it really varies by category you take a category like outdoor grilling.

Speaker Change: Broadly across all different categories, we use arcana.

Speaker Change: Who is kind of a gold standard that used to be MPD.

It's probably the home improvement guys. We compete against you take a category like fishing, maybe a company like bass pro or hunting, maybe like a cabela's <unk> sportsman's warehouse, so depending upon the category.

Track market share for the categorization cover through that we use nix checks data for firearms, some places like ammo, where theres not market share data, we use vendor sources and what we hear and see and all of that is that if you look back on a long term basis over the past five years, we picked up a lot of market share running up about 22, 23% versus where we were in 2019 at this point in time.

Speaker Change: We have a different competitive set we look at market share.

Speaker Change: Across all different categories, we use arcana.

Speaker Change: Who is kind of the gold center that used to be MPD.

Speaker Change: So we've picked up a lot of market share we continue to hold on to it. We also look at it on an annualized on a quarterly basis and in both those metrics. We look at market share is flat to up slightly depending upon the category Theres a couple of categories, where maybe it's down apparel was down slightly I think within Q3, but we would attribute that more to kind of the distortion, we have and the Rangers product.

Speaker Change: Market share for the categorization covered through that we use nix checks data for firearms, some places like ammo, where theres not market share data, we use vendor sources and what we hear and see and all of that is that if you look back on a long term basis over the past five years, we picked up a lot of market share running up about 22, 23% versus where we were in 2019 at this point in time.

Speaker Change: But our goal is to continue to take market share, it's going to change and vary by category we carry.

Speaker Change: So we picked up a lot of market share we continue to hold onto it. We also look at it on an annualized on a quarterly basis and in both those metrics. We look at market shares flat to up slightly depending upon the category. There is a couple of categories, where maybe it's down apparel was down slightly I think within Q3, but we would attribute that more to kind of the distortion, we have and the Rangers product.

Speaker Change: But we feel really good about our opportunity to do that not only in 2025, but in the future as well I just want to add just a little bit more color to that the biggest share opportunity that we have is 80% of Americans are not live within 10 miles of Academy and so look at the state of Ohio, We have a zero percent market share there last year and now we have two stores.

Speaker Change: But our goal is to continue to take market share, it's going to change and vary by the category we carry.

Speaker Change: <unk> kind of in suburbs outside of Columbus.

But we feel really good about our opportunity to do that not only in 2025, but in the future as well I just want to add just a little bit more color to that the biggest share opportunity that we have is 80% of Americans are not live within 10 miles of Academy and so look at the state of Ohio, We have a zero percent market share there last year and now we have two stores.

Speaker Change: And the stores are performing well that are exceeding our expectations and so now we're capturing market share there theres a lot of white space associated with that if you look at our other growth initiatives E. Commerce penetration of 11% look I would tell you I think retail averages closer to 20% a good omnichannel retailers do it at 30%.

<unk> kind of in suburbs outside of Columbus.

Speaker Change: We brought in Chad Fox, our chief customer officer, he's been there and done that we think that we've got some really easy ways to elevate there we've talked about door dash same day delivery things like that that optimize the user experience are big for US and then and then lastly from a customer data standpoint launch the Pla.

Speaker Change: That form last year.

Speaker Change: We brought in Chad Fox, our chief customer officer, he's been there and done that we think that we've got some really easy ways to elevate there we talked about door dash same day delivery things like that that optimize the user experience are big for US and then and then lastly from a customer data standpoint launch the Pla.

Speaker Change: <unk>, our first ever loyalty program this year going to be at $11 million Biocatalyst members. These are really powerful long term growth engines that yes, we think will take share we say internally, we do not have a challenge strategy, we have a challenged customer right now.

Speaker Change: That form last year.

Speaker Change: And we're trying to unveil this thinks improve the base while all these other things Ken can help on the outside but we see a lot of opportunity in the future.

<unk>, our first ever loyalty program this year going to be at $11 million Biocatalyst members. These are really powerful long term growth engines that yes, we think will take share we say internally, we do not have a challenge strategy, we have a challenged customer right now.

Speaker Change: And that's why we're continuing to invest in strategic and vessels.

Great. Thanks, Good luck with the holiday.

Speaker Change: Thank you happy holidays.

Speaker Change: Yes.

Speaker Change: We have reached the end of the question and answer session I would now like to turn the call back over to Steve Lawrence for closing remarks.

Speaker Change: And we're trying to unveil those things to improve the base while all these other things Ken can help on the outside but we see a lot of opportunity in the future.

Steve Lawrence: Thanks, operator, and thanks to everyone for listening recall as we've outlined today, we remain confident in our long range plan and business strategies and have been working hard to put in place the building blocks for growth in the future over.

Speaker Change: And that's why we're continuing to invest in it.

Speaker Change: The strategic and vessels.

Speaker Change: Great. Thanks, Good luck with holiday.

Thank you happy holidays.

Steve Lawrence: Over the past year, we've consistently seen the customer come out and shop with us during key moments on the calendar.

Speaker Change: Yes.

Speaker Change: We have reached the end of the question and answer session I'd now like to turn the call back over to Steve Lawrence for closing remarks.

Steve Lawrence: This demonstrates the strength of our position as the value leader in our space.

Steve Lawrence: With the credit customers get us for extensive and differentiated assortment of categories and items.

Steve Lawrence: Thanks, operator, and thanks to everyone for listening our call as we've outlined today, we remain confident in our long range plan and business strategies and have been working hard to put in place the building blocks for growth in the future.

Steve Lawrence: Despite some of the headwinds we've experienced this past year, the fundamentals of our business and long term growth trajectory remain intact, our investment back into the business through our strategic initiatives is a testament to our belief in the long term future of Academy.

Steve Lawrence: Over the past year, we've consistently seen the customer come out and shop with us during key moments on the calendar.

Steve Lawrence: This demonstrates the strength of our position as the value leader in our space, coupled with the credit customers get us for extensive and differentiated assortment of categories and items. Despite some of the headwinds we've experienced this past year the fundamentals of our business and long term growth trajectory remain intact, our investment back into the business through our strategic initiatives is a testament for.

Steve Lawrence: In the short term, we'll continue to take a proactive approach in managing the business protecting margins and cash flow. While also ensuring that we're best positioned to capitalize when customer spending returns to normalized levels.

The opportunity is clear to us as we've said multiple times on this call over 80% of Americans do not live within 10 miles from the Academy.

Steve Lawrence: Our belief in the long term future of Academy.

Plenty of white space for expansion opportunities, we have a much beloved brand with high awareness in our core geography, and we have the opportunity to bring this brand new customers, who are not yet familiar with academy.

Steve Lawrence: In the short term, we will continue to take a proactive approach to managing the business protecting margins and cash flow. While also ensuring that we're the best positioned to capitalize on customer spending returns to normalized levels.

Steve Lawrence: Finally, our value based and broadened complete assortment helps us fill a void that no. Other retail fully addresses we believe remaining true to the strategy will allow us to breakthrough and deliver against our vision to be the best sports and outdoor retailer in the country.

Steve Lawrence: The opportunity is clear to us as we've said multiple times on this call over 80% of Americans do not live within 10 miles from the Academy.

Steve Lawrence: Plenty of white space for expansion opportunities, we have a much beloved brand with high awareness in our core geography, and we have the opportunity to bring this brand new customers, who are not yet academy.

Steve Lawrence: Thanks for joining us today, and if I don't speak to you before then I'd like to say have a Merry Christmas and happy holidays to all of our team members vendors and investors.

Steve Lawrence: Finally, our value based and broaden complete assortment helps us fill a void that no. Other retail fully addresses we believe remaining true to the strategy will allow us to breakthrough and deliver against our vision to be the best sports and outdoor retailer in the country.

Steve Lawrence: The call is now concluded you may disconnect your lines and thank you for your participation.

Thanks for joining us today, and if I don't speak to you before then I'd like to say have a Merry Christmas and happy holidays to all of our team members vendors and investors.

Speaker Change: The call is now concluded you may disconnect your lines and thank you for your participation.

Q3 2024 Academy Sports & Outdoors Inc Earnings Call

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