Academy Sports & Outdoors - Q2 2024

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to the Academy Sports + Outdoors second quarter fiscal 2023 results conference call. At this time, this call is being recorded and all participants are in a listen-only mode. Following the prepared remarks, there will be a brief question and answer session. Questions will be limited to analysts and investors. Please limit yourself to one question and one follow-up. To ask your question during the call, please press star one. If you require any assistance during the call, please press star zero. I will now turn the call over to Matt Hodges, Vice President of Investor Relations for Academy Sports + Outdoors. Matt, please go ahead.

Matt Hodges (VP of Investor Relations)

Good morning, everyone, and thank you for joining the Academy Sports and Outdoors second quarter 2023 financial results call. Participating on the call are Steve Lawrence, Chief Executive Officer, Michael Mullican, President, and Carl Ford, Chief Financial Officer. As a reminder, statements in today's earnings release and the comments made by management during this call may be considered forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the earnings release and in our SEC filings. The company undertakes no obligation to revise any forward-looking statements. Today's remarks also refer to certain non-GAAP financial measures. Reconciliations to the most comparable GAAP measures are included in today's earnings release, which is available at investors.academy.com.

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

Steve Lawrence (CEO)

Thank you, Matt. Good morning to all, and thank you for joining us for our Q2 earnings call. It's been three months since Michael and I stepped into our new roles, and over the past 90 days, we've worked hard to improve our sales trend, align our expenses with the current run rate of the business, and to backfill some key positions on our leadership team. I'm excited that we're able to fill all of our key roles with internal promotions, which speaks to the work the team has done over the past couple of years on building a strong internal bench and focusing on succession planning. To highlight that, I'm thrilled that Carl Ford, our new CFO, was one of these promotions, and he will be joining us on today's earnings call.

Carl has been with Academy for four and a half years, and during that time, he's played an integral role in helping the company achieve several milestones, including navigating the pandemic, achieving all the objectives in our first long-range strategy, supporting our IPO, and helping shape and create our new long-range plan. Turning to our Q2 results, for the quarter, we achieved net sales of $1.058 billion for a -7.5 comp. While we are not happy with running a decrease, these results were in line with our first quarter trend and are in line with the guidance we shared during our last call. What was encouraging was that unlike Q1, we saw the business decelerate as we moved through the quarter. In Q2, we saw steady improvements in both sales and margin rates, with each month getting successively better.

Our belief is that we can continue to build on this momentum as we progress through Q3 and into the holiday selling season in Q4. Looking at sales by division, our best performing business during the quarter was sports and recreation, which ran a 2.7% decrease. Sporting goods equipment, outdoor cooking, and outdoor furniture all performed well during the quarter. However, the fitness equipment and bike business continue to be tough. Apparel was the second best performing division, with a negative 3.7% decrease. We continue to see solid performance out of the men's and youth businesses, as well as our licensed apparel area. Nike also continues to perform well for us, along with our private label business. The women's business has remained more challenging for us. As we move forward, we're very focused on getting our women's active business back on track.

Footwear during Q2 ran a 4.5% decrease. We continue to see a strength in casual and work footwear, driven by national brands such as HEYDUDE, along with our private work boot and apparel brand, Brazos. The cleated business was also strong as we continue to be in a much better inventory position versus where we were a year ago. Our outdoor trend for Q2 was a 12.2% decrease, which was an improvement versus Q1's down 15%, but it's still well below our expectations. Better performing categories for the quarter were fishing and camping. Hunting remained the most challenged business, with continued softness in both the ammunition and firearms businesses. Both of these categories continue to perform well above 2019 levels, but continue to decline from the peaks that we saw during the last couple of years.

As we move forward, we expect to see the declines in these categories moderate as we start to lap softer comparisons from last year. When you look across the various businesses, many of the key themes that we called out in our Q1 call carried forward into the second quarter. Customers continue to gravitate towards value on one end of our assortment, demonstrated by an increase in the penetration of private brand sales. At the same time, customers are also focusing on new and innovative products, such as Bogg Bags or OOFOS recovery slides, which in many cases were not value items. Bigger ticket items with long replacement cycles continue to be challenged, along with many of the surge categories that benefited from increased demand during the pandemic.

We've also seen a consistent pattern of the customer aggregating their purchases during the national shopping time periods, such as Mother's Day, Memorial Day, Father's Day, and the Fourth of July. We are continually adjusting our assortment and future buys, along with our promotional efforts, to align with these trends. Customers will continue to see us lean into our position as the value leader in our space by expanding our everyday value offerings, while also leveraging strong promotional efforts during the key shopping moments on the calendar. In regards to new brands and ideas, I'd like to highlight a couple of new initiatives launching in Q3 that will help us take advantage of the customer's appetite for newness. This past week, we announced a new partnership with L.L.Bean to become one of their key retail partners.

We believe their focus on outdoor apparel and footwear with a northern sensibility is the perfect complement to our Magellan Outdoors and Columbia businesses, which lean more towards fishing in southern climates. Another new initiative is our partnership with Escalade and American Cornhole League to become the exclusive seller of ACL boards and bags for this fall. With the strong market share we have in all things tailgating, this partnership is a perfect fit for us. Later in Q3, we'll kick off a new partnership with Fanatics to help expand our online offering and licensed team apparel. This business has been a strong suit for us over the years, but our offering has traditionally been anchored in the leagues and teams that live within our geographic footprint.

Our new relationship will allow us to dramatically grow our assortment and to service a greatly expanded number of categories, teams, and leagues moving forward. Shifting to profitability, we remain focused on proactively managing our business to deliver the best possible results for our shareholders this year, while ensuring we remain on track to achieving our long-term initiatives and goals. Our gross margin for the quarter came in at 35.6%, which was a 30 basis point improvement over last year, with a 180 basis point increase over our Q1 rate. Beneath the surface, our merchandise margins stabilized at down 21 basis points versus last year, which was a marked improvement over our Q1 run rate of down 110 basis points versus 2022. Carl will give you more color around our financial performance shortly.

Turning to inventory, at the end of the quarter, our inventory balance was $1.3 billion, which was flat to last year in terms of dollars and down 2% in units in total. On a per store basis, units declined 5% compared to Q2 of last year. Team has exhibited a very disciplined inventory management approach through the past couple of years, and we plan to continue to lean into this strength as we move forward. We are confident that our current inventory position is at the right level to support our business, and the content is fresh and forward-facing, which should position us well for the fall and holiday selling seasons.

As we discussed in June on our Q1 call, we're taking aggressive action in proactively addressing the trends that we've seen in the business this year in order to help improve sales and profitability as we move through the remainder of the year. I want to give a quick reminder of the key actions we're taking to drive the business. First, we'll continue to highlight and focus on our position as the value leader in the space across all customer touch points. Second, we're introducing new offerings in our assortment, such as L.L.Bean, Fanatics, and American Cornhole League, to capitalize on the customer's desire for newness. We're also improving our advertising effectiveness with better targeted marketing that will be facilitated by our new customer data platform. We're continually enhancing our omni-channel functionality and features to improve the customer experience.

Lastly, we also expect a sales boost from the new stores we opened up in 2022, along with 11-12 new stores opening this fall. Now I'd like to turn the call over to our new CFO to walk you through the financials. Carl?

Carl Ford (EVP & CFO)

Thank you, Steve. Good morning, everyone. It is an honor to be selected to follow Michael as the Chief Financial Officer of Academy Sports and Outdoors. I am excited about the opportunity to lead our finance organization into what I believe is a very bright future. I have been with the company since 2019, and I am proud of the work we have done to strengthen our balance sheet and improve our operating model. Academy is not the same company as it was then, and I am excited about our long-term growth initiatives and capital allocation philosophy. I will now walk you through the details of our second quarter results. Net sales were $1.58 billion, a 6.2% decline compared to the second quarter of 2022, with comparable sales of -7.5%.

Sales were impacted by an 8.3% decline in transactions, partially offset by a 0.8% increase in ticket size. During the quarter, customers were more active during holiday periods, and we saw an improvement in the comp during each month of the quarter. Gross margin rate was 35.6%, an increase of 180 basis points sequentially and 30 basis points higher than last year. The improvement compared to last year was driven by 88 basis points of lower freight cost, partially offset by a 21 basis point decline in merchandise margins and 37 basis points of higher shrink. Our merchandise margins improved sequentially as we benefited from our ongoing efforts to manage inventory through system capabilities, price optimization, and localization. We saw a 42 basis point sequential improvement in shrink, driven by actions taken to detect and deter losses.

We continue to be able to operate at substantially higher gross margin rates, even in a challenging environment. During the quarter, SG&A expenses were $352.5 million or 22.3% of net sales, an increase of 220 basis points compared to the second quarter of 2022. This deleverage is primarily driven by investments we are making in our long range plan. We are investing in new stores, omni-channel, IT, and digital marketing projects that support our growth initiatives. Approximately 80% of this quarter's SG&A dollar increase is related to growth investments. When compared to Q1 of this year, SG&A expenses were 230 basis points lower as a percentage of sales.

As we discussed during our first quarter call, we focused on aligning our expenses with our revised sales guidance and the sequential improvement of our expenses as a percentage of sales reflects the hard work done across the organization to rightsize our spending. Examples of areas of the business we have focused on rightsizing include flexing store and distribution labor hours based on revised sales and inventory receipt expectations, targeted distribution scheduling during non-peak times, and scaling back on projects that are not aligned with long-term growth strategies or current year sales growth. Net income was $157.1 million, or 9.9% of sales. A 130 basis point decrease from the second quarter of 2022, resulting in GAAP diluted earnings per share of $2.01. Adjusted diluted earnings per share were $2.09.

Moving to the balance sheet, at the end of the quarter, we had $311 million in cash and no outstanding borrowings on our $1 billion credit facility. Academy generated $191 million in net cash from operating activities during the second quarter. This is a 19% increase compared to the second quarter of last year. We deployed this cash to invest in our growth initiatives and to repurchase approximately 2 million shares for $107.3 million and pay out $6.9 million in dividends. The board has approved a dividend of $0.09 per share, payable on October 11, 2023, to stockholders of record as of September 13, 2023. Capital expenditures were $69.3 million. For the full year, we still expect to spend between $200 million and $250 million.

With that, I will turn the call over to Michael to provide an update on some of our key initiatives and our full year guidance. Michael?

Michael Mullican (President)

Thanks, Carl. Good morning, everyone. I want to say congratulations to Carl on his promotion to Chief Financial Officer. He has been a core member of Academy's finance organization for the last several years. During that time, Carl has been a key driver of our financial performance. I know that Carl and his team will continue to be excellent financial stewards of the business as we move forward with our long-range plan. I'd like to take some time to update everyone on the progress of a few key initiatives that will drive the long-range growth plan we described during our Investor Day this past April. As a reminder, the key components of the growth plan are, first, to open new stores to expand the store base by 50% in existing and new markets. Second, to build a more powerful omnichannel business.

Third, to drive our existing business by improving service and productivity in our stores, strengthening our merchandising, and attracting and engaging customers through communication, content, and experiences. Fourth, to leverage and scale our supply chain, and to achieve these objectives by building the best team in retail. I'll start with our new store initiative, which we expect will be the largest driver of sales and profit growth over the next few years. As a reminder, all of our mature stores are profitable and collectively have sector-leading store productivity metrics. We opened 9 stores in 2022, and even though they opened in a challenging economic environment, they are, as a group, meeting expectations and already positively contributing to EBITDA. As I have said in the past, 2022 was a test and learn year, and we are in the very early innings of this initiative.

While our current new store pro forma assumes approximately $18 million of sales in year one, inclusive of omnichannel sales, we have learned that new market stores need time to build brand awareness and may have longer sales maturity ramps, while stores in existing markets generally come out of the gate faster. Our sample size is limited and the current economic environment is challenging, but we continue to learn and refine our expectations and processes with the goal of making each new store opening better than the last one. So far, we are pleased with the learnings that we have implemented. Given the positive preliminary results of the stores we opened in 2022, we are confident that we can take our unique Academy brand, concept, and business model to many new markets with great success.

In the second quarter, we opened one store in Peoria, Illinois, which was our second store opening this year. We have six scheduled openings in Q3, including our first store in the Indianapolis, Indiana area, which opened last Friday. We are on track to open another five to six stores in Q4. Steve and Carl mentioned the challenging economic environment, but I want to emphasize that in spite of these challenges, we are able to fund store growth with our existing strong cash flow. As of today, we are only in eighteen states, so we have a large runway for growth in front of us. In addition, with other retailers scaling back their outdoor product offerings, there are many markets that are favorable for market share gains. Our past experience has confirmed that our market research and due diligence identifies locations where stores will be successful for the long term.

We launched our new customer data platform in July to drive further sales growth. This valuable tool will allow us to aggregate customer data from multiple sources within our organization, creating a comprehensive view of our customers. With this new perspective, we will have the ability to create and develop a robust customer profile portfolio segmented by cohorts, shopping behaviors, outdoor interests, sports fandom, and many other filters. We can use this refined customer data to proactively design highly targeted marketing campaigns tailored to specific customer behaviors and interests. We anticipate that connecting with our customers on this deeper level will drive an increase in traffic, conversion rates, and loyalty. We look forward to updating you about this exciting new capability as we develop and refine it further. Finally, a brief update on our supply chain initiatives.

As we discussed at our Investor Day in April, part of our long-range plan is to generate 100 basis points of adjusted EBIT margin improvement from our supply chain. We intend to do this by increasing our unit productivity, leveraging existing distribution capacity, lowering our e-commerce fulfillment costs, decreasing lead times, and leveraging transportation costs. A major component of achieving this goal is the implementation of a new warehouse management system in partnership with Manhattan. We are on track to convert one of our distribution centers to the new system in 2024. We are also taking other steps to improve supply chain logistics and productivity by implementing consistent processes and procedures, increasing cross-docking and multi-store deliveries, and investing in technology to improve visibility of product flow. I expect us to achieve our EBIT margin contribution goal by the end of the long-range plan.

To sum it all up, based on our results, current trends, and back half expectations, we are reiterating our full-year sales and net income guidance while updating our earnings per share forecast to reflect the share repurchase activity in the second quarter. Net sales are still expected to range from $6.17 billion-$6.36 billion, with comparable sales ranging from -7.5% to -4.5%. Gross margin rate between 34% and 34.4%. GAAP income before taxes is still expected to range from $675 million-$750 million, and GAAP net income between $520 million and $575 million. GAAP diluted earnings per share are now expected to range from $6.65 per share to $7.35 per share.

Adjusted diluted earnings per share are expected to range from $6.95 per share-$7.65 per share. The earnings per share estimates are calculated on a share count of 78.1 million diluted weighted average shares outstanding for the full year and do not include any potential future repurchase activity. Finally, we still expect to generate $400 million-$450 million of adjusted free cash flow. With that, I will now turn the call back over to Steve for his closing remarks.

Steve Lawrence (CEO)

Thanks, Michael. As we move forward, I think it's important to note that despite some short-term headwinds, Academy is a much stronger company than we were before the pandemic. Our sales and gross margin rate remain significantly above 2019 levels, driven by the operational improvements made over the past few years that have structurally enhanced our earnings power. We have a strong and flexible balance sheet, a very productive four-wall operating model that is scalable and transportable, a solid team with a track record of executing and delivering results, and high customer affinity within our core markets. Longer term, we believe we have a compelling growth strategy with multiple ways to capture market share and drive growth through new store expansion into adjacent, new, and existing markets.

We have an improving dot com business with significant upside, and we have the ability to continue to refine and drive more productivity out of our existing store base. Most importantly of all, this growth can be funded from the free cash flow generated by the business, while also returning value to our shareholders through dividends and strategic share repurchases. In closing, I'd like to thank all of the Academy team members for their dedication and hard work in helping deliver an outstanding experience to our customers. Now, let's go have fun out there. We'll now open the call up for your questions.

Operator (participant)

Thank you. The company will now open the call up for your questions. To ask your question, please press star one. We will pause for a moment to wait for the queue to fill. Thank you. Our first question comes from the line of Daniel Imbro with Stephens. Please proceed with your question.

Daniel Imbro (Managing Director and Equity Research Analyst)

Yep. Hey, good morning, guys. Thanks for taking our questions. Michael, I want to start just broadly on the consumer trends that you're seeing. You know, we've talked in the past about Academy benefiting from a more discerning customer, maybe looking for value. Do you see any signs of that this quarter, whether it was new customers shopping the store, any trade down within the store? And then also one that within the quarter's kind of improvement, was any of that attributable to the new marketing plan, or is that really gonna be on the come for the back half of the year when you think about the sales cadence?

Steve Lawrence (CEO)

Yeah, this is Steve. I'll start with the first part. I'm sure Michael will jump in. We definitely see the customer under stress and under pressure. We see that reflected a couple different ways. We talked about customer gravitating towards value. We see that in terms of growth in private label, which represents kind of the value end of our assortment. We see them also taking bigger advantage of deals or clearance when we sell that. So there definitely is a move towards customers seeking out value. On the flip side, we also see them seeking out newness, right? We see them going after things that are new and innovative to the market, like we talked about Bog Bags or OOFOS slides.

That's why we're excited about some of the new brands that we're launching this fall between L.L.Bean and Fanatics and ACL. So that's definitely a trend we've seen. We've also seen the customer shop during kind of the key appointment shopping time periods and aggregate the purchases there. And then we've also seen them kind of, when we get past those key shopping time periods, pull back a little bit, and that's really how we planned our marketing, our promotions throughout Q2 and all the way through the remainder of the year. In regards to the targeted marketing from the CDP, that was really put in place really late in the quarter, so we really didn't get any benefit out of that. We think we'll start seeing some benefit out of that in the back half of the year.

Michael Mullican (President)

Yeah, Danny, on the CDP, we've been flying a propeller plane in a dogfight, holding our own against fighter jets for the past three or four years. Now we have our own fighter jet, and we're learning to fly it. Most of that benefit will start to come next year. We should see a little bit this year, but it will not be a meaningful driver of comp this year. The big benefit will come in the out years.

Daniel Imbro (Managing Director and Equity Research Analyst)

Super, super helpful. Then maybe we'll follow up just on gross margins. Obviously, there's discussion from peers or maybe higher promotions. Your margins held in well. I'm curious, when you look at your competitive pricing analyses, are the peers coming down to where Academy is priced, or are they actually trying to undercut you on certain items? Just any granularity on that or changing promotional backdrop? Then tied into that, you noted shrink improved, I think, a little bit quarter-over-quarter. What was the main driver there? Anything worth calling out there for the back half? Thanks.

Steve Lawrence (CEO)

... Yeah, I'll start and answer the question on promotions, then we'll have Carl jump in on shrink. Definitely it's more promotional out there this year than it was a year ago at this time. We talked about on the past call where, you know, we really started seeing promotions creep into the marketplace in the back half of last year, and that carried forward into the first half of this year. You know, that being said, as I just said earlier, you know, we're definitely seeing those promotions most effective during those key shopping moments, so we're certainly leaning into that as we move forward. You know, that-- we did have a 20 basis point erosion in merch margin, that came from some additional promotions.

But probably the best thing that we've done to help manage through that is our inventory management. You know, when you think about all the strong disciplines we put in place in terms of our planning and allocation, assortment planning, all those things have really helped us control inventories and control margins and not see the same erosion that maybe other people have seen.

Michael Mullican (President)

Let me. I'll take shrink. It's a real issue. In spite of the headwinds we faced from higher shrink, as Steve said, we were able to meaningfully expand our gross margin rate compared to last year. We sequentially improved our gross margin from last quarter. We've taken a lot of actions, many of which are confidential and frankly, clandestine in nature, and we can't talk about many of them, but they're working. One thing that we do from a process standpoint is we count our stores regularly throughout the year, and we take our high shrink store inventories early in the year. That gives us some chance to adjust them and to take some actions and perhaps count them again. And so we have visibility into trends throughout the year. It's a difficult environment.

I will tell you that good leaders adjust, and that's what we've done. I do have to take the time to thank all the Academy team members in our stores, the folks in the blue shirts that have been so attentive in helping us manage these issues. They want to do what they do best, and that's help customers have fun. And the best way to prevent shrink is to provide great customer service in the stores. We can do that and provide more labor and more customer service because our stores are significantly more productive than our peers. So we can have people in the stores helping customers. Our LP department has worked very hard with law enforcement.

We've got great partnerships with law enforcement, and we've been able to frankly help intervene and take down some organized crime rings that have helped shrink. So, you know, last thing I'll mention here on this issue, because it is a big issue, and we've heard a lot of people talking about it. If you reflect back on many challenges facing retailers over the past few years, we'll start with the COVID pandemic. During the peak of the COVID crisis, I believe we managed that better than anybody else. We got our stores open more quickly. We were able to help the community get back on their feet more quickly. If you look at ballooning freight costs over the past few years, we've managed that better than most other folks in the space.

If you look back to a year ago, when many retailers were overbought and didn't manage their inventory well, we did that better than others. We're gonna do the same with shrink. We have a great team, we're nimble, and we're gonna manage it. We're not gonna use it as an excuse to not hit our gross margin goals.

Daniel Imbro (Managing Director and Equity Research Analyst)

Appreciate all the color and best of luck, guys. Thanks.

Steve Lawrence (CEO)

Thanks, Dan.

Operator (participant)

Our next question comes from the line of Greg Melich with Evercore. Please proceed with your question.

Greg Melich (Senior Managing Director)

Hi, thanks. First, I wanted to just look at the, the comp. Were transaction counts getting better sequentially, and did that drive the, the negative 7.5 comp, or was it more average ticket?

Steve Lawrence (CEO)

So for the quarter, transactions, which is also a proxy for us for traffic, was down high single digits, AUR up slightly, units per transaction down slightly. We did talk about how the comps successfully got better as the quarter progressed. You can infer traffic improved steadily as we got less negative as we got through the quarter.

Greg Melich (Senior Managing Director)

It sounds like given the, I guess, the midpoint of the guide now would have you at a sort of a -4.5 to 5 comp in the back half. That's. Is that where we're running now?

Steve Lawrence (CEO)

You know, so we obviously don't give interquarter guidance, but the performance of the business continues to be within the guidance range that we've shared.

Greg Melich (Senior Managing Director)

Got it. And then I want to follow up on this. Thanks for the answer on shrink. That was good and pretty holistic. Freight benefits or supply chain was a benefit that helped grow gross margin or hold, stabilize it. Could you quantify that and maybe sort of give us some idea as to how you're thinking about that into the back half?

Carl Ford (EVP & CFO)

Yeah, Greg, this is Carl. So freight was a tailwind of 88 basis points during the quarter, quarter-over-quarter improvement. So up 30 basis points, up 30 basis points in gross margin. The, the puts and takes on that were freight was a +88 basis points, merch was a -21 basis points, shrink was a -37 basis points. And we continue within the guidance to see that as a tailwind throughout fall.

Greg Melich (Senior Managing Director)

Got it. Thanks, and good luck.

Steve Lawrence (CEO)

Thanks.

Operator (participant)

Our next question comes from the line of Christopher Horvers with JP Morgan. Please proceed with your question.

Christopher Horvers (Senior Analyst)

Thanks. Good morning, guys. Can you talk about what you're seeing in some of the, you know, key COVID winning categories, whether it's hunt or exercise equipment, bike, and so forth? Are you seeing the bottom form in the business such that we can start to look forward to, you know, improvement in comp, but then ultimately, you know, positive as you think about the out year? Or are those like, basically relative to 2019, you know, are things stabilizing and we can start to think about the business more seasonally?

Steve Lawrence (CEO)

Yeah, on a TYY basis, when you look at just the comparison of those bigger business, big-ticket businesses, some of the search categories you talked about, they're still challenged, right? I mean, our fitness business continues to be pretty challenged. The hunt business we've talked about between firearms and ammo continues to be challenged. As we get through this year, the comps get a little less daunting the further we get through the year. So we're counting on some of that improvement as we move through the year. But going back to the latter part of your question, when you look at these businesses versus 2019, they're still all really healthy.

When you look at, like, the hunt business, it's still up in the mid-40s versus 2019, and you take a category belief beneath the surface or like ammo, it's still up in like 96% versus where it was in 2019. So, you know, it's certainly falling back a little bit from the activity we've seen in the last couple of years, but still maintaining a really healthy spread versus pre-pandemic. And, you know, once we kind of see this business start to stabilize, and I think it is gonna stabilize at a higher level than where it was in 2019, I think that's when we'll start being able to move more towards growth from a total company perspective.

Christopher Horvers (Senior Analyst)

So I guess just to focus in on that. So in these categories or, you know, broadly in the business, do you feel more confident today than a quarter ago that we are getting to that point of, okay, we're seeing a bottom form and you have better visibility as you look forward?

Steve Lawrence (CEO)

They're becoming more predictable for us. We certainly are getting a lot closer to pin in terms of how forecasting those businesses. They're still running negative, though. I mean, I don't want to not mislead you on that. They're running negative. But as we get through the year, these headwinds start to diminish a little bit, and so that's where we're counting on as part of our guidance.

Carl Ford (EVP & CFO)

Chris, one other thing. I think if we're looking out long term, and again, we're focused on the long term, we're more differentiated in this space than we were a few years ago. I think there's fewer competitors, and some of the largest competitors have really, you know, backed away from this space. So you know, short term, it definitely, as Steve said, we're still running down in some of those categories. It is stabilizing. I think long term, we've got a great opportunity to pick up meaningful share and new customers as we really support and lean into this category.

Steve Lawrence (CEO)

Yeah, a lot of the categories that you're talking about have major cross shop across the company. And you know, ultimately, even though we're fighting through some short-term, short-term chop on this, you know, we believe the diversified assortment, the complementary nature of the businesses and how they cross shop is the right place for us to be. You know, we're a sports and outdoor retailer, and candidly, as more people pull back from the outdoor space, we become, you know, maybe the only player in this space with a large footprint.

Christopher Horvers (Senior Analyst)

Got it. And then my follow-up question is, any help here on the back half in terms of, you know, cadence from a top line and gross margin perspective, as we think about the models? Thanks very much.

Carl Ford (EVP & CFO)

Yeah, no, I think our, from a guidance perspective, you know, we're, we're comfortable with the annual guidance of -7.5% to -4.5%. The flexibility or the variability as you think about that is, is on consumer health. You know, we're gonna continue to lean into value. We're gonna continue to lean into newness. It's completely, related to consumer health. And on the, on the margin guide from 34.4%, down to 34.0%, we feel comfortable with that. We've delivered that consistently over the past two years. It's up 500 basis points since pre-COVID.

And all of those business disciplines that Steve kind of walked through, this leadership team started doing in 2019, really coming back to, you know, merchandise planning and allocation, the systems and enhancements, planning and buy execution, open to buy discipline, having that markdown life cycle management, we're doing those consistently. That's what we're doing day in and day out, is managing the business. And so we feel comfortable with the margin guide, and we've delivered it for the past two years.

Christopher Horvers (Senior Analyst)

Thank you.

Operator (participant)

Our next question comes from the line of Kate McShane with Goldman Sachs. Please proceed with your question.

Emily Ghosh (Equity Research Associate)

Hi, this is Emily Ghosh on for Kate. We wondered how you were thinking about the overall health of the marketplace currently and into the second half of the year. It sounds like there are some areas where there's heavier inventory, and we wondered how that might impact Academy. Thank you.

Steve Lawrence (CEO)

Yeah, I mean, certainly, you know, we've talked about we're very comfortable with where our inventory position is. We also know that competition sometimes has some issues out there, and those problems can become our problems as they liquidate product. That being said, you know, some of the headwinds you're talking about, there's definitely increased promotions out there, the heavy inventories you mentioned, and, you know, customers under pressure, right? There's the credit card debt's higher than it's been. Inflation is real. But when you think about some of the other tailwinds we have, you know, we've got this everyday value positioning that is kind of core and fundamental to who we are, and I think customers will continue to gravitate towards value. We got strong offerings of new brands and a really strong private label business that customers resonate with.

So we've got some new things coming in. Combination of all those things, we feel like the guidance we gave is thoughtful and encompasses both an upside and a downside scenario. And, you know, we're just gonna have to read the situation and react as we go, much like we've done all year.

Michael Mullican (President)

Yeah, and going back to a year ago, there was, I think a number of retailers weren't happy with their inventory positions at that time, and we've certainly more than were able to hold our own based on the strength of our inventory management. Reiterating what Steve said, we're in an environment where we, we certainly believe that value will be more important in the future than it is today and than it was a year ago, and we think we're the, the best positioned to benefit from that. At the risk of tripling up, our units are down 5%, on a per store basis. We, we feel like we've really leaned into this inventory management thing, and, we've been doing it consistently.

Brian Nagel (Managing Director, Senior Analyst, Consumer Growth & eCommerce)

... Thank you.

Michael Mullican (President)

Thank you.

Operator (participant)

Our next question comes from the line of Robbie Ohmes with Bank of America. Please proceed with your question.

Alex Perry (Director Equity Research)

Hi, this is Alex Perry for Robbie. Just first, could you give us some more color on how back-to-school is shaping up? Has the July momentum that you've seen sort of continued? And then I think the high end implies a same-store acceleration in the back half. Is that based on the trends you're currently seeing? And then what are sort of the buckets that would drive an acceleration in the back half? And then also, I think you're lapping an Astros win as well. Can you just remind us, you know, how much of a headwind, you know, that could be to same-store sales, if that's not repeated? Thanks.

Steve Lawrence (CEO)

Well, I wrapped up the next question. We'll do our best to tackle it. You know, we, as we said before, we don't give interquarter guidance. That being said, our back-to-school is earlier than a lot of other people, so our back-to-school really starts kind of the back half of July. We already told you, July was the best performing quarter for, or best month of the quarter for us. A lot of those trends that we saw happen at the end of July carried into August in terms of strength and key back-to-school areas like youth apparel, footwear, backpacks, hydration, all those things were really strong for back-to-school for us. Now, that being said, we still have a lot of the quarter ahead of us.

You know, we talked about how we've seen the customer shop during those key appointment time periods, but once you get past back to school, right now, we have kind of the kickoff of tailgating and hunting season. Then we go into a little bit of a lull in the later part of the quarter, until we get to the holiday shopping time period. So we've certainly got that modeled into our, our forecast. In terms of the Astros, we are up against an Astros win. I hope you're not counting the Astros out yet. We're tied for first place, I think, at this point in time. And we also, by the way, have the Rangers still in this, as well as the Braves, I think, are still in the hunt.

So we've got a lot of teams still in the hunt, and that's one of the, kind of the fun things about the licensed business, is that there's always something that happens, right? And you know, while we certainly try to take those out of our forecast, we know that if we do get one of those teams to get into the World Series and win the World Series, that would be upside to what we're forecasting.

Michael Mullican (President)

Yeah, and Alex, one more thing on the licensed business. You know, we're not odds makers, and we don't take the field and play the game. We like when the local teams win, but we don't really plan for that, no matter how, you know, strong we think the seasons that they may have can be.

So anything there that's beneficial to us is beneficial to the forecast.

Steve Lawrence (CEO)

And then back to kind of the remainder of your question. You know, the things we've talked about on the call that we think give us a belief that business is, you know, our forecast is achievable, is the focus on value that we have, leaning into the newness that we have, the new store initiatives where, you know, we've got somewhere between 14 stores, 15 stores this year. We should have another 11 stores, 12 stores open up in the back half of the year. That's gonna be a tailwind for us. We start to anniversary some of the new store openings from last year. They start falling into the comps. So there's a lot of different things that give us a belief that our forecast is pretty solid for the back half of the year.

Carl Ford (EVP & CFO)

I just want to say the forecast that we put out there, it, although non-comp, it includes 13 stores -14 total new stores, in this year.

Alex Perry (Director Equity Research)

Perfect. That's all really helpful. And then just on margins to follow up there, I think the high end of the guidance implies, you know, year-over-year increases in the back half. What would sort of be the buckets of drivers there for 2H gross margin improvement? Maybe just give us some color in terms of, you know, how you're thinking about shrink versus freight versus, you know, the promo environment. Thanks.

Carl Ford (EVP & CFO)

Yeah, I mean, the 34-34.4 annual actually represents a little bit of a giveback from what we've had last year. It's still in that same general range. It's up 500 basis points to pre-pandemic. I think the three buckets that you saw this quarter, merch margins, shrink, and freight are going to be the main players. We're not gonna throw anything new at you in the third quarter or the fourth quarter. We started seeing shrink start to turn last year, beginning in the third quarter. We were up 40 basis points in the third quarter of FY 2022 to the previous year. So Michael talking about taking those year-round physical inventories, you know, we kinda got ahead of this a little bit.

I'm not saying it's the environment's gonna change, but we had already baked some of that into our accrual rate. With that being said, you know, the second quarter was up 37, approximately 40 basis points. From a merch margin standpoint, I think it begins and ends with inventory management, and just providing the customer with value options on stuff that they really want. And freight, as I previously stated, you know, I think that's gonna be a tailwind for fall. So that's what's embedded within the guidance.

Steve Lawrence (CEO)

Yeah, I just-- I would, I would reiterate that point. You know, we, we get this question every quarter around margin. And when you, you look back and you think about where we are as a company, I think we-- a couple of times we said it, we're a different company than we were pre-pandemic. You know, we're sustaining right now at about 27% ahead where we were in 2019 from a sales perspective. The margin is about 500 basis points higher, and that's really built on, on the back of a lot of really strong, meaningful operational changes that we've made to the business in terms of how we buy and allocate our regular price and markdown optimization work we do, the better size profiling we do in getting the right goods to the right stores.

You know, we also think that mix should benefit us as the soft goods business starts to be kind of normalize and become a bigger percentage of the business, that provides a gross margin tailwind. Private brand becoming a bigger percentage of the business provides margin tailwind. So we feel like we've made the right moves long term to structurally improve the margin. Promotions are gonna be what they're gonna be, and, you know, we certainly participate in promotions during those time periods. But, you know, at our core we're an everyday value retailer. We talked about on previous calls that roughly 75% of our sales come from regular price, which is, you know, driven by our value pricing, right? So promotions are out there. They're certainly gonna be what they're gonna be.

We feel like we've got them planned appropriately, but we feel like the strength of the margin is structural and foundational, and we're gonna hold on to it.

Alex Perry (Director Equity Research)

Perfect. That's really helpful. Best of luck going forward.

Steve Lawrence (CEO)

Thanks.

Operator (participant)

Our next question comes from the line of Anthony Chukumba with Loop Capital. Please proceed with your question.

Anthony Chukumba (Managing Director, Senior Research Analyst and, Consumer Sector Head)

Good morning, and thanks so much for taking my question. To be respectful to my peers who may also want to ask questions on this call, I will just ask one question. So you talked about the SG&A expense and leverage drivers, you know, the new store investments, omni-channel, technology, and digital marketing. Obviously, the new store investments will continue, you know, given the fact that you have a very aggressive new store opening plan. But I guess my question is: when do we start to anniversary the bulk of the omni-channel technology and digital marketing investments? Thank you.

Michael Mullican (President)

You say inventorying the bulk of the... I'm sorry, Anthony, one more time?

Anthony Chukumba (Managing Director, Senior Research Analyst and, Consumer Sector Head)

Yeah. When do we start to anniversary the bulk of the omni-channel technology and digital marketing investments?

Carl Ford (EVP & CFO)

Hey, Anthony, it's Carl. When we launched our long-range plan back in April, we actually baked in about 100 basis points of expense deleverage into it, and it was really around the things that we viewed as strategic priorities to invest in. New stores, we think there's a ton of white space there. Omni-channel capabilities, we think we have a lot of upside there, and we're just starting to get into the cockpit of the fighter jet associated with the customer data platform. So I really think you can expect us to continue to lean into that. We're gonna be responsive from an expense standpoint as we look at a challenged macroeconomic environment and kind of always optimize our expense structure, but you're gonna see us consistently leaning into investing in those areas throughout the long-range plan.

Steve Lawrence (CEO)

Yeah, I was gonna say, I think, I think particularly in the, in the realm of dot-com, you know, the investment never stops, right? You're continually reinventing your site, adding new capabilities. You know, we're adding some new buy now, pay later capabilities currently. We're gonna have Sezzle online in the next couple of weeks, which is a big win for us. So I don't think you're gonna see us necessarily discontinue those investments, or they're gonna stop. They're gonna be continual as we evolve the business, but, you know, we're gonna be very thoughtful about where and how we invest those dollars and make sure that they really pay for themselves. This new marketing platform, I think, you know, we're really early innings.

As a matter of fact, I'd say we're at the start of the game on this one, and there's gonna be more investment against that. But I guarantee you that everything we do, we run an ROIC against, and we're gonna get paid back in spades for those investments.

Michael Mullican (President)

In funding those initiatives with existing cash flow, that's the one of the more important parts.

Anthony Chukumba (Managing Director, Senior Research Analyst and, Consumer Sector Head)

That's helpful. Thank you.

Operator (participant)

Our next question comes from the line of Brian Nagel with Oppenheimer. Please proceed with your question.

Brian Nagel (Managing Director, Senior Analyst, Consumer Growth & eCommerce)

Hi, good morning. I'll follow Anthony's lead and only ask one question as well, but with multiple parts. First off, congratulations, Carl. We look forward to working with you.

Carl Ford (EVP & CFO)

Appreciate it.

Brian Nagel (Managing Director, Senior Analyst, Consumer Growth & eCommerce)

So the question I have, look, you're doing-- you've done a fantastic job of managing the business, you know, through some crosscurrents out there. Comps are still negative, you know, the guidance you provide to balance sheet would suggest they stay negative through the year. So I guess the question I have is, you know, how do we think about these negative comps? Is it a-- what portion of this is lacking, you know, some of these post-pandemic type categories versus an underlying, more challenged consumer? And then really, what are the-- as you're looking at the business beyond the current year, what are the building blocks to get back to that, say, steady, positive comp for the company where it should be?

Steve Lawrence (CEO)

Yeah. So when we thought about coming out of the pandemic last year in 2022, I mean, clearly during 2020 and 2021, the business grew to an outsized kind of state of repose, right? It was, you know, inflated by one-time customers coming to our stores. We're the only store open, et cetera. We had some of these surge categories. There was extra stimulus in the economy. We saw last year's kind of that reset year, and really intended to move back to growth this year. I think the thing we weren't counting on coming into this year was how much pressure the customer is under.

So I'd attribute a lot of what we're seeing this year is in negotiating through that, that short-term kind of chop that's being created by the state of the economy, the you know, the inflation we talked about, high credit card debt, et cetera. So, as we move forward, you know, the thing that's gonna that we have to keep navigating through is that short-term chop. When we see the customer start to get a little healthier and stabilize, I think that's when we start moving back to growth, and that's when a lot of these initiatives that we're, we're still investing in, right?

I mean, that's one of the things we talk a lot about is, you know, these investments we're making in new stores, these investments we're making to our CDP or to our .com site, they're all long-term investments, and that's when they're really gonna start paying off, is once we come out of this kind of short-term, dislocation we're having in the market, you're gonna see those really kick in.

Brian Nagel (Managing Director, Senior Analyst, Consumer Growth & eCommerce)

Got it. That's really helpful. I appreciate it. Best of luck for the balance of the year here. Thank you.

Michael Mullican (President)

Thanks, Brian.

Operator (participant)

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

Michael Lasser (Equity Research Analyst)

Good morning. Thanks a lot for taking my question. How much lower can Academy take its operating expenses without having a negative impact on the customer experience, especially if comps remain negative into 2024?

Michael Mullican (President)

Yeah, well, I think we've got our expense structure in a pretty good place. We're happy with it. You know, I would reiterate, we are more productive on a sales per sq ft basis. We're more productive in a profit per sq ft basis. We're more productive than the competition when you look at productivity per employee, and that's important. I know that others have had some actions with their employees, but we're more productive than our competition in most of the sector when it comes to productivity per employee, per employee. So I think we've got our expense structure in a pretty good place, from a store standpoint. We are looking very diligently, as you know, to improve our expense structure and our supply chain.

And we've got a very long-lived initiative that we're undertaking there that really won't start benefiting us until next year. So look, we are working hard on the initiatives that Steve talked about to turn the comp trajectory. We do anticipate that that will happen, based on the initiatives, again, not this year, but hopefully shortly thereafter. And as the other initiatives that we have on the expense side, particularly in the supply chain, take hold, we should have some good offsets there.

Steve Lawrence (CEO)

But your question is a great question. I mean, that's, that's something we spend a lot of time talking about, is making sure that as we're, we're managing through this, we're not, you know, doing anything to hurt the customer experience. You know, we're more productive in our stores because we've taken non-customer-facing tasks off the plate, and that's allowed us to flex our labor down there, and, you know, we'll continue to flex as we need to. But there is a certain, to your point, base level of, of service we want to provide to the customer. You know, as, business comes down, receipts come down a little bit, and that gives us a little bit of room in terms of how we manage our supply chain.

So I think we've got some natural flexes still in the business based off of, you know, how receipts come in, how customers are shopping, that we can flex up or down. But we also always want to make sure, to your point, we don't want to erode that customer experience.

Michael Lasser (Equity Research Analyst)

Got it. Thank you so much. My follow-up question is, some of your key vendors are going to soon expand the distribution of their products, and the perception is that as there's more expanded distribution, this is going to put pressure on the profit pool that Academy plays in, which in turn is lowering the operating profit margins for some of your key competitors. So, A, how have you factored in this expanded distribution into your outlook? And B, over the next few years, if we see your competitors have their margins drift lower, what is it about Academy's model that would enable you to maintain the margins that Academy has right now?

Steve Lawrence (CEO)

Yeah. I'd, I'd start with the distribution question. We, we got this last quarter because it was right around that time that it was announced that I think Nike is going back into a couple of retailers, apparel in, in Macy's, and I believe footwear in DSW. And, you know, our, our response then is the same as it is now. You know, a lot of where Macy's is picking up apparel, they're mall-based, we're non, non-mall-based. We, we really don't anticipate that impacting us too much. DSW tends to be a little more, off-mall-based, so certainly, that you could worry about maybe a little bit of traffic from there. But when we look at their assortment and, and what they traditionally have carried, it's, it's not the same level of assortment that we carry.

So, you know, having more people having access to brands isn't a positive thing for us, but we think we've got it accounted for and appropriately projected in our margin forecast. You know, longer term, I keep coming back to, you know, the margin improvement that we've seen over the past four or five years is foundational, and it's how we manage the business. And I think Carl said it a couple of times in this call. It starts with inventory management. That is a key foundational thing. As a company, we used to carry way too much inventory. That created way too many markdowns and inefficiencies in the system.

Managing the inventory, managing the receipt flow has so many positive benefits in terms of not creating markdowns on the back end, in terms of not creating trapped inventory that the stores have to move around needlessly. So inventory management's a big one, and then just how we manage through our pricing and make sure that we present a value price on a day in, day out basis, and offer great value. I think the combination of those disciplines we put in place and our everyday value model, I think, are two things that help us believe that our margin is going to be sustainable in the long term.

Michael Mullican (President)

And then again, back to the other initiatives. We believe very strongly that we've got 100 basis points of benefit coming from the supply chain. More cross-dock, more multi-stop deliveries, better use of variable labor. I mean, our workforce in our DCs today is frankly highly fixed, so we've got opportunities there. And then with more effective and efficient marketing, being able to target customers directly, instead of using a blunt instrument, using a scalpel will help our margins as well.

Michael Lasser (Equity Research Analyst)

Thank you.

Steve Lawrence (CEO)

Thank you.

Operator (participant)

Our next question comes from the line of Seth Basham with Wedbush. Please proceed with your question.

Seth Basham (Managing Director Equity Research)

Thanks a lot and good morning. My question is around new store productivity. By our calculation, it slipped again this quarter. I'm wondering if there's anything associated with the new store you opened in terms of location or timing? That's my first question. Thanks.

Michael Mullican (President)

Sure. We're, we're pleased with the progress of the new stores. We've opened three stores this year. All three have been out-of-footprint. All three, much more successful than the out-of-footprint openings we had back in 2018, 2019. The last store we opened was in the Westfield Carmel, Indianapolis, and even though, you know, to be quite honest, not an ideal time to open a new store, it's one of the better openings we've had out-of-market in the past five years. So we are seeing, the 2022 stores a little slower ramp than we had planned, but again, the chain is down. It's-- they're opening stronger than they did in 2019. The economy is challenging, and it takes time to build some brand awareness. And, and as I've said many times over, it's a test and learn year.

Our 2022 stores, we're still learning from those. We've got 13 stores-14 stores that will open this year. The analogy that I've used internally around this initiative is Milton Friedman's Fool in the Shower. You turn the water hot, and it doesn't get hot, and then you turn it cold, and when you turn it cold, it finally gets hot. And that's meant to illustrate that many times people fail to account for the lag time when they're studying cause and effect. And so this initiative, we're going slowly here. The punchline is, when you have these large initiatives, when you can implement them slowly and not all at once, so you can study the impact of those decisions, and that's what we're doing. We're still studying the 2022 vintage. We feel like we've got some good learnings, and we're applying them, but very, very happy so far.

Again, the key things to keep in mind is that all of our mature stores are profitable. We've got more white space than almost any retailer that I can think of, certainly in our sector, only being in 18 states. We're funding all of this growth through existing cash flow. The stores that we opened in 2022 are already creating cash flow. They're accreted to cash flow, so now we're reinvesting that to open more stores.

Steve Lawrence (CEO)

The other thing I would add to that is, as we continue to open stores out of our traditional footprint, that's all market share opportunity for us-

Michael Mullican (President)

Hundred percent.

Steve Lawrence (CEO)

We continue to pick up market share in those markets.

Michael Mullican (President)

It helps the dot com business as those customers now have awareness for, to Academy.

Seth Basham (Managing Director Equity Research)

That's helpful. Just to follow up, so the 2022 class, you're still expecting, on average, $18 million in sales for that, those stores. And then the 2023 class, with more of those opening outside your footprint, do you expect that $18 million figure again, or could it be lower than that?

Michael Mullican (President)

Yeah, on average, that's how we underwrite the stores, and that's what we expect on average. They may be different, depending, again, we've tried some different things. We've got some smaller format stores, I would say, that are, you know, below the 62,000 prototype. Those will be smaller. Again, 20% ROIC hurdle for really every store, and they're—they will achieve that, both vintages, based on what we've seen.

Steve Lawrence (CEO)

They're tracking ahead of that.

Michael Mullican (President)

Tracking ahead of that. That's a-

Seth Basham (Managing Director Equity Research)

Thank you.

Michael Mullican (President)

Pretty attractive return.

Operator (participant)

Thank you. Ladies and gentlemen, we have time for one more question, which will come for the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Jackie Ramkumar (Executive Director, Portfolio Specialist)

Hey, thanks so much for taking our question. This is Jackie on for Simeon. Just looking forward, what is the right kind of comp level that you would need to drive leverage in the business? Should we expect there to be some degree of deleverage in the model over time as you open new stores and ramp up your growth investments, or how should we think about that? Thanks so much.

Carl Ford (EVP & CFO)

Yeah, from a long-range plan standpoint, we modeled in low single digit comps and 100 basis points of expense deleverage. We do have some things that offset that in the supply chain space. And we've seen nothing that says that that's not what we're expecting. You know, if you look at, you know, SG&A, for example, in the near term, in the current quarter, up $13 million year over year. That investment is really in those long-range strategic priorities. And our free cash flow, you know, Michael spoke to it, but under $90 million in cash flow from operations during the quarter, that's actually up $30 million year over year compared to last year.

I think 19% increase in a tough environment, when you got a down 7.5 comp. We're creating the cash flow that makes us feel like we have permission to continue to invest in these strategic priorities, and that's what we're doing.

Steve Lawrence (CEO)

Great. So,

Jackie Ramkumar (Executive Director, Portfolio Specialist)

Got it. And-

Steve Lawrence (CEO)

Oh, go ahead.

Jackie Ramkumar (Executive Director, Portfolio Specialist)

Oh, no, you go ahead. If I can squeeze in a quick follow-up. I know you guys don't guide Q3, Q4 gross margin, but given that Q2 gross margin kind of came in line with normal seasonality versus Q1, should we think about whether Q3 and Q4 from a margin cadence should follow seasonality as well? Thank you.

Carl Ford (EVP & CFO)

I'll take it. I'm just gonna reiterate the 34 to 34.4. The three things that are gonna move it are the three things that you saw move it this quarter: merch margin, shrink, and freight. From a merch margin standpoint, you know, units down 5, we feel pretty good from a sales to inventory spread standpoint. We feel like from a promotional standpoint, we're gonna, we're gonna do that, but we're gonna do it during those key time periods, and that really worked for us in the second quarter. From a shrink perspective, we're beginning to lap some stuff from last year that we saw, but I'm not expecting the environment to change magically.

We're doing the things that we think help prevent and deter, and in some cases, follow up on losses, that is having a beneficial sequential impact. And freight, you know, it's still gonna be a tailwind into fall. So those are the three things. We're not gonna give guidance on Q3 and Q4 specifically, but those are the three things that are gonna impact it, and we feel like we're managing what we can manage in those spaces.

Jackie Ramkumar (Executive Director, Portfolio Specialist)

Great. Thanks so much.

Steve Lawrence (CEO)

Thank you. So, just want to close and, and kind of reiterate. We believe that, Academy represents a compelling growth opportunity, in the retail space for investors. We have one of the most compelling growth opportunities out there, and want to make sure you guys realize the team is simultaneously focused on two things. We're going to continue to navigate through the short-term headwinds, while the customer is under pressure, but at the same time, we're going to be working against our long-range plan and make sure we're, we're setting ourselves up for success in the long term, to achieve our long-range plan and objectives. So with that, I want to thank everybody for joining the call out there, and thanks to all of our Academy associates, and everybody should have a good, Liberty weekend. Thanks.

Carl Ford (EVP & CFO)

Thank you.

Operator (participant)

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