Academy Sports & Outdoors - Q4 2024

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to the Academy Sports + Outdoors fourth quarter and fiscal year 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'll be a brief question and answer session. Questions will be limited to analysts and investors. Please limit yourself to one question and one follow-up. To ask your question during the call, please press star one. If you require operator assistance during the call, please press star zero. I would now like to turn the conference over to Matt Hodges, Vice President of Investor Relations for Academy Sports & Outdoors. Matt, please go ahead.

Matt Hodges (VP of Investor Relations)

Good morning, everyone, and thank you for joining the Academy Sports & Outdoors fourth quarter and fiscal 2023 financial results call. Participating on the call are Steve Lawrence, Chief Executive Officer, and Carl Ford, Chief Financial Officer. As a reminder, statements in today's earnings release and the comments made by management during this call may be considered forward-looking statements. These statements are subject to 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 statement. 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.

Please note that we have posted a supplemental slide presentation on our website to accompany today's earnings release. I will now turn the call over to Steve Lawrence for his remarks. Steve?

Steve Lawrence (CEO)

Thanks, Matt. Good morning to everyone, and thank you for joining us on our fourth quarter earnings call. During our call today, we'll provide details on the results for both Q4 and 2023 full year. We'll also share a progress update on achieving our long-range goals and our thoughts on additional guidance for 2024. First, I'd like to start with our Q4 performance. As you saw from the results we announced earlier this morning, we had an improvement in our trend during the fourth quarter, with sales coming in at $1.8 billion, which was up 2.8% in total and translated into a -3.6% comp. This was a 400 basis point improvement in comp sales trend versus the -7.6% we ran during the first three quarters of the year.

Our adjusted earnings per share for the fourth quarter came in at $2.21, an increase of 8% versus last year. We would characterize the cadence of the quarter as reverting back to the traffic patterns and volume progression that we traditionally saw pre-pandemic. There was less pull forward of demand in early November than we'd experienced over the last couple of years when customers shopped early based on scarcity of supply. We then saw the traditional acceleration of business during Thanksgiving and Cyber Week, followed by a lull in traffic during the middle part of December. We finished holiday with a strong surge of sales and traffic the week leading up to Christmas, that sustained into the post-Christmas time period and early January. The sales increase we ran in December made it the strongest month of both the quarter and the past year.

Based on these results, when you pull back and look at the full year 2023 sales, we came in at $6.2 billion or -6.5% comp. These results were at the high end of our annual guidance and on a 52-week basis, remain roughly up 25% versus pre-pandemic levels. Moving on to gross margin, the quarter came in at 33.3%, which is a 50 basis point improvement above last year. This increase was primarily driven by inventory and freight savings, partially offset by our merchandise margins. Holiday season played out as we anticipated and was more promotional than the past couple of Christmases, but still not back to the discount levels that were common pre-pandemic.

For the full-year, our gross margin rate came in at 34.3% or 30 basis points below last year, which was at the high end of our guidance, remains roughly 500 basis points higher than the margins we ran pre-pandemic. Combination of sales and margin performance allowed us to generate adjusted earnings per share for the full-year of $6.96. Now, I'd like to give you an update on our progress against the long-range plan goals we issued in April 2023 and our path towards achieving them as we move forward. 2023 was a busy year for us, and we made progress across multiple fronts. We opened 14 new stores, which is 5 more stores than we opened in 2022.

The team is applying learnings from the prior year's openings, and as a result, these stores are projected to have a higher year-one volume than the 2022 vintage. We also installed our new customer data platform, which is going to be a huge unlock for us moving forward as we gain greater insights into our customer shopping patterns. This new tool allows us to increase our targeted marketing capabilities, which we believe will drive more store visits and greater sales through our conversion rates. The team also laid the groundwork for the launch of our new warehouse management system, or WMS for short, which we'll be rolling out to all of our distribution centers over the next 18-24 months. We're also proud to give back to the communities we serve.

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

To combat this, we're increasing our focus around delivering an outstanding value proposition to our customers in order to help them stretch their wallet as they outfit their family for all their sports and outdoor activities. A great example of this is a promotion we just ran to kick off baseball in early March. The team created a package where we provided a parent all the gear their child would need to start T-ball, including a glove, bat, helmet, pants, and bag, all for under $100. In other cases, we'll be lowering prices in key categories, such as bikes and grills, as we head into the summer months. Turning to slide 5 of the supplemental deck, while we continue to manage through the short-term choppiness in the business, we remain focused on delivering against the long-range goals that we articulated last spring.

To reiterate a few of the key metrics, our plan is to grow top-line sales to $10 billion+, generate earnings of 10% or greater, achieve a 13.5% adjusted EBIT margin rate, drive our dot-com penetration to 15% of total revenue or greater, and thoughtfully invest in our cash flows into initiatives that drive a 30% ROIC. We've learned a lot over the past year, and as we move forward, we will continue to refine the tactics to support us achieving our long-range goals. We've done a deep dive on the 23 stores that we opened up in 2022 and 2023, and are applying the lessons we've learned from these two vintages for our new store opening plans moving forward. Page 7 of the supplemental deck details how we're fine-tuning our forecast for new store openings.

Initially, we modeled 120-140 stores with a year one volume target of $18 million that would mature over 5 years. The majority of the stores that we've opened up over the past years have been in newer markets. As we've discussed previously, we're seeing faster ramps as stores open in existing markets, where we have higher brand awareness and slower ramps as stores open in newer markets, where the customers are less familiar with Academy. Based on this, we're revising our new store forecast for year one sales volume to be between $12-$16 million with a 5-year ramp to maturity. The second change is how we're building out and sequencing our new store pipeline.

Moving forward, we'll strive for a better balance each year, with roughly half the new stores being opened in existing markets and the other half in new or adjacent markets. It's also important for us to balance our openings by time of year. We've learned that stores open in the first half of the year, get out of the gate faster than stores open up in Q3 and Q4. Based on this, starting in 2025 and forward, we're building our new store pipeline to support roughly 50% of the stores for each year to open up in first and second quarters. Another win is that we've seen strong results in smaller and mid-sized markets. While these stores may have slightly lower volume potential, the favorable expense structure it takes to run these stores helps ensure they're profitable investments and clear our ROIC hurdles.

As we build out our future pipeline, we're opening the aperture of our consideration set to include more single or 2-store markets, versus focusing primarily on large multi-store markets. Once again, it will be a balanced approach between various market sizes. Finally, over the past 18 months, we've opened up 4 new stores in Southern and Central Indiana. While they did not all open in the same weekend, having a cluster of stores that opened in a relative close time proximity to each other helped us gain greater efficiencies across multiple fronts, with the clear win being in driving greater marketing synergy. As we move into 2025 and beyond, our goal will be to go into new markets with a greater density of new store openings around the same time.

The end result of all this work is that we believe we have an opportunity to open up even more stores than we initially modeled in our long-range plan. As you can see on slide number 7, our revised new store growth plan now projects 160-180 stores over the next 5 years, with a target of 15-17 of them opening up in 2024. The second pillar of our growth strategy is to drive our dot-com penetration to 15% of total revenue. On the surface, this doesn't seem like an overly audacious goal when you consider that many other retailers are already at or above this level of penetration.

However, when you consider that we're expanding our store base by greater than 50% during the same time period, it means that we'll have to double our dot-com sales over the next 5 years in order to hit this goal, which we would characterize as challenging but achievable. The major driver of this strategy will be to have a laser focus on the customer, with a mission to seamlessly streamline the shopping experience across all touch points. This was the primary reason we recently created our new Chief Customer Officer position and hired Chad, Chad Fox, to fill this role. We've combined our marketing, customer analytics, and e-commerce teams into one organization to make us more nimble while also driving greater synergies across the organization. Chad is a seasoned executive who has helped other large retailers, such as Walmart and Dollar General, accomplish these same goals.

He's a data-driven merchant who's going to help us lever our new customer data platform to drive greater customer engagement and new customer acquisition. Key focuses for Chad over the next year will be driving increased traffic to our physical and digital stores, dramatically improving the site experience on both academy.com and our mobile app, and improving customer identification and engagement with the rollout of an expanded loyalty program. The third leg of our growth plan is to drive greater productivity out of our existing businesses and assets. We've made a lot of progress in upgrading our merchandising, processes, and procedures, along with our store execution over the past several years, which has resulted in the volume and margin gains that we've made. While these initiatives are in the middle to later innings, we believe that there's still opportunity for improvement on both these fronts.

The work that Chad and his team are focused on will also help accelerate growth from these initiatives. Where we believe we have the most untapped opportunity to improve efficiency is the work we're undertaking to strengthen our supply chain infrastructure and capabilities. Hiring Rob Howell as our new Chief Supply Chain Officer will be a huge unlock for us as we build out our supply chain capabilities. He's a skilled strategist to help develop a world-class supply chain for Sysco. His deep experience in working with Manhattan should also help us ensure that the WMS rollout we're embarking on over the next 18-24 months goes as smoothly as possible. In the short term, we're focused on improving our cross-dock receipt flow and speeding up the pace at which receipts move out to the stores.

This will allow us to reduce the average inventory we carry, resulting in increased turnover, while also freeing up cash flow. Rob will also be reviewing the current assumptions in our long-range plan to identify ways to drive greater efficiencies across all of our existing assets. One preliminary outcome from this review is that we now believe we can deliver improved utilization out of our existing DC network. The result of this is that our forecasted need of a fourth distribution center will move from a 2026 go-live to 2027 or 2028. As you can see, we're making solid progress across multiple fronts. That being said, as we turn our focus to 2024 guidance, the short-term economic outlook remains cloudy. The customer continues to be under pressure and is being very thoughtful over when and how they will spend their money.

The upcoming election, coupled with a compressed holiday calendar, also adds a degree of uncertainty to the outlook for the year. Based on these factors, we're conservatively modeling a -4 to +1 comp for next year, which would translate into a -1.5% to +3% total sales growth for the year. We believe this is a prudent base to build our expense and receipt plans off of, knowing that we can chase the business if we see the headwinds abate, they'll start trending upward. I'm now going to turn it over to Carl Ford, our CFO, to walk you through a deeper dive on our Q4 and full-year financial performance, along with an expanded look at our 2024 guidance. Carl?

Carl Ford (CFO)

Thanks, Steve. Good morning, everyone. While our top line in Q4 and full year was impacted by our customer being financially pressured, we diligently controlled inventory and operating costs, which enabled us to generate healthy cash flows and profits, as well as invest in future growth drivers. I will now walk you through the details of our fourth quarter and full-year results. Our fourth quarter net sales came in at $1.8 billion, with a comp of -3.6%. This was at the upper end of our expectations, led by December sales that were higher than last year. So we were pleased with the trajectory change from prior quarters. While customers were financially stressed, they responded to our strong value message across a broad assortment of products. For the quarter, ticket size increased by 1%, while transactions declined by 5%.

E-commerce sales were 14.7% of total merchandise sales, compared to 13.5% in the fourth quarter of 2022. Our fourth quarter 2023 had an extra week of sales. So when discussing divisional sales to last year, we are providing comparable sales by division instead of total sales for a more accurate comparison. The best performing division was Outdoor, whose sales increased 6.3% compared to Q4 of last year, driven by strength in hunting and camping. Within camping, the standouts were Stanley and Yeti. Both brands did an outstanding job of driving newness through color and product extensions, such as the barware collection that Yeti rolled out prior to holiday. Apparel was our second-best division, with a 6% sales decrease.

We saw growth in work apparel and fleece, driven by Carhartt and Nike, offset by declines in outdoor and athletic apparel. Footwear sales declined 8.8%. We continue to see outperformance in key brands such as Brooks, Hey Dude, and Nike. One area that struggled was our cleated business. Cleats were one of our last businesses to fully get back in stock, and we faced strong sales from Q4 of last year that were still being driven by some scarcity in the marketplace and the World Cup. Last, sports and recreation sales decreased 8.9%. Growth in outdoor cooking and games was offset by continued weakness in fitness and bikes. For the full-year, net sales were $6.2 billion, with comparable sales of -6.5%.

E-commerce sales were 10.7% of total merchandise sales, which was the same as last year. Looking at gross margins, the gross margin rate in the fourth quarter was 33.3%, a 50 basis point increase compared to Q4 of last year. Merchandise margins declined by 40 basis points, and shrink was 37 basis points worse than Q4 of last year. These declines were offset by inventory and freight savings. For the full-year, our gross margin rate was 34.3%. Freight savings were offset by merchandise margin and shrink declines, leading to a 30 basis point decline compared to last year. This is the third consecutive year that our gross margin rate has exceeded 34%. This demonstrates that the merchandising and operational changes made over the last few years, such as the investments made in price optimization and planning and allocation,...

as well as better clearance and promotions management and disciplined inventory management are now reflected in the long-term margin structure of Academy. We continue to find opportunities in these areas to drive margin improvement through technology enhancements and stronger processes. During the fourth quarter, our SG&A deleveraged by 80 basis points. We are focused on managing our cost structure while investing in the pillars of our long-term growth strategy. More than 75% of the dollars spent above last year were for investments in our growth initiatives, new stores, omnichannel, customer data, and supply chain. For the full-year, over 90% of the SG&A dollar growth was spent on our growth initiatives. Overall, we controlled inventory, promotions, and expense to deliver net income during the fourth quarter of $168.2 million, a 6.7% increase over last year.

GAAP diluted earnings per share was $2.21 for the fourth quarter and $6.70 for fiscal 2023. Adjusted diluted earnings per share was also $2.21 for Q4 and $6.96 for fiscal 2023. Looking at the balance sheet, our inventory at year-end was $1.2 billion, a decrease of 7% compared to fiscal 2022. Total inventory units were down 7.2%, and this includes having an additional 14 stores compared to fiscal 2022. On a per-store basis, inventory units were down 11.8%. We have had a balanced approach to capital allocation since going public in October 2020. The three pillars of our strategy are maintaining adequate liquidity for financial stability, self-funding our growth initiatives, and increasing shareholder return.

Our cumulative shareholder return over this time period is more than 500%, driven by operational execution and more than $1 billion of share repurchases. We have also reduced our debt by almost $1 billion and paid more than $50 million in dividends. As a result of these actions, Academy is one of the highest-returning stocks from the class of 2020 IPOs. During Q4 and fiscal 2023, Academy continued to generate positive net cash from operations. In Q4, we generated approximately $235 million and $536 million for the full year. We utilized the cash to pay down $100 million of the company's term loan, reducing the outstanding balance to $91.8 million.

After the paydown, we have $348 million in cash, $484.6 million of total debt, and no outstanding borrowings on our $1 billion credit facility, which was recently amended and extended through March of 2029. During Q4, we repurchased approximately $3 million worth of shares. For all of fiscal 2023, we decreased our net share count by 3.7 million through $204 million in share repurchases. As of the end of the fiscal year, Academy has $697 million remaining on its share repurchase authorization. In addition, the board recently approved a 22% dividend increase to $0.11 per share, payable on April 18, 2024, to stockholders of record as of March 26, 2024.

Heading into 2024, we have the cash to fund our growth initiatives and to continue to execute our capital allocation plan. Turning to 2024 guidance and slide 8 of the deck, we expect to operate in a challenging economic environment as the current macro dynamics are still impacting our customers. We are going to run the business as efficiently as possible while also making investments that support our long-term strategic opportunities, as outlined on slide 6, opening new stores, growing our omnichannel business, leveraging our customer data platform, and modernizing and scaling our supply chain. Based on this, Academy is providing the following initial guidance for fiscal 2024. Net sales ranging from $6.07 billion to $6.35 billion.

At the midpoint, this is 2% growth compared to fiscal 2023, when excluding the $73 million in sales related to the 53rd week. Comparable sales of -4% to +1%. Gross margin rate between 34.3% and 34.7%. GAAP net income between $455 million and $530 million, resulting in GAAP diluted earnings ranging from $5.90 per share to $6.90 per share. The earnings per share estimates are calculated on a share count of approximately 77 million diluted weighted average shares outstanding for the full-year and do not include any potential repurchase activity. In 2024, we will no longer be guiding to adjusted net income or adjusted earnings per share. Any adjustments, such as stock compensation, will be provided in the quarterly results.

SG&A expenses, which includes stock-based compensation expense of $30 million, or approximately $0.30 of earnings per share, are expected to be approximately 100 basis points higher than in 2023. Interest expense is expected to be $38 million, down from $46 million in fiscal 2023 due to our reduced debt levels. We expect to generate $290 million-$375 million of free cash flow, including $225 million-$275 million of capital expenditures. As we begin a new year, we are focused on addressing our opportunities to return to growth and delivering long-term value to our customers and stakeholders. I will now turn the call back over to Steve.

Steve Lawrence (CEO)

Thanks, Carl. As we turn our focus to 2024 and beyond, we remain committed to our long-range targets. We've taken the lessons we've learned over the past year and have leveraged them to help improve our go-forward strategies. We believe that this refined approach to new store openings, coupled with an increased focus on improving customer experience and driving more productivity out of our supply chain, will be the keys to driving growth and unlocking value for our shareholders. We've put in place a strong, talented team to help guide the company through our next phase of growth, and we're energized and optimistic about the future for Academy. With that, we'll now open it up for questions.

Operator (participant)

Thank you. The company will now open the call up for your questions. To ask your question, please press star one. As a reminder, we ask that you please limit to one question and one follow-up. We will pause for a moment to let the queue fill. Our first question comes from Simeon Gutman with Morgan Stanley. Please proceed with your question.

Simeon Gutman (Executive Director and Senior Equity Analyst)

Hey, guys. Thanks for the question. My first question is on thinking about the normalized comp rate for the business. It's, you know, 3 years sort of post-COVID, and the business did really well. It, but it is still comping negative. And I don't know if it's taking longer in your mind to turn the corner or not, but because it is, does that affect the normalized comp rate going forward, especially since you're adding more stores?

Steve Lawrence (CEO)

Yeah, thanks for the question. So how we would characterize it is, we have a challenged customer, not necessarily a challenged strategy. We really believe in, obviously, the long-range goals that we put forward out there. If you go back, as you pointed out, we obviously had a pretty strong growth in 2020 and 2021. And then we saw a pullback in 2022. We think that was start of the rebaselining coming out of COVID that continued into 2023. I think as we got through 2023, that's why we put some commentary in there around, we're starting to see the kind of the builds on a weekly, monthly basis return to pre-COVID time periods. We feel like we're past a lot of that rebaseline. What we're dealing with right now is primarily a challenged customer, and I think that's pretty well documented.

I mean, obviously, inflation continues to be pretty high, consumer debt's pretty high. And what that's really translating into is a customer who's behaving in a specific way. They're shopping for newness, they're shopping for value, and they're coming out and shopping at key time periods during the year when they need to shop, whether it's a replacement cycle, as a kid starts a new sports season or gift-giving time. And so that's really how we've modeled our business and built it moving forward.

Simeon Gutman (Executive Director and Senior Equity Analyst)

The one follow-up related is, I think, just to clarify what you said, the stores that you're opening in existing markets, those are performing better relative to either new space productivity or a comp waterfall, second, and third year than you thought. It's the stores that are in markets in which you don't have a presence that have been ramping more slowly. Is that a fair characterization?

Steve Lawrence (CEO)

Yeah, that, that's correct. I mean, and that's why we went into some pretty good detail on that. I mean, it stands to reason, where we've got high brand awareness, you know, we're seeing those stores start out very, very strong. In some of these smaller markets where we're going in with one or two stores at a time, it's taking a little longer to build brand awareness. We're changing kind of how we think about modeling these new stores going forward and building pro formas, which we detailed in the call, as well as on the supplemental material that we provided. But over time, I mean, the expectation is that these stores are gonna have a five-year ramp with outsized growth in the first 5 years.

Over the next 5-10 years beyond that, we would accept them to continue to grow maybe slightly faster than the chain and settle in around the average of what an average store volume does for us. But new stores, new markets, low brand awareness are definitely a little more slow to start out than stores in existing markets with high brand awareness.

Simeon Gutman (Executive Director and Senior Equity Analyst)

Yep, makes sense. Okay, thanks. Good luck.

Steve Lawrence (CEO)

Thanks.

Operator (participant)

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

Kate McShane (Managing Director)

Hi, good morning. Thanks for taking our question. You mentioned in the prepared comments that you're gonna focus on value and price, and I know that's pretty much always where you've been focused. But do you think that you got a little bit away from where you've been historically, and that could be part of the reason why you've seen some pressure on the comps? And how should we think about just this renewed emphasis on value going forward in 2024?

Steve Lawrence (CEO)

I think you said it best in your question, Kate. It's not a renewed focus. It's always a focus for us. We see ourselves and our customers see us as the value provider in our space. And we deliver value on a multitude of fronts. You know, a lot of that's driven by our private label, which is about 22% of our total business. We have strong, strong value in those items, and they're priced every day at really low prices compared to like items in the marketplace. At the same time, we also deliver value on a lot of well-known national brands, where we provide a split ticket price on there, where we're selling that at a slightly lower price than competitors are selling at an MSRP.

And then the third way we develop or deliver value is promotions, right? And so we generally aren't a promotional retailer, but we certainly do promote during key time periods during the year. Certainly holiday being one of the biggest one of those. And, you know, I think we leaned into those three different ways to deliver value for holiday, and we think that's what we saw in inflection during Q4. We saw, you know, a negative 3.6 comp versus the negative 7.6 that were running through the first 3 quarters of the year. So we think that that really kind of broke through during that time period. So I wouldn't say it's as much of a new focus, it's just a continued focus, and then looking for ways to expand it.

I mean, that's what the customer's telling us they're voting on. So you're gonna look at ways that we're gonna add some more, we call them key value items. So really, you know, sharp items on well-known categories like bikes and grills at really sharp prices. We're expanding some of the offerings there, and I think you're gonna see us continue to lean into promotions during those key moments on the calendar when the customer's really shopping.

Kate McShane (Managing Director)

If I could just ask a quick follow-up on the promotions. I know there's been a lot of vendor support for promotions over the last year or so. Are you expecting the same level of vendor support in 2024 as what you saw in 2023?

Steve Lawrence (CEO)

Yeah, I mean, obviously, we have really strong partnerships with our vendors. I don't see any reason why they wouldn't support us to the degree that they've supported us in 2023 and beyond. You know, I think that, candidly, we're seeing more vendor support on a multitude of fronts, not just obviously margin or price support, but on marketing and other initiatives, you know, because they look at us as a growth partner. And, that means we're getting access to more products, newer products, more innovative products, it means better support on the marketing front. So we actually see our vendor support growing in the future, not declining or maintaining.

Kate McShane (Managing Director)

Thank you.

Steve Lawrence (CEO)

Thank you.

Operator (participant)

Our next question is from Greg Melich with Evercore ISI. Please proceed with your question.

Greg Melich (Research Analyst)

Hi, thanks. Maybe just to help us on what's driving the growth or that inflection you talked about, Steve. In the fourth quarter, ticket was still positive and transactions running down 5. If you look at the guide this year, would you expect that all the improvement to be on transactions and transaction growth if we get back to a 0 comp, actually being positive this year?

Carl Ford (CFO)

Yeah, I'll take it, Greg. This is Carl. Embedded within the 2024 guidance, if you just kind of look at the midpoint, how we see it is tickets slightly up and traffic slightly down. We're very aware that the consumer is challenged. We're gonna monitor it throughout the year, but at the midpoint, that's how we would model it.

Greg Melich (Research Analyst)

Got it. And in terms of a progression, just given how it sounds like it's the first quarter would be the weakest, and then we'll get slowly better over time, or do the comparisons get harder by the end of the year, given how December was strong?

Steve Lawrence (CEO)

I think you stated it correctly, the first way you said it. The way we see the quarter progressing or the year progressing is, you know, obviously, customers are still under pressure. That didn't change as we turned the page to 2024, so we think that's gonna continue into the first part of 2024. So, we do expect Q1 to be the softest quarter, and that's how we've modeled it. We expect Q2 to build upon that. We expect the back half of the year to be better than the H1 of the year.

Greg Melich (Research Analyst)

Got it. And just to clarify that the SG&A, now including the stock comp, and thanks for that, it's nice to make it clean. Is that 100 basis points increase that you flagged, is that a new run rate that we should think of in terms of stock-based comp, or was there something about this year that sort of steps it up versus last year?

Carl Ford (CFO)

No, I think the $30 million is fair to use going forward. But I do wanna kind of speak to what's embedded within FY 2024 in the holistic SG&A. It's about, at the midpoint, about 100 basis points of deleverage and expense. And I wanna take you back to our long-range plan, where we said we anticipate 200 basis points of expense deleverage, offset by about 150 basis points of supply chain and overall, like, gross margin benefits, which is inclusive of private brands and whatnot. So the deleverage that we're seeing is, from a dollar perspective, what we anticipated. What is causing the deleverage from a rate perspective is running a negative 6.5% comp.

To Steve's earlier point, and I think it's been very well discussed in the retail industry this year, the consumer's under pressure, so that is what we are experiencing. That does not make us second-guess the strategies that we're building this long-range plan on. We're gonna continue to open stores, we're gonna continue to invest in omnichannel, we're gonna continue to, you know, invest in customer data and supply chain. But specific to stock compensation, $30 million in the next year is a fine run rate to think about, but we'll obviously update you, you know, year-by-year.

Greg Melich (Research Analyst)

That's great. Thanks, and good luck.

Carl Ford (CFO)

Thanks. Appreciate it.

Operator (participant)

Our next question is from Chris Horvers with JP Morgan. Please proceed with your question.

Christopher Horvers (Senior Analyst)

Thanks, and good morning, guys. So a couple follow-ups there. So first, on the comp, do you expect the H1 to be within the range of the year, and sort of, are you, are you essentially expecting Q1 to look like the quarter-to-date trend? And then, you know, as you think about it, can you, can you talk about, like, the, the gross margin puts and takes? You, you mentioned, you know, rolling out WMS over the next 18 months. You talked about some, some efficiencies that the new head of supply chain has seen. How are you thinking about the, the gross margin good guys in 2024, and, and what are the offsets?

Steve Lawrence (CEO)

Yeah, so, we'll probably tag team this one. In terms of the comp progression, I think it plays out exactly as I said before, where we see the first quarter being the weakest. You know, certainly, you know, we're coming out of Q4 last year with a down 3.6% trend. If you look at our low end of our guidance, it's -4%, which is basically in line with that. And then as you progress forward through the year, we expect the Q2 to be better, and then obviously, the fall will be better than that. So you can kind of model it based off of that feedback. In terms of margin puts and takes, you know, there's several, right? And Carl's got a long list here.

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

Carl Ford (CFO)

Yeah. From a Gross Margin going forward standpoint, you know, we're seeing what's going on with international shipping. We don't put quite as much through the Red Sea as perhaps others do, but there is a delay coming around Africa and kind of the equipment that's being used. And so there might be modest deleverage there, but we've got. We've talked about, like, outbound transportation and how we run our trucks between our distribution centers and our stores. We've got opportunity there associated with WMS, just keeping out the trucks and doing multi-stop shuttles, which we don't really do in any large way now.

The second would be just in that broader supply chain space, if you think about kind of the labor management aspect associated with what we're doing within the distribution centers. Yeah, we get a new tool in WMS that is a lot more sophisticated than the almost 30-year Exeter system that we're using now. And just from an overall labor management standpoint, I would say the merchants are really leaning into this as well. As we think about cross-stock penetration or how much stuff doesn't need to be put away and separately re-picked, that's a big opportunity at the company. And Matt McCabe, the Chief Merchant, and Rob Howell, the new Chief Supply Chain Officer, are in lockstep on this. We've seen that there's betterment there, and we started executing on that.

Yeah, I won't reiterate kind of the merchandising stuff, but I am excited about our private brands offering. Freely and R.O.W. are doing well, and we're seeing customers resonate with that value opportunity. The last thing I would say as it relates to, you know, specific to FY 2024, I wanna be clear, we did not make our sales plan for FY 2023. Although we ended with an inventory that was down 7% and we feel was well managed, and the merchants really did a Herculean effort at bringing that in where they wanted to. There was some promotional activity associated with pockets of inventory, where when you're planning on something a little bit higher and it comes in after we re-guided in Q1, they took some actions, and we're ending clean now.

We like our inventory position, and so we don't think that we'll have to, you know, kind of execute in that manner, for FY 2024.

Christopher Horvers (Senior Analyst)

Got it. And then my follow-up just on the new store maturity ramp. You lowered the year 1, given the new market mix. But as you think about, like, where— Can you remind us what you said about where do they get in year 5? Because it sounded like you said there's this very steep ramp to year 5, and that over the next 5 years, it'll get to the average, you know, the average of the chain 10 years out. So can you maybe just provide some more color? Because typically we think of, you know, double-digit comps in year 1, and then by year 5, you're— you know, you're floating with the overall business.

Steve Lawrence (CEO)

Yeah. So we. You know, in our long-range plan, we initially modeled this, we said, $18 million in year one and then ramp 5 years from there. We didn't put an endpoint associated with where we think they matured over time. We said it would come in close to where the average store volume is. We don't think that, that necessarily changes. It's starting from a lower pace, right? So, obviously, you know, the, the $12 million-$16 million is meant to encompass a, a couple of different types of stores, right? Smaller stores and smaller markets where we have less brand awareness, probably would be towards the low end of that 12 versus new stores in the, you know, existing geography, where we have high brand awareness, probably be to the high end of that range.

We would expect them to grow at a faster rate, you know, at least two times faster than the company growth during the first five years. That wouldn't get them all the way to the average for the new store. That's why when you look at it over a 10-15-year time horizon, we expect them to get there. We've really seen this play out over time. If you go back, you know, 10-15 years, Northern Florida was a new market for us. When we looked at those stores initially, they started off, you know, with lower volumes because it was a new market. As we look at them today, you know, we've been in that market now over 10 years, those stores are doing on average store volume.

So that's how we're looking at it over time. But it's a 5-year faster ramp and then, you know, 5-10 year after that, where they settle in at the company average.

Christopher Horvers (Senior Analyst)

Thank you very much.

Operator (participant)

Our next question is from Robbie Ohmes with Bank of America. Please proceed with your question.

Robert Ohmes (Senior Research Analyst)

Hey, good morning, guys. Can you talk a little more about— You know, you've mentioned how well the private label is doing. You know, how are you thinking about getting, you know, the, the athletic apparel, the outdoor apparel, some of the branded athletic footwear? You know, are there things you can do to get those businesses to, to be a little stronger, or any initiatives underway? You know, how are things like L.L.Bean doing? You know, I'd love to get some, some color on that.

Steve Lawrence (CEO)

Yeah, so I would say in general, a theme we've seen happen over the past couple years is new ideas have done very well. So a lot of the new brands you've heard us mention, like L.L.Bean or Bogg Bag, continue to do very well, and we're expanding a lot of these categories. I think last year, we had Birkenstocks in a small number of doors, or OOFOS in a small number of doors. We're expanding those very rapidly. We've got new brands we're introducing this year, like CrushCity Baits, that's already off to a fast start. So new brands are working for us, and we're scaling them out very rapidly.

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

Robert Ohmes (Senior Research Analyst)

Thanks. Then my follow-up is, actually, I wanna follow up on Kate's question. When you look at the vendor community, are you seeing prices coming down?

Steve Lawrence (CEO)

I wouldn't say we've seen prices coming down. Certainly, there are places where, you know, we've negotiated better deals on things. But, you know, we haven't seen, as freight settled in, that necessarily translate through a ton of cost reduction so far. But we continue to work and negotiate with vendors on that front.

Robert Ohmes (Senior Research Analyst)

Got it. Thanks.

Steve Lawrence (CEO)

Thank you.

Operator (participant)

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

Michael Lasser (Equity Research Analyst)

Good morning. Thanks a lot for taking my question. So Steve, when we compare Academy's results to, especially in the footwear and apparel categories, to several other retailers, especially those retailers that also index to the lower income consumer segments, the footwear and apparel categories in particular seem to be doing worse at Academy than many other players out there, suggesting it's ceding market share. A, why do you think that is the case? And B, outside of, you know, some of the factors that you pointed to, what do you think is the principal strategy that's gonna allow Academy to stabilize its market share? Because if it's simply a function of its core customer base getting healthier, that might prove to be elusive. Thanks a lot.

Steve Lawrence (CEO)

Yeah, I'd start with, I'm not sure I agree with the premise of the question. We can tell you, we look at market share on a monthly, quarterly, annual basis. We use Circana as the primary source for that. And if you look at Circana data, they will tell you that we picked up market share broadly across the business in 2023. I would also say that we picked up market share over a 4-year stack pretty aggressively, considering the fact we're still up about 25% versus where we were in 2019.

And I would also say when we look at our comparison in footwear and apparel to other retailers, in general, the results I've seen as others have called out and gone through the earnings cycle, for the most part, are at or maybe a little better than broad-based retail. I mean, we do have a competitor who is outperforming us right now. I think we have a different customer than they have. I think we've got a more middle-income consumer versus a high-end consumer. We've certainly seen the high-end consumer continue to spend a little bit more, you know, than the middle- or lower-income consumer is a little more pressured.

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

Michael Lasser (Equity Research Analyst)

My follow-up question is on the gross margin and the elasticity you're seeing to any investment that you might be making in either promotions or price. Would you see—how much would you see an improvement in sales if you were willing to sacrifice some of the gross margin gains that you've achieved? And as a quick housekeeping note, how much will SG&A grow—how much will SG&A dollars grow this year due to investments that you might be making in wages or labor within the store? Thank you very much.

Steve Lawrence (CEO)

Carl and I are gonna tag team this one. I'll start on the margin front. It's a question that I think every retailer asks themselves on a regular basis. If I promoted more, would I, you know, would I see a higher sales trend? And you certainly understand the math is, Michael, that, you know, if you sell a discount of 25 off, you got to sell 33% more units to offset that. And so what we've seen, candidly, throughout the course of 2023 and part of 2022 is when we've leaned into promotions during kind of non-peak time periods, when the customer's not willing to shop, we've seen a trade-down in AUR, and we haven't seen an offset in terms of unit growth to, you know, offset the sales decline. So-...

We've been very thoughtful about where we plan our promotions. As we've talked about, we plan them around the big market share moments on the calendar, like a Mother's Day, like a Father's Day, like an Easter, like a back to school, like a holiday, and that strategy's worked for us. I mean, if you look at our margin, our merch margin for Q4, it was down about 50 basis points. We had to offset some other lines to help pull the total gross profit up. But, you know, we did certainly lean into promotion a little bit, during Q4, and I think that that definitely helped. So I think you'll see us continue to run those plays as we move forward. But broadly promoting all the time, we don't think is the pathway to success.

Carl Ford (CFO)

I'll take from an SG&A standpoint, Michael. I said 90% of what we invested in this year from an SG&A rate standpoint was the investments. I also said, you know, expect at the midpoint, 100% growth in SG&A rate next year. It's really all investments, like, 100% of it. I'm actually pretty proud of the team when anything incremental that was over and above launching new stores, investing in omnichannel, making investments on the customer data platform that we implemented last year were all really offset dollar for dollar with incremental savings.

So if you think about how that is going to manifest itself on a more detailed P&L, you know, 15-17 stores versus 14 this year, we'd like to start a little bit earlier in the year, so there's a little bit of capital investment late in 2024 that'll get us out of the gate good in FY 2025. That represents the wages that we pay to our associates and managers in those facilities, the rent, property taxes, the seeding of the market. You know, Steve talked a lot where there's low brand awareness, and now we've got a new tool with the customer database platform and some other tactics, investing in advertising associated with those new markets.

And the other thing would be just the technology core cost associated with, you know, the WMS is a SaaS-based system. There's gonna be tech expense associated with that. The Treasure Data, customer data platform, you know, has a cost to it, and, and obviously, omnichannel from the, from the user experience investments that we're making there. So in short, the 100 basis points of expense deleverage that you should expect for next year and that was embedded within our long-range plan, is all of the investment. That's the totality of the investment cost.

Michael Lasser (Equity Research Analyst)

Thank you very much.

Carl Ford (CFO)

Thanks, Bobby.

Operator (participant)

Our next question is from Anthony Chukumba with Loop Capital Markets. Please proceed with your question.

Anthony Chukumba (Managing Director and Senior Research Analyst)

Good morning, and thanks for taking my question. So, just want to kind of tie a couple things together in terms of my question. You, you talked about, you know, the outperformance in certain, footwear brands. You specifically brought up Brooks. You also talked about, you know, the fact that you're, you know, definitely counting on some new products, to drive growth in 2024 to help in 2024. So, you know, kind of tying those two, together, any insights in terms of some of the, you know, sort of hot running brands, specifically HOKA and On?

Any insights in terms of whether, you know, what your expectation is in terms of whether you can get one or either or both of those brands, particularly given the fact you've had success with Brooks, which is a relatively, you know, sort of high-ticket footwear brand. Thank you.

Steve Lawrence (CEO)

Yeah, no, I think you asked us this question last time, too. We don't have any updates on that front. I mean, as you know, you're right, those are two of the hottest brands that are out there. We would love to have access to those, and as I've said before, I don't think it's a matter of, you know, if it's when. You know, we continue to have dialogue and we'll continue to put our ask out there. Right now, we don't have access to those, and so our mission and our plan is to win with the brands we have access to. And I think we're—you're seeing that play out in some of the successes Carl called out with Nike, particularly in some of the higher-end running shoes that we've gotten from them.

Brooks, great call out there. Brooks has, has been, absolutely on fire for us. You know, we're seeing great success in brands like New Balance and other running brands. So we're gonna win with the brands we currently have. We're gonna continue to try to get the brands we don't have access to that the customer's telling us they want, and we're gonna continue to seek out more, you know, brands and, and incubate new brands earlier in the cycle so that, we're not trying to catch them when they're hot. We're gonna have them at the moment they start to turn. So you'll see that, and that's not just a footwear conversation. I think that's broadly across the store.

We've gotta get better at getting newness in the stores, and I think the team's really rallied around that, and you see that in, you know, a lot of the new brand initiatives we've called out. And we're gonna scale them very quickly and make them big and important, so that we don't have to, you know, have a conversation about why we don't have access to a HOKA and On going forward.

Carl Ford (CFO)

Yeah, at the risk of double-dipping, I will. So we've got 282 stores in 18 states, and when we talk with our vendors about what's on the horizon, and we talk to them about 160-180 stores over the next five years. But longer term, you know, we see runway to be an 800+ store location that's nationwide and partnering with us, and what has the unitary growth potential of an Academy. So we definitely talk to them about the here and now and how we're happy about 25% sales growth from pre-pandemic and all the things that we talk about here, but we talk with them more about the future, what's over the midterm and the longer-term horizon.

I think it really resonates of the growth potential associated with the company.

Anthony Chukumba (Managing Director and Senior Research Analyst)

Got it. And, and apologies for asking the same question, two quarters in a row. I'm nothing if not consistent. Just-

Carl Ford (CFO)

You are.

Anthony Chukumba (Managing Director and Senior Research Analyst)

Quick follow-up. You know, so you talked about the stock-based compensation, that's like $0.30. So, you know, when, you know, as I look at this initial guidance, so, you know, on a kind of apples-to-apples, like, adjusted basis, that would, you know, say the guidance was really more like kind of $6.20-$7.20 on an adjusted basis. Is there also the potential for there to be other add backs over the course? I mean, I know it's obviously hard to say, and then you wanna stick with the GAAP, but I'm just trying to, you know, make sure I'm thinking about this apples to apples. I mean, could there be other potential add backs to GAAP, you know, as the year progresses? Thanks.

Carl Ford (CFO)

So I'm gonna take that. As we think about add backs, we actually pride ourselves on the simplicity of our PNL. So stock-based comp is the one, and for the last 3 years, there's been a small add back for, you know, early extinguishment on debt, which we think is the right thing to do for our business. We're not gonna. You know, we disclose to you in the 10-K what pre-opening store costs are. But the SEC frowns upon a lot of add backs, and so we're really vanilla because our business just makes sense without the add backs. If you think about the guidance for next year, you know, from an adjusted EBIT standpoint, at the midpoint, it's about a -70 basis point decline.

At the pre-tax income standpoint, it's about -60 basis points to FY 2023, and net income is about 50 basis points of degradation at the midpoint. Literally, all of it is related to our strategic initiatives that we have confidence in and that are getting better with each vintage. And so, yeah, we're not—there's probably not—I mean, who knows what comes, but we're not thinking about any new adjusting items.

Steve Lawrence (CEO)

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

Anthony Chukumba (Managing Director and Senior Research Analyst)

Thanks for the kind words. Good luck with fiscal 2024.

Carl Ford (CFO)

Thank you.

Operator (participant)

We have time for two more questions. Our next question comes from John Heinbockel with Guggenheim Securities. Please proceed with your question.

John Heinbockel (Managing Director)

Hey, Steve, can you just walk through CRM initiatives this year, right? Now that you've stood that up? You know, whether it's reactivating customers, wallet share, how are you gonna lean into that? And then, the thought about personalized promotions, right? You talk about this pricing, bikes and fitness and stuff like that. Do you see an opportunity to do personalized promotions where you're not blasting that out to the marketplace, but being very surgical in how you attack that?

Steve Lawrence (CEO)

Yeah, it's a great question. So I would say a couple of things. First, you know, we, we installed the, the new CDP last summer. We spent the back half of last year testing a lot of different use cases in terms of customer reacquisition, customer acquisition. I think as you move forward, you're gonna see us lean into a couple of focuses. First, traffic is, is a challenge. I mean, you know, the, the traffic for-- and transactions for Q4 were down mid-single digits. Our goal is to, to drive more customers coming into our store and drive traffic. So I think you're gonna see us use the CDP in working with our various agencies and partners to generate more lookalike audiences and to really start filling the top of the funnel up. That's gonna be a big focus for us.

I think you're gonna also see us then, look at our high-value customers and look at ways to, get them to shop with us more frequently and move people up, the identity ladder and have them become, you know, have some, some customers who are more, occasional shoppers, become more loyal shoppers and move them up. So I think you're gonna see a multipronged focus there, but new customer acquisition and driving traffic is number one, and then moving customers up that identity ladder to shop with us more, will be the second focus. In terms of more, personalized promotions, I think you're dead on. I mean, that, that is the future, and that's where I think we're ultimately headed. We're probably a little behind on this one.

you know, that being said, it's an opportunity for us, and I think you're gonna see us, as we learn more about our customers, have more one-to-one marketing, and to have more targeted promotions. I think that will allow us to pull back on some of the more global promotions that we do run, and that will be a journey as we move forward. But there's definitely an opportunity for that, and it's something we're looking at very closely.

John Heinbockel (Managing Director)

Just quickly, last thing. When do you think, when do you launch the new loyalty program? Is that, you know, pre-holiday?

Steve Lawrence (CEO)

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

You'll probably see us take some things that have resonated well with our credit card customer, which is kind of the basis of our loyalty program, and extend that more broadly to a broader range of customers, and then test into new capabilities, as we progress forward. It'll be a slow burn and then add over time, but we definitely wanna get something out in the marketplace before holiday.

John Heinbockel (Managing Director)

Thank you.

Steve Lawrence (CEO)

Thank you.

Operator (participant)

Our next question comes from Will Gaertner with Wells Fargo. Please proceed with your question.

William Gaertner (Research Analyst)

Hey, guys. Thanks for squeezing me in here. So if we just talk about the new stores, can you just talk a little bit about lowering the guide for the new stores? I mean, where's the drag coming from? And then secondly, are all the new stores that you're opening, are they all EBITDA positive, or is it very?

By, you know, new store or new markets versus existing? And then what gives you confidence in increasing your store footprint, you know, particularly as comps remain negative?

Steve Lawrence (CEO)

Yeah. So I'd go back to answer probably the last question first. I mean, we're investing in opening new stores because it's critical to our future. And so, you know, we are gonna keep pushing forward on this pace. Now, that being said, we're moderating it a little bit, right? So, you know, this year, candidly, we guided 15-17 new stores. We probably could have opened up a few more stores this year, but we pushed some out of Q4 into Q1 of next year so that we could get more density as we go into a new market. So we're trying to be very deliberate and thoughtful about how we pace out these new stores. It's kind of going slow, so you can go fast in the future.

In terms of the volume expectation, I think it's really driven by what we described in the call. You know, obviously, the stores that are in newer markets, it's taking a little longer to build brand awareness, so those would be at the lower end of that 12 million range, you know, versus stores in existing markets being in or in larger markets being in the higher end of that volume range at 16 million. I think the key is, in terms of the number of stores, looking at more mid-sized markets. I would say initially, we were focused primarily on going into large metro markets, and I think as we've had some stores in more mid-sized markets be very successful. We've got, you know, a store in Christiansburg, Virginia, that's done very well for us, or Harlingen, Texas.

And so I think we look at those stores and say, "Okay, there's an appetite for a sporting goods store such as ours, sports and outdoor store such as ours, to go into those markets and really take care of an underserved customer." So you're just kind of opening the window a little bit in terms of our consideration set, and that's what's really driving more stores. So it'll be, you know, more stores, maybe a slightly lower volume, but because they're in smaller markets, the operating costs to run those stores are very favorable and more than offset the slightly lower volume targets.

Carl Ford (CFO)

Will, I'll hit the last kind of two parts of your question. As you think about, I think you said, like, slowing new store growth and headwinds of negative comps. On a -6.5 comp this year, we generated $536 million in cash flow from operations. We invested that $208 million into capital, $203 million into share repurchases, $103 million into debt service, and $27 million into dividends, and ended with $10 million more in cash than we did the year before, and that's on a -6.5 comp. So I give all the credit to the merchants for their inventory management, but negative comps are not going to cause us to come off of this strategy.

We have so much white space. We want to open great stores, and we're gonna methodically do that over our long-range plan. As it relates to EBITDA, you know, by vintage, they're all positive. I would tell you, at $12 million, you know, we're EBITDA positive, depending upon the location that. You know, if it's in the city or something like that. Below that, it gets tough to be EBITDA positive, and that's why we're just being really discerning, specifically with these new markets that we're going into.

Steve Lawrence (CEO)

Okay, so with that. Oh, sorry. I didn't know if you had another question.

William Gaertner (Research Analyst)

No, that's it, Steve. Thank you. Appreciate it.

Carl Ford (CFO)

Okay.

Steve Lawrence (CEO)

No, I appreciate it. I appreciate everybody joining us on the call today. Just in closing, our goal over the next year is to move back to top-line growth. We'll continue to make investments that will drive returns in future years and allow us to achieve our long-term objectives. We believe that we have a unique concept that resonates with a wide range of consumers and is scalable and transportable. You know, while our long-range plan encompasses targets that we plan to achieve over the next 5 years, our ultimate long-term goal is to be the best sports and outdoor retailer in the country, with stores stretching across the continent, and that is what we remain focused on. In closing, I want to thank all 22,000 of our Academy associates for all the hard work and effort they put in over the past year.

We continue to believe that our employees are the key ingredient in our secret sauce, and I know that every one of our team members is going to give it their best effort out there and help more people have fun out there in 2024. Thanks for joining us today, and have a great rest of your day.

Operator (participant)

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