Academy Sports and Outdoors, Inc. (NASDAQ: ASO) experienced a decline in sales in the first quarter of fiscal 2024, citing a tough macroeconomic landscape as a key factor. Despite a 1.4% drop in net sales to $1.36 billion and a 5.7% decrease in comparable sales, the company noted sequential improvements, with April showing the strongest performance.
The outdoor retailer's .com business, however, saw an 8% increase and contributed to 9% of total sales, driven by the hard goods division, particularly outdoor and camping products. Academy Sports and Outdoors maintained its full-year guidance, expecting net sales to be between $6.07 billion and $6.35 billion.
Key Takeaways
- Net sales declined by 1.4% to $1.36 billion with comparable sales down 5.7%.
- The .com business experienced an 8% increase in sales, now representing 9% of total sales.
- The hard goods division, especially outdoor and camping, performed well.
- The company opened three new stores, increasing the store count to 285.
- Academy Sports and Outdoors plans to open 12 to 14 more stores in the second half of the year.
- A new loyalty program, My Academy, and a partnership with DoorDash (NASDAQ:DASH) for same-day delivery are part of the growth strategy.
- Gross margin guidance remains at 34.3% to 34.7%.
- Full-year guidance for fiscal 2024 is maintained, with net sales expected to range from $6.07 billion to $6.35 billion.
Company Outlook
- Academy Sports and Outdoors aims to grow its online business to 15% penetration over the next five years.
- The retailer is focusing on marketing and promotions around key events like Father's Day and Back-to-School.
- New store openings are expected to contribute to positive same-store sales growth.
Bearish Highlights
- The company faced a challenging macroeconomic environment with high prices affecting customer spending.
- Sales in the sports and recreation division declined, particularly in the fitness category.
Bullish Highlights
- Sequential improvements in sales were observed throughout the quarter.
- The company plans to leverage its customer data platform for targeted marketing efforts.
- New initiatives, including the My Academy loyalty program, are expected to drive sales.
Misses
- The first quarter saw a decline in overall sales and comparable sales.
Q&A Highlights
- Management discussed the positive impact of new stores and the potential of the My Academy loyalty program.
- The partnership with DoorDash is showing favorable early results.
- The company is working to gain access to key footwear brands to drive traffic and sales.
- Academy Sports + Outdoors is controlling promotions and focusing on inventory and expense management.
Academy Sports and Outdoors is navigating a challenging market with strategic initiatives aimed at driving growth and improving sales. The company's focus on key shopping events, new store openings, and the expansion of its online and loyalty programs show a commitment to adapting to consumer needs and market conditions. With plans to open more stores and launch new offerings, Academy Sports and Outdoors is positioning itself for future success despite the current economic headwinds.
InvestingPro Insights
Academy Sports and Outdoors, Inc. (NASDAQ: ASO) has been navigating a complex economic landscape, as reflected in its recent performance metrics. According to InvestingPro data, the company has a market capitalization of $3.81 billion and is trading at an attractive earnings multiple with a P/E ratio of 7.44. This suggests that the stock may be undervalued, especially considering that the company's liquid assets surpass short-term obligations, indicating a strong liquidity position.
An InvestingPro Tip highlights that despite the stock taking a significant hit over the last week, with a one-week price total return of -8.11%, analysts predict that the company will be profitable this year. This is backed by the fact that Academy Sports and Outdoors has been profitable over the last twelve months, showcasing resilience in its business model.
Investors may find additional insights and analysis on Academy Sports and Outdoors by visiting https://www.investing.com/pro/ASO, where they can access more InvestingPro Tips to guide their investment decisions. Currently, there are 8 additional tips available, which could provide a deeper understanding of the company's financial health and market position.
To further enhance their investment research, users can take advantage of a special offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
In summary, despite recent challenges, Academy Sports and Outdoors shows signs of undervaluation and profitability, making it a potentially interesting option for investors seeking value in the retail sector.
Full transcript - Academy Sports Outdoors Inc (ASO) Q1 2024:
Operator: Good morning, ladies and gentlemen, and welcome to the Academy Sports and Outdoors First Quarter Fiscal 2024 Results Conference Call. At this time, this call is being recorded and all participants are in listen-only mode. Following the prepared remarks, there will be a brief question-and-answer session. Questions will be limited to analysts and investors. [Operator Instructions] I'll now turn the call over to Matt Hodges, Vice President of Investor Relations for Academy Sports and Outdoors. Matt, please go ahead.
Matt Hodges: Good morning, everyone, and thank you for joining the Academy Sports and Outdoors First Quarter 2024 Financial Results Call. Participating on the call are Steve Lawrence, Chief Executive Officer, and Carl Ford (NYSE:F), Chief Financial Officer. As a reminder, statements in today's earnings release and the comments made by management during this call may be considered forward-looking statements. These statements are subject to risk and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to the factors identified in the earnings 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. Reconciliation 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: Thanks, Matt. Good morning to everyone and thanks for joining our first quarter 2024 earnings call. As always, we appreciate your interest and support of Academy Sports and Outdoors. As you saw from our press release this morning, sales for Q1 came in at a [$1.36 billion] (ph) which was a 1.4% decline versus the first quarter of last year. As a reminder, we had a 53rd week in 2023, so we're using a shifted comp sales calculation which compares weeks one through 13 this year versus weeks two through 14 last year. Using this methodology, our comparable sales for the first quarter came in at down 5.7%. As we expected, our customer remains challenged by the current macroeconomic environment. Inflation is keeping prices at elevated levels while personal savings have been depleted, causing our customers to be tight with their discretionary spending. The trends we've cited in previous calls in terms of customer shopping patterns held true in the first quarter with customer shopping episodically, while gravitating towards the value offerings in our assortment along with new and innovative items. What was encouraging was that we saw sequential improvement throughout the quarter, with April being the best month of Q1. The second quarter represents a good opportunity for us to show continued improvement with several natural shopping events still ahead of us, such as Father's Day, Fourth of July, and the beginning of Back to School. Beneath the surface, our .com business posted an 8% sales increase over last year and comprised 9% of total merchandise sales versus 8.2% last year. BOPIS and ship-from-store represented more than 80% of total .com sales for Q1, which highlights the true omni-channel approach that we've taken to growing this business. As you know, one of our long-range plan goals is to build a more powerful omni-channel business. We are focused on engaging as many customers as possible across all of our channels because we know that an omni-channel shopper is our most valuable customer. They shop more frequently, they spend more per transaction, and are worth three to four times more in sales per year than a non-omnichannel customer. In terms of sales performance across our different divisions, the hard good side of the business performed the best during the quarter on a non-shifted basis. Our strongest category within hard goods remains the outdoor division which ran a 2% increase. Camping continues to run significant gains driven by Stanley and YETI. The strong field trend we saw on Q4 slowed down a little bit in Q1. We expect this business to activate later in the year. The hunting and fishing categories remain key differentiators for us, and both businesses are in the best inventory position we've been in over the past four years, which sets us up well heading into the summer months for fishing and in the fall for hunting season. The other portion of the business that we categorize as hard goods is sports and recreation which ran down 4%. We saw strong performance in this division in team sports which was led by continued growth in pickleball. It also includes our outdoor cooking category, which has been a strong suit for us over the past couple years, but had a challenging quarter, primarily driven by a crawfish shortage, to suppress sales across the entire Gulf region. We have seen this business rebound as we exited crawfish cooking season and people started preparing for summer outdoor grilling. To help capitalize on this, we also have a strong marketing plan for the summer to ensure we grow our market share. We offer the broadest and most holistic assortment in the marketplace across cooking types and surfaces, Spices and Rubs, accessories, and premium fuels, making it another key differentiator and traffic driver for Academy. The most challenged business in sports and recreation remains fitness, where we continue to see softness in cardio equipment. We'll talk about some plans to help improve this business a little bit later in my remarks. On the soft good side of the business, footwear sales were down slightly at negative 1%, which was a solid improvement over our Q4 trend. Athletic footwear had the strongest performance for the quarter, driven by increases in performance running brands such as Nike (NYSE:NKE), Brooks, and New Balance. Casual footwear is the second best performing category with strong sales in Birkenstock (NYSE:BIRK)'s, Crocs (NASDAQ:CROX) and Skechers, driven by slip-ins. We continue to partner with our existing footwear brands to gain expanded access to the innovation pipelines so we can ensure our customers have access to the new styles. At the same time, we continue to work with relevant brands to gain access to items and categories that are not already part of our current assortment. Apparel sales were down 3% for the quarter. Within this division, our kids and outdoor apparel businesses were the top performers. We continue to see strong results from key national brands, which is Nike, Carhartt, and Levi's (NYSE:LEVI), while also seeing solid growth in some of our newer private brands such as Freely and R.O.W. Licensed apparel was the weakest segment of the business as we were lapping the release of the commemorative Astros World Series jerseys that launched last spring, along with the LSU Women's Basketball National Championship from last year. That being said, the majority of this business for us is done during the fall, and the team has done a lot of great work around editing the assortment, the position as well for the kickoff to college and pro football later this year. From a profitability standpoint, our gross margin rate came in at 33.4% for the quarter for a 40 basis point decline versus last year, primarily driven by an 80 basis point decline in merchandise margins. The merchandise margin decline versus last year is primarily caused by sales mixing into lower margin hard goods businesses coupled with some planned extra promotional activity this year. We remain on track to achieve our full year gross margin rate guidance of 34.3% to 34.7%. Carl will discuss our possibility performance in more detail in his comments later in the call. As we forecast sales out for the remainder of the year, we expect that our customer base will remain under pressure and continue to moderate their spending. To combat this, we're leaning into the shopping trends that customers clearly demonstrated over the past year, while also focusing on our long-range plan initiatives. In regards to customer behavior, there are three primary sales drivers. Newness, value, and driving traffic during the key time periods on the calendar. In terms of newness, we continue to look for emerging and innovative brands to add to our assortment as another way to spark customer interest and drive traffic and sales. Several of the new brands that we've added to the assortment over the last year, such as Birkenstock, NordicTrack and Fitness, and [indiscernible] Apparel, will be available in an expanded number of stores this year. We also continue to bring in well-known brands that previously weren't part of our assortment, such as Altra Trail Running Shoes or Choco sandals. In order to highlight our value offering, another place we've added newness is in our private brand portfolio, where we recently launched MacGregor Golf as a brick and mortar exclusive for Academy. Initially, we're leaning into golf balls and club sets, but similar to Redfield on the outdoor side of the business, we think there are category expansion opportunities down the road. The last way we're leveraging newness is to jumpstart sales and lag in categories. I mentioned earlier in my comments about the continued softness in the fitness business, and our plan is to lean into newness and innovation as a way to help spark this business. The first focus is to re-energize our cardio equipment assortment by capitalizing on emerging trends while also leaning into value with items such as walking pads, which are essentially a simplified treadmill that works well for people who use standing desks or want a low impact aerobic workout at home. Another addition is taking advantage of the CrossFit trend by being the first retailer to add a salt fitness to our brick and mortar assortment. They're a digitally native brand that is well known and respected within the CrossFit community. Finally, within cardio, as I briefly mentioned earlier, we're expanding our NordicTrack Assortment out to all doors with additional styles. Another growing fitness trend is focused on recovery, where we're expanding into cold therapy with offerings from LifePro and Hyperice. Sports and nutrition is the third leg of the stool, with several new brands launching in our stores, including Jocko and Podium. On the value front, we continue to ramp up our focus by distorting the products, brands, and categories we have clearly defined everyday value leadership on key private and national brand items. You'll see these items heavily featured in marketing and prominently positioned and signed in our stores and on our website. While we remain firmly committed to our everyday pricing model, we will also use promotions on seasonal categories as a way to take advantage of customers' episodic shopping patterns and drive traffic during the key milestones in the calendar. As I mentioned earlier, we have several natural shopping events on the calendar in the second quarter, including Memorial Day, Father's Day, 4th of July, and the kickoff to back-to-school and football season. We have a strong slate of promotions focused into this time period with an emphasis on key summer categories such as grilling, patio furniture, pools, and fishing to help ensure we win the driveway decision. We also have several initiatives that are incorporated again to our long-range plan strategies, which we expect to start paying dividends as we progress through the year. Opening new stores remains the number one growth driver for us. As we previously guided, in 2024 we plan to open up 15 to 17 new stores. During the quarter, we open up two new stores, with the first one in Knightdale, North Carolina, which is right outside of Raleigh, and the second in Greenwood, Indiana, which is south of Indianapolis. We're excited that just a couple of weeks ago, we opened up our third new store for this year in Zanesville, Ohio, expanding our presence from 18 to 19 states and our store count to 285. The remaining 12 to 14 stores will open up in the second half of the year with a good balance of locations between new and existing markets. During the first quarter, our 22 vintage and new stores ran positive comps. While the 2023 vintage is not currently in the comp base, they are tracking to higher year one volume levels than that of the 22 vintage. Our expectation is that the 2024 stores will be even stronger. Our second core strategy is to grow our .com business to 15% penetration over the next five years. As I mentioned earlier, our sales in this channel are off to a strong start in Q1. This is the second consecutive quarter of positive comps for the .com business. Our core focuses on this front are to streamline and elevate the Omni-channel shopping experience, offer expanded assortments online, and improve our fulfillment speed. One key capability that will go live as we head into the remainder of the year is the ability to offer same-day delivery for many of our products. We've partnered with DoorDash to help us deliver this new level of same-day fulfillment. We'll launch this capability across our entire footprint, as we head into back to school. Initially, customers will be able to order Academy products through the DoorDash app. The next phase will be to integrate this functionality into our site so that customers can choose same day delivery as another fulfillment option. We believe that this added capability will help us reach new customers through the DoorDash app and drive incremental sales. This new service, coupled with our strong [focus] (ph) offering, where we will focus on one hour fulfillment guarantee, helps further simplify our customer shopping experience and better enable them to have fun out there in all of their sports and outdoor activities. Another focus under the strategy is all the work you've heard speak to in prior calls from driving a deeper connection with our customer through the use of data and analytics. Over the summer, we plan to launch our first ever loyalty program, which will be branded as My Academy. To be clear, our Academy credit card will remain our primary loyalty tool, with 5% off every purchase being the cornerstone of the value proposition. That being said, we have many customers who don't either qualify for the card or choose not to apply. So we plan to expand how we engage with non-academy credit card customers through My Academy. The goal is to reduce and/or eliminate friction for a loyalist while also expanding their buying power by offering targeted offers and promotions. The elements of My Academy will include a welcome offer of 10% off your next purchase of up to $200, free shipping on purchases over $25 versus $50 for people who aren't in the program, faster checkout for both online and in our app, insider access to personalized offers, deals and products, and a birthday reward. Over time, as we test new features and benefits, our plan is to integrate the ones that resonate with our customers into this loyalty program. At this point, our plan is to have the program fully rolled out prior to back to school. Another one of our long-range plan initiatives is to leverage and scale our supply chain. The implementation of our new warehouse management system is one of several supply chain initiatives. We should see increased productivity and service levels out of our Georgia distribution center as we move forward now that it has gone live. Our management team has collectively been through many of these transitions at other companies and we are all pleased at how smoothly the change over to the new WMS is gone. As a reminder, the implementation of a lot of this system is foundational to us achieving our new store growth targets that we outlined in our long-range plan. This is the first of our three DCs that we will be converting over to the Manhattan WMS. While we can't control the economy, we can control how we deliver value and newness for customers on a regular basis. We can also control how we engage with our customer through marketing and the service levels we provide, along with how we execute against the pillars of our long-range plan. And that is what we're going to remain focused on. With that, I'll turn it over to Carl, who'll give you a deeper dive into our Q1 financials. Carl?
Carl Ford: Thanks, Steve. Good morning, everyone. Our top-line in the first quarter did not meet our expectations. Given this, we worked to manage our inventory levels and control our operating costs, resulting in Academy generating $200 million in cash from operations during the quarter. Now let's walk through the details of our first quarter results. Net sales came in at $1.36 billion, a 1.4% decline compared to the first quarter of last year with a comp of negative 5.7%. Our comp ticket size decreased by 1% while comp transactions declined by 5%. Our omnichannel sales were 9% of total merchandise sales compared to 8.2% in the first quarter of 2023. The investments we have made over the past couple of years upgrading the technical aspects of our website and the connectivity to the stores have solidified the backend infrastructure to improve the customer checkout experience. We are now focused on investing in new customer acquisition and driving more traffic to the site. The gross margin rate in the first quarter was 33.4%, a 40 basis point decrease compared to Q1 of last year. Merchandise margins declined by 80 basis points primarily due to a higher sales mix of hard goods and more promotional activity versus last year. This decline was partially offset by a 40 basis point improvement in freight costs and a 20 basis point improvement in shrink compared to Q1 of last year. We remain on track to achieve our full year gross margin guidance of 34.3% to 34.7%. Our SG&A dollars as a percentage of sales increased by 130 basis points or $12.5 million compared to Q1 of last year. We deleveraged 30 basis points on existing store operations, primarily due to the decline in sales volume. The other 100 basis points of deleverage was a result of Academy investing in its primary growth initiatives, opening new stores, growing Omnichannel, scaling and leveraging our customer data platform, and modernizing our supply chain. We believe in our long-range plan and are committed to investing in it, while also managing our existing cost structure. Overall, in the first quarter, Academy generated net income of $76.5 million and diluted earnings per share of $1.01. Adjusted net income, which excludes stock-based compensation of $6.1 million and $449,000 of deferred loan costs was $81.6 million or $1.08 in adjusted earnings per share. Looking at the balance sheet, we ended the quarter with $378 million in cash. Our inventory balance was $1.36 billion, a decrease of 2% compared to Q1 of 2023. Total inventory units were down 11%, and this includes having an additional 15 stores compared to the end of Q1 2023. On a per-store basis inventory units were down 11.5%. In terms of capital allocation we continue to execute a balanced capital allocation strategy focused on our three priorities. One, maintaining adequate liquidity for financial stability. Two, self-funding our growth initiatives; and three, increasing shareholder return through share repurchases and dividends. In Q1 we generated approximately $200 million of cash from operations. We invested $32 million in our growth initiatives, repurchased 124 million worth of shares or 2.7% of the total outstanding shares of the company, and paid out $8 million in dividends. We are investing in future growth as well as shareholder value, particularly when it is discounted relative to the company's long-term growth potential. Academy had $574 million remaining on its share repurchase authorization at the end of Q1. Lastly, a couple of other notes from the quarter. We amended and extended our $1 billion credit facility through March of 2029, and the Board recently approved a dividend of $0.11 per share payable on July 18, 2024, to stockholders of record as of June 20, 2024. Turning to guidance, we expect the economic environment to remain challenging. Therefore, we will continue to efficiently run the business, while also making investments to support our long-term strategic opportunities. We are reiterating our previous sales and net income guidance for fiscal 2024, while updating our EPS forecast to reflect the shares repurchased in the first quarter. Net sales are still expected to range from $6.07 billion to $6.35 billion with comparable sales of negative 4% to positive 1%. Our gross margin rate is still expected to range from 34.3% to 34.7% and GAAP net income between $455 million and $530 million. GAAP diluted earnings are now expected to range from $6.05 per share to $7.05 per share based on a revised share count of approximately 75 million diluted weighted average shares outstanding for the full year. This amount does not include any potential future repurchase activity. SG&A expenses are still expected to be approximately 100 basis points higher than in 2023. As a reminder, SG&A includes stock-based compensation expense of $30 million or approximately $0.30 of earnings per share. We also remain confident in the strength of our cash flows and still expect to generate between $290 million and $375 million of free cash flow, including $225 million to $275 million of capital expenditures. With that, we will now open it up for questions.
Operator: Thank you. The company will now open the call for your questions. [indiscernible] Thank you. And our first question is from the line of Seth Basham with Wedbush Securities. Please, proceed with your questions.
Seth Basham: Thanks a lot and good morning. My first question is just thinking about the balance of the year with your maintained full year guidance and implies material improvement in both the top-line as well as gross margins. Can you reiterate or help us better understand the key drivers of that improvement in the second quarter and beyond?
Steve Lawrence: Yeah, So I'll start with when we talked in the last call how we described the kind of sequence of the quarters and progression was that we thought Q1 would be the most challenging quarter for us. We saw sequential improvement coming in Q2. We saw the back half getting better than the first half of the year. So that was how we described it, and we're sticking with that as kind of our thoughts on how the quarterly progression goes. In terms of things that we have within our control that we're using to try to drive the business and start moving the needle, obviously we talked about the customer behavior, right? We said the customers clearly demonstrated over the past years a focus on value, newness, and episodic shopping around those key moments in the calendar. And so we really aligned our assortments, our marketing, and all of our promotions around that. So you'll see very aggressive pushes for us across all fronts during those key time periods on the calendar, such as Father's Day, Fourth of July, Back-to-School and holiday, and then I think you'll see us pull back a little bit from promotions on the gaps within. So we've got a good game plan from that perspective. We've got a couple of categories that are resurgent. Our outdoor business has been positive now for two quarters in a row, so we're excited about that. That had been a drag on the business for a couple years going back to 2022 and early part of 2023. So we feel good about that. The .com business has had two back-to-back quarters of positive growth as well. We expect that continues to move through the year. As we get deeper in the year, some of the other initiatives start to kick in. Obviously, we talked about the 2022 vintage of new stores running a positive comp for first quarter. We expect those to continue to positive comp for us, and then as the 2023 vintages start feeding into the comps, we believe that those would also inflect a positive. And then we start opening up our [24 stores] (ph). We only have 3 stores so far we opened up. We guided 15 to 17 to the back end of the years where most of the stores are going to open up and start contributing. So that's another driver for us. A couple of other things, you know, we've talked a lot about loyalty and our new CDP on the last couple of calls. So I think we're about a year into now having that customer data platform in place. We're getting smarter about how we leverage that in terms of targeted marketing to our customer. I think the new My Academy reward that we're rolling out is an outgrowth of that, and it gives us another tool to interact and engage with our customers, particularly those who haven't been using our credit card. And then lastly, we've got an improving apparel and footwear business. Both of those businesses were better in Q1 than they were in Q4, so we got those businesses moving in the right direction. So those are all the reasons why we believe that we're going to start seeing steady improvement throughout the remainder of the year. That's really helpful. And as a follow-up on that last point, apparel and footwear are still lagging as categories. It seems like industry-wise they're doing better, so opposite for you. Are there key initiatives or key brands that will help drive improvement in that business as we move through the year?
Steve Lawrence: Yeah, so footwear for us was a drag in Q4. It was actually one of the better businesses for us in Q1. There's certainly things going on in the performance running sector that we don't have access to a couple of those brands. That being said, we're working with our core suppliers, the Nikes, the New Balance, the Adidas (OTC:ADDYY), the World, to continue to get expanded access to premium footwear there. We're also working with our other brands. One of the things that's good about our business is it's not just active footwear, right? We have a work boot business. We have a casual shoe business. We're working with brands like Sketchers to really drive the slip-in piece that we're working with our -- work boot vendors to drive that piece of it. And then we continue to add new brands such as Birkenstock which has only been in the store about a year. We've expanded the presentation of that now into more doors. We just added Altra Trail Running Shoes for Q1, as well as Choco sandals. So it's a mixture of working with our existing brands to get access to things that we currently haven't had access to, layering on new brands and expanding new brands rapidly as they prove successful. And that's how we're going to drive growth and flow work.
Seth Basham: Thank you.
Operator: Our next question is from the line of Justin Cleaver with Baird. Let's proceed with your question.
Justin Cleaver: Hey, good morning, everyone. Thanks for taking the questions. Steve, you mentioned the positive comp in new stores. I was hoping you could expand on that a bit. How did the 2022 vintage comp and aggregate, how does that compare to what you would anticipate from normal maturation? Just trying to understand the comp benefit from new store maturation versus how your mature stores are performing.
Seth Basham: Yeah, I would say it was in-line with how we modeled it based off of, if you remember, we talked a little bit about how when we initially came forward with our forecast, we were kind of looking at stores that had some influence from the pandemic. So we went back and looked at stores in the [‘14, ‘15, ‘16] (ph) vintages to kind of get a sense of what year [two] (ph) would look like. And that's how we modeled it. So I would say that they were in the, you know, mid-single digits from a comp, mid-to-low single digits from a comp perspective. It was significantly better than the remainder of the stores. So we definitely saw an inflection there. You know, our expectation would be that as the 2023 vintages start to mature and feed in, we'd see similar behavior. As a reminder, the 2022 vintage was somewhat opportunistic. We tested a lot of different things. We applied those tests to the 2023 vintage. And as we've been tracking them, they're tracking to a higher year one volume than the 2022 vintage did. And our expectation is we'll see the same thing with the 2024 vintage. So this is something that's going to take a while to build. It's a little bit of that flywheel as we're trying to get it going. It's encouraging to see the 2022 vintages perform much better than the rest of the chain. And as we get more of these advantages, 2023 and 2024, feeding into that, I think it's just going to help accelerate our comps.
Justin Cleaver: That's helpful. Thanks. And then maybe a question for Carl, just on gross margin. Curious how 1Q came in relative to your expectations, and if you could just help us bridge the gap between the 1Q gross margin rate to the full year guide. I know 2Q, 3Q historically have higher, or historically higher margin rate quarters, but just how do you envision merchant margins evolving over the balance of the year, and what's your assumptions for freight within the full year guide? Thanks.
Carl Ford: Yeah, so last year came in at 34.3% gross margin. We guided to 34.3% to 34.7%. So on the high side, 40 basis points of growth. Where we thought that would come from would be two real places. One would be on distribution center operations. Steve mentioned that we went live with the Manhattan Active Product in our Twiggs County or Georgia Distribution Center, which is our least productive. We're happy with what we're seeing coming out of there in terms of productivity. And so we think that getting out of, you know, the quarter of implementation, if you will, that there's upside potential associated with DC operations. Second would be around merchandise margins. You know, call it 20 basis points of upside potential associated with that. Our inventories are pretty clean, guys. We're proud of how we manage inventory. We're proud of how we manage promotions. So, you know, clean inventory balance, don't need to promote into things to clear it. You know, what we would promote is on this key traffic driving time period where we want to incentivize the customer to come in. As it relates specifically to Q1, our gross margin was down 40 basis points. That was 80 basis points of merge margin decline, 40 basis points of freight improvement year-over-year, and 20 basis points of shrink improvement. You know, I would really expect shrink to be flat for the year, year over year. I think we've got opportunity areas and we're focused on it. You know, coming out of the gate 20 basis points better than last year on the inventories that we did. You know, I'm pleased with it, but I would tell you to think about it as a flat opportunity. And then freight overall, I think it will generally be flat for the year within our guidance. You know, we'll have some pressure associated with import. We've got opportunities on the outbound side from a DC to store standpoint. I think those will generally be flat. The two upside potentials are DC operations and Merch Margin.
Steve Lawrence: Yeah, I would jump in and just say that the merge margin, coming in a little lower than last year, I think was really the effect of two things. First, we talked about how Outdoor perform better within the quarter, and that certainly has a lower margin profile, so that mixes us down a little bit. And I'd also say that we're talking about the customers being under pressure and they're gravitating towards value. Early in the season, one of the number one ways we deliver value is clearance. And so we certainly saw a higher take rate on some of the clearance promotions that we ran early in the season with the customer gravitating towards those. That being said, I think we've got a solid plan and visibility of the gross margin and we think merge margins over the course of the year will be roughly flatish is how we're thinking about it.
Justin Cleaver: All right, guys. Thanks for all the color. Best of luck.
Steve Lawrence: Thank you.
Operator: Our next question is from the line of Michael Lasser with UBS. Please proceed with your question.
Michael Lasser: Good morning. Thank you so much for taking my question. So it sounds like the consumer has been responding to some of the promotional activity and discounting that the Academy's been doing. How aggressive is the Academy willing to be with its gross margin in order to drive sales, given what's happening in this environment?
Steve Lawrence: Yeah, so Michael, I think what we shared with you in the past, and I think it's held true candidly in terms of the behavior we've seen in the first quarter, in periods where there's not a reason for the customer to shop, promoting aggressively has not really driven incremental traffic. You know, it is just basically been an AUR erosion. And so what our game plan has been and will remain is we know that the customer's coming out and shopping during those key moments on the calendar. You know, so we've got a couple of the big ones ahead of us. I mean, we really activate over the summer, as you all know, and as we get into Father's Day, which is, you know, one of the larger weeks of the year for us, and 4th of July and Back-to-School. We have promotions lined up and will be more promotional than last year. That being said, it's anticipated in our gross margin forecast. We pull back on kind of the gaps in between when the customer isn't showing as much willingness to shop based off of discounts. We've got it modeled in there, but you're going to see us be promotional during those key time periods and then pull back on the gaps in between. And that's worked for us over the past, you know, six months to 12 months, and you're going to see us lean more into that.
Michael Lasser: My follow-up question is on the momentum you talked about in April. Has that continued into the current quarter? And Steve, there's a lot of skepticism on Academy's ability to hit at the least the low end of the guidance for the rest of the year. What's implied in that is that comps do make a meaningful improvement. You outlined several factors that you think will drive the improvement. If you don't see that improvement, what actions are you going to take in order to preserve the profitability and manage the business? Thank you.
Steve Lawrence: Yeah, so I would tell you is that, yes -- you're right, if you look at the guidance, I mean, obviously Q1 is down 5.7. It's outside the low end of the guidance, so it does imply that we see improvement as we move forward. The thing I'll point out is, we really haven't had any of those major kind of customer shopping moments on the calendar in Q1. We're not obviously a big Easter business. There's not a lot of outdoor activities going on during that time period, et cetera. So really our sweet spot, and we've described this, I think, in a lot of different venues, is that kind of Memorial Day through back-to-school time period. You know, that 13-week period is a very big time period for us. That's where we've lined up a lot of our marketing initiatives. That's where we've lined up a lot of our promotions. That's why we're launching, you know, a lot of new capabilities, such as our new loyalty program, same-day delivery with DoorDash, things like that, around that time period to really take advantage of it. So our belief is we're going to see that inflection during that time period. Back to the start of your question, I would tell you that the start of May, was a little softer than we wanted. I think it's been pretty well documented that we had some pretty tough weather in a lot of our geographies with a lot of stores shut down for periods of time. That being said, when we got to Memorial Day and we got to some clean kind of weather, we actually saw Memorial Day behave as we thought it should and we were pretty happy with how Memorial Day inflected. That being said, we got a lot of lines to [allot of us] (ph). This is a big week for us. Fourth of July is a big week for us and obviously back-to-school is a big week for us. So we're going to lean into those things and then after we get through those time periods, we're going to assess where we're at and call audibles based off of what we're reading in the business from that point forward.
Michael Lasser: Thank you very much and good luck.
Steve Lawrence: Thanks, Michael.
Operator: Our next questions are from the line of Simeon Gutman with Morgan Stanley. Please proceed with your questions.
Simeon Gutman: Good morning, everyone. My first question is on new stores. Can you talk about the newness in terms of the, you said new vintages are comping positive. Does that include all stores? And then can you assess why the 2024 class is, or the 2023 class, sorry, is comping well ahead or at higher levels, like how do you diagnose that, and is there any cannibalization happening across neighboring stores?
Steve Lawrence: So first off, I want to be clear. When we're talking about new stores comping positive, the only ones we're referencing right now are the 2022 vintages because the 2023 vintage, you know, candidly most of them open up in the back half of the year, so they haven't even lapped themselves yet. So we're pleased that the 2022 vintage, which are the first vintage, feeding into comps are comp-positive. What we've commented on is we've seen the 2023 vintage start off to a higher year one volume trajectory than the year two vintage. And we would attribute that to the fact that, we took a lot of the learnings from the 2022 vintage and applied them to the 2023 vintage in terms of how we grand opened and ran the marketing cadence, a longer period up front of seeding those stores, a longer sustainment time period, those kind of things, better localized merchandising, better staffing models. So we just took the learning supply to them and we're seeing the payoff on that and our anticipation is, the 2024 is going to be off to as good a start. We've had three stores we've opened up this year. One of the things we're really pleased with is two of them I think I called out in the comments. Knightdale, North Carolina, and Zanesville, which I would characterize as not in our current footprint. Those are relatively new markets for us, are both doing very well. So I think it's taking some of those learnings we've had as we've gone in new markets and applying those to getting them off to a good start. And our belief is that the 2024 vintage is going to be off to a higher year-on volume than the 2023 vintage is.
Simeon Gutman: Okay, and a follow-up regarding the cadence for the rest of the year. You said the customer is being more discerning and you talked about promotion and then you have more newness and activities, I guess, initiatives as it goes on. So the question is how do you balance the more discerning, maybe more value-oriented customer with the – I guess the slope now that's implied for the rest of the year to drive the events or to drive the comp?
Carl Ford: So, I would say a couple things. You're going to see us lean into value a couple of different ways. First, we view ourselves as an everyday value price retailer. About 75% of what we sell is at regular price. We've got great everyday value on our private label. We've got everyday value in a lot of our national brand offerings. And sometimes we're not sure we're being as overt as we should about that. So you're going to see us really lean into that from a marketing message. You're going to see us sign it more aggressively in stores. You're going to see it more prominently featured in our website and our marketing. So you're going to see it across every touch point. At the same time, we also use promotion strategically during those key moments on the calendar, like a father's day, like a back-to-school, to drive traffic. And so during those time periods, we're going to have more broader-based promotions and somewhat deeper promotions in certain key categories to drive traffic and win the driveway decision. And of course we've got that modeled into our margin. One of the things that's really been helpful with the new customer data platform that we have is we can start seeing customer behavior. So we know within our customers who the more value-based customer is, and we're targeting a lot of that marketing towards that customer. Conversely, we also have a customer who we can tell is more triggered by or activated by newness. And So we're using our CDP to really target them with more of the new offerings and some of the new brands that we're launching. So that's really how we're going about it, using CDP as a way to kind of target those messaging and making sure we've got good fuel from a promotional perspective and newness perspective to send to those customers based off of what they're gravitating towards.
Simeon Gutman: Thank you. Good luck.
Carl Ford: Thank you.
Operator: Our next questions are from the line of Christopher Horvers with J.P. Morgan. Let's just hear your questions. Mr. Horvers, you may proceed with your questions.
Chris Horvers: Thanks. Good morning. So in terms of the improvement in the back half, can you talk a little more specifically about the categories that you expect to turn positive? You know, to what extent is MIX going to play out in the gross margin as it relates to that? And to what extent are you expecting, maybe the hunt category to see some lift around the election.
Steve Lawrence: Yeah, so you hit on the first one where you're asking which categories to expect to continue to drive for us, drive sales. I think certainly outdoor is one of those. You know, it's lapped itself in terms of some really tough comps and it's been now two quarters of a pretty good performance we'd expect that to continue through the year. I think that would be broad-based you know one of the things from on the call we called out was the camping category really fueled by Stanley and YETI. We think that's going to continue through. We also expect that the hunt business will be good as we turn the quarter into hunting, and we expect fishing to be good over the summer. So I think all those categories should continue to be drivers for us. The impact of the election on it, hard to tell at this point in time. We really haven't modeled a ton of activity off of that. We don't know when we go back and look at election years that we see that business activate, or almost time periods, but, you know we're not really banking on that if it happens. That would certainly be a positive. We expect the .com business can be positive and we expect the apparel and footwear business to steadily improve. You know, at the low end of our guidance, to down 4 comp, that imply the customer remains under pressure and doesn't really improve in terms of how they're shopping and us leaning into our activities and focuses from a newness value experience perspective, you know, kind of get us below end of the guidance. If we can see some inflection from the hunting category based off election and we can see some of the newness and value offerings really kick in from a parallel forward perspective and those with deposit, that's how we get to the high end of our guidance. So that's why we didn't narrow the range at this point in time. We're only 25% of the way through the year. We think we still have a lot of outcomes ahead of us that are undetermined. And as we get deeper into the year, we'll certainly share what we're seeing in the business once we get through Q2 because we've got a lot of key events right now in front of us.
Chris Horvers: Got it. And then just to clarify, so in the gross margin, supply chains are tailwinds, shrinks flat, merchandise margin is flat. Is that right? Am I missing any pieces? And then that merch margin, you know, are you expecting mix to be a positive and then essentially offset more promotions year-on-year?
Steve Lawrence: So we're expecting, I think you have the puts and takes right. We're expecting a flat merch margin. We've modeled in some deleverage from the hard goods, the big ticket side of the business, particularly outdoor, which has a lower margin profile. But we expect that certainly the footwear and apparel margins are going to be strong as we progress through the year.
Chris Horvers: Got it. Thanks very much.
Steve Lawrence: Thank you.
Operator: The next questions are from the line of Kate McShane with Goldman Sachs. Please proceed with your questions.
Kate McShane: Hi, good morning. Thanks for taking our question. Our first question was just on the My Academy loyalty program. I just wondered if you could give us a little bit more detail on the timing of the rollout of that, and is the guidance capturing any kind of upside potential from that or any kind of margin implications, as a result of the promotions and offerings that go along with it.
Steve Lawrence: Sure. Good morning, Kate. So I'd start with, from a timing perspective, it's going to roll out over the summer. We want to have it in place prior to back to school. As you know, our back-to-school starts a little earlier, so it starts kind of at the tail end of July, so I'd expect we'll have it fully rolled out to all stores by the first or second week of July. Really the goal is we have a pretty powerful loyalty program right now with our credit card. That being said, we have several customers who either A, don't want another credit card, or B, maybe in some cases don't qualify for the credit card. And so we wanted to offer them a lot of the same sort of values. And so we [talked on the call] (ph), that's your initial signup discount of 10% of up to $200. That's free shipping over $25. That's targeted discounts. So all those things that are kind of endemic to a lot of those programs we're going to have. The only thing you don't get with My Academy that you do get with the credit card primarily is the 5% off every day. We certainly believe that's going to be a sales driver for us. We have that model in there as part of our improvement. That's one of the ways we see, you know, getting from the negative [5.7%] (ph) we had in Q1 to our guidance ranging down 4 to up 1. From a margin erosion perspective, we've repurposed other discounts that we've been running towards this. So it's not really from our perspective, going to be initially gross margin accretive because we've offset other promotions to fund it. And certainly over time, we're going to test how targeted offers work. And if certain offers resonate more than others, we might add those into benefits, hard benefits that we'll run going forward. But – and we started off a little light, and our goal would be to add to this over time as we test our way into offers that the customer responds to.
Kate McShane: Thank you. And our second question just was around your comment around some of the key brands that you aren't currently carrying in footwear. How much do you think this specifically is challenging traffic to the store?
Steve Lawrence: Well we certainly pay a lot of attention to market share data and what's going on. You know, the brands we've been most questioned about, on this call last time and certainly in other calls is there on [Hoganon] (ph). And if you look at those two brands, they've more than tripled their market share over the past three years. So I think it's a meaningful driver out there for running footwear. And, you know, not having it, I think, it's certainly something that we would love to have as part of our assortment so it could help drive traffic for us. That being said, we're not sitting around waiting for them to open us up. We certainly are having dialogues with them and believe at some point we'll get access to that. But it's all the work we're doing with our existing brands to get access to things we currently don't have access to that are more premium for them. It is adding in new brands that help us complement our assortment. It's all those things that we're going to be focused on while we also simultaneously work with those brands we don't have to gain access to them.
Kate McShane: Thank you.
Operator: Our next questions are from the line of Robbie Ohmes with Bank of America. Please proceed with your questions.
Robbie Ohmes: Oh hey, thanks for taking my question. Maybe for Carl, just on the store opening cadence for the year, anything you can tell us about how that may or may not pressure certain quarters, pre-opening expense, you know just timing a store opening is being back half-weighted?
Carl Ford: Yeah so the balance of our stores that we're going to open are going to be in the second half of the year. As you think about pre-opening costs, we really modeled those into the 100 basis points of de-leverage that we put in the SG&A guide. So that's really what's driving the year-over-year deleverage is our investments into new stores. And we like the way that they're starting off. We like the way that they're comping once they get past that 14th month. And we think this is a big driver for the long-range plan. So we're going to continue to do that. It will de-leverage us. You know our average store did $22 million in sales volume last year and you know these new stores were guiding you know $12 million to $16 million in year one, so there's de-leverage associated with it but that's what's essentially baked into the 100 basis points of de-leverage embedded within our guidance.
Robbie Ohmes: Gotcha. And then can you walk us through the economics of the DoorDash deal? Is that very favorable to you guys? How is that structured?
Carl Ford: Can't, obviously, devote all the details of it, obviously from a contractual perspective, but basically They have a couple of different ways they model it. In the initial phase for us, the way it works is the customer can shop through the DoorDash app and find Academy product. The DoorDash will actually physically come into the store, find the product, purchase it, and then we pay commission after the fact on that. Over time, we see this probably going to a model where it looks more like a bulk disorder for us, where we pick the goods and deliver it to the DoorDash person outside. It has a slightly different, rate associated with it. And then longer term the goal would be to integrate it as we talked about in the call into our website, so you can pick that as an option. One of the things that is we've been studying the customer behavior and seeing what they're reacting to, what they're not reacting to. You know, time is one of those things. They're voting for convenience. And us not having this as an option, I mean we had both as we could pick it up, but you know think about the use case where the customer's at the field and they forgot their [cleats or the mouth guard] (ph) and they want to have it delivered to them while they're at the tournament. We can now do that, we couldn't do that before. When we looked at the customer overlap between their file and our file, it's mostly accretive. There's not a lot of overlap there. And so for all those reasons, we've decided to add this capability. We think it's going to be a nice add for us. Of course, DoorDash makes the delivery fee that's embedded in their fee structure. But like I said, we're pretty happy with it so far. It's really early days as we roll it out and we think it's going to help us reach across from what we haven't been reaching before.
Steve Lawrence: Robbie, the only thing that I would add to that is obviously somebody's not going to DoorDash a gun, say, for a kayak or some of these bigger ticket items that tended to be lower in margin rates. So there is a royalty and commission associated with it but the margin profile that gets being sold should be elevated based off our holistic product assortment.
Robbie Ohmes: Got it. Thank you.
Operator: Our next question is from the line of Greg Melich with Evercore ISI. Please proceed with your questions. Mr. Melich, you may proceed with your questions. Mr. Melich, perhaps your line is muted.
Steve Lawrence: Let's move to the next one.
Operator: Thank you. The next question will be coming from the line of Anthony Chukumba with Loop Capital Markets. Please proceed with your questions.
Anthony Chukumba: Good morning. Thank you so much for taking my question. I won't add my -- I won't give my usual on and [hoax] (ph) question, given that's already been covered. So I guess I'll have to come up with something else. I guess my question is just on the competitive promotional environment. I mean, you've been talking now for a while about the fact that you're not promoting much, if at all, between big sale events, which makes a lot of sense. What are you seeing from your competitors? Are competitors, are they doing a similar thing in terms of the timing of their promotions? And how would you just sort of compare maybe just year over year or maybe now versus pre-pandemic, just, you know, kind of the overall competitive promotional environment. Thank you.
Steve Lawrence: Yeah, so I would characterize it similar to how we talked about in previous quarters. I mean, it's certainly not back to where it was pre-pandemic. It seems that each year it's getting a little more promotional. You know, as I mentioned earlier, we don't have a ton of big events for us in the first half of -- the first quarter of the year. We really start hitting that time period right around now, Memorial Day, Father's Day, 4th of July, back-to-school. You know, early read so far is that it seems like it's a little more promotional last year, but certainly not crazy, not irrational. It feels like people are, you know, promoting the categories you'd expect them to promote right now. A lot of the summer categories, grilling, you know, pool, things like that. So I would characterize it as still very rational. And candidly, I would say Q1, it wasn't terribly promotional outside of the clearance cycle that I think everybody went through.
Anthony Chukumba: Got it. And then just 1 quick follow-up. You know, you mentioned that your shrink was down 20 basis points year-over-year. Is there anything in particular that was driving that, and do you expect continued shrink improvement over the remainder of the year?
Steve Lawrence: Thanks. Yeah, so shrink was, just to be clear, shrink was up last year, and so being 20 basis points off of, 20 basis points better than being up year-over-year, it's better. The things that we're doing is we've deployed some technology solutions around license plate readers or dwell sensors, things that are in store that kind of give us a heads up on when something's not going well. In certain cases where the product has been stolen and it's not available for sale. We're doing precautions like locking up product and putting a customer service button right there to help the customer. We partner closely with local law enforcement and we keep a beat on this overall, the cycle counts and physical inventories throughout the year. The things that are driving it, I think that's still up across the market. I think this is a big retail issue. I think we're taking issues to correct it and address it, but it's not like it's suddenly dropped off of a cliff. I would tell you that the Manhattan system within the distribution center space is a lot more methodical than our previous warehouse management system, and we do carry a fair amount of inventory in our distribution centers. And so accounting for that correctly, that was a little bit of a source of goodness over year-over-year. But 20 basis points, we're probably halfway through our physical inventories for the year now. We feel like we've got to be on where it's going. We're happy with 20 basis points, but I would I would guide you that you know flat for the year.
Anthony Chukumba: Got it. Good luck with the remainder of the year.
Steve Lawrence: Thanks Anthony.
Operator: Our next questions are from the line of John Kernan with TD Cowen. Please proceed with your question.
John Kernan: Good morning. Thanks for taking my question. So Carl, just on the SG&A rate, looks like SG&A dollars were up about 4% in the first quarter. How should we think about SG&A dollars in rate into the back half of the year and in the different scenarios of comps that you laid out? It's a fairly wide range at down, forward, or up once. I'm just thinking how that rate might trend given the high and low-end of the top [guy] (ph)?
Carl Ford: Yeah, it's a good question, and it's one that I'm kind of proud of the team on. So SG&A dollars quarter-over-quarter are up $12.5 million or 130 basis points. And this is for Q1. As it relates to $12.5 million, more than all of that was associated with the investment in new stores primarily, but also some technology solutions around the customer database platform, e-comm user experience, and now the go live of the WMS system. So that's what's driving more than all the dollars and almost all the leverage. I think we deleveraged pretty modestly on the negative comp base, the negative 5.7%. And what, John, what that shows is a responsiveness by the team. We understand how to pull levers inside the quarter, and we're very responsive to what we're going to do and not do and how that plays out. I would tell you, customer satisfaction's never been higher. The polls that we get, the overall satisfaction of the customer. So we think, we're flexing with things that the customer still perceives that they're really getting good service. As it relates to the balance of the year, what's really in the full year guide. Yeah, 100 basis points is how I would counsel you on the high and the low. If we hit the low, there will be some more give back associated with incentive comp and things of that nature. And on the high, we flex pretty well. But as it relates to controlling promotions, controlling inventory, and controlling the expense profile of the company, the team is really united here. What we are investing in is these new stores, and then we're offsetting internally in a way that the customer is not displeased with.
John Kernan: That's helpful, Carl. Steve, just on the merchandising front, I think footwear has been a big driver of one of your biggest peers at Comps recently. What are you doing in terms of working with the vendors, working with the in-store presentation within Footwear? Because the category obviously has a lot of momentum right now. It's not all just with ON and Choco. You have a big Nike business and New Balance and others. So just what are you doing in terms of allocations as we get into the back half of the year?
Steve Lawrence: Yeah, that's a good question. So, you know, we continue to work with our existing partners. You know, certainly Nike is our biggest vendor in the store. It's our largest vendor in footwear, and working with them to get access to better footwear. So example 270s, within a limited door count last year, it's going to be in over 150 doors this year. We've done an elevated presentation for it in our store. We're working with them on other footwear as they move forward to get access to that. Same conversations candidly with New Balance and Adidas as well. But the thing that I want to also make sure that I land the point is, athletic is a big chunk of our business, but it's winning in the other categories too. Like I said, we do a big work [group] (ph) business. We do a big seasonal footwear business. We do a big casual business. So leaning into things like Birkenstock, which is an expanded door account for us this year. Taking a brand last year like Coolibar and [Bio] (ph), that we had in a very limited door account and expanding that out more broadly this fall. I think there are a lot of ways for us to win in footwear. The team is really working broadly with the broad-based vendors to make sure we can do that. And I'm optimistic about our opportunities in footwear to move forward with all the newness that we're driving there.
John Kernan: That's great. Thank you.
Operator: Thank you. At this time, we have time for one final question which will be coming from the line of John Heinbockel with Guggenheim. Please proceed with your questions.
John Heinbockel: Hey, Steve. Two member-related questions, right? We've talked a lot about driving business in the episodic periods. But in the periods in between, right, when you think about using CDP to go after heavy users, rather whether it's fishing or outdoor cooking, what do you see as that opportunity in those periods? And then during the promotional periods, are you getting a better sense of promotional elasticity by customer, right such that your promotions are more effective than they were a year or two ago?
Steve Lawrence: Yeah, I'll start with the first part of your question. So one of the new use cases we've really started leaning into is, you know, we've done our traditional customer segmentation. And so one of the customer segments that we've identified, for example, is high-value first-time purchaser. So think about somebody who came in and purchased, you know, a grill or an elliptical or something like that with their first purchase, and we haven't really seen them shop us before. So we're using kind of those lulls where we're targeting those types of customers to come in and drive whatever the attachment is. In the case of a grill, maybe it's more fuel, some of the spices and rubs we sell or a cover. And turning those customers into kind of high-value, one-time shoppers into loyalists over time. And so really leaning to offers during those time periods has been one of the things we've used the CDP for. I think your second question, kind of observation, is spot on. As we've gotten deeper into the use cases on our CDP, I think we are getting a better sense of which types of promotions resonate with which customers. And so I think that's something that we're just going to continue to refine and be sharper and sharper on in terms of the types of promotions we deliver to the customers, delivering the right ones to the customers who activate against them. As I mentioned earlier, some customers really gravitate towards value. So leaning into promotions with them versus the customers who really are more about newness. So we maybe can be a little shallower with those customers in terms of discounts we offer, but really focus and feature newness in those. So it's still, we're a year into this. I think we're a lot smarter today than we were a year ago. We still have a lot of opportunities. We continue to wring this out. And I think that my Academy Rewards program that we're launching is going to help us get even deeper in mesh with our customer in terms of them engaging with us and us engaging with them in ways that they really want to be engaged with.
John Heinbockel: Thank you.
Steve Lawrence: Thank you. Appreciate it. Okay, first I want to say that I think the team has done a really good job of managing through the current economic environment while steadily executing against our long-range plan objectives. We're committed to helping active young families that are under financial pressure stretch their dollars and have fun out there by providing compelling assortments coupled with an outstanding value proposition. We still have three-quarters of the year in our most important shopping seasons ahead of us, and we remain optimistic about the opportunities in front of us throughout the remainder of the year. Beyond 2024, we're also investing in the business to drive long-term shareholder value. These critical investments are linked to the strategies of our long-range plan, which are opening new stores, growing Omni-Channel, driving our existing business by improving our connection to customers through improved merchandising and marketing, and leveraging scaling our supply chain. We believe that remaining true to this strategy will allow us to break through and deliver against our vision to be the best sports and outdoor retailer in the country. In closing, I want to thank all 22,000 of our Academy team members for the hard work and effort they've put in over the past quarter. We continue to believe that our associates are the key ingredient, our secret sauce, and I know that every one of them is committed to delivering an outstanding shopping experience to all of our customers. Thanks for joining today, and have a great rest of your day.
Operator: Ladies and gentlemen, the call is now concluded. Thank you for your participation. You may now disconnect.
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