Academy Sports and Outdoors, Inc.

Good morning, ladies and gentlemen, and welcome to the Academy Sports Plus Outdoors second quarter fiscal 2023 results conference call. At this time, this call is being recorded and all participants are in a listen-only mode. Following the prepared remarks, there will be a brief question and answer session. Questions will be limited to analysts and investors. Please limit yourself to one question and one follow-up. To ask your question during the call, please press star 1. If you require any assistance during the call, please press star 0. I will now turn the call over to Matt Hodges, Vice President of Investor Relations for Academy Sports and Outdoors. Matt, please go ahead.

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

Thank you, Matt. Good morning to all, and thank you for joining us for our Q2 earnings call. It's been three months since Michael and I stepped into our new roles, and over the past 90 days, we've worked hard to improve our sales trend, align our expenses and the current run rate of the business, and to backfill some key positions on our leadership team. I'm excited that we're able to fill all of our key roles with internal promotions, which speaks to the work the team has done over the past couple years on building a strong internal bench and focusing on succession planning. To highlight that, I'm thrilled that Carl Ford, our new CFO, was one of these promotions, and he will be joining us on today's earnings call. Carl has been with Academy for four and a half years, and during that time, he's played an integral role in helping the company achieve several milestones, including navigating the pandemic, achieving all the objectives in our first long-range strategy, supporting our IPO, and helping shape and create our new long-range plan. Turning to our Q2 results, for the quarter, we achieved net sales of $1.58 billion for a negative seven and a half comp, While we are not happy with running a decrease, these results were in line with our first quarter trend and are aligned with the guidance we shared during our last call. What was encouraging was that unlike Q1, we saw the business decelerate as we moved through the quarter. In Q2, we saw steady improvements in both sales and margin rates, with each month getting successively better. Our belief is that we can continue to build on this momentum as we progress through Q3 and into the holiday selling season in Q4. Looking at sales by division, our best performing business during the quarter with sports and recreation, which ran a 2.7% decrease. Sporting goods equipment, outdoor cooking, and outdoor furniture all performed well during the quarter. However, the fitness equipment and bike business continue to be tough. Apparel was the second best performing division with a negative 3.7% decrease. We continue to see solid performance out of the men's and youth businesses as well as our licensed apparel area. Nike also continues to perform well for us, along with our private label business. The women's business has remained more challenging for us. As we move forward, we're very focused on getting our women's active business back on track. Footwear during Q2 ran a 4.5% decrease. We continue to see a strength in casual and work footwear driven by national brands such as Hey Dude, along with our private work boot and apparel brand, Rosmos. The cleated business was also strong as we continue to be in a much better inventory position versus where we were a year ago. Our outdoor trend for Q2 was a 12.2% decrease, which was an improvement versus Q1's down 15%, but it's still well below our expectations. Better performing categories for the quarter were fishing and camping. Hunting remained the most challenged business with continued softness in both the ammunition and firearms businesses. Both of these categories continued to perform well above 2019 levels, but continued to decline from the peaks that we saw during the last couple of years. As we move forward, we expect to see the declines in these categories moderate as we start to lap software comparisons from last year. When you look across the various businesses, many of the key themes that we called out in our Q1 call carried forward into the second quarter. Customers continue to gravitate towards value on one end of our assortment, demonstrated by an increase in the penetration of private brand sales. At the same time, customers are also focusing on new and innovative products, such as bog bags or UFOS recovery slides, which in many cases were not value items. Bigger ticket items with long replacement cycles continue to be challenged, along with many of the surge categories that benefited from increased demand during the pandemic. And we've also seen a consistent pattern of the customer aggregating their purchases during the natural shopping time period, such as Mother's Day, Memorial Day, Father's Day, and the Fourth of July. We are continually adjusting our assortment and future buys, along with our promotional efforts to align with these trends. Customers will continue to see us lean into our position as the value leader in our space by expanding our everyday value offerings while also leveraging strong promotional efforts during the key shopping moments on the calendar. In regards to new brands and ideas, I'd like to highlight a couple of new initiatives launching in Q3 that will help us take advantage of the customer's appetite for newness. This past week, we announced a new partnership with L.L. Bean to become one of their key retail partners. We believe their focus on outdoor apparel and footwear with a northern sensibility is the perfect complement from Magellan Outdoors and Columbia businesses, which lean more towards fishing in southern climates. Another new initiative is our partnership with Escalade and American Cornhole League to become the exclusive seller of ACL boards and bags for this fall. With the strong market share we have in all things tailgating, this partnership is a perfect fit for us. Later in Q3, we'll kick off a new partnership with Fanatics to help expand our online offering and licensed team apparel. This business has been a strong suit for us over the years, but our offering has traditionally been anchored in the leagues and teams that live within our geographic footprint. Our new relationship will allow us to dramatically grow our assortment and to service a greatly expanded number of categories, teams, and leagues moving forward. Shifting to profitability, we remain focused on proactively managing our business to deliver the best possible results for our shareholders this year while ensuring we remain on track to achieving our long-term initiatives and goals. Our gross margin for the quarter came in at 35.6, which was a 30 basis point improvement over last year, with 180 basis point increase over our Q1 rate. Beneath the surface, our merchandise margins stabilized at down 21 basis points versus last year, which was a marked improvement over our Q1 run rate of down 110 basis points versus 2022. PARL will give you more color around our financial performance shortly. Turning to inventory, at the end of the quarter, our inventory balance was $1.3 billion, which was flat to last year in terms of dollars and down 2% in units in total. On a per-store basis, units declined 5% compared to Q2 of last year. The team has exhibited a very disciplined inventory management approach through the past couple years, and we plan to continue to lean into this strength as we move forward. We are confident that our current inventory position is at the right level to support our business and that the content is fresh and forward-facing, which should position us well for the fall and holiday selling seasons. As we discussed in June on our Q1 call, we're taking aggressive action in proactively addressing the trends that we've seen in the business this year, in order to help improve sales and profitability as we move through the remainder of the year. I want to give a quick reminder of the key actions we're taking to drive the business. First, we'll continue to highlight and focus on our position as a value leader in the space across all customer touchpoints. Second, we're introducing new offerings in our assortment, such as L.L. Bean, Fanatics, and American Cornhole League to capitalize on the customer's desire for newness. We're also improving our advertising effectiveness with better targeted marketing that will be facilitated by our new customer data platform. We're continually enhancing our omnichannel functionality and features to improve the customer experience. And lastly, we also expect a sales boost from the new stores we opened up in 2022, along with 11 to 12 new stores opening this fall. Now I'd like to turn the call over to our new CFO to walk you through the financials. Carl?