Academy Sports and Outdoors, Inc.

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. 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 zero. I'll 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 first quarter 2024 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 risk and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risk and uncertainties include, but are not limited to, the factors identified in the earnings release and in RSVC 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 gap 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? 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 $1.36 billion, 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 1 through 13 this year versus weeks 2 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 dot-com business posted an 8% sales increase over last year and comprised 9% of total merchandise sales versus 8.2% last year. Opus and ship-from-store represented more than 80% of total dot-com sales for Q1, which highlights the true omnichannel 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 omnichannel business. We are focused on engaging as many customers as possible across all of our channels because we know that an omnichannel 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 the non-omnichannel customer. In terms of sales performance across our different divisions, the hard goods 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. Amping continues to run significant gains, driven by Stanley and Yeti. The strong field trend we saw in Q4 slowed down a little bit in Q1, but 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 that suppressed 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, but we continue to see softness in cardio equipment. I'll talk about some plans to help improve this business a little bit later in my remarks. On the soft goods 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, Brooks, and New Balance. Casual footwear was the second best performing category with strong sales in Birkenstocks, Crocs, 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 newest 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 such as Nike, Carhartt, and Levi's. We're also seeing solid growth in some of our newer private brands such as Freely and Rowe. 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 to position us 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, Nordic Track & Fitness, and Burlabo 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 Chaco sandals. In order to highlight our value offering, another place we've added newness is in our private brand portfolio where we recently launched McGregor 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 lagging 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 Hyper Ice. 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 calendars. As I mentioned earlier, we have several natural shopping events on the calendar in the second quarter, including Memorial Day, Father's Day, Fourth of July, and the kickoff to back to school and football season. We have a strong slate of promotions focused in 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 decisions. We also have several initiatives that are incorporated into 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 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 dot-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 cons for the dot-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, and 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 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 this strategy is all the work that you've heard us speak to in prior calls around 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 MyAcademy. The goal is to reduce and or eliminate friction for a loyalist while also expanding their buying power by offering targeted offers and promotions. Key elements of MyAcademy 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, fast for checkout for both online and in our app, insider access, 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. 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 changeover to the new WMS has gone. As a reminder, the implementation and rollout of the 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 will give you a deeper dive into our Q1 financials.