Academy Sports and Outdoors, Inc.

one follow-up. To ask a question during the call, please press star 1 on your telephone keypad. If you require operator assistance during the call, please press star 0. I'll now turn the call over to Dan Aldridge, Vice President of Investor Relations for Academy Sports and Outdoors. Please go ahead.

Good morning, everyone, and thank you for joining the Academy Sports and Outdoors first quarter 2025 financial results call. Participating on today's call are Steve Lawrence, Chief Executive Officer, and Carl Ford, Chief Financial Officer. As a reminder, today's earnings release and the comments made by management during this call include forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the earnings release and in our most recent 10-K and 10-Q 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. This morning, we will review our financial results for the first quarter of fiscal 2025, provide an update on our strategic initiatives, and to discuss our outlook for the year and share our updated guidance for the full year of fiscal 2025. After we conclude the prepared remarks, there will be time for questions at the end. With that, I'll turn the call over to our CEO, Steve Lawrence.

Thanks, Dan, and good morning to everyone on the call. I'd like to start by covering the subject that is top of mind for most analysts and investors, and that would be how Academy is navigating through the additional tariffs that have been levied since our last earnings call. We, like most people in our business, have been dealing with a fluid situation that's created a lot of complexity in how we forecast, and manage our business on a day-to-day basis. We're fortunate that we have a strong team that has navigated through other periods of rapid change, such as the pandemic in 2020, the cotton crisis from 2010 and 2011, and the subprime mortgage crisis in 2008 and 2009. The team has drawn on these past experiences to help strategize how to effectively navigate through the current situation. The first step was for the teams to calculate the impact on the business for the 10% reciprocal tariffs on most countries, coupled with the additional tariffs on goods coming out of China, which are currently set at 30%, along with the steel and aluminum tariffs. Once this work was completed, we moved to our second step, which was to work with our factories and suppliers to look for tariff offsets by reducing costs on product. Using this approach, we worked with each supplier in a partnership fashion to help share some of the burden of the incremental tariffs. From there, we moved to step three, which was to work on strategies to help minimize the impact that these additional costs will have on our customers and our internal P&L. The team has taken the following key actions on this front. First, we paused shipments out of China during the period that the tariff rate was set at 145%. Once the rate was lowered, we selectively resumed shipments. Second, we've accelerated our focus on reducing our exposure to products made in China. As we covered in our last earnings call, we've been on a journey over the past couple years to reduce our direct exposure to China imports, and we're pleased that at the start of the year, our exposure to products sourced from our private brands from China accounted for roughly 9% of our business, which was down from pre-pandemic levels. We have further accelerated our efforts here, and we'll reduce this number down to roughly 6% by the end of the year, versus our original goal of 8%. We've also leveraged our strong balance sheet to pull in domestic inventory on Evergreen product at pre-tariff prices. You can see this pull forward of receipts in our inventory at the end of the quarter, which was up 6.5% on a units per store basis. Next, we utilized our pricing optimization engine to look for opportunities to offset cost increases for strategic pricing and promotional adjustments. As we worked through these changes, our focus was to ensure that the impact on the customer was minimal while also protecting our position as the value leader in our space. We know that when discretionary spending is under pressure, customers look to maximize their spending power by seeking out value, and we plan to capitalize on this and capture market share by continuing to provide the best value in the sports and outdoor space. Finally, each of our branded partners has a different exposure to tariffs based off their unique supply chains. We continue to work with each of them on a case-by-case basis to develop offset strategies. At this point, We believe we've effectively mitigated costs of tariffs at their current levels while minimizing the impact on our customers. Moving forward, the team will remain nimble and make adjustments if or when the situation changes. Before moving off of the tariff topic, I think it is important to point out that as the situation has evolved, we continue to see an increase in foot traffic from customers to household incomes over $100,000 annually. This is a pattern we've seen emerge over the past couple of quarters, and it is starting to accelerate. We would expect this trend to continue as customers look to stretch their discretionary spending power by seeking out value. Carl will provide more details on tariff impacts and how we think it could influence our customer spending patterns, along with our updated guidance for the remainder of the year later in the call. Shifting to the first quarter fiscal 2025 results, as you saw from our earnings release earlier this morning, sales came in at $1.35 billion, which was down 0.9% to last year, and translated into a negative 3.7% comp. As we shared on our last call, February sales were soft, primarily driven by cold temperatures and winter storms across our footprint. We saw the business sequentially improve in March, and we exited the quarter with momentum, with April finishing with a positive comp. What were in apparel were the two strongest businesses for the quarter, running roughly flat for last year, with sports and recreation closely following. All three of these businesses started to accelerate once we got past the cold weather in February with warmer temperatures in March and April. Nike was a key sales driver across all three areas and, as you'd expect, was one of our best-performing brands in the quarter. Outdoor was down most single digits, primarily driven by software sales and ammo. Fishing, firearms, and coolers and drink were all posted solid increases for the quarter. We would attribute the momentum we're starting to build in the business to the solid progress we've been making against our long-term objectives and goals. And now I'd like to highlight some of the progress we've made on our strategic initiatives during the first quarter. New store expansion remains our largest long-term growth engine. We're pleased to see the 2022 and 2023 vintages, which are both now fully in the comp phase, have positive low single-digit comp growth in Q1. As we discussed in our last call, We're applying the learnings from each vintage to subsequent openings to continually improve our site selection process. You can see the impact of this in our 2024 vintage, which, while not currently in a comp base, is off to a great start, and we expect them to be strong contributors moving forward. We remain on track to open up 20 to 25 new stores this year and open five locations in Q1, including our first locations in Pennsylvania and Maryland. Our store count at the end of the first quarter was 303, and we now include 21 states in our footprint. While we're not ready to give guidance on our targets for 2026, we have thoughtfully slowed the pace of signing deals for the 2026 new stores. This will allow us to get a better handle on how the current tariff situation will impact construction costs moving forward. At this point, we don't expect it to change the overall number of new stores, but it will shift the timing of openings that were originally targeted for Q1 into Q2 or Q3, Our goal is to maintain maximum flexibility as we navigate a rapidly changing landscape. Our second growth pillar is to drive accelerated growth in our e-commerce business. We also made progress here during the quarter with academy.com posting a 10% sales increase and growing in penetration by roughly 100 basis points to over 10%. Our focus remains on delivering a streamlined experience on our site that is intuitive and inspiring. A lot of the work completed in Q1 was around streamlining and improving the internal search functionality of our site. At the same time, we've also been pushing hard to grow our endless aisle offering with an expanded assortment online supported through dropship. The team has been making solid headway on both fronts, and you can see it reflected in improvements in both conversion rate and average order value during the quarter. Our third growth pillar is to improve the productivity and drive the business within our existing stores. As we discussed during our last call, we have multiple initiatives targeted at achieving this goal. A major tentpole to this strategy is delivering new brands and products that inspire customers to shop more frequently at Academy. To this end, on April 23rd, we launched the Jordan brand in 145 doors and online. This was the first time that we crossed merchandise apparel, footwear, and accessories together by gender into a branded shop concept. Our Jordan brand offering is focused on sports products at accessible price points For example, a key shoe for us is a Luka 77, which is a game shoe that someone would actually play basketball in. It can also work as a casual shoe, and it retails for $99.99. My son is a sneakerhead, and I can assure you that I've paid over $100 for his first pair of Jordans. While it's still early days, the initial reaction with the customers was strong, and the brand is tracking ahead with initial sales plans. Our goal is to expand key items such as cleats for football season into all doors later this summer, and we anticipate the Jordan brand will be a top 20 brand for us by the end of the year. Our second tactic under this color is to better leverage technology to improve our customer shopping experience. Our focus this spring has been on rolling out RFID scanners to all stores, coupled with new handheld devices for our team members, and we just completed the full chain rollout at the end of May. Simplistically, we're leveraging RFID chips already embedded in products from key brands such as Nike, Jordan, and Adidas, to update store inventories on a weekly basis. When we piloted this technology in 70 stores last year, it led to a 20% improvement in store-level inventory accuracy. Rolling this technology to all stores will help improve our in-stocks, which ultimately will lead to increases in conversion. As we move through 2025, we expect to add more brands for regular RFID counts, such as Levi's, Under Armour, Columbia, Brooks, and Puma. Looking into next year, Our goal is to embed RFID tags in most of our private label products, along with working with other national brand suppliers to follow suit where it makes sense. The other new piece of new technology is our handheld devices, which have POS functionality integrated into them. With this new capability, if a customer cannot find something in a store and we own it somewhere in the chain, we can save the sale and get the customer what they need, either by shipping it to their home or to their closest store for a bonus pickup, whichever is most convenient for them. As stores have started to use this new technology, we're seeing their save-the-sale revenue increase 900% on average per store. The last thing I'll cover on our long-range plan is the work we've done to improve our marketing reach and effectiveness. In late April, we launched a new campaign, which was created by our new agency of record, Gary Jesse, and features our new tagline, Fun Can't Lose. We believe that this new campaign is authentically Academy and is resonating well with our customers. It serves a dual purpose in both driving top-of-mind brand awareness while also reinforcing our strong value messaging. In addition, we're increasing our advertising spend by 10 basis points this year to 2.7% of sales to support this campaign while also spotlighting our Jordan brand introduction and our new store rollouts. Another key focus on the marketing front is to leverage our new loyalty program to drive value for the consumer. We're planning to add an additional 2 million customers to MyAcademy Rewards in 2025 and which should take us to over 13 million members by year end. Growing our loyalty program membership will drive growth for us both now and in the long term. Loyal, more engaged customers tend to shop Academy two to three times more in a year than an average customer and spend four to five times more on an annual basis. While we're excited about the progress we're making against our long-term initiatives and the momentum we're starting to see in the business, we're also sober about the fragile state of the U.S. consumer and the inflationary pressures it could face as the year progresses. As noted in our Q1 fiscal 2025 earnings release, we're widening our comp sales guidance to account for an expanded range of outcomes. Our balance sheet is strong, and we're confident that we have the right team and strategy in place to effectively navigate through the short-term disruptions for the consumer. On a longer-term basis, we believe our long-range planning strategies and investments are just starting to bear fruit and have a long runway ahead of them. and that the future is bright for Academy. I'll now turn the call over to Carl to review the financials in more detail and provide an update on our guidance. Carl?