Good morning, ladies and gentlemen, and welcome to the Academy Sports and Outdoors Second Quarter Fiscal 2024 Results Conference Call. 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. 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 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 risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the earnings release and in our SEC filings. The company undertakes no obligation to revise any forward-looking 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?

Thanks, Matt. Good morning to everyone, and thank you for joining our second quarter 2024 earnings call. We truly appreciate your interest and support of Academy Sports and Outdoors. Sales for the second quarter came at $1.55 billion, which was down 2.2% versus the second quarter of last year and which translated into a negative 6.9% comp on a shifted basis. The active young families that we primarily serve remain under financial pressure. They are struggling with reduced spending power, driven by price inflation coupled with higher credit card debt and delinquencies, both of which remain well above pre-pandemic levels. We continue to see these factors constrain household spending on discretionary goods in the near term. At the same time, we faced a very active storm season during the quarter, which included tornadoes in Houston and Dallas in May, and Hurricane Beryl in July, both of which disrupted the business in some of our biggest markets for several weeks during the quarter. Hurricane Beryl was particularly impactful and left a few million people without power for multiple days. After making certain all of our team members were accounted for and safe, we started reopening stores as quickly as possible and began reaching out within the local communities to provide assistance where we could. As part of the recovery effort, Academy donated nearly 200,000 bottles of water to help provide relief from the summer heat to those without power. We also provided financial assistance to more than 450 of our associates through our team member assistance program. I'm very proud of the team for their efforts to quickly deploy the supplies to help out the communities we serve. We estimate that these events negatively impacted our sales for the quarter by approximately $16 million, or roughly 100 basis points in comp. The other challenge we faced had to do with some of the issues that arose as we converted our Georgia distribution center to our new warehouse management system. As we mentioned in our last call, the initial switchover went smoothly. The main issue we faced was that the ramp up in productivity from the system scaling up could not keep pace with the accelerated throughput we needed to keep us fully in stock during the large volume weeks we experienced during the key summer months. Working through these sorts of issues is par for the course in these types of systems implementations, and at this point, we're now mostly caught up in this facility and believe it will be ready to take on the accelerated volume we will see as we ramp up for the holiday season. Our estimate is that the out of stocks created by this issue cost us approximately $32 million in sales, or roughly 200 basis points in comps. We intend to apply the learnings from this go-live to our Cookeville, and Katy, DC rollouts to help minimize any impact on our sales. At this point, we believe we will convert our next DC in Cookeville, Tennessee in early 2026. While we're not satisfied with our Q2 results, we recognize that we continue to operate in a challenging retail environment for the sports and outdoor categories. Our goal remains to grow market share, and we're pleased that we continue to hold on to the lion's share of the business we picked up over the past five years, Q2 sales running up 25% versus pre-pandemic levels. The trends we've cited in previous calls in terms of customer shopping patterns continue to hold true. We're seeing customers coming out to shop during the key moments on the calendar and then pulling back on spending during the lulls. Sales results during key events such as Memorial Day, Father's Day, and the 4th of July were solid and in line with our expectations. The back-to-school business, which straddles Q2 and Q3 for us, was weaker than anticipated at the end of July. As we turned the corner into August, we saw that customers were compressing their shopping closer to the school start dates, which shifted some volume from late July into August. Looking at sales across both months, we're pleased with the overall results for back-to-school and the solid start to Q3 that it gave us. Business outside of these key time periods is more challenging than anticipated, primarily driven by the aforementioned storms and DC conversion issues. When the customer does come out to shop during the key events of the calendar, we continue to see them gravitate towards value as well as the new and innovative items in our assortment. We will continue to leverage these customer shopping behaviors by leaning into our position as the value leader in our space across all touch points. Our approach is to drive traffic with strong everyday pricing day in and day out, while focusing our promotional efforts into the key shopping moments on the customer's calendar. At the same time, we will continue to incubate new ideas and roll them out aggressively as they resonate to ensure that we're delivering a steady diet of newness to our customer base. In terms of performance across our different businesses, on a non-shifted sales basis, footwear was the best performing division with sales increasing 1% over last year. Kids and athletic footwear outperformed for the quarter, driven by increases in leading active brands such as Nike, Brooks, ASICS and New Balance. Work footwear was also a key contributor with strong sales in Ariat and Wolverine. We're also pleased with the momentum we're seeing in our casual business driven by Birkenstock, Crocs and Skechers. The outdoor division also ran a 1% increase during the quarter. We continue to see strength in hunting and fishing businesses. Drinkware also remains a strong trending category with YETI, Stanley and Owala all consistently delivering a strong pipeline of newness. Apparel sales were down 2% for the quarter. Within this division, our kids business ran a solid increase. Our adult outdoor and athletic businesses performed in line with the average for apparel. Across both adult and kids, we continue to see strong results from key national brands such as Nike, Carhartt and Levi, while also seeing solid growth in some of our newer private brands such as Freely and R.O.W. Similar to Q1, our licensed team sports business underperformed, primarily driven by slow starts by the key professional baseball teams in our region, including the Rangers and Astros. As a reminder, the bulk of this business is done in the back half of the year and we remain optimistic about our ability to turn this business around as we head into college and pro football season. Sports and recreation was our most challenged division with sales down 7% versus last year. We were encouraged by our team sports business, which ran a modest increase during the quarter, primarily driven by baseball, football and pickleball, but that was not enough to offset the declines we continue to see in several of the big ticket long replacement cycle businesses. Certain sports and recreation categories such as pools, trampolines and fitness, along with kayaks and power marine and outdoor division continue to be some of our softer businesses. To help manage through these slow sales trends, we've rightsized the inventory, floor space and marketing investments for these businesses to align with their current sales contribution. As I covered on the last earnings call, we also continue to invest in new ideas and brands as a way to spark demand and stabilize the trend lines in these categories. We've seen some early encouraging results with some of the new ideas in fitness that started landing later in the quarter, such as walking pads, and we will need to continue to monitor progress here as we move forward throughout the fall. At this point, we've made it through many of the key selling events for 2024, including a strong finish to back-to-school which just wrapped up in August, and we're now more than halfway through the fiscal year. Year-to-date sales through August are down 2.9% to last year, which translates into a negative 5.4% comp on a shifted basis. We believe that most of the economic factors suppressing consumer spending on durable goods will continue throughout the remainder of the year. Based on this and our year-to-date results, we believe it is prudent to revise and narrow our annual guidance. We now forecast sales for the full year to range from $5.9 billion to $6.07 billion, which would be a negative 4% to negative 1% decline in total sales versus last year, and a negative 6% to negative 3% in comp sales. The team is laser-focused on aligning our expenses, receipt flows and inventory with this revised forecast. From a profitability standpoint, our gross margin rate came in at 36.1% for the quarter or a 50 basis point increase versus last year. Despite the softer than anticipated sales trends, we remain focused on our inventory control disciplines, which we believe will enable us to achieve our full year gross margin rate guidance range of 34.3% to 34.7%. Carl will discuss our profitability performance and revised guidance in more detail in his comments later in the call. Beneath the surface, we continue to see some green shoots in our business as our growth strategies from our long range plans start to take root. As a reminder, those are opening new stores and expanding our store base, building a more powerful omnichannel business and driving greater productivity out of our existing businesses. Now I'll give you an update on each. New store growth remains our primary sales driver, and for the second consecutive quarter, our 2022 vintage of new stores posted a positive comp despite the challenging economic backdrop. At the same time, we're continuously applying learnings from each new store opening to future vintages, and we remain pleased with the sales trajectory we're seeing for both the '23 and 2024 vintages of stores. During the quarter, we opened one new location in Zanesville, Ohio, and the leaders in the store are strong. This is our first store in Ohio, expanding the academy brand to 19 states. As we've discussed previously, our goal is to quickly build density in these new markets after we enter them. So you'll see our second Ohio store open up this fall, with several others planned for 2025 and 2026. While we currently only have nine stores from the 2022 vintage in the comp base, as we lap the majority of the 23 stores in the back half of the year and into early next year, we expect the contribution from new stores to increase their impact on the total company comp sales trend. Year-to-date, we've opened up three new stores and are currently on track to hit our goal of 15 to 17 new stores this year. In terms of our second growth initiative, our dotcom business ran its third consecutive quarter of positive growth and our penetration increased to 9.7% of total sales, which is 30 basis points over last year. While it is still early days and the contribution level is still low, we're encouraged by the performance of some of our new capabilities, such as same day delivery, powered by DoorDash. Our initial analysis for DoorDash data indicates that the business generated through this platform is accretive due to it attracting both a younger customer along with customers who tend to live in more dense urban city centers, where we don't have a large brick and mortar presence. The third leg of our growth strategy is to drive greater productivity out of our existing business. We expect that a key contributor to this will be the work we're doing around expanding our customer base while also cultivating a deeper engagement with shoppers who are already in our ecosystem. During Q2, we launched My Academy Rewards, which rolled out to all stores in early July, and it's meant to supplement our academy credit card, which remains the highest tier in our loyalty program. As a reminder, the key value propositions include a welcome offer of up to 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, a birthday reward and insider access to personalized offers, deals and products. A great example of this last benefit was in an activation campaign we ran at the start of back to school. We worked with Stanley to procure an exclusive limited edition colorway in their iconic Adventure Quencher tumbler. This exclusive color was only available to members of our loyalty program for the first week, we saw it drive strong sign-up and engagement with our My Academy Rewards program. While we just launched it, we're pleased with how our customers are embracing and actively signing up for My Academy. To put some numbers around this activity. Our daily signups are over three times what we previously saw from customers opting in to create an account with us and/or opting into targeted marketing efforts. Our original goal when we constructed the program was to have over 10 million members enrolled by the end of the year. And based on the early reads, we're confident that we'll exceed this goal. While getting customers to sign up is step one, the real value of loyalty will be to migrate customers from occasional shoppers to loyalists. We know that our best customers are omnichannel shoppers and they shop with us three to four times more frequently than a single channel shopper, and that on an annual basis they spend four times as much with us. To reiterate, we're not satisfied with year-to-date results, but are encouraged by our performance during the key shopping moments in the calendar, including the strong finish to back-to-school. The team is moving with urgency across all fronts and is single-mindedly focused on improving our top line performance. While we cannot control many of the economic factors our customers are dealing with, we can control how we deliver in market, value and newness to our customers on a consistent basis, which should lead to improving our top line performance while maintaining our bottom line profitability. Our focus remains on managing through the short term by growing market share while also planting seeds for the future executing against our long range growth platforms. Now, I will turn it over to Carl who will give you a deeper dive into our Q2 financials and our updated guidance for the full year. Carl?

Thanks, Steve, and good morning, everyone. Steve covered some of the numbers, but I am going to walk you through the results in more detail. The second quarter sales of $1.55 billion and comparable sales of negative 6.9% fell short of our expectations, primarily due to a decline in store traffic compared to last year. Our comp transactions declined 7.4%, while comp ticket increased by 0.5% compared to last year. Our primary customers, those with annual incomes of between $50,000 and $150,000, remain very budget conscious and cautious, showing low consumer sentiment for certain discretionary categories. We also see an increase in credit card and buy now pay later usage in conjunction with household debt continuing to reach multiyear highs. So while inflation has moderated, prices are still high and that along with an increase in personal debt is impacting spend in our category. During the quarter, we did see a sales trajectory lift during the major shopping events, but it was not enough to offset the slow periods in between. Speaking to the trends of the quarter, May was impacted by tornadoes in our two biggest markets, Houston and Dallas-Fort Worth. Sales improved in June, but weakened in July due to Hurricane Beryl hitting the Houston area, the impact of temporary outbound inventory issues at our Georgia distribution center and a compressed back-to-school shopping period. Our gross margin rate in the second quarter was 36.1%, a 50 basis point increase compared to Q2 of last year, primarily driven by inventory cost management and lower freight expense. Shrink was five basis points better than last year as a percentage of sales. Our second quarter SG&A expense of $368.6 million was $16 million, or 150 basis points higher than Q2 of last year. All of the increase is attributable to spend on our growth initiatives, primarily for new stores and technology. We are confident in our long range plan and are committed to investing in it, while also controlling our existing cost structure. Overall, in the second quarter, Academy had a double-digit EBIT margin rate of 12% and generated net income of $142.6 million and diluted earnings per share of $1.95. Adjusted net income, which excludes stock-based comp of $8 million, was $148.6 million, or $2.03 in adjusted earnings per share. Looking at the balance sheet, we ended the quarter with $325 million in cash. Our inventory balance was $1.37 billion, an increase of 4% compared to last year. Total inventory units were flat, and this includes having an additional 15 stores compared to the end of Q2 2023. On a per store basis, inventory units were down 5%. The merchandising team continues to do a great job of managing our inventory in sync with our sales. In terms of capital allocation, our strategy remains the same, to execute against our three pillars, which are; one, financial stability; two, self-funding our growth initiatives; and three, increasing shareholder return through share repurchases and dividends. We believe these priorities will help drive future sales and earnings growth as well as increase shareholder value. In Q2, we generated approximately $91 million in cash from operations. We invested $41 million in our growth initiatives, repurchased approximately 1.8 million shares for $99 million, and paid out $8 million in dividends. Year-to-date, Academy has generated approximately $217 million of adjusted free cash flow, compared to $136 million during the first half of 2023. This is a 60% increase, driven by strong retail operations across Academy. Tangible examples include; one, disciplined inventory control leading to a decline in units per store; two, managing promotions in a strained economy resulting in 10 basis points of year-to-date gross margin rate expansion; three, controlling expenses while investing in growth initiatives; and four, reducing the amount of capital it takes to open new stores. Finally, the Board recently approved a dividend of $0.11 share payable on October 17, 2024 to stockholders of record as of September 19, 2024. Now, turning to our outlook for the remainder of the year. Based on the current state of the consumer and our year-to-date results, we are revising our previous guidance for fiscal 2024. One note, in addition to GAAP measures and adjusted free cash flow, we are also providing guidance on two non-GAAP measures, adjusted net income and adjusted earnings per share. Our revised guidance is as follows. Net sales are expected to range from $5.9 billion to $6.07 billion, with comparable sales of negative 6% to negative 3%. Let me provide a bridge between the low end and the high end of the comp range. The low end of the range assumes that the economy does not improve meaningfully over the back half of the year and that there is no real change in our customers' behavior. The delta from the low end to the high end estimates that sales remain on the current August trend, and we benefit from some or all of the plans and tactics we are deploying to drive traffic and sales in our stores and online. These include adding 12 to 14 new stores, focusing on promotional efforts around the key shopping events utilizing our customer data platform, being more pronounced with our value messaging, bringing in more new and innovative products, capitalizing on our resurgent outdoor business, growing the new My Academy loyalty program, and finally leveraging DoorDash, especially after the Christmas shipping cutoff dates. Our gross margin rate is still expected to range from 34.3% to 34.7%. Our SG&A expense rate is now expected to be approximately 150 basis points higher than in 2023. GAAP net income of between $400 million and $460 million. Adjusted net income which excludes certain estimated expenses, primarily stock-based compensation of approximately $27 million, is forecast to range from $420 million to $480 million. GAAP diluted earnings per share of $5.45 to $6.20, and adjusted diluted earnings per share of $5.75 to $6.50. The earnings per share estimates are based on a revised share count of 73.5 million diluted weighted average shares outstanding for the full year. This amount does not include any potential future repurchase activity using our remaining $476 million authorization. We also remain confident in the strength of our cash flows and still expect to generate between $290 million and $340 million of adjusted free cash flow, including $175 million to $225 million of capital expenditures. The reduction in CapEx guidance is primarily from the work of our real estate and construction team, finding ways to open stores more efficiently and building those cost savings not only into 2024, but '25 and beyond. We are proud of the value engineering work Sam Johnson and his real estate team have done in lowering the cost profile of our new stores. When we first restarted opening stores in FY '22, we were far from optimized. As we build our capabilities and leverage our scale, we have found a number of ways to optimize costs, inclusive of raw material procurement, construction services and landlord participation. This value engineering is also benefiting our store remodel program, allowing us to better serve our team members and customers for less. Finally, as we focus on our growth strategy, we have elected to pursue fewer technical projects to focus on our biggest projects associated with omnichannel, our customer data platform and our new WMS system. Through the first half of the year, our sales were lower than expected, but we have prudently managed expenses, resulting in a double-digit EBIT margin. We also increased our adjusted free cash flow by 60% over last year, which we utilized to repurchase 3.8 million shares, or 5% of the outstanding shares of the company. At the same time, we have self-funded the investments in the growth pillars of our long range plan. We believe the actions we are taking to grow the business will drive future sales and earnings growth. With that, we will now open it up for questions.

Our first question today is from Brian Nagel with Oppenheimer. Please go ahead with your questions.

Hi, good morning.

Good morning, Brian.

The first question I want to ask is a maintenance question, and I apologize for that, but I just want to better understand the sales trajectory in the business. I want to confirm my understanding of your prepared comments. You mentioned that there was essentially a 300 basis points impact on comparable sales from either the weather or the distribution center issues. You also provided a comparable sales figure for August showing a decline of about 5 percent. So my question is, how do we reconcile that? Has the business improved going into August with the back-to-school season starting?

Yeah. So in terms of the trajectory, what ended up happening was, we talked about the events being strong, right? So we saw a strong Memorial Day. We saw a strong Father's Day. We saw a strong 4th of July. Business was impacted in early July with the onset of Hurricane Beryl, that lasted for about 2 weeks where we felt that depressed business. And then towards the latter part of the month, I would think that's where some of the in-stocks hurt us from our Atlanta facility, right? So that probably suppressed a while a little bit, plus a little bit of trade-off volume into August. Business really rebounded in August. We actually ran a positive comp in the month of August, which we're pretty excited by. It's one month. We don't want to get too far ahead of ourselves. But it kind of bracketed, we had a positive comp for the 4th of July week, and then we had kind of some disruption in the business and came back to a positive comp in August. So it feels like some of the initiatives that we're working on are kicking in. It's still early, right? We still have a lot of the back half ahead of us. The negative 5.4% that we cited was the year-to-date comp through seven months. So not to be confusing, we were down about 6.4% through six months. Through seven months, it was down 5.4%. We wanted to provide that data point because we get questions around, okay, the low end of your guidance is down 6%. We wanted to make sure people understood that we were within the low end of our guidance in that guidance that we gave you.

Got it. That's very helpful. So just to reemphasize, the comp in August was positive.

Correct.

Okay. And the second question I have as a follow-up to that. I mean what you're saying today and we're hearing from a lot of other companies is that consumers are showing up for events. It's just that there's incremental weakness and the lulls between those events. So I guess the question I want to ask, you've done a great job of maintaining gross margins, and you're looking at your guidance, you expect that to persist for the balance of the year. But is there any thought, given the state of the consumer, given how the consumer is behaving, to get more selectively promotional here to drive better sales?

Yeah, we've tried a lot of different things over the past 12 months to try to stimulate sales, particularly in those lulls. And what we found is, in those lulls, when the customer is really pulling back on spending, running extra promotions tends to erode our AUR. We don't get the unit uplift to offset the AUR erosion, and we just give up margin. So the strategy we've landed on that really seems to work for us is draft off our everyday value proposition kind of in the lulls in between because we have really strong everyday value, whether it's in our private brands or national brands that we offer, and then really aggregate those promotions around those must-win moments. And that really seemed to work for us, and I see that continuing as we move forward through the remainder of this year.

All right, guys. I appreciate the color. Thank you.

No problem. Thanks, Brian.

Thank you. The next question is from the line of Anthony Chukumba with Loop Capital Markets. Please proceed with your question.

Good morning. Thanks for taking my questions. What are you seeing in terms of the competitive landscape? I mean particularly, given the fact that as you mentioned, consumers are really kind of in a pressure right now. Is it just getting any more promotional out there? I mean, anything notable that you would point out there?

I believe we are seeing a continuation of trends that we have discussed on previous calls regarding the highly promotional environment before the pandemic. Much of that diminished during the pandemic. As time goes on, we are noticing an increase in promotions at various events. However, we are still far from returning to pre-pandemic levels. It seemed that there were more promotions and broader promotions during the back-to-school season, but we are still not at the levels we experienced before the pandemic. We have factored this into our promotional strategy for the rest of the year and feel confident about it. I would say it is slightly more promotional than last year, but definitely not back to previous levels.

Anthony, from a competitive landscape standpoint, I think you see promotions spike when retailers don't control their inventory. We feel good about where we are from an inventory discipline standpoint. Units per store were down 5% year-over-year. And looking at a lot of the earnings that I've seen come out thus far, it looks like inventories are relatively well controlled across the channel. That's just my viewpoint. But I think to the extent that people let inventory get out from under them, that will tend to inflect promotionality. And again, we're just going to lean into what Steve said on everyday value in the lulls and then win on the must-win time periods.

Got it. That’s helpful. Thank you.

Thanks.

Our next question comes from the line of Seth Basham with Wedbush Securities. Please proceed with your questions.

Thanks a lot and good morning. My first question is just thinking about the improving trend in August and expectations for the back half of the year. You gave some good color on the low end versus high end of the comp outlook. But if we think about some of the other drivers of potential improvement, perhaps you could give us some more color on things like contribution from new stores that are coming in the comp base? And how much do you expect from the loyalty program?

Sure. When considering our guidance, the lower end reflects our expectation that the trends observed in the first seven months will continue. This means we anticipate ongoing declines in the range of 5.4% to 6%, without much improvement. It's worth noting that the 5.4% decline during those months included challenges from adverse weather and a slowdown at our Atlanta facility, which we believe is mostly behind us now. Looking ahead, we hope to avoid similar issues. The upper end of our forecast suggests that trends seen in August will persist to some extent for the rest of the year, supported by several factors. We plan to focus on customer behavior, ensuring we offer good value and appropriate pricing during key promotional periods, while also striving to gain market share with new products and innovations, as customers are still willing to buy irrespective of price. We've seen a rebound in our outdoor segment and an uptick in the footwear and apparel markets. Notably, our performance in August was strong across various categories, not just back-to-school items; we had significant strength in both kids' and adults' footwear and apparel, as well as in outdoor products. Additionally, our new stores are contributing positively, with stores from the 2022 cohort showing two consecutive quarters of positive sales growth. As we progress through this year, new stores from 2023 will start to contribute as well. Our new loyalty program, although still in its early stages, has seen sign-up rates accelerate to three times faster than before. This will enable us to implement more targeted marketing, and we’re on track to exceed our goal of over 10 million customers in the program by year-end. The upcoming election year presents uncertainties that could enhance some areas while potentially harming others. Our online sales have continued to experience three quarters of consecutive growth. We’ve also launched same-day delivery through DoorDash, which allows us to reach more customers in urban areas, notably enhancing our offering. This is particularly beneficial during the crucial holiday shopping period, especially right before Christmas, when timely delivery becomes a concern. These initiatives are aimed at elevating our results from the lower end to the higher end of our guidance.

That's really helpful color. And maybe just a follow-up on new stores. Could you provide some more information on how the 2023 class is performing relative to your expectations? And as you look to 2025, do you plan to materially accelerate the number of stores you're opening that year relative to 2024 to hit your medium-term guidance? Thank you.

I'm excited to share that the stores from the 2022 vintage are showing positive comparable sales. We have taken insights from each vintage and applied them to the next. I'm pleased to report that the 2023 stores, while not yet included in the comparable sales, are performing better right from the start compared to the 2022 vintage. We have just opened our fourth store in Beckley, West Virginia, and we anticipate that these stores will outperform the 2023 vintage. We see consistent improvements as we launch each vintage. This year, our goal is to open 15 to 17 new stores, with a target of 160 to 180 over the next five years, indicating an acceleration next year. While we haven't specified the exact number yet, we expect to open more stores than the 15 to 17 planned for this year.

Our next question is from the line of Simeon Gutman with Morgan Stanley. Please proceed with your questions.

Hi everyone. Following up on the prior question. Steve, if you look at the holistic spread between the comps of new stores and mature stores, however way you can segment them, is that spread roughly holding? Did it narrow? Did it widen if you look first to second quarter? Thanks.

I would say that the comp between new stores and existing stores was about the same first quarter to second quarter. The thing we're pleased by is when you think about our growth strategies, I mean, we talked about, obviously, new store growth is number one platform for growth, and that's where we're going to get the biggest bang for our buck. The second one is dotcom. But implied in our long-range plan is to have flattish to slight comp increases in the base. We haven't had that. So the fact that the new stores are comping positive, that's a much bigger spread than we initially modeled between the base and the new stores. And our hope and belief is that as we see the base business starts to come back, that we'll see an even greater acceleration in the comp on a new store waterfall because if we can hold that same delta, that would be really, really a strong outcome for us.

The next question is from the line of Justin Kleber with Baird. Please proceed with your questions.

Hey, good morning everyone. Thanks for taking the questions. First, just on gross margin. Steve and Carl, you mentioned inventory cost management. Can you comment just on how merchandise margins performed during Q2 and what your guidance assumes for merch margins across the back half of the year?

Yeah. So just in review, 50 basis points of gross margin in Q2, year-to-date up 10 basis points. My comments are on Q2. So that 50 basis points is a composition of about 20 basis points from a merchandising margin tailwind, slight tailwind associated with freight. Shrink was 5 basis points better. So nothing much to speak of there. I think it's good old-fashioned like inventory management, to be honest with you, and leaning into promotions only during those key time periods and then leveraging EDV during the lulls. That's a bit of a composition.

So from a guidance perspective, we held guidance at 34.3% to 34.7%, implied in that is roughly a 40 basis point spread. That 40 basis points would be driven primarily by merchandise margin if we achieve the high side of that guidance.

Got it. Okay. Thank you. Very helpful. And then just given last year's extra week and the fact each quarter this year starts one week later, what was the sales and EPS benefit here in 2Q? And can you provide just any color on what that calendar shift headwind will look like as it reverses across the back half of the year, just so we have our models calibrated appropriately?

Yeah. For Q2, it was about $35 million benefit to the second quarter. So that's how I comment a bit on the shift. That will reverse the bulk of that in third quarter, the remainder in fourth. I've heard a lot of commentary in the marketplace associated with that cadence. It's applicable to us. The magnitude is just a bit different based on our size and scale.

Just to be clear, that impacts the total number that we're reporting. The comp number is on a shifted basis.

Absolutely.

Thank you. The next question is from the line of Cristina Fernandez with Telsey Advisory Group. Please proceed with your questions.

Hi, good morning. I wanted to ask about the improvement you saw in August. Were there specific categories that had more of a benefit? And can you talk about was the improvement mostly in traffic or conversion, just to understand what led to the better trend?

Yeah, the primary improvement came through traffic. We also had some AUR uplift during the month as well. In terms of the performance, it was fairly broad-based. I would say initially, the first part of the month, it was more back-to-school driven. Obviously, footwear, apparel driving that. But that being said, our back-to-school is earlier. We don't have a lot of school districts in our geography to go back-to-school closer to Labor Day. So really back-to-school for us kind of straddles that last week or two of July into the first week or two of August. And we saw continued strength once we got past those first two weeks all the way through into Labor Day. And it was broad-based. It was apparel, it was footwear and it was our outdoor division. So I think certainly, we saw an increased traffic from back-to-school, but it felt like it kind of sustained as we moved through the month, which was encouraging to us.

Thank you. Our next question comes from the line of Christopher Horvers with JPMorgan. Please proceed with your question.

Thanks. Good morning, guys. So just wanted to follow up on the August comment. Can you maybe, back into like maybe a slightly positive comp. Like, to what degree was August positive? And do you have an estimate of maybe how much the back-to-school shift helped August?

I'm not going to get into the quarterly comp progression. It was positive. We're excited about that. It was a significant trajectory change from what we saw obviously in July. I think some of it, you're probably right. We thought that at least the first week or two, it was some compression of back-to-school timing where people are buying closer to need. We certainly have seen that happen even if you go back to 4th of July or Memorial Day, where it used to be maybe a five to seven-day event, maybe it's a three to four-day event now. So we see that compressed shopping pattern happen. And that's what we initially thought was happening in August. But the fact that it's sustained throughout the entire month, and we also saw a really strong Labor Day and that it was more broad-based outside of just the back-to-school categories was encouraging. That being said, we still have nine weeks ahead of us throughout the quarter, so we don't want to get too far ahead of ourselves. It was an encouraging early sign to see kind of that sales trajectory flip during the back-to-school time period.

Our next question is from the line of Henry Carr with UBS. Please proceed with your question.

Hi, this is Henry Carr on for Michael Lasser. Thanks a lot for taking our questions this morning. I just want to clear up. So the $16 million headwind from the storms and the $32 million headwind from the out-of-stocks both occurred in 2Q, and the out-of-stock issue isn't expected to impact 3Q and 4Q?

Yeah, that's correct. I mean the statement is we're mostly caught up. What ended up happening there is we actually had anticipated some slowdown and we put goods into the stores and service providers to see extra goods to help them get through the month of May all the way into Father's Day. The ramp-up of productivity was a little slower than we anticipated. So it did create some out-of-stocks as we got past Father's Day and the summer months. The team, now that we'll pass that back-to-school surge, is chipping away at the backlog. And as I characterize it, we're mostly caught up at this point. It actually did impact us a little bit in August, but we offset that with the strength of the rest of the business. So positive comp that we had did have some impact to that. But as we move into September and beyond, we're kind of in a lull for the next probably 30 to 45 days until we see it start to ramp up heading into the holiday. So we don't anticipate it having any impact on our business heading into holiday.

Okay. Thanks. And just as a follow-up, the strong performance in the second quarter was driven by effective inventory management despite the challenges of being out of stock.

Yeah, that's right. Yeah. So when we quote like inventory per store or units per store, we're quoting the total inventory divided by the number of stores. Some of that inventory does happen to be in the distribution center at any given time. But yeah, inventory management, units per store are down 5%. We like where that's at. Launching nine new stores. So there was a little bit of inventory in there associated with stores that haven't opened yet. And then, yeah, the composition of the gross margin, call it 20 basis points, merchandising margin, a little bit of good news from a shrink, from a freight standpoint, a mix of other things. We feel good about the composition of the margin. As we mentioned, I think this is a bit of a surprise to the external user because our gross margins were down 40 basis points in the first quarter. It was that over penetration to clearance we feel like right now, with what we've got going on from an inventory composition standpoint, the newness, the freshness, per store efficiencies, that's what's driving gross margin, and we feel good about that going into fall.

Thank you. Our next question is from the line of Robby Ohmes with Bank of America. Please proceed with your questions.

Hello. Good morning, everyone. Thank you for addressing my question. As you look towards the second half of the year, particularly the holiday season, could you share your thoughts on the merchandising strategy for this period? Are you anticipating better allocations from some key brands? How do you feel about YETI and Stanley drinkware? Do you expect to have a more favorable setup for the second half compared to the first half, especially with Nike? Are there any new footwear brands that will be introduced in the second half that were not present in the first half? Any insights on this would be appreciated.

Yeah. So I'll say, in general, we feel very good about where we're positioned for holiday. I think that the team is really leaning into kind of both ends of that barbell we talk about. There's a ton of newness coming in. You're correct in your assumption that we're getting a lot better allocation of both Stanley and YETI. And candidly, Owala is coming up as a strong kind of third contender in that mix. And we feel really good about the inventory we have positioned in all of those brands. And the interesting thing is all three of them are performing very well for us. I think they're generating a steady diet of newness across all three of the brands. And I think that's going to really help us heading into holiday. We continue to work with our existing vendors to get greater access to product. We continue to get expanded access, particularly within Nike, as you mentioned. Shoes like the 270 works in more doors, they add more colors. And so we're excited about that. We're taking some ideas we tested last year, and we talked about this on a previous call, where Birkenstock has done really well. We've expanded our distribution and our door count there. UGG was having a lull on last holiday. We carry Koolaburra by UGG, that's going to be an expanded door count. So we feel really good about on one end, the newness component and then the team is loaded for better on value. I mean, we've gone after a lot of these key categories. We saw a really strong trend in opening price point drilling over the summer. And so we're going to lean into that kind of an idea as we head into holiday. So we feel like we're well positioned. The only wild part really is just the compressed holiday calendar we're dealing with.

Got you. That's helpful. And then a quick follow-up. Did you guys give the digital percent of sales for the quarter? And also related to that, is DoorDash expected to drive up digital penetration, the trajectory there for the back half?

Dotcom penetration increased by 30 basis points for the quarter. Currently, DoorDash is not contributing to the dotcom figure as it's managed externally. As we move into Phase 2, which includes same-day delivery on our site, it will begin to impact the dotcom metrics. At this time, it is not contributing to those numbers.

Our next question is from the line of John Kernan with Cowen. Please proceed with your questions.

Hey, good morning. Thanks for taking my question. A lot of helpful commentary on quarter-to-date and outlook for the back half of the year. I think 12 of the stores from the 2023 cohort are going to jump into the comp base pretty soon, and you had pretty bullish commentary on how they're performing versus the '22 cohort. How should we think about new store productivity as you start to ramp openings? It sounds like even beyond the 16 or the 15 to 17 you're doing this year? Thank you.

Yeah. From a new store productivity standpoint, we're still kind of operating within the framework of what we put out there, $12 million to $16 million year one sales, it's going to be towards the low end in the newer markets where brand awareness is lower. It's going to be at the higher end on existing markets where there already is a brand awareness of what an Academy Sports and Outdoors is. Committed to 20% ROIC is a hurdle rate. Payback is typically in year four on a cash-on-cash basis. We put out there $4 million to $5 million from a CapEx standpoint. I gave a little bit of commentary about what the real estate team is doing there. I think as we begin to scale this program more, they're finding more efficiencies, not only with how we're working with landlords, but also raw materials and whatnot. Yeah, positive comping, second quarter in a row from a '22 standpoint. I think our first new store from 2023 has just entered the comp set. We're not going to speak on kind of individual onesie, twosie stores. But obviously, from a comp waterfall standpoint, the more stores that we get into that waterfall that are in the aggregate providing comp sales, obviously, that lifts all boats from a comp trajectory standpoint. But with only nine in there right now from '22 and the first one from '23 standpoint. Again, we'll kind of talk about all of our initiatives as we move forward, but we're pleased with what we're seeing, and it's operating within the framework that we put out there for you guys.

That's helpful. Moving on to SG&A, you have provided clear guidance for the latter half of the year. The new stores will contribute additional expenses to the income statement. As we look ahead to potentially faster unit growth in 2025, how will that impact the overall SG&A rate? What should we consider when modeling SG&A expenses?

The LRP experienced a 200 basis point decline in leverage and had low single-digit comparable store sales growth, which is not what we're seeing so far this year. I want to commend the team; our Q2 SG&A expense increased by $16 million from the previous quarter, primarily due to new stores and technology investments related to CDP, omnichannel, and WMS. The only additional spending is tied to these initiatives and strategies we've discussed. These strategies are straightforward and are not groundbreaking; we are implementing them in a slow and methodical manner. You can expect ongoing incremental growth associated with these strategic initiatives. An increase in new store growth will lead to higher rent and payroll expenses. The key difference will be in our long-term goals and how the base stores perform, particularly as they start to show the expected comparable sales growth, which should result in improved leverage. The 150 basis points we mentioned aligns with an LRP focused on a 200 basis point expense decline while still aiming for a 13.5% EBIT rate. However, the real differentiator will be the performance trajectory of the base comparable stores.

Thank you. We have time for one more question, which will come from the line of John Heinbockel with Guggenheim Securities. Please proceed with your questions.

Good morning. This is Anders Meyer on behalf of John. I have just one question. Now that Robert has been with the company longer, can you give us an update on when we can expect to see the 100 basis points in supply chain savings? Also, have any additional opportunities been identified?

Rob Howell joined our team earlier this year and has quickly become a valuable asset. He has been key in addressing the developments we're observing from Twiggs. As we discussed during the call, we are aiming to open our next distribution center in early 2026. It's important for us to thoroughly analyze the insights gained from our Georgia distribution facility, ensuring that we improve based on what we learn, much like how we approach our stores. He is also exploring additional opportunities in the wider supply chain. I've mentioned that currently, we have one distribution center door assigned to manage deliveries for just one truck servicing one store, which is unusual in retail. Typically, we would expect to see multi-stop deliveries, especially in cities like Houston, Dallas, Atlanta, or Charlotte, where these trucks could operate in loops. Our warehouse management system supports this approach and helps us with planning for stores in advance. There are several opportunities for improvement there, and overall, I’m satisfied with how our distribution centers are set up and operated. Rob is also focusing on aspects beyond just the warehouse management system, and I am very optimistic about the contributions he will make. I have no concerns about achieving 100 basis points of efficiency in our long-term supply chain plan.

Got it. Thank you.

As we move into the back half of the year, we remain deeply committed to helping the active young families we serve have fun out there by expanding their spending power to providing a compelling assortment at an outstanding value. At the same time, we're also laser-focused on delivering value to our shareholders across multiple fronts, including our quarterly dividend, while also strategically repurchasing shares. On a longer-term basis, we think Academy is one of the most compelling growth opportunities in retail, and we'll continue to thoughtfully invest in our long-term growth initiatives. Ultimately, we believe that remaining true to these strategies will allow us to break through the current short-term consumer malaise and deliver against our vision to be the best sports and outdoor retailer in the country. I want to thank all 22,000 of our Academy team members for all the hard work and effort they put in so far during 2024. I know we have the right team in place to allow us to win during the back half of the year, and the future for Academy is bright. Thanks, everybody, for joining us this morning, and have a great rest of your day.

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