Capital Markets Day Transcript - ASO 2026-04-07

Dan A. Aldridge, Head of Investor Relations

All right. Good morning, everybody, and thank you for joining us at Academy Sports 2026 Analyst Day. I'm Dan Aldridge, Vice President of Investor Relations. Before we get started and go through the boilerplate, I wanted to call everybody's attention to the release that we issued this morning with an update on Q1. We now expect sales to be in the range of 6% to 7% and comparable sales to be in a range of 2% to 3%. So with that being said, as a reminder, today's presentation and the comments made by management during the event 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 press release 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 gap measures are included in today's presentation, which is available at investors.academy.com. This morning, we will provide an update on our long-range plan, the building blocks to get there, and after we conclude, we'll have time for questions. With that, let's start the event.

Speaker 14

You know what fun can do? Everything. It gave us fish kissing and end-zone dancing, getting down and coaching up, swim moves, and belly dance. And then, all these other voices came out and made fun serious. Team, it's time for the comeback. Time to make fun fun again with bat flips and bright sides and the kind of winning that doesn't wait until the game is over. We are Academy. We're here to change the game, to help fun do its thing because the only thing fun can't do is lose and if your game fun's out there not on the scoreboard or in the live realm but fun is out there it's hunting deer and and dub and quarterbacks making its own trophies and playing by its own rules fun is loud and fun is quiet it knows smoke signals work as well as cell phones face paint is for everyone and the win or lose you win because fun can't lose. Fun can't lose.

Steve Lawrence, CEO

What's up, right? Good morning, everybody. I'm Steve Lawrence, Academy CEO, and we're excited to be with you guys this morning. We're going to share some information about the company, give you guys an update on our strategic initiatives, present our vision for Academy over the next five years, and then wrap it up with a financial overview with a way on how we're going to plan to deliver value not only to our shareholders but our customers as well. Joining me today, we've got our chief customer officer, Chad Fox, who's been with the company a little over two years now. He joined us from Dollar General, where he was the chief marketing officer for about five years. Prior to that, Chad worked at Walmart, where he helped them build out their marketing tech stack and customer data architecture. We also have Carl Ford, our CFO. A lot of you guys know Carl. Carl joined the company about seven years ago around the time I did, so we've worked together for a long time. And prior to working for us, Carl worked at Belk in a bunch of different financial roles over time. So I'd like to start with just kind of a quick re-baselining of where we've been and where we are today. So as you guys know, we were privately held prior to 2019, right? So we were founded in 1938 in San Antonio. KKR bought us in 2011. And really KKR's growth strategy when they bought us was a new store expansion. And so they grew the store count to about roughly 259 stores in 16 states by the time we got to 2019. The challenge was a lot of those stores were opening up within our legacy geography. So you think about Houston, you know, we were taking, we had 34 stores, we'd add a 35th and a 36th and we're just kind of subdividing the same volume and they're cannibalizing each other. So we stopped opening stores in 2019 and our .com penetration was sitting at roughly 5%. We actually weren't growing in 2019 and .com. Obviously, from 2020 and 2021, we experienced outsized growth with the pandemic and the stimulus that was out there. As you guys know, we got to about as high as $6.8 billion. We went public as a company in 2020 at about $13 a share. And then I would say since then, the business has re-baselined, right? Coming out of the pandemic, the customers started returning to normal shopping patterns. Competition reopened up and got back in stock. At that time, we started new store growth again. So we started opening stores again in 2022. And over the past four years, we've opened up 63 stores. We've leveled up our team in our dot-com business and put in place some really good fundamentals there. We've built out our better, best architecture from an assortment planning perspective. And we've put in place some really strong merchandising and planning and allocation disciplines. We've improved our assortment planning process. we've moved to a product lifestyle management which is really helping us keep our inventory fresh and current we've also implemented price and markdown optimization which takes us to today we're currently sitting at 6.1 billion dollars we're in 21 states and we have 323 stores margins right now are sitting at about 500 basis points higher than where they were pre-pandemic and we think a lot of the work we did from a merchandising fundamentals perspective is driving that. And our dot-com business is sitting at a little over $700 million, grew double digits last year, and we're sitting around 12% penetration. And last year was the first time we grew the top line since 2021. So what we feel like is we've laid the groundwork, refined the business operating processes, and sharpened our strategies. And now we're ready for our next phase of growth. And so when you look at our targets over the next five years, we're going to grow the top line to roughly $8 billion. And store growth is going to be fundamental to that. So we're going to open up roughly 125 stores during this time frame. We're going to grow our dot-com business by roughly 70% to get to a 15% penetration. And we're going to deliver net income of roughly 7%. And all of that should yield what we believe would be a $9 earnings per share. So people who know me probably would not describe me as braggadocious, but I'm going to start with something pretty bold. Within our geography, if you're familiar with this, we are the best sports and outdoor retail in our geography, and I'd offer up a couple of data points to support that. First, foot traffic share. So if you go into our legacy footprint, which is Texas, Oklahoma, Louisiana, and Arkansas, we command a dominant 40% traffic share. Four out of 10 people who shop for sporting goods or outdoor product come to our store, and that's out of a subset of roughly 65 stores. So it's not a small grouping of stores. If you expand that out to our existing markets, which are markets we've been in over five years, we have a 30% traffic share. Another metric I'd talk about is net promoter score. You guys are familiar with this. This is a one-word question where you ask people, would they recommend the brand? And you subtract the detractors from the brand advocates, come up with a net score. At 47, we're the highest in our peer group and are about one and a half times higher than our closest competitor. And the last stat I would touch on is our customer satisfaction score. We work with a company called SMG and they do customer satisfaction surveys for us and at 86 percent that's the highest we've ever been and it's in the top five of all the retailers that they measure. And simply put what I would tell you is within our footprint there is much love and brand affinity for academy sports and outdoor and our goal really then is to how do we build that in some of these newer markets we're going into and how do we take this nationwide ultimately to be the best sports and outdoor retailer in the country. Now I'd like to shift gears and talk about the market that we're going after. So the total addressable market for the categories we carry is $245 billion. I would say that the breadth of our assortment and all the different categories we cover make us unique and set us apart from a lot of our competitors. I'll start with the sporting goods market, which is the largest one we participate in. It's $125 billion. It probably also has the largest competitive set. But we also do a really big business in outdoor apparel and Western lifestyle. That's a $45 billion dollar market and growing. And we do really good businesses here with brands such as Wrangler and Ariat. And you see those kind of highlight on these mannequins over here to my right. Work and outdoor recreation, another really big category for us at 40 billion dollars. And we have a market leading outdoor cooking business here. We have a big work wear and work boot business anchored in brands like Carhartt or a private brand Brazos. And finally, the hunting and fishing business is a category that does 35 billion dollars. Highly fragmented, right? There's not a lot of big players in this. We compete with more mom and pops. But if you double click on this and you look at the market share within our footprint or the TAM that's available within our footprint, it's $130 billion. So roughly 53% of the entire TAM we're going after resides currently within our legacy footprint. And if you actually double click on that, the top five states out of the 21 represent half of that $130 billion. And when you take our annual volume of $6.1 billion, dollars you get roughly a five percent market share so what that tells you is we've got a ton of opportunity within our existing footprint and we're just scratching the surface in terms of market share shifting gears you guys remember about three years ago I think it was right around this time actually we came forward with our long-range plan we had everybody down into Houston and we put forward three growth strategies those remain the same those haven't changed right the first one is new store expansion it remains our number one lover for growing the company Second, improving the productivity of our existing base of stores and business. That's number two. And driving positive comps would certainly be a key metric we're looking at there. And third is driving outsized growth in our dot-com business and bringing a more compelling dot-com experience to our customers. But what I would say has changed is the refinement and focus that we're bringing along with the pacing and scale of these strategies. Another change I'd talk about is that all these strategies now are filtered through the lens of customer. I mentioned Chad joined us a couple of years ago. over the last couple years we've done a ton of customer research shop along surveys etc to really come up with a crystal clear point of view who our customer is and we're using that to filter all these strategies through and i'd like to play a quick video that kind of demonstrates who this always game family is that we're going after we've done camping archery fishing ever since our kids were little we've had them out running the trails the boys really love saltwater fishing any sport involving a ball he is a very proficient sporting clay shooter i do a lot of barbecuing.

Speaker 21

I like to smoke beets.

Speaker 17

We want our kids to be part of a community and be part of a team. Me and my family do value outdoor time. That's where I feel like my kids learn the most. It's the time to bond, get together, gives the kids meaningful memories.

Speaker 24

Somewhere where we can get everything we need for all outdoor activities. Quality is always going to be top of mind in a priority when purchasing.

Steve Lawrence, CEO

I need to not go to five different places to get everything that i need sometimes when i have less than no time like when we're traveling with my son's baseball team and he forgot his cleats at home that's when i need to do that quick pickup and have academy save the day so hopefully that gives you kind of a sense of who this customer is but i'd like to put some demographics around this um who's this always game family first uh tend to be married uh with two to three kids in the household and they tend to be in their 30s to 40s Dad, very comfortable in the deer blind or in the fishing boat, or equally as comfortable in the car, driving everybody around to all the different events and cheering from the sideline. Mom keeps the household going, is keen on working out, and is really focused on making sure that her family leads a great lifestyle. But we also spent some time trying to get into their heads, and you hear some of those kind of ahas that we got from there. So some things that we're thinking about as we move forward. First, convenience is key. They don't have the time to make multiple trips to multiple stores to satisfy all their shopping needs. Second, don't waste their time. Be reliably in stock on the things that you're carrying and don't make them have to find them and search the store on end looking for your size or color. Value is important to them. They want to stretch their spending power, but they will splurge a little bit if it's an affordable luxury that they think is going to make an experience better. So think about, like, the turtle box speakers that are in front of you guys or Yeti coolers or things like that. If it's going to make their hunting or fishing camp better, they will splurge on some affordable luxuries. And as I said, this is the lens through which we're passing all of our strategies. So now I'm going to start with our first growth strategy, which is growing new stores. So as you guys know, we restarted our store expansion strategy in 22, and we opened up nine stores that year. And at our analyst day, if you remember, it was about three years ago at this time, we hadn't even lapped those stores being open, right? But we came forward, and we gave you guys some pretty definitive targets around what we thought these stores were going to do. We said they're going to do $18 million in volume. We said that they're going to be roughly 63,000 to 65,000 square feet. We said the cost per store is going to be somewhere between $5 million to $6 million. And at that time, most of the growth was going to be focused into new markets, so we didn't repeat the mistake we made when we were under KKR ownership of only opening up in our legacy markets and cannibalizing our basis stores. So we're really focused on new markets. And the other thing was we were following a pretty traditional retail real estate strategy, which is put your stores in dense urban population centers with high household incomes. After a couple years, after 22 and 23 vintages, stores were open, Carl and I came back in an earnings call, and we tweaked those targets a little bit. We told you, you know what, legacy and existing stores probably are going to be closer to $16 million or $14 million. We said Newmark is closer to $12 million, so we gave you a range, $12 to $16 million versus the definitive $18 million we gave you before. We also refined the cost per store because we had a chance to value engineer the box a little bit. We said it's probably going to be like $2.5 to $3.5 million in CapEx with $1 million in net inventory. But we remain focused on new markets as our primary way of expanding. So now what I want to do is kind of walk you through two stores that we opened up during this time period. We call this the Tale of Two Cities. So the first store we opened up was in a very dense urban population center, 460,000 people, household income pretty high, over $100,000 annually. And the second one we opened up was in a more rural blue-collar town, right? It had about a quarter of the population at 116K. Household income was about half of what the other store was. And I'm sure based off the setup, you're going to guess that which store outperformed the other one is probably not intuitive. The first store we opened up was in Perimeter, Georgia. This is one of the first new stores we opened up. And I will tell you, it did $10 million in the first year, which was below the performer. We were disappointed with that. Now, what I'll also tell you is that store, we've done a lot of work in terms of fixing the assortment and retuning it. And it's doing much better now. Now it's copying double digits. But the second store is really interesting. It's in Searcy, Arkansas. You guys may not know where that is, but it's about 60 miles outside of Little Rock. As we started studying, why did Searcy so far outperform the other store? It did 60% more. It's doing $16.5 million in its first year. It's a simple answer. It's because that's where customers live, right? The families in these towns tend to have kids who are in youth sports. The dad's into outdoor hunting and fishing. Mom's focused on value because she has half the household income of somebody in Atlanta. And we also had high brand awareness, right? When we came into town, the fact that we're coming to town in and of itself was big news. The mayor was there. The high school marching bands were there. We didn't have to spend a lot of money marketing this. So what's really exciting is we're starting to think about this is there are a lot of towns like Searcy, Arkansas in our footprint. So this causes us to start rethinking our real estate strategies. I mentioned kind of traditional retail real estate strategy is to open up in dense urban centers and push our way out. We call this inside out, right? And what we found is that it makes more sense for us to go outside in And so our stores that we're opening up are targeted primarily in outer suburbs exurbs exurbs a fancy word for an outer suburb and Kind of satellite markets that are in between some of the major markets And so this has really helped us think through where we're gonna open up stores And we also revalue engineered the box to have a slightly smaller prototype at 50 to 55,000 K So a great example of this is our strategy going in Ohio, right? The first store we put in Ohio, normally you think you go into Cincinnati or Cleveland or Columbus. We open up in Zanesville, which is about 30, 35 miles outside of the heart of Columbus, doing very well for us. The next store we're going to open up is in St. Clairsville. It's about 120 miles east of Columbus, 110 miles south of Cleveland. DMA is roughly 70,000 people, but it's going to do very well for us. And we think by having this outside-in strategy, we're going to be able to build brand awareness in these new markets and then push our way into the outer suburbs over time. Another big aha as we were studying our real estate strategy was that while we stopped opening stores in our markets, the population was growing rapidly. So if you look at our legacy footprint, the population has grown roughly 12% over the past 10 years, which is about four times faster than the population outside of our legacy footprint. I'd also say that job growth and household income has gone even faster. And what we also saw was that our competition was wise to this, right? So they were opening up stores. The square footage that's opened up over the past five to ten years has been 3x what the population growth has been. So there's a lot more competitors coming into our legacy footprint. And if you look at Texas as an example, over one-third of all commercial real estate that's being developed right now is being developed in Texas. So we thought, we need to rethink this strategy and maybe go back and look at some of these legacy markets and see if there's an opportunity for us. The other thing I'd also say is, as this population has been growing within our legacy footprint, it's not just in the big metro centers. It's out in some of these satellite markets, right? So the first place we looked at some of our big metro markets. So this is kind of a screenshot of Dallas. And historically, if you go back four or five years ago, we didn't think there was any more opportunities in Dallas. We had roughly 26 stores in the DFW kind of geo. is about a 26, 25-mile radius around the city. And we didn't think there was an opportunity there. But as we've looked at where this population is growing, it's now growing another 20 miles out, right? And so we've expanded that range where we're looking. And so a great example of this is a store we're going to open up this year in Salina, Texas. You guys may or may not know where that is. If you're familiar with Dallas, you probably know Frisco and McKinney were kind of the growth engines 20 years ago. Now it's Salina, right? That population is growing 27%. It's about 45 miles north of downtown Dallas on a good day with no traffic. It takes you 45 minutes to get out there on a bad day. It's probably an hour and a half. And by the way, the population there is growing 27% annually. So we're going to open up a store there this year. But then we also started thinking, go back. And then we also started thinking about how does this impact some of these more satellite markets that we're going into in between some of these big metro markets. These DMAs tend to be, once again, rich with our always game family, more middle-income consumers who hunt fish, tend to have high brand awareness in a lot of these geos, so low marketing expense, and they tend to be less expensive to operate, candidly. And we also believe that putting stores in some of these more satellite markets gives us a defensible moat because we think we can go places where competition cannot and will not go. So you think about some of these markets, the population is not big enough to support a full-line, just sporting goods only store or a full line only outdoor store. The fact that we have both sides of the box and carry other things like outdoor puts us in kind of a unique position. So you think about some of these towns, the only place or the only competitors may be there like a Walmart. So you think category like fishing, they have maybe a half an aisle of fishing and only anchored in the good versus our assortment that takes you from good to better to best. Or maybe a tractor supply that does a deep dive in mainly the work category but doesn't carry most of the categories that we carry. So there's not a lot of competition there and a lot of opportunity for us to go So great example this we opened up a store last year in Palestine, Texas You probably don't know where that is, but it's 110 miles southeast of Dallas It's got a population drop roughly 65,000 people And it's on track to exceed its year one pro forma of over 16 million dollars And so we think that by looking at these more rural markets This is going to help us expand our opportunity within our legacy and existing footprint to open up almost a hundred stores over the next five years, while not cannibalizing or minimizing cannibalization of our existing base, because they're about 45 minutes to an hour away from the rest of the more dense urban population centers. And it's also going to allow us to capture some of that $130 billion in TAM that I mentioned, that's in our legacy footprint, because we're going to go where those customers live. And they live in a lot of these small towns, and we're going to provide locational convenience to them. So moving forward, our strategy, as we're going to open up stores, that 125 target that I gave of you guys earlier. It's going to be about 40% in legacy, which is Texas, Oklahoma, Louisiana, and Arkansas. About 40% in existing, which are states we've been in in five years longer, and about 20% in new markets. The other benefit to this strategy is, as we're looking at this, if you remember at the analyst day a couple years ago, we told you guys we thought we're going to have to build a fourth DC to fuel our growth. We don't think we're going to have to do that to hit this 125 stores. We think we can leverage our existing supply chain network of three DCs to get to this 125 store target which is a really good thing for us shifting gears to driving the existing business I mentioned we kind of did a deep dive and got in the customers head and came up with these kind of four universal truths that they told us were important to them right first fuel the fun and we do that through assortment they want shopping at Academy to not be a chore they want us to help them enable to have all the fun that they're looking for in the sports and outdoor with the gear we sell them second simplify my shop they They want to cut down on the number of stores they visit in order to complete their shopping. Respect my time. Remove as much friction from the shopping process as humanly possible. Stretch my dollar value. We need to make sure we got great prices at high quality for them. And we've used these customer insights to really fuel this strategy of growing our existing base of business. So the first slide I'll show up here is they want us to be a one-stop shop for all the goods they're looking for. And as we were talking to them, what we found was within our assortment architecture, there's some categories that they expected us to go deeper in that we didn't cover in a big way. So you think about this family always being on the go on the weekend, right? And they've got cell phones and tablets, and they need to charge. They need portable power solutions. And we traditionally would do generators around disaster recovery and, you know, put them out there if a hurricane was coming. But we really didn't go deep into this category. So based off this insight, we've gone into a much more robust portable power so that we can take care of our customers' busy lives. Another one they shared with us is pets are an important part of the family, and we've always carried in a limited amount of doors some pet stuff, more focused on hunting dogs, but we saw this as an opportunity. So we're testing in a limited group of doors right now a more expanded pet assortment. And another one was a car and garage organization. Like I said, they're spending the weekend kind of driving from an event to event, and they're looking for ways, whether it's in the cargo hold of their SUV or in their garage, to organize all this gear and make it make sense. And so we're working on assortments there as well. Second, it's also important for them to have a way for them to progress from beginner to intermediate to advanced. So they want us to build out a good, better, best assortment, and that's exactly what we've I think we fill the void kind of in the marketplace. I'll pick a category like fishing that I mentioned earlier where, you know, you compete against a Walmart who has about a half an aisle of fishing, focused primarily on good and the basics that you need from a fishing perspective. And then the only really competitor there is a big box, super regional kind of a store that you have to drive some cases an hour, an hour and a half to. And we really bridge that gap between that Walmart and that big box competitor. So we have a good anchor in H2OX, which is our private brand. Better would be Abu Garcia, and then best would be Shimano. I'd also say that this expansion into more mid-sized markets helps us from a locational convenience. And you think about this. I grew up in a small town in Oklahoma, and it was about an hour and a half to Tulsa and about two hours south to Dallas. And we only have a Walmart and maybe JCPenney in our town and so frequently probably six seven eight times a year We'd have to drive up one direction or down the other to get back to school shopping or Christmas shopping done Having these stores more conveniently located cuts away the need for a lot of those trips and wins on locational convenience And so we think that's going to be a big one for us And the last one I'll touch on is it's really important for them for us to drive a sense of discovery by delivering a steady diet of newness and so that's exactly what we're going to do teams across the business have been really focused on this and i'll hit on a couple sports and rec we're going after the baseball lifestyle in a big way you see that kind of illustrated by the mannequin cluster and bags over here to my left this is a big movement happening in baseball you got brands like baseball lifestyle 101 dirty mids bruce bolt we're going into that in a much deeper way leaning into emerging health and wellness and fitness trends we talked about an earnings call and you have a little setup in the back about high rocks This is the fastest-growing fitness trend in America. We're the exclusive brick-and-mortar partner for Hirox-branded workout equipment, and we are very excited about that. We're putting in red light therapy vests. We're putting weighted vests out there. We're putting vibration plates out there. And then it seems kind of logical, but the sporting cards business also reports in this business because they also merchandise in the front queue are expanding that because that whole collectibles business is on fire. With an apparel, Jordan shops expand from 145 doors last year to 200. So we're expanding that out to 55 doors. We're bringing in new fun brands. You see in the back a little vignette of running shorts by a brand called Chicken Legs. I'm not sure if you're familiar with this, but it's an emerging running brand, very similar to this baseball lifestyle with kind of fun printed shorts. That's going to be in over 200 doors by the time we get back to school. We're partnering with a big footwear brand, Brooks, that's going into apparel for the first time. We have that apparel in our stores. Going to shoes. It's taking a brand like Birkenstocks that's having a moment and expanding that out broadly to over 200 doors Putting Javianas out there in a much greater door count We're expanding our premium running footwear from brands like Nike under the Lomero platform or Adidas under the Evo SL Having a bigger footprint there and then lastly an outdoor a couple of different things we're doing there We're putting in suppressors, which is a growing business in the firearms category. We're gonna have Suppressor shops and over a hundred stores by the time we get to the back half They were partnering with a company called silencer shop to do that We're putting in a best-in-class, fully-loaded hunting rifle under a private brand called Redfield. And then we're expanding into a premium camo brand called First Light. And the reason I run through all this is I think a lot of times we talk about newness. We get fixated on footwear and apparel kind of athletic brands. And we have newness, guys. And it's broad across all the different categories. It's equally important in outdoor and in sports and rec as it is in apparel and footwear. And we want to make sure you guys understand that's something we're really going after. The second thing we're working on is leveraging technology to simplify the shopping experience by driving more accurate in stocks and improved inventory visibility. So you guys know we talked a lot about on earnings calls how we expanded RFID count or counting devices or sensors out to all stores last year so we could start consuming inventory on a weekly basis counts and updating those on hands. And so at that point last year, as we roll it out, about 25% of our sales base is RFID enabled. So this year, we're expanding that out to include private label footwear and apparel, which should take us to about 35%. But then we're also working with other footwear and apparel brands who currently don't use RFID to adopt it. And then we're partnering with Auburn University, who's kind of the think tank for RFID technology, and looking for solutions on categories that don't lend themselves normally to it, like baseball bats or ammo, right? And so our goal ultimately is to get roughly half of the business on RFID over the next five years. We're also leveraging handhelds in a big way when we rolled out the RFID technology as you guys know We rolled out these new customer handhelds, right? And why is that important because you think about these these mid-sized market stores that have a slightly smaller footprint of 50 to 55,000 square feet? With this handheld device they have visibility to the entire inventory of the chain as a matter of fact They have an expanded available of inventory because of the dropship we do right And so putting those devices in the associates' hands is really unlocking the full assortment in these smaller stores. We're also leaning into AI. We've got a partner we use from an allocation perspective. And so what they're helping us do is proactively allocating goods in advance of sales and anticipating where they're going to be versus the traditional reactive model that fills in after sales happens. And the last thing we're testing, and you see this in this lower corner here, is electronic signing. We've got two doors we're piloting this in this year. And we're going to be studying a couple of use cases first more accurate pricing signing disciplines second It should help improve for our associates Picking for both disorders because there's a pick-to-light functionality with these signing as well as potential wayfinding So it could help within an app customer navigate the store Early days, but really promising uses of technology to help simplify the customer shop The third thing that they told us that was really important for them is value help them expand their spending power. And I would say I'd start with value is multifaceted, right? I think a lot of times we hear the word value and we immediately go to price. And I think that certainly is a key component of value, but quality is as well, right? And I think we deliver on quality by having the most trusted national brands in each of the space that really kind of helps credentialize our existing private brands. We also deliver high quality private brands that are rigorously tested through the Q&A process. And we stand behind all this with a best in class returns policy. But I would also say we return value a couple other ways. We give away free services like bike and grill assembly. That being said, though, price is pretty key, right? I think that's what the customers really focused on right now. And so there are multiple ways I would tell you that we deliver value through price. First, I would start with a private label, which I believe is our best expression of value. So what we do on our private brands, as you guys know, is we price those at what the selling price should be every day. We don't mark them up just to mark them down and promote off that price and so you take a category like private brand apparel and you look at our pricing on our private brand apparel against a like competitor on like-to-like items we're about 60% of where they are on a daily basis. You take a category like fishing I mentioned we have a brand they're called H2OX we're about 80% of the price of what our nearest competitor is on those items day in and day out. You also know that we carry a lot of the national brands that we do and everyday value pricing on categories like t-shirts and shorts we're about three to five bucks below where the NSRP is a daily basis. I'd also tell you we run promotions during key time periods of the year about 75% of what we sell is at regular price but we do promote and we tend to promote during those kind of high traffic time periods like back to school or Christmas or Father's Day when the customer is looking for value. We also deliver deep value through our clearance and that's another thing we run clearance events generally in the February and September time period tend to be low volume periods on the calendar but we think it's a great way to drive traffic into our stores by going through our clearance cycle then, and we bring in deep value customers there. And finally, as you guys know, we're constantly monitoring our pricing to make sure that we're at the best pricing out there. We do weekly price scrapes, make adjustments as we need to. And our safety net really is our best price guarantee. So we have a guarantee out there that's loud and proud in every store. If somebody beats our price, we'll match it and beat it by 5%. But that being said, one of the best and most important ways that we're going to unlock value for a customer is really this new integrated loyalty and credit card program that we're launching. And now what I'm going to do is I'm going to hand over to Chad Fox, who's going to get up, and he's going to cover that along with how we're going to grow our dot-com business.

Chad Fox, Other

Thank you, sir. All right, so Steve talked to you about the Always Game family, and we did. We have spent a lot of time with these folks over the last couple of years, And I think we have been blessed with the opportunity to serve the most deserving customer on this planet. We truly do believe that the better we know our customer, the better we can serve our customer. And so we've invested quite a bit in advanced identity resolution, just really building out our first-party data set and enriching that. In fact, today, we're at over 50 million unique and verified marketable customer profiles in our first-party data set. Now, we haven't just grown them horizontally. We've also grown them vertically. We have over 500 derived attributes that can be appended to these profiles. If that doesn't mean anything to you, those are basically triggers or digital signals that the data science team can build models off of, right? And so, it goes from just being a deterministic asset to a probabilistic asset. But this rich data set, it truly is. It is an enterprise asset that fuels our entire business, not just marketing. In fact, we leverage all of these learnings to design the first My Academy Rewards program that we launched around 18 months ago. So that program, we could not be happier with it. We finished this last year at over 13 million members. And to put that into perspective, if you just look at our last 12-month active customer base, roughly 30% of them were MyAcademy members and they made up 45% of our sales, okay? So this is a really sticky problem or sticky product. Sorry about that. But what we, you know, we continued to learn from the customer over this year and a half period, though, and we still saw opportunity to do even more with the platform to make it even more relevant to customers. And it really came down to two things. um and this first one's going to sound really obvious but customers want to be rewarded for their loyalty and so when we launched the program we had a series of uh called published benefits and unpublished benefits and essentially you know what that means is we would use it more as a crm tool and we'd surprise and delight customers by putting money in their wallet right and driving trips back in the store, and they loved that, but they wanted to see something that was a little more cause and effect or action-reaction. So that was a great learning for us, and I'll talk to you a little bit about what we've done there. And then the second one was, and I'm a parent of three kids, and they all play sports, but there is a tension in their lives trying to do the things that they need to do or they believe they need to do as parents to, one, make sure they have all the equipment for all the sports that they want to try or participate in, and then two, setting them up for confidence, right, and to give them the ability to be successful in whatever it is that they try. So we believe that we were able to go back and optimize that platform, create a product that delivers on releasing this tension. So we soft launched the program, our 2.0 version of the program a couple of weeks ago. You'll see that continue to roll out throughout the summer. And we made a lot of optimizations from what we learned from the customer. But there are three that I want to take you through today. Okay? The first one you heard Steve talk about, we had, how many of you are familiar with our private label credit card? All right. That private label credit card, we've had it for roughly seven years now. When customers, the holders of that card, they get 5% off every single day inside our stores. Okay, so we've taken that credit card program and we've merged it with My Academy Rewards to create one streamlined program and then now it's a three-tier program that has more value baked into it. The second thing that we've done, I talked to you about, you know, action-reaction. So what we've done is we have put a $500 threshold reward in place where customers can earn 25 bucks whenever they cross it, and that goes into their My Academy digital wallet. Carl was showing me his app earlier. He's like on the verge of earning it. I've already earned it, which means I spend way too much money in our stores because we're only two months into the fiscal year, but we're really excited about that, and I think our customers are as well. The third thing that we've done, and this is the one that just – I get so excited about this, but it's the, we've added a tier, which is the ultimate tier, which is the My Academy Rewards MasterCard. And, and the reason like this is, this is so cool is, uh, most retailers, uh, their loyalty programs, they are rewarding customers for spending more money inside their stores, right? Um, we've chosen to go a different path. Um, we are going to reward our customers with this MasterCard for spending money on the everyday needs of life, right? And so how many of you have kids that are in sports? All right, a few of you. All right, so you spend a lot of time taking them to practices, travel, probably spend a lot in the grocery store stocking up the refrigerator in the pantry. We are going to reward customers every time they swipe that card at the grocery store, Every time they tap that card at the gas station, every time they hand that card over at the drive-thru for a quick dinner after practice, we're going to give them 2% cash back in their MyAcademy wallet that then can be spent back at our stores to fuel the fun. And the combination of that will relieve that tension for those customers so that they can set their kids up for success and they can make sure, you know, that they have the confidence to succeed in whatever they do and they can do it without, you know, figuring out, you know, how they're going to pull it off. All right? So I've got a TV spot that I'm going to share with you. It's a rough cut. As a marketing guy, I feel like I need to say that. But it's going to start airing here in a couple of weeks and it communicates the value proposition. I just walked you through.

Operator

Turn everyday spending into more fun. Earn unlimited 2% in rewards when you spend outside Academy. My Academy Rewards MasterCard, the official card of fun.

Chad Fox, Other

All right. So, you know, I've been in retail for about 27 years and marketing. And it's not very often that you truly do get to identify a customer problem and go build a product that truly solves that. And we spend a lot of time with customers talking about it. We think it's going to be great and drive a lot of engagement. And engagement is what this is all about, right? Because the more engaged a customer is, the more productive a customer is. And customers who are members of MyAcademy Rewards and cardholders spend 3.5 times more than the average Academy customer. So this phenomenon, all this engagement, you know, delivering productivity isn't just the case for MyAcademy or the case for the card, but it's also the case for our omni-channel business, for e-commerce. And we know that customers that shop both in our stores and on our site spend two times more than the store-only customer. And that's why, you know, the expanding Omnichannel, Steve talked about our goals, are so important to our long-range plan. He mentioned that we have the intention of growing our e-commerce business by 70% throughout the long-range plan, that we want to grow our penetration to 15%. And we believe that we are on track to do that, as seen in the double-digit growth that we saw in e-commerce just this past year. So I'm going to walk you through how we're going to do that. And I promise you guys, I mean, there's nothing crazy or sexy about what I'm about to share with you. The first thing that we're going to do is we are going to take all that customer data that I was telling you about earlier, And we're going to use it and infuse it throughout that entire customer experience to create more relevant and personalized journeys at every single point of contact, right? The next thing we are going to do is, or we are doing, is focused on the fundamentals. And I would say, at least in my experience, this seems to be the most difficult part of a traditional brick-and-mortar retailer really transforming to an omnichannel company, right? I mean, whenever you set up items for a four-foot section in a physical store, you can pretty quickly set those up, cut a PO, and get inventory flowing. When you set up an item for the e-commerce business, you need to be able to do about 100x that amount of work to make sure that the customer has a really good experience when they're reading a product display page or whenever they're searching something to have enough signals to cause it to show up. So we're doing a couple of things, and I'll walk you through each one of them from left to right. The first one is item master data management. We are going in and we are setting up standards and then governance and controls item by item, category by category in order to make sure that these items are set up and there's enough content to trigger those search terms and make sure that things show up whenever customers are searching for it. The next thing we're doing is we are automating the setup process and the vendor data acquisition piece. I mean, the way that that is done or has been done historically is very hands-on keys. It's very human. It's a lot of running up and down the hall and calling people and texting people and emailing people. We have now automated that workflow so that we can scale and we can scale in a sustainable way. The next piece is really exciting. We, another one that is just very hands-on keys and human is the enrichment process. We are now leveraging AI to mine that unstructured vendor content that is captured in the automation process and then AI to generate and fill in the gaps for what we don't have so that we can have these rich, really customer-friendly PDPs. And then the final thing we're doing is once we get those foundational pieces right, we're migrating our search platform that sits on top of that from more of a traditional rules-based search to a more modern semantic and agentic-based search. Again, delivering a much better customer experience. so on our private brand which is roughly 22 23 percent of our assortment um we can't depend depend purely on that process because we are the vendor right and so whenever you are the vendor when you are the supplier on something like private brand you've got to shoot all that content you've You've got to write all that content and enrich all of that content. But it's very important, and we know this, that customers, they want to evaluate the fit of a product on model, right? And so to do every product on model, that's time consuming, it's costly, it's really difficult to scale whenever you know 20-25% of your business is private brand and so what we've done over the last year is we have developed the capability to leverage AI to create on model imagery for every apparel item that we have from a private brand standpoint and to put this into perspective why this is so important we ran a proof of concept when we were building the business case for this investment. And what we saw was a 30% increase in views. We saw over a 10% increase in conversion. And we saw a 20% increase in orders. So this really does matter to customers. And having great content and rich content really does drive the business. Okay. Okay, as many of you may remember, this past holiday season, we launched our Scout agent or our AI agentic shopping bot on our site during the holiday season. And we are really excited about how it performed during the holiday season and where it's going to go from here. What we saw whenever customers engaged in Scout, which is a large number of customers, We saw a 2x increase in conversion rate versus our standard search, and we saw average order values of 12% higher. So as I mentioned, we're getting ready to migrate our search and take advantage of these learnings to where you will see more semantic search and agentic search come together as one customer experience so they can search the way they want to search. Very similar to what you'd see today in Chrome when you're searching off the site. Very similar to loyalty and the card and e-commerce, our app also drives engagement, right? And engagement equals customer productivity. So historically, our app has really had the same commercial, supported the same commercial objective that the site did, right? There was really no reason for being or added utility or value exchange that really mattered to the customer. What we've done is we have now repositioned our app where the primary objective is to be the remote control to the MyAcademy Rewards experience. And we've infused it with utility and with value exchange, and we're already starting to see that pay off. Our monthly active users have grown over 40% over the last two years, okay? Units per transaction are 10% higher in the app versus the web, and our conversion rate is 50% higher in the app versus the web. So you're going to see us continue to invest in the app, create experiences, create utility, create value exchange. That sticky drives that engagement gives a little bit of that dopamine rush, right? That drives customer productivity And you're going to see us continue to make you know push that to happen over time away from traditional desktop and away from mobile Okay Let's talk a little bit about Expanded out so we've had a lot of success in our special orders firearm business in fact, I would argue that we have one of the largest assortments online, if not these largest assortment online, of firearms as a result of this. We've also had a lot of success with our partnership with Fanatics, which is also a dropship capability. So you're going to see us continue to grow dropship as a way to expand our assortment online and as of today, we have about two times more items online than we do in our store, right? And so there's a reason for Bing to have an e-commerce business, and we plan to grow this by another 20% this fiscal year. Okay, so that expanded assortment, Steve talked a little bit about this, that expanded assortment not only benefits customers shopping online, it benefits customers in our stores, right? So our Jordan brand, or the Jordan brand, we carry that in in about 50% of our stores, okay? But if a customer wants Jordan and they come into our stores and they're looking for, say, a certain Jordan shoe, right, and we don't carry it in that store, all they have to do is go to a team member, right? They'll pick out the shoe that they want, they'll tap their card, and we can have it delivered to their home as early as that same day, right? So we've talked about our site, we've talked about the app, But we've also talked about the app and expanding commerce in the store. Keep going on this journey of the, call it decentralization of digital commerce. So many of you know over the, I guess about 18 months ago, we launched our storefront in the DoorDash app, right? And DoorDash does a couple things for us. One, they power our white label same day delivery product. but then they also we have a storefront inside their app environment and we've been very pleased with how that business has performed how it wrapped up this last year and we're already pacing this year to double the size of that business this year. Now we know that the reason one of the reasons this is successful and why it's so incremental is because these are subscription based it's a subscription based wall garden right and so how many of you have DoorDash? How many of you have a DashPass? Really? I would have thought it would be more than that. Do you also use Uber? You do. Do you have an Uber subscription as well? All right. That is highly unusual. So there are more wall gardens out there. There are more of these delivery storefronts and you'll see our efforts there start to manifest over the next year because we believe that there's a lot more incrementality out there. The other thing we're doing is we're expanding into agentic commerce, right? We are on this journey of going where our customers are and making sure they can transact in that environment. So we've entered into a strategic partnership with Google. We are on a short list of retailers today participating in four key initiatives that they talked about just earlier at some of the different, you know, meetings like Shop Talk, NRF, et cetera. So one of them is Universal Commerce Protocol. How many of you have heard of that? All right. Well, it's pretty cool. And what it's going to do is it's going to really strengthen the pipe, the product feed that goes into that environment, whether you're in AI mode or you're in Gemini, and then have the ability to click and pay in that environment without leaving and going to a site. The next one is conversational attributes. In this world of agentic AI where people are typing in more conversational prompts, those attributes matter to ensure that you show up organically in that environment. The next one is direct offers. I don't know that Google would say it this, but this feels like an early days version of what ads would look like, right? And so if you're in AI mode or you're in Gemini and you're shopping, serving up offers to you that are very relevant to the conversation that you're having with AI at that point. And the final one is business agent, right? So I talked a little bit about Scout AI and what Scout does for our customers from a conversational and agentic standpoint on our site. business agent is our version of that that lives in the wild that lives in ai mode that lives on gemini and in addition we're also in an early partnership with open ai as part of their pilots for ads in chat gpt which is really exciting and like i said whenever the infrastructure that's got to be built to enable all of that is really going to pay off for us whenever it comes to more of the organic, call it generative engine operation that's necessary to start showing up organically in the AI environment, whether you're on perplexity or you're on co-pilot or on a Gemini, ChatGPT, et cetera. That'll help us a lot as we move forward to where the customer and technology is taking Then the final thing I'd say on this slide about going where our customers are is social commerce. In fact, we are building out a TikTok shop, and you will see us in the back half of this year launch that. Okay, so I also had the pleasure of overseeing our customer care center. And we have about 200 team members that are out there. They're on the phone with customers all day long. As a marketing guy, I see that, and I think, wow, that's like dynamic ethnographic research. And we've always recorded all of these calls, and we transcribed them. But typically, it was humans looked at it, and they used it for training purposes. What we've done is we've taken a large language model, and we've set it on top of all of that data, And that is now starting to inform and populate dashboards, reports, and studies that go back to the business, whether it's operations, it's merchandising, it's e-commerce, it's marketing, so that we can action on that in real time and really serve our customers. All right. So I've talked to you about building out a unique data set, a loyalty program of really rich data. we've talked about getting you know the e-commerce business fundamentals right which we're already seeing pay off with double-digit sales now we have an opportunity to monetize that with retail media now we're a second mover in this space and some would say we're a late mover but I will tell you I've had experience with my past two retailers with retail media it was really important that we get that foundational stuff right first so that we can maximize this opportunity and get it right out of the gate. The other thing I will tell you is technology has changed so much in the last two years. A lot of retailers, a lot of our competitors are stuck with outdated technology. They've got technical debt, they've got effort debt, and they want to take advantage of new, you know, machine learning and AI capabilities, but that's a lot to rip and replace and get out of that technology. We're going to be able to take advantage of the latest and greatest technology and leapfrog in this space, and I will tell you, one of the main reasons we're so excited about this and we feel like we have a value proposition when it comes to retail media, and it's not just a me too, is roughly 70% of our customers do not shop with our nearest top two national competitors, right? And so we have a very unique data set that offers advertisers, offers our vendors extended unduplicated reach that's additive to their existing plans, right? And as a marketer, I will tell you that we are always chasing unduplicated reach and it's hard to come by once you hit a certain threshold and so that's a huge value proposition for our vendors for our advertisers and then the other piece we talked about e-commerce but it's growing so fast for us the ability to capture that demand at the point of sale is going to be a great opportunity for them to grow their business at Academy but also grow their business in aggregate. Okay so this is my last slide You're going to lose me here pretty quickly. So just a couple of things. One, we've invested a lot in our customer. We believe that the better we know our customer, the better we can serve our customer. That's led us to a really robust loyalty platform. We've only been out there for 18 months, and already over 30% of our customers, active customers, are MyAcademy members, and they represent nearly 45% of our sales. And we're launching the new value prop now, right? We didn't let it grow stagnant, right? We're already out there with something new that answers what our customers needed with the 2% cash back on the MyAcademy Rewards MasterCard when they shop on the everyday needs of life. And why is this important? Customers who are cardholders and customers who are members of MyAcademy spend 3.5 times more than the average customer. Next, we're working on our e-commerce business. We've made a lot of efforts here, made a lot of investments. It's paying off with double-digit gross, and most of that is getting the fundamentals right. Not chasing the shiny objects, but getting the fundamentals right, then putting the new technology on top of that. And we're going to see that continue to pay off. The next thing, we talked about decentralization of commerce, going where our customer is, not just our site, not just our app, but a team member app with a handheld inside our stores, right? But then also going out into the wild with agentic commerce, with storefront delivery, marketplace storefronts, and then also social commerce. And then, you know, finally, we talked about margin expansion. We talked about the introduction of retail media, and we've got a very strong value proposition for advertisers to invest in our retail media through unduplicated, extended reach that is very valuable for them in a robust and growing e-commerce business so that they can capture demand at the point of sale. All right, so that's all I've got. I'm going to turn it over to Carl Ford. He's our CFO, who you know well. And thank you, guys.

Carl Ford, CFO

All right, I'm going to bring it home. You guys have heard Steve and Chad talk about the strategies and the tactics around growing new stores and expanding the productivity of our existing business as well as growing Omnichannel and how all of those meet the needs of this always-gain-family, these pain points that they have, how our strategies align to that. I want to walk you through how those strategies and tactics manifest themselves into a five-year financial vision for the company. Before I do, believe it or not, we've only been public for a little over five years. And during that time period, we've grown sales significantly. We've improved our gross margin in a pretty dramatic way, and that has not been happenstance. If you look at what we've had the opportunity to bring to Barrett Academy, is a disciplined open-to-buy process. We've leveraged new tools associated with inventory allocation and replenishment, some of the things that Steve talked about. We've modernized the tools that we use for pricing, reg price optimization, promotional effectiveness, and how you manage the lifecycle when you go to markdown is really important. And we've elevated the efficiency and the effectiveness of our supply chain. um we've invested uh into omni-channel capabilities and customer data capabilities that frankly when i got here seven years ago i just i didn't i didn't know we had that much upside associated with the capabilities that we could bring to bear and we've launched 63 new stores all while while paying down over a billion dollars in debt and repurchasing almost 40 percent of the shares that we went public with um we are proud but we are not satisfied this is truly the early innings of a multi-year growth story that I want to walk you through how we think that's going to unfold. So FY25 was a pivotal year for us. We grew sales by 2%, and it'll serve as the foundation year that will grow from here. And as you saw this morning, Q1's off to a good start. So we've got a little momentum behind us. Our internal initiatives are what is driving the growth in FY25, and you're going to see more of the same. When you think about FY25 as that 2% growth year, we had new stores that are exceeding our expectations. And once they lap their 14th month and get it in the comp set, they're growing at mid-single digits. That's a little above where I pro-formative. From an omni-channel standpoint, we grew at 13.6%. We're almost at 12% penetration. Steve and I were here when we were a 5% penetration shop. We've leveled up significantly. Secondly, people were already shopping with their phones and with their desktop computers. They just weren't shopping with Academy because our capabilities were pretty limited. We've enhanced those. There's more to come. As it relates to launching Jordan brand, when you take it in parity with Nike, we grew at high single digits in FY25. We're proud of that. That's a meaningful volume increase. Nike was our number one vendor prior to, and the Jordan brand has been a great add-on to We've grown our MyAcademy members, we're up over 13 million and we've seen a real shift in the customer demographics that are shopping at Academy. Now those quintiles four and five that are above a hundred thousand in median household income, they're our largest and our faster growing, fastest growth consumer cohort. That's really de-risked the customer profile for us and I think that's pretty important as it relates to inflation. We're also sober about the macro headwinds. We feel it. When you're a $75,000 median household income, you feel gas prices growing. You feel inflation growing. We have to manifest value, and they're finding value at Academy. So FY25 was a solid foundational year for us. As we think about the building blocks of our growth, they're going going to be based on those same initiatives that I just walked through but that the team talked through the tactics with just a little bit more. We're going to grow to $8 billion in the next five years. It represents a 5% compound annual growth rate. I want you guys to think about top line consistent 5% growth and what that would look like over five years. There's not a lot of retailers that have had a 5% compound annual growth rate over five years. That's what we're looking to drive. We're going to grow 125 stores over five years, so ballpark about 25 per year. That represents a 7% growth per year in new stores. Penetration of new stores in that comp base, it's growing. We've got 63 that are already in the comp base. We finished FY25 with 39 stores that were in the comp base, we'll finish FY26 with 63 stores, and then we're going to add approximately 25 per year going forward. That penetration of new stores in the base, it's significant. It provides a meaningful waterfall associated with where we're going from a comp perspective. We've applied the lessons that we've learned on each subsequent vintage. Steve walked you through an example in Atlanta, Georgia, where we launched at 10 million. It wasn't our customer there. It's growing. We're happy with it. It's EBITDA positive. It's going to have a little bit lower of a ROIC than what I pro-formated at. But we've learned so much. And these stores that we're launching now, they're exceeding our expectations. We want to do that consistently over time, each vintage getting better, quicker, faster, stronger than the next. We expect to grow omni-channel up to 15% penetration. I would tell you that the average omni-channel retailer is a 20% penetrated from an omni-channel perspective. I think the good ones do it at 30. Us having a goal for 15%, we think it provides meaningful growth for years to come, but when you're growing your store base by 7% per year, to get that penetration up to 15%, it's growing omni-channel volume by 70% over this five-year time period. We're going to grow in the existing businesses through brand launches and expansions, square footage productivity gains and the customer loyalty aspect, making each of those stores more productive. And lastly, we're going to grow earnings per share to $9. We've got a balance sheet with industry leading leverage and we self-fund all of our initiatives while returning a healthy portion of free cash flow to our investors. These are the building blocks for durable, long-term growth. I'm a waterfall guy. They make a lot of sense to me as it relates to where we're going. And so I wanted to walk you through, we ended last year with $6.1 billion in sales. When you look at the growth initiatives that we've laid out, this kind of manifests how those will play out over five years. There's overlap associated with some of these, and we'll get into that as it relates to new stores, because we see omni-channel activity when we launch new stores go up significantly. So there's brick-and-mortar stores as well as e-commerce sales. But we're going to get $1.9 billion in sales from launching 125 new stores. If we're just able to hold our ground on where we're at, we'll almost be at our goal of $8 We think that there will be headwinds associated, but we're trying to launch new stores, no regrets, you know, the best vintages going live. So we think that's worth $1.9 billion over five years. That includes omni-channel behaviors related to demand generation in those markets. So think about buy online, pick up in store, or special order firearms, or the associate using a handheld device to mine inventory that's across the channel. It's the demand generation associated with that new store as well as the brick and mortar sales. There's an additional $300 million in e-commerce growth that's not linked to new stores, and that's all of the stuff that Chad just talked about, such as alternative marketplaces, modernizing the search, and dropship expansion. We think there's another $300 million from growing the existing business through brand launches, customer loyalty, and launching of the retail media network. We know that there's going to be headwinds. Not everything is going to go perfectly. We feel like $8 billion for us and where we are in our growth trajectory is a challenging but achievable target for five years from now. As it relates to EBIT margin, we're going to expand by 100 basis points. And let me unpack that to you. We're going to get leverage from a low single-digit comp. This includes the cost of launching approximately 25 stores per year, as well as the technology costs associated with driving omni-channel, as well as the customer data analytics that we've talked about. We think there's 50 basis points of supply chain efficiencies. You guys have heard me talk about 100 basis points in the past. We've leveled up since when we talked to you a few years ago. I still think there's efficiencies on the come, 50 basis points associated with D.C. operations, but also related to transportation as we fill in the 21 states that we talked to you about that we plan to stay contained within for the next five years. Retail media network will be an overall EBIT increaser in terms of dollars as well as rate. And just getting private label to 25% and balancing out the penetration of soft line and hard lines is another 20 basis points of gross margin expansion. So I think that there's going to be an opportunity to give some value back to the customer. So while I called it a headwind from a sales perspective, I think we're going to have opportunities to invest into value to the consumer. If we lose our everyday value proposition, we've lost our North Star associated with what it is that we do. So this is a bridge of how we get from 9% to 10%, and we think it's challenging but achievable. This is my last slide, and it's my favorite slide, because our capital allocation philosophy has not changed. At our core, we are going to be stability first. We are going to keep a healthy amount of cash on the balance sheet, and we're going to have a $1 billion ABL behind it that I don't have a tactical use for, but it's the best insurance in the world. This company that stands before you is going to be stable first and foremost. The second thing as it relates to capital allocation is we're going to invest into these initiatives that you've heard. We think the best use of the cash that we generate from our operations is to invest back into the things that you've heard about today. New stores, two and a half to three and a half million dollars in CapEx. Selected well, aligns with our customer demographic, great ROIC associated with investing back into ourselves. Omnichannel behaviors, we're at almost 12% penetration, a lot of upside, it doesn't come free. We're focused on the capabilities that Chad talked about in unleashing that. And then brand launches, brand expansions, retail media network, invest into ourselves is the next thing that we're going to do. And the last thing is we're going to give back everything else to our shareholders. We have a pretty modest dividend, and you've seen what we've done from a buyback perspective. I like this slide. it shows that I don't have a laser pointer, but $1.8 billion we've given back to shareholders in the form of dividends and share buybacks since we've gone public over five years. I'll leave you with this. There are few retailers that have the long-term growth opportunities that we have. Second, our balance sheet looks really good. We have the ability to self-fund these growth initiatives. There's not a lot of retailers. I'm going the funnel here. This is who has the growth opportunities, who can actually fund that growth opportunities, who has a track record of giving value back to shareholders in the form of what we talked about here. And then last, there's none that have the value multiple that we have affixed to them right now. If you take that $9 earnings per share, which I consider to be very straightforward associated with the tactics that we've laid out and you apply that value multiple, I'm looking trailing right now, value multiple, you would have a $90 stock. If we got halfway to a consumer sort of portfolio average, you'd have $135 stock. And if we just achieved the average consumer multiple, you'd have $180 stock. I want you guys to leave here thinking, why is academies not one of my top five picks when I'm talking with folks about long-term value investing? We invite you to join us on this journey. The best is yet to come. With that, we are going to do Q&A, and we're going to have a really manual setup associated with getting some chairs up here. So give us just one second. Thank you, sir.

Dan A. Aldridge, Head of Investor Relations

All right, so we're going to have two mics roving around the room. I'm just going to call on people. When I call on you for the webcast purposes, please state your name and the firm. And due to the amount of people in the room, we're just going to do one question, no follow-up. All right, so we're going to start up front with Kate.

Kate McShane, Analyst — Goldman Sachs

Hi, Kate McShane from Goldman Sachs. I just had a few questions. Well, one question. Sorry, Dan, and I'll follow up. with the pivot in terms of the store growth strategy, are most of the markets you are targeting seeing similar population growth as some of the examples you used? And how should we think about the cost of building a store in that rural or exurb market versus the suburban and rural?

Steve Lawrence, CEO

Yeah, so we cited a couple of different stores. So some, you know, we're certainly in those far out suburbs and exurbs, large metros. They're definitely growing very, very quickly. we're seeing that. Some of the more mid-sized markets, probably not growing as fast, but I will tell you that there's tons of opportunity just based off of their underserved customers who don't have access to the brands that we're selling on a daily basis. So it's a combination of the two, but they are growing. In terms of build-out, it's obviously cheaper to build out in some of those towns. In a lot of cases, we get some subsidies from the local municipality, and then obviously from a wage rate to operate them on a yearly basis is a little bit less expensive as well.

Kate McShane, Analyst — Goldman Sachs

And then just as a follow-up with the goal of sales of $8 billion, what is the assumption for same-store sales within that? It seems like the contribution of existing stores is $300 million over the five-year period or $50 million, $60 million a year. It seems like it's less than 1% comp store sales.

Carl Ford, CFO

Low single-digit comps. Overall, 5% you should think about as an average across this five-year time horizon. But low single-digit comps. Let's go, Michael.

Michael Lasser, Analyst — UBS

It's Michael Lasser from UBS, thank you so much for taking my question. In order to get the multiple that Carl referenced as part of his presentation, the company's going to need to generate positive comps, which has proven to be a bit elusive over the last few years. What, as part of this plan, is going to address those factors that led to the comp challenges that have occurred in the past? And secondly, as you look towards the 50 basis points of value investment as part of the plan, how would you compare that to what Academy has been able to invest over the last few years? Is it more, less, or about the same? Thank you very much.

Steve Lawrence, CEO

I'll take the first part. You know, what I'd say, Michael, is if you think back over the last couple of years, right, I mean, obviously, we sort of pretty lofty heights during the pandemic that were probably unsustainable, right? And so I think that there's certainly been a re-baselining of the business since then, which I think a lot of retailers have experienced. I'd say probably over the last year, year and a half, the thing that's probably been our biggest challenge has been health of the consumer with the backdrop of inflation. What gives us confidence now is we've been working really hard for the last couple of years and where we came forward with strategies a couple of years ago. I'm not sure we had the refined tactics in place to deliver against those strategies. And so you hear the work we've done on the real estate front, and I feel very confident sitting before you today that we can open up 125 stores. We opened up 24 last year, and I feel very confident that we know what those stores are going to do now that we've got 63 stores that we've opened up over the past four years. And I can tell you that stores in legacy markets do 16, stores in existing do 14, and stores in new do 12. So we've got really finite results that tell us we should be confident of that. You think about the work Chad and the team have done from a dot-com perspective to build the foundation there. We didn't have all that in place two years ago. And we've proven this past year that we can grow the dot-com business double digits. And then when you look at the existing base business and you think about the expansion of brands, the work we're doing on loyalty, these are all, once again, proven things that not only have we proven ourselves we can do, but others have done as well. So I think it's the combination of all those things being a year or two down the road on some of those strategies and building some really good disciplines and some tailwinds from them. And I think it's pulling all those things together. It's having that scale of those initiatives that give us confidence we can get back to consistent regular comps.

Carl Ford, CFO

From a gross margin standpoint, the 50 basis points, we've grown gross margin by 500 basis points since pre-pandemic, a little over 400 basis points since we went public. We think that there's going to be opportunities to specific categories to make an investment into the value that the customer sees, whether that's at good, better, or best pricing, and give back. So I would tell you we've done a lot of structural work on how we manage inventory and how we manage pricing, almost like from a scientific standpoint. We just think there's going to be opportunities over the next five years to invest in some categories and continue to take market share.

Dan A. Aldridge, Head of Investor Relations

Let's go up front and Simeon.

Simeon Gutman, Analyst — Morgan Stanley

Hi, Simeon Gutman, Morgan Stanley. I'll make it two parts with one question, Dan. The margin outlook, what happens as e-commerce grows a little faster over time? Does that fit into that 50 bips? Bigger question, I thought I heard two themes. There's a lot of blocking and tackling things that you're doing. You talked about them, pricing, inventory, merchandising, real estate, and then next level stuff, loyalty, agentic. I don't think we appreciated where you were on some of the blocking and tackling. There's a lot more opportunity for Academy. me. Can you give us a sense of where you are on those initiatives? And then what are most important? What's the lowest hanging fruit? And then in some of the next gen stuff, whether it's loyalty or agentic, where should we see some progress being made? Thanks.

Steve Lawrence, CEO

I think we'll split this one up across multiple people. I'd say I'd start. Go ahead.

Carl Ford, CFO

Go first. E-commerce sales tends to over-index towards hardline goods in our business. They have a merchandise margin that is lower than soft goods. But what we've experienced pretty consistently is that with those hard good purchases, still over 50% of customers don't have it delivered to their home. They come pick it up at the store. We think as we grow stores in these midsize markets where the store is conveniently located, it's going to continue to be up over 50 percent so there's a modest headwind associated with growing e-commerce but it's not quite as much as i think in other retail businesses because of the high propensity to pick up in store i'd also say that the margin mix that carl talked about where we have an opportunity to grow private label and the soft goods mix kind of balances that so we took that into account as we built out the waterfall in terms of where we're at on different initiatives I mean, certainly on the merchandising side, we started earlier, right?

Steve Lawrence, CEO

So we're further along on the good, better, best from an assortment perspective. We're pretty far along, I would say, probably in the middle of later innings on a lot of the merchandising disciplines. I'd say the dot-com piece of it, the technology stuff, obviously retail media network, early, early, early innings on a lot of that. Chad, I don't know if you have anything you want to add to that.

Chad Fox, Other

Yeah, I'll just add to a couple things. One, just building on what Carl was saying about e-commerce being heavy on hard goods, we talked about expansion of dropship. And two things that that will help us do, it will also help us to mix out and bring in more soft lines into e-commerce without the burden of the inventory because it's dropship. So that will help in terms of margin mix on e-commerce as well. On the journey that we're on, I would say we're probably about just a little south of halfway through, going item by item, catalog, you know, throughout the catalog, category by category. We will be done with that before we get to the holiday season. But that's the starting point. We're just trying to get to the starting point. Yeah, but I'm really excited about that. I know it's foundational and it's basic, but that's huge. In terms of leveraging agentic AI for enrichment purposes and automation, all of that stuff is happening right now, right? But as you get those standards and governance in place, then it will just continue to cycle through that and just get better and better. In terms of search and migrating search, we'll be launching in the next couple of months on a new search platform that leverages both semantic and agentic. And that sitting on top of that cleaner, better hygiene data and structure will have an accelerated effect as it gets better and better.

Dan A. Aldridge, Head of Investor Relations

Let's go to the back to Greg.

Greg Malek, Analyst — Evercore

Hi, thanks. Greg Malek with Evercore. My question is on the capital investment required to get to these goals. So we have the capex per store. I think you said was around two and a half three What should we be thinking about for the total capex investment and P&L investment to hit this the sales targets? And then my follow-ups on retail media.

Carl Ford, CFO

Yeah, so we've guided to 250 million ish in capex two to 250 this year. I think you should see us Below four percent as it relates to four percent of sales as it relates to capex investment I would have told you a couple of years ago that we would be over that threshold as we built out a fourth distribution center. I feel really good about what the team's doing in leveraging the three 1.5 million square foot facilities that we have and increasing the capacity there. So I would say we're going to be below 4%, and again, we'll invest about half of our cash flow from operations back into ourselves through the growth initiatives as well as maintaining the overall fleet. and the other half you should look to give back to shareholders.

Steve Lawrence, CEO

I'll jump in before we go to Retail Media Network. I would say that we didn't bring him up here today, but we've got a new head of supply chain. He's been with us about the same time as Chad, about two years. His name is Rob Holley, came to us from Cisco. He's a supply chain strategist, and he's really helped us. That's something that we mentioned briefly, but this idea of being able to kind of re-engineer our distribution centers and be able to fill 450 stores out of those three DCs, We didn't think we could do that a couple of years ago, and he's really helped us rethink that. So I think that's a big unlock for us and helps us defer an investment further down the road that ultimately we're going to have to make but buys us some time against that as we get more thoughtful about where the next tranche of stores comes from. Retail media?

Greg Malek, Analyst — Evercore

Yeah, the follow-up there. Thanks, Chad. Maybe if you could just unpack a little bit more. I looked at Carl the Waterfall. I saw $300 million from Retail Media Network. So should I be thinking that, that it would be about 4% of sales by the time we get in five years?

Carl Ford, CFO

So let me, as it related to the $300 million, that was a mix of what I would have called investments into the existing. So that included loyalty, that included retail media network, that included brand launches. You saw 30 basis points of profitability growth on the $8 billion. So you can infer what we think it means from a bottom line impact associated with EBIT. But as it relates to retail media overall, we put in the waterfalls what we think that we can achieve. We're in super early innings associated with that. Chad's the thought leader. I'll let him unpack any other themes. But financially, we feel good about what we put in there.

Chad Fox, Other

Yeah, I mean, you know, just from a financial standpoint, I think, you know, we're going to launch middle of this year. year, and so I wouldn't anticipate a lot in the back half of the year, but I think as we start to get into next year, you'll start to see that compound as time goes on. We are going to launch retail media out of the gates, both with onsite and offsite capabilities, and so when you think about sponsored search and sponsored product and display and OLV on our site. That inventory will be available from the get-go. If you cover retail media, you know that that's the highest value inventory in terms of what's sought after from the vendors and from the advertisers because it's an opportunity to capture that demand while on-site. But we'll also make our audiences available off-site, very similar to other retail media networks through different DSPs, whether that be Trade Desk or DB360 with Google or Meta or others. So we'll do that right out of the gate. The value prop will exist both, so we'll be able to accelerate pretty quickly.

Dan A. Aldridge, Head of Investor Relations

Let's go back up front to Brian.

Brian Nagel, Analyst — Oppenheimer

Thanks. We have Brian Nagel from Oppenheimer. So a couple questions. First, just real near term, so the business update today, it sounds like the business is tracking somewhat better than we heard from you just recently. Maybe just talk about what the drivers have been there. And then longer term, I guess longer term, we talked a lot about the success of the new store openings, and it sounds like that's tracking really well. Any thoughts about going back to the existing base? I mean, are there stores that maybe don't make sense anymore that could be shut down?

Steve Lawrence, CEO

Yeah, so in terms of what's working in the short term, we saw business start to inflect before Christmas, right? And it's been fairly consistent, positive, from pretty much the week or two before Christmas all the way up until recently with the exception of about a three-day window where we were shut down with some storms in kind of the end of January. And it's been broad-based. It's not been one area. We mentioned on our earnings call all four divisions ran positive in the month of February. That continued into March. Certainly you have some business outperforming a little better, like the baseball business, which is a big business. First and Spring is doing really well with some of the new initiatives. But every business is running positive, And I think it's the combination of all these different metrics that we've pulled together in terms of the strategy, starting to get some traction and all working in unison with each other. That's what we would attribute it to.

Carl Ford, CFO

From a store closure standpoint, we haven't closed a store since 2019. We haven't impaired any stores, whether they're existing stores or new stores. In my prior life, where I did evaluate that a little bit more closely, I kind of used a $500,000 EBITDA threshold to say, does it still make sense to operate? If I close the store, would the volume just go to another, you know, near-term store? We're not evaluating closing any stores is the short answer.

Steve Lawrence, CEO

But I do think over time as some of these stores and the population continues to migrate outwards, we may have that opportunity. At those points, we're probably at the end of lease or we're in a year-to-year situation, and we can make those calls individually as need be. Another thing that we also are very focused on is we want to make sure we're keeping our existing basis stores updated. So we're going to, moving forward, try to remodel or touch roughly 30 to 40 stores a year, which is roughly 10% of the population, with the idea being that, you know, you want to touch them roughly every 10 years. That's kind of a good discipline to be in. Stores that are higher traffic that are shopped more frequently maybe every seven, eight years, and stores that are less frequently shopped maybe, you know, like 11 to 12 years. But that's also another thing we're working on as well. Up here. Thank you.

Adrienne Yu, Analyst — Barclays

Adrienne from Barclays. I guess my question is really sort of how should we think about the shaping of the five-year plan over the five years? Obviously, you've given guidance for this year. And I guess, you know, we've heard from the ASIC CEO recently about inflationary pressures on the horizon for back to school, and maybe kind of this spike nature of, you know, price increases. Have you seen any of that in your discussions? And how should we think about kind of the macro backdrop and then have a follow-up. Thank you.

Steve Lawrence, CEO

So you talk to shape and I'll talk about pricing.

Carl Ford, CFO

I wouldn't, I wouldn't overthink it. I think it's going to be pretty, uh, symmetrical across the five years. I don't think that there's any, um, any, any year that we think is going to have outsized store growth above that 25 average. I don't think that there are milestones for three years from now as it relates to e-commerce spiking. I think you should think of it as pretty, pretty symmetrical.

Steve Lawrence, CEO

Perfect. In terms of pricing, I would say that, you know, we were probably faster to move on some of our private label because we're the importer record than some of our brands have been. Brands took varied approaches depending upon where they're at from a supply chain perspective. Some took pricing up immediately. Some took it up on as new items were coming in. Some waited until we got to the new year to start raising prices because, as you know, one of the tricky parts about all this is the ticketing increases and changing those. I believe where we're at today assuming there's no major changes one way or the other from a trade policy perspective is the pricing architecture we have in place right now is going to be pretty stable for the remainder of the year. Our goal was, you know, it was very disruptive last year to go through all these pricing changes and all the convolution of trying to raise AURs. Our goal was to get into spring with the pricing architecture at the right level and right now I believe we're at that level and I would think as we actually get to the back half there what we're going to see is customers getting more used to it because they're now lapping seeing some of those price increases they saw last Great.

Adrienne Yu, Analyst — Barclays

And then my follow-up is, Chad, for you. There are many different, you know, MDO, RFID, AI, retail media. Can you also kind of talk about kind of which of those are sort of furthest along? I would imagine that MDO is largely in the base. RFID, the type of productivity gains that you're seeing in the first quarter, and what we can expect to see on the next kind of path to 50% on that.

Steve Lawrence, CEO

I'll take the RFID one because we're all owners of the business, but Chad's got the omni-channel piece of it. We've seen with the implementation of RFID, in-stocks go up almost 500 basis points year over year. And when you think about retail, the number one reason why somebody doesn't buy something is they can't find their size or color. So having that kind of a meaningful improvement in in-stocks broadly across Apparel and Fort where we've deployed this has been a driver, And it's part of the reason why I think, you know, when we talk about it's getting traction against all these initiatives. You can't point to one and say the reason sales are positive is because they're in-stocks are better. But I think it's a piece of it, right? It's not solely because of that, but it's certainly a piece of it. So I think as we get RFID pushed out more, we're going to continue to see a compounding effect of that. I'd say MDO and a lot of the assortment planning work we're farther along on. All the stuff from a technology perspective that Chad talked about in terms of agentic search, retail media network. I mean, we're early, early innings on all that stuff. I don't know if you have anything you want to add there.

Chad Fox, Other

Yeah, you said it.

Chris Horvitz, Analyst — J.P. Morgan

Thanks. Chris Horvitz, J.P. Morgan. So I always have two questions. My first question, Carly, your favorite topic is capital allocation. So does that high single-digit EPS growth algorithm assume share repurchase?

Carl Ford, CFO

Yes, it does. We do not, when we give annual guidance, we do not embed within it share buybacks. We had $437 million of share buyback authorization at the end of FY25. This would be contemplative along that five years of us re-upping and continuing to about 50% of our cash flow from operations back to shareholders through modest dividend and share repurchases. So the simple answer is yes.

Chris Horvitz, Analyst — J.P. Morgan

Okay, understood. And then on the dividend side, how are you thinking about growing that dividend? Obviously, it's a value stock pitch, which you laid out at the end. Do you think about growing that in line with the earnings growth? Is there a certain yield that you're trying to target to draw that investor base in?

Carl Ford, CFO

We've grown it for four consecutive years. We used to talk about trying to grow by over 10% per year. We've been able to do that. We do not have a defined what we're looking to do, but I would tell you we're looking to continue a dividend and continue dividend growth along the five years.

Chris Horvitz, Analyst — J.P. Morgan

Got it. And then the follow-up question is on loyalty. So 45% of sales going through the loyalty card in 18 months, how is that relative to your expectations? On one hand, it sounds like rapid growth, but you also have very high brand awareness and you have a lot of concentration of sales in your legacy heritage market. And then you also just, you're changing the loyalty program. So I guess taking the glass, you know, half-empty point of view, did you expect it to be higher? And does it say something about, you know, who your customer is, this core male outdoor enthusiast who's maybe just not interested in loyalty, and that's why it didn't grow to a higher penetration?

Chad Fox, Other

Yeah, no, I appreciate the question. So I'll start with, like, who our customer is. And you're right. We look at a couple of different cohorts that make up the Always Game family. and one of them is that outdoors enthusiast. The other one is what we call sporting families. And both of those cohorts punch above their weight, but what we see is whenever those cohorts overlap, that's where the always-game family comes from. And loyalty is very important to them. I would argue coming out of the gate 18 months in and being at 13 million members is a good thing. But the fact that 33% of our customers that are active over the last 12 months are MyAcademy Rewards members, right, and they make up 45% of our sales, we're not changing the program. We're just enhancing the program, right? We've learned a couple of things along the way where we can enrich it even more, make it even more relevant. But I can tell you, at least in my past life, to be that quickly, that heavily penetrated is a good thing. Now, do we want to keep growing it? And is there headroom? You bet. But, you know, customers are signing up for it. It's growing at an accelerated rate. And we believe that there's a lot of upside. We have not seen anything that the value prop doesn't resonate with customers. In fact, we did some pretty high-end conjoint analysis and other types of research whenever we were pulling this together. We truly believe that we have put the right permutation and combination of reasons to believe and benefits together to have the best rewards program in our space, if not all of retail.

Steve Lawrence, CEO

So I'd say $13 million in 18 months exceeded our expectations. you got to think about it we didn't have a loyalty program for many many years I guess you'd say our private little credit card was kind of our de facto loyalty program right and what's been interesting is because we launched that seven years ago and when we launched loyalty 18 months ago the programs don't work together they're almost two parallel paths we actually have a big cohort of customers in the credit card program who aren't in the loyalty program and vice versa so this opportunity to pull them all together we think is going to be an accelerator for us so we're pleased with what we built so far. We think there's a lot of opportunities still ahead of us.

Carl Ford, CFO

I did want to mention, just because you talked about male-dominated shoppers, about 55% of our customers are male. We come out of the department store space where I was used to 90% of sales being from a lady for herself or for her family. We have a lot of parity in our shopper.

Steve Lawrence, CEO

It's actually interesting. If you take the outdoor business out and you just look at the other three businesses and aggregate it, it's more female. So certainly that does skew the total, but if you take outdoor, which is, we know, a very male-dominated category, and you look at apparel and footwear and sports and rec, you actually have your penetrated female shoppers. Jonathan.

Jonathan Matuszewski, Analyst — Jeffries

Thanks. Jonathan Matuszewski, Jeffries. Nike and Jordan were a success for you guys this past year, high-single-digit growth. Curious the reaction from other national brands. They saw your success there in terms of their vote of confidence, and any examples in terms of national brands and their intentions to replicate what Nike has done in your stores?

Steve Lawrence, CEO

Yeah, certainly I would say it's a great proof point for us, right? I mean, I think when you're talking to a brand who's not in your store, particularly a more premium brand or a better brand, they want to know how you're going to treat the brand, right? And so I think the way we launched Jordan, pulled the shops together with integrated product presentations, marketed it, put it on our site, I think it surpassed what Nike was expecting of us. And I think it's been a good proof point for us as we're trying to woo other brands. And so we'll certainly share more as those come. But, you know, brands like you've got Turtle Box in front of you or we mentioned Birkenstocks, right? We had a limited door in Birkenstocks. We're getting more doors faster there. You look at premium running, where in the past we didn't think we could sell shoes over $100. Now we have a really nice business between $100 and $200 and even north of $200. And that's helping us get, like, the Vamero platform out to 150 doors by the time we get to back to school or the Evo SL. So I think it's as much wooing new brands to come in, but it's also giving brands existing in the portfolio confidence that we're going to treat their more premium product the right way, and it's giving us access that way as well.

Jonathan Matuszewski, Analyst — Jeffries

And then a follow-up along those lines, you mentioned Burlabo and TurtleBox a number of times, high growth. I think the goal for owned brands is 25% sales penetration. Is that all organic in terms of incubating more brands and brand extensions, or would you contemplate looking at some of these small, high-growth brands, bringing them in-house, capturing the margin, et cetera?

Steve Lawrence, CEO

Yeah, it's very possible. So the 25% we set out there is an organic target. I mean, I've worked for a couple different retailers in the past that fell in love with kind of the margins that private label give you and artificially tried to drive to a number. This is a well-laid-out plan where we're going into categories. An example I used in the overview is we have a private brand called Redfield. It used to be a national brand. We actually bought the brand, and we've been expanding it into new categories. Tradition was an optics brand. We sell it in gun safes now, shooting accessories. Now we're going into hunting rifles, right? So it's a very methodical plan built out with brand extensions in the logical categories. We think we're going to get there organically. We're going to let the customer vote. If over time they tell us that once we get to 25, the right level could be as high as 30, we'll go there. but we're not going to dictate it. Could we accelerate that through the acquisition of some of these brands? We'd certainly consider that. It would have to make sense, right, for us to do that. But it's certainly something, you know, we've gotten this question in the past around M&A and is that a strategy we'd pursue? And I think our answer is we feel very confident in our three growth pillars. And if we thought M&A would help us get to one of those end results faster and it acted as an accelerant, we would consider it. If it's not, we'd probably think of it as a distraction. But I think acquiring a brand like that that is hot could be something we'd look at. All right, Johnsy.

John Lloyd, Analyst — Scovetis Capital

Hi, John's Lloyd at Scovetis Capital. First of all, thank you so much for having this event. And, Carl, thanks for the price target suggestions that you provided at the end of your chat. They're only suggestions.

Steve Lawrence, CEO

Only suggestions.

John Lloyd, Analyst — Scovetis Capital

And so my question is about the changing nature of your customer demographic. So you spoke about having a $75K income customer with high gas prices being potentially a difficult place to be. You also spoke about the higher income quintiles being the fastest growing component. And we know about the price increases that were taken throughout last year and into this year related to trade policy and other factors. having an influence on your customer and transactions within the store. So when you think about five years into the future and the targets that you provided, are you deliberately trying to position the store to appeal to a different demographic than you have today? Or how do you envision the customer file changing over that time frame?

Steve Lawrence, CEO

Yeah, I think we'll probably tag team this. I think at our core, and Carl said this, our North Star is value, right? And I think that that is what we're founded in, and if we ever lose sight of that, we're going to stop being an academy and be some other kind of a retailer. So everything we think of is through the lens of value. That being said, certainly the lower-income consumer is probably the hardest-pressed right now, and in a lot of cases is opting out with the higher gas prices and inflation on everything else, and is either trading down or just sitting out, right? That's not forever. They're going to have to come back at some point, and we want to make sure when they're ready to reengage and gas price and normalize, we still provide great value for them. That being said, we think that there's a way for us to track customers we currently maybe weren't reaching with some of the additions of some of the You know, we talked about adding Jordan last year. We had a customer cohort. It was one of the most shopped or requested brands on our website that we had, you know, call it null search terms, that we didn't satisfy them with. So I think this is helping us, in some cases, A, retain a customer that maybe had to go to other places to find brands, or in some cases, is bringing a customer in the past maybe didn't think about shopping with us. And so we look at it in both ways. But our goal here is not to move away from our existing customer base to attract a newer customer. That's like the quintessential mistake in retail, right, to abandon your existing customer base in the pursuit of another. We want to expand our reach. And the last thing I'd say is, and I kind of put this in my prepared remarks, I mean, sometimes we think just because something costs a little bit more that it's attracting a different customer. I mean, the speakers that you have in front of you today are turtle box speakers. They're, I think, a $250 retail wholesale. But they're selling very well, and they're selling broadly across all customer spectrums because it's something that's going to help them enjoy their event. If they're out golfing or they're sitting around the campfire on a hunting trip, having a great sound system is something they'll splurge on. And so we don't think that leveling up and having more better best is, in some cases, maybe helping us diversify customer base, but it's not alienating our existing customer base. We don't want to do that.

John Heimbachle, Analyst — Guggenheim

Thank you. John H. John Heimbachle, Guggenheim. So two questions. In your plan, where do you think the number of loyalty members are in five years or the number of loyalty members plus co-branded MasterCard? Because it looks like when you look at the differential in spending, I mean, that alone looks like that could be half of that $300 million in sales increment. And then secondly, what would not be? You talked about basically a linear P&L. what would not be? Is there any element of supply chain that would not be linear? Or I think about the rollout of, we didn't commit to a rollout of electronic shelf labels.

Steve Lawrence, CEO

Yeah, we started piling it.

John Heimbachle, Analyst — Guggenheim

Right, piling it. But if that works, that would be back-end loaded. Does that make a difference, a noticeable difference in labor productivity?

Steve Lawrence, CEO

Okay, I... Why don't you take the first part and Chad can answer the loyalty question.

Carl Ford, CFO

Yeah, I think I'll take it. So when you talk about, I think you're talking about investment into the business as opposed to, like, top-line growth when you talked about... Oh, from a margin perspective? Yeah, I think the biggest things that we're investing in are from a CapEx standpoint that you saw up here. It included the burden of 25 stores per year. It included, you know, leveling up in omni-channel capabilities and customer data capabilities. I think those are going to be the main investment types over this five-year time horizon. I think we feel like we've got, from a supply chain standpoint, we'll have to invest for capacity as we grow, you know, the store base from 323 as we sit here today to 450. But I don't think there's going to be large infrastructure related to supply chain. I think it's going to be a little bit of, you know, racking and tools and technology. We talked about the warehouse management system. um so from an investment standpoint i think it would probably come back to value and what we put in the ebit bridge i just i don't know the specific things that the categories that we'll want to invest in but you know even with the gross margin expansion that we've seen over time we're still taking market share which i just think is amazing um but are there categories that we really want to own and dominate that that's where i would think about the investment uh from what would be and value back to the customer to piggyback on carl's comment so in in the um strategy we have money uh set aside for capex each year for technology right um and so if for example

Steve Lawrence, CEO

electronic shelf labels end up being something there is there's some money built into that to support that you know obviously the pacing of that depending upon how successful it is we may decide to accelerate that and then they move money forward or out depending on the plan but it's not like all the capex that we built into the plan is solely to support new stores I mean, we know we have to continue to invest in core-based technology, and there's money set aside for that. And we're going to determine how fast we go on some of those things based off of the success and the payback we get off those investments.

Chad Fox, Other

On the loyalty base, I'd say, one, we think of when we're evaluating our first-party data and we're building out different models, we think of it on really two axes. One would be the identity ladder, and the other one is productivity, right? And so you can stack that identity ladder of where each rung they become more and more productive, right? And so if you just got your average customer that is store only, we want them to become an omni customer. They become more productive. We want them to become a MyAcademy rewards-based member. We want them to get the MyAcademy credit card, et cetera, right? And so we've engineered an infrastructure or an ecosystem that creates stickiness, right? And we've modeled that data in a way to where we know what the propensities are, the next most likely thing that you may be interested in, right? To truly be targeted and mindful in the way that we push people or pull people up the ladder, which will have a direct impact on how they come out to the right. And so, you know, in terms of the card itself, I haven't looked at it as we want, well, we do have in the financial model, like how many members of the card do we have? But it's really more of the combination of all of those things working together and having those choices so that the customer can opt in to what is relevant to them. And not every, you know, combination is going to be relevant to them, right? But giving them the choice to engage in the things that they want that creates a brand that they feel like it hears them, sees them, what they say matters. Their money is valuable in our store. It's a brand for them. And therefore, I'm going to shop more often. And I will tell you, we had it in the presentation, but it was just probably too much. But we've literally gone in, and you can grab just a real customer, right, and watch them over an 18-month period and see the space in between their shop. And then they opt into one, right? And then the space contracts, right, in terms of the number of shops. Then they opt into another one, and you see it get even tighter and tighter. And so we know how it works, and we've got the playbook in place in order to incentivize the customer to adopt, move up that identity ladder, and become more engaged. Does that help? Anna?

Anna Glaskin, Analyst — B. Riley Securities

Hi, Anna Glaskin, B. Riley Securities. Was curious how you assess the loyalty and credit card opportunity as you think about your various customer income cohorts. Do you see outsized opportunity to stabilize maybe the lower-income cohorts or accelerate that trade-down that you're seeing with the higher income?

Steve Lawrence, CEO

I think certainly at the base level, my academy, which doesn't require getting qualified for a credit card, is a great way for a lower-income consumer to unlock value, right? I mean, they get several different value propositions with that, a birthday reward, a sign-on discount, et cetera. So I think that is certainly one way that we think we can kind of offset some of the pressure that customer is facing through loyalty. Ultimately over time then the goal would be as the economy gets a little better or their finances get a little better that they could apply for and qualify for a credit card. And when they do that you know that five percent back we give off every day on purchases from academy I think is a really big value proposition for them. So we think definitely the lowest tier of the program being my academy rewards without a is a great way for them to harvest value from us.

Dan A. Aldridge, Head of Investor Relations

Stay there with Ike. This is right next to you.

Ike Borshaw, Analyst — Wells Fargo

Ike Borshaw, Wells Fargo. Carl, could you elaborate a little bit more on the comp outlook, maybe a little bit more detail on the waterfall that's embedded in there, kind of legacy store versus the waterfall? It kind of sounded like those 60-plus stores should hit in the mid-single-digit range. I'm just kind of curious, is there any more year one, year two, year three versus what are you baking in for legacy store comp over that five-year period? I'm just curious if there's more detail you could provide.

Carl Ford, CFO

What we're seeing is a mid-single-digit comp. So we've got 39 stores that are in the comp base that we've begun when we started building new stores back in FY22. And those taken as a whole in FY25 were at a mid-single-digit comp. What I will tell you is that stores, when they launch at a little bit of a lower volume in the newer markets where the brand awareness is a little bit lower, we do tend to see a little bit higher comp versus in legacy markets where they're coming out closer to $16 million. But overall, mid-single-digit comp, that'll be 63 stores at the end of this fiscal year, 25 new stores per year. They'll all get in in the 14th month related to the comp. From an algorithmic standpoint, that provides a pretty meaningful tailwind associated with this low single-digit comp. Could it be higher? What we've baked into the model is low single-digit comps, 5% overall sales, getting to $8 billion in five years.

Ike Borshaw, Analyst — Wells Fargo

Does that mid continue into year two, into year three?

Carl Ford, CFO

That mid, I want to be, so I want to make sure it's clear. When I say a mid single-digit comp, that includes the FY22 stores that are now on their third year, still comping positive. they're a component of that mid-single digits. We do tend to see like in the first month or two as there's a little bit of anniversarying of the sort of the grand opening festivities and maybe a little bit of the outsized marketing. Hey, how you doing? We're here. There's a slight negative comp in that like first comp month, maybe into the second. But overall, all of those stores, in some cases, meaningful double-digit comps are contributing to that mid-single-digit comp, which I think is a good average to use as you take it back.

Steve Lawrence, CEO

So I think I'll try to help answer, I think, the question you're trying to get at, like what's the base business, what are the comps there? So if you look at, there's a slide, the presentation's live, so you can pull it up. But we show you kind of a new store starting at 12, a legacy store starting at 16, and then existing at 14. We show you kind of the lines all converging at the same point. So ultimately, what we see over time, if we go back, is that they all get to roughly around the store average of $20 million. So obviously a store that's in a legacy market starts out higher at $16,000, and if they end up at the legacy average of $20,000, it's a steeper, I'm sorry, it's a shallower, shorter curve versus a new store that has a longer ramp. So as we're moving more stores into legacy and existing, I think it's going to pay off, have a quicker payoff for us, but I think it's also going to lessen a little bit of the comp tailwind that we're going to get from new stores. And so the legacy stores are implied to be flatbed up slightly as part of the model moving. Thanks guys.

Dan A. Aldridge, Head of Investor Relations

We're going to take one more question and then we'll call Steve back up. We'll take the last question from Christina.

Cristina Fernandez, Analyst — Telsey Advisory Group

Christina Fernandez from Telsea Advisory Group. I had two questions. The first one is on e-commerce. You've made a lot of progress targeting 15%. Some of your peers or some of the other industry are higher, let's call it 20%, 25%. So as you look at your business, do you feel like you'll get there eventually or just an issue of your business with the new store openings and higher e-commerce penetrations kind of limits you from, you know, being, like, at the industry average?

Steve Lawrence, CEO

Well, I think the short answer is, I mean, our goal isn't to stop at 15, right? I mean, that's just our goal over the next five years. I think that a couple things that are unique to our business is we see a very symbiotic relationship between our new store growth and our dot-com business. And that's because half our dot-com business is bogus. I mean, we sell big, bulky things like gun safes and treadmills and things like that. And so I think part of how we're getting to that 15% is the store growth that Carl said. I'm not sure it's a limitation for us, but I certainly think that our mix is different into those bigger, bulky things, which probably means we're going to be at a little bit lower percentage than, like, an apparel-only or footwear-only retailer who tends to ship a lot of their product direct to the consumer. But our goal long-term is not to stop at 15, and if we can accelerate and get to above 15 in the next five years, we're certainly going to do that. There's no governor on the business. We think it's a logical growth plan, though, when you think about it. I mean, we're going to have to grow the business 70% over the next five years. That's not a small number. I mean, it implies double-digit comps, low double-digit comps, and .com every year. I think we've got the game plan to do it. But, I mean, it's not an auspicious goal.

Cristina Fernandez, Analyst — Telsey Advisory Group

And then the second question is more short-term. You know, the first quarter guidance, you know, better than expected, 2%, 3% comp. I assume, you know, tax refunds have been some help. But I was wondering if you can talk about, you know, when gas prices have gone up this much historically, like what you've seen from your consumer.

Steve Lawrence, CEO

It's not a good thing, right? I mean, you can't say that $4 gas is good for most people outside of maybe the gas companies, right? It certainly takes a bite out of consumer spending. So, you know, I definitely think that's a headwind that's facing the American consumer right now. I think inflation is real, and I think we're still feeling the effects of some of the trade policy stuff. I think that some of the tailwinds that we're seeing right now, you could argue that there's some tax refund in there. It's hard for us to disaggregate that. I mean, certainly we're running positive in January. I don't think you could say tax refunds were helping that. Certainly in February, I don't think you could say it was helping that. Maybe a little bit in March, but I think it's still early to tell. So I think that certainly, you know, as this thing prolongs, we don't know how long it's going to last. I think there are puts and takes on our business one way or the other. So certainly the gas pricing is a headwind. We see some businesses activate when there's global conflict like this. Certainly our ammo business has accelerated. It was running positive before. It's gotten a little better since then. But I think we have puts and takes on the business. But I don't think you could argue gas prices being as high is a good thing for the American consumer. thank you very much once again value based retailer you know we move our own furniture so hopefully you guys feel that we presented a clear cut approach and pathway to achieving $8 billion in sales 7% net income and we believe that should yield a $9 earnings per share our growth strategies remain constant right we haven't changed since that presentation we did a couple years ago New store growth remains our number one strategy, growing our dot-com business to 15% penetration is number two. And then, of course, we have solid plans in place, I believe, to grow our existing base of business. So you may ask yourself, what has changed? Why do they feel more confident in their ability to deliver versus where we were three years Let's say a couple things. First, and you heard us talk about this, right? We've had time to really develop and fine-tune the tactics. You know, we're four years now into this new store opening process, and we've seen how these new stores are comping, right? And we we've refined that strategy and we're telling you that the new stores are copying mid single digits We've also told you that the new stores that we're opening up that aren't in the comp base are exceeding the performer right now So that's a good thing And I also tell you we've proven that our dot-com business can grow double digits We did that last year and it's off to a good start this year So we're talking about our base business being up running positive our dot-com business is running positive comp as well But second it's that we're starting to build critical mass behind these strategies, right? This year, as Carl mentioned, we're going to have over 60 stores in the comp basis versus maybe 25 most of last year, right? So that's providing a comp tailwind. Next year, it's going to be 85 new stores, right? So that's going to continue to compound over time. Our dot-com business is growing double digits, and I think we've proven and shown you guys we've got some really concrete strategies that are self-help generated that are going to get us there. And I'd also tell you that the strategies about growing our existing base business, the steady diet of newness that we're bringing in, The expanded loyalty program, the technology we're leaning into are all proven things that we know are going to drive the business moving forward. That's really what we think has changed, right? It's the critical mass behind those strategies and having time to build out the tactics to support those. So with all that, as Carl said, we believe the future is very bright for Academy. We're excited that you guys came to talk to us today and gave us a chance to articulate our strategy. And we want to thank you for coming and wish you all a good rest of your week. Thanks, everybody.