Academy Sports and Outdoors Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Anthony Chukumba - Loop Capital - Analyst : A lot of good information shared on the call. So I guess my question was on your gross margin guidance for 2025. Specifically, I guess I was a little surprised given the tariff impact that you are expecting that to be up 40 basis points at the midpoint. So I guess I was just wondering, what are expected to be the drivers of gross margin expansion in 2025?

Question: Christopher Horvers - JPMorgan - Analyst : So my first question is as you think about the consumer, the great debate of how much is this weather versus how much is uncertainty weighing on the consumer, can you share what you're seeing sort of quarter to date how that makes you think about the whether it's a weather issue versus a consumer? And would you expect the first quarter to be below the lower end of the annual comp guide range?

Question: Christopher Horvers - JPMorgan - Analyst : And then on the snow in Houston and Dallas is quite unusual. Just think about January and February. As you think about like the what's embedded in the comp, it's sort of a two part question. One is on the new stores. You talked about the 2022 vintage comping positively, I guess, normally, year one, year two stores comp sort of in the double digit range. So how are you thinking about like how much did they contribute? What's your expectation on what new stores contribute to the comps in '25? And then related to that, any commentary on what's embedded for the Nike launch?

Question: Brian Nagel - Oppenheimer & Co., Inc. - Analyst : So the first question I want to follow up a bit is on the launch of Jordan in your stores. So clearly, I mean the way you're talking about this is a significant move for Academy. Is there any more color you can give us on just the number of products that are launching? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 2:00PM, ASO.OQ - Q4 2024 Academy Sports and Outdoors Inc Earnings Call Is it totally incremental? Are you replacing some product with Jordan? Has Academy sold Jordan in any way in the past? And then I think you touched on this in your prepared comments, but just with Nike in general, is this -- should we really view this launch of Jordan as a indication of just an overall strengthen relationship with Nike and expect more and more Nike products in your stores over time?

Question: Brian Nagel - Oppenheimer & Co., Inc. - Analyst : Just a follow up question. With regard to tariffs, just given the focus of all of us on this topic. So it sounds the comments you've made, your exposure to China is limited and getting more limited. We have no exposure to Mexico and Canada. So those are the countries that have been discussed most, but I guess the question I have is if you look at that, the rest of the business, is there anything hidden in there maybe from a just from a component standpoint that we could see some tariff impact that's not captured that China number of the commentary around Mexico and Canada? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 2:00PM, ASO.OQ - Q4 2024 Academy Sports and Outdoors Inc Earnings Call

Question: Kate McShane - Goldman Sachs - Analyst : We wondered if we could ask for a little bit more context around the numbers you provided on the higher income cohort that is shopping Academy. We wondered if this was a meaningful change from what you were seeing in previous quarters. It sounds like maybe it was. And what do you think the driver of this -- what the driver of this is and now? And is there any insight you can give around the basket size and what that looks like with that customer versus your core customer?

Question: Gregory Melich - EVERCORE ISI - Analyst : I have two questions. I want to start with a tariff follow up and then get into the categories. On the tariffs, is it fair to think about the direct sourcing, the 8% would be -- it's roughly a third of your private label of 23% if we were trying to think about what percentage of your product is coming -- is imported from China? Is that a fair ratio?

Question: Gregory Melich - EVERCORE ISI - Analyst : And then second, I'd love to go deeper into some of the categories where you started to see a turn, particularly outdoor. I think you mentioned some of these bigger ticket areas are starting to pick up. I'm just curious, are we fully down and have cycled the pull forward of COVID demand in a lot of those categories? Are we starting to see that in what, would it be fitness or grills or you name it?

Question: Gregory Melich - EVERCORE ISI - Analyst : Good luck.

Question: Michael Lasser - UBS Equities - Analyst : Understanding that it is a very uncertain time right now, the midpoint of your guidance embeds the expectation that you -- that Academy is going to comp negative this year despite all the initiatives that are at play, including the launch of Jordan, the trade down you're already starting to see. And the contribution from the ramp of the new stores. So this begs the question, what type of environment, macro or backdrop for the sporting goods industry would be necessary for Academy to drive a positive full year comp? And then I have a follow up.

Question: Michael Lasser - UBS Equities - Analyst : My follow-up question is on your gross margin outlook for the year. You laid out that the majority of your gross margin recapture will be driven by some of the supply chain and other factors that impacted your gross margin in 2024. With that being said, you do have what would probably be a lower margin vendor coming deeper into your assortment and the potential that tariffs will weigh on the profitability of the overall sector. So how did you incorporate those factors along with what is likely to be a very promotional environment if the consumer does take a step down into your gross margin expectations for the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 2:00PM, ASO.OQ - Q4 2024 Academy Sports and Outdoors Inc Earnings Call And can you also isolate how much exposure you have to reciprocal tariffs such that as those come in around April 2, that could create a little bit more pressure on Academy's profitability in 2025?

Question: Michael Lasser - UBS Equities - Analyst : Welcome to Dan Aldridge. Good luck to you all.

Question: Simeon Gutman - Morgan Stanley - Analyst : My first question, Carl, you mentioned SG&A per store, I think in the fourth quarter being well managed. Can you give us the 52 to 52 week what's implied for SG&A per store for 2025? And then I have one follow up.

Question: Simeon Gutman - Morgan Stanley - Analyst : And then the follow up, it's also on the new stores or I guess I think Steve mentioned the base stores. Because if you take the estimated benefit from new classes of stores, I think you could get to something like a 1 point contribution of comp. That's rough math. It could be even higher, it could be a little lower. But it's certainly positive, which means the base is still implied to be negative. My question is on the base stores, mature stores. What's happening to the trend line there? Does it look similar to the ramping stores? And then what's happening to cash flows? Are cash flows stable, growing, or deteriorating in some of these base stores that have had negative comps for a couple of years?

Question: Simeon Gutman - Morgan Stanley - Analyst : Good luck.