Academy(ASO) - 2026 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited consolidated financial statements, including balance sheets, income, equity, cash flow, and condensed notes on operations and accounting policies Consolidated Balance Sheets Details the company's financial position, including assets, liabilities, and stockholders' equity at specific reporting dates | Metric | August 2, 2025 (in thousands) | February 1, 2025 (in thousands) | August 3, 2024 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------ | :------------------------------ | | ASSETS | | | | | Total current assets | $1,985,922 | $1,710,149 | $1,812,388 | | Property and equipment, net | $584,045 | $525,136 | $470,752 | | Total assets | $5,275,983 | $4,900,963 | $4,874,358 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | Total current liabilities | $1,212,008 | $960,881 | $1,091,275 | | Total liabilities | $3,200,833 | $2,896,928 | $2,921,964 | | Total stockholders' equity | $2,075,150 | $2,004,035 | $1,952,394 | - Total assets increased to $5,275,983 thousand as of August 2, 2025, from $4,900,963 thousand on February 1, 2025, and $4,874,358 thousand on August 3, 2024. This growth was primarily driven by increases in merchandise inventories, net, and property and equipment, net[11] - Total liabilities increased to $3,200,833 thousand as of August 2, 2025, from $2,896,928 thousand on February 1, 2025, mainly due to a significant rise in accounts payable and long-term lease liabilities[11] Consolidated Statements of Income Reports the company's financial performance over specific periods, detailing net sales, gross margin, operating income, and net income | Metric | Thirteen Weeks Ended August 2, 2025 (in thousands) | Thirteen Weeks Ended August 3, 2024 (in thousands) | Twenty-Six Weeks Ended August 2, 2025 (in thousands) | Twenty-Six Weeks Ended August 3, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------------------------------------- | :-------------------------------------------------- | | Net Sales | $1,599,838 | $1,548,980 | $2,951,247 | $2,913,200 | | Gross Margin | $576,733 | $558,725 | $1,035,602 | $1,014,519 | | Operating Income | $172,381 | $190,086 | $241,646 | $292,469 | | Net Income | $125,434 | $142,588 | $171,518 | $219,053 | | Basic EPS | $1.89 | $1.99 | $2.57 | $3.00 | | Diluted EPS | $1.85 | $1.95 | $2.52 | $2.93 | - For the thirteen weeks ended August 2, 2025, Net Sales increased by 3.3% YoY to $1,599,838 thousand, while Net Income decreased by 12.0% YoY to $125,434 thousand. Diluted EPS also decreased by 5.1% YoY to $1.85[13] - For the twenty-six weeks ended August 2, 2025, Net Sales increased by 1.3% YoY to $2,951,247 thousand, but Net Income decreased by 21.7% YoY to $171,518 thousand. Diluted EPS saw a 14.0% YoY decline to $2.52[13] Consolidated Statements of Stockholders' Equity Presents changes in equity, including common stock, retained earnings, and additional paid-in capital, reflecting net income and share transactions | Metric | As of August 2, 2025 (in thousands) | As of February 1, 2025 (in thousands) | As of August 3, 2024 (in thousands) | | :-------------------------------- | :---------------------------------- | :------------------------------------ | :---------------------------------- | | Total Stockholders' Equity | $2,075,150 | $2,004,035 | $1,952,394 | | Common Stock Shares Outstanding | 66,625 | 68,333 | 70,916 | | Retained Earnings | $1,818,967 | $1,756,258 | $1,707,101 | | Additional Paid-In Capital | $255,517 | $247,094 | $244,584 | - Total stockholders' equity increased from $2,004,035 thousand on February 1, 2025, to $2,075,150 thousand on August 2, 2025, primarily due to net income contributions and equity compensation, partially offset by share repurchases and dividends[15] - The Company repurchased 2,080,772 shares of common stock for retirement during the twenty-six weeks ended August 2, 2025, totaling $99,900 thousand, reducing outstanding shares[15][29] Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities over specific periods | Cash Flow Activity | Twenty-Six Weeks Ended August 2, 2025 (in thousands) | Twenty-Six Weeks Ended August 3, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------------- | :------------------------------------------------- | | Net cash provided by operating activities | $236,047 | $291,023 | | Net cash used in investing activities | $(107,899) | $(73,739) | | Net cash used in financing activities | $(116,217) | $(240,636) | | Net increase (decrease) in cash and cash equivalents | $11,931 | $(23,352) | - Net cash provided by operating activities decreased by $54,976 thousand (18.9%) for the twenty-six weeks ended August 2, 2025, compared to the prior year, primarily due to lower net income and a decrease in cash flows from operating assets and liabilities[20][139] - Net cash used in investing activities increased by $34,160 thousand (46.3%) for the twenty-six weeks ended August 2, 2025, mainly driven by increased capital expenditures for new and existing stores and distribution centers[20][139] - Net cash used in financing activities decreased by $124,419 thousand (51.7%) for the twenty-six weeks ended August 2, 2025, primarily due to a $121.3 million decrease in cash outflows for common stock repurchases[20][139] Condensed Notes to Consolidated Financial Statements Provides detailed explanations and disclosures supporting the consolidated financial statements, covering various accounting policies and financial items Note 1. Nature of Operations Describes the company's business, including its retail operations, store count, geographic presence, and sales channels - Academy Sports and Outdoors, Inc. is a leading full-line sporting goods and outdoor recreational products retailer in the United States, operating 306 retail locations in 21 states and three distribution centers as of August 2, 2025. The Company also sells merchandise via its website and mobile app[23] Note 2. Summary of Significant Accounting Policies Outlines the key accounting principles and methods used in preparing the financial statements, including share repurchase programs and tax law changes - The Company's Board of Directors approved a new share repurchase program on December 4, 2024, authorizing up to $700 million in repurchases over three years, replacing the previous program. As of August 2, 2025, $536.5 million remained available under this program[28][30] | Period | Shares Repurchased | Aggregate Amount Paid (in millions) | | :-------------------------------- | :----------------- | :-------------------------------- | | Thirteen Weeks Ended August 2, 2025 | — | $0.0 | | Thirteen Weeks Ended August 3, 2024 | 1,809,856 | $98.8 | | Twenty-Six Weeks Ended August 2, 2025 | 2,080,772 | $99.9 | | Twenty-Six Weeks Ended August 3, 2024 | 3,793,823 | $222.3 | - The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, introduces significant changes to U.S. tax law, including full deductibility of qualified capital and domestic R&D expenditures. The Company anticipates a material decrease in current tax expense and a corresponding increase in deferred tax expense for fiscal year ending January 31, 2026, with no net impact on the effective tax rate[32] Note 3. Net Sales Details net sales by merchandise division and other sales, including e-commerce contribution to overall sales | Merchandise Division | Thirteen Weeks Ended August 2, 2025 (in thousands) | Thirteen Weeks Ended August 3, 2024 (in thousands) | Twenty-Six Weeks Ended August 2, 2025 (in thousands) | Twenty-Six Weeks Ended August 3, 2024 (in thousands) | | :--------------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------------------------------------- | :-------------------------------------------------- | | Outdoors | $448,937 | $438,105 | $831,488 | $826,262 | | Sports and recreation | $369,791 | $357,145 | $704,837 | $695,743 | | Apparel | $451,121 | $435,041 | $783,802 | $769,409 | | Footwear | $323,243 | $312,120 | $615,918 | $604,553 | | Total merchandise sales | $1,593,092 | $1,542,411 | $2,936,045 | $2,895,967 | | Other sales | $6,746 | $6,569 | $15,202 | $17,233 | | Net Sales | $1,599,838 | $1,548,980 | $2,951,247 | $2,913,200 | - E-commerce sales represented 10.9% of merchandise sales for the thirteen weeks ended August 2, 2025, up from 9.7% in the prior year period. For the twenty-six weeks, e-commerce sales were 10.5%, up from 9.4% in the prior year[37] Note 4. Long-Term Debt Outlines the company's long-term debt obligations, including term loans, notes, and available borrowing capacity under its ABL facility | Debt Type | August 2, 2025 (in thousands) | February 1, 2025 (in thousands) | August 3, 2024 (in thousands) | | :-------------------------- | :------------------------------ | :------------------------------ | :------------------------------ | | Term Loan, due November 2027 | $87,250 | $88,750 | $90,250 | | 6.00% Notes, due November 2027 | $400,000 | $400,000 | $400,000 | | Total debt | $487,250 | $488,750 | $490,250 | | Long-term debt, net | $481,738 | $482,679 | $483,617 | - As of August 2, 2025, the Company had no borrowings outstanding under its ABL Facility, with an available borrowing capacity of $990.9 million, and outstanding letters of credit of approximately $9.1 million[42] - The Term Loan had a weighted average interest rate of 8.19% as of August 2, 2025, with quarterly principal payments of $750 thousand required through September 30, 2027[43] Note 5. Fair Value Measurements Details the fair value of financial instruments, including money market funds and long-term debt, categorized by valuation hierarchy - The Company held $250.2 million in money market funds as of August 2, 2025, which are classified as cash and redeemable on demand[48] - The estimated fair value of the Term Loan and Notes was $0.5 billion as of August 2, 2025, February 1, 2025, and August 3, 2024, classified as Level 2 within the fair value hierarchy[49] Note 6. Property and Equipment Provides a breakdown of property and equipment, net, including leasehold improvements, equipment, software, and construction in progress | Category | August 2, 2025 (in thousands) | February 1, 2025 (in thousands) | August 3, 2024 (in thousands) | | :-------------------------- | :------------------------------ | :------------------------------ | :------------------------------ | | Leasehold improvements | $709,739 | $663,869 | $605,746 | | Equipment and software | $754,848 | $733,939 | $713,400 | | Furniture and fixtures | $451,879 | $431,577 | $407,371 | | Construction in progress | $64,362 | $54,236 | $53,326 | | Building and Land | $33,748 | $16,010 | $14,921 | | Total property and equipment | $2,014,576 | $1,899,631 | $1,794,764 | | Accumulated depreciation and amortization | $(1,430,531) | $(1,374,495) | $(1,324,012) | | Property and equipment, net | $584,045 | $525,136 | $470,752 | - Depreciation expense for the thirteen weeks ended August 2, 2025, was $31.0 million, up from $28.9 million in the prior year period. For the twenty-six weeks, it was $61.2 million, up from $57.8 million[51] Note 7. Accrued Expenses and Other Current Liabilities Details various accrued expenses and other current liabilities, including personnel costs, deferred revenue, and income taxes payable | Category | August 2, 2025 (in thousands) | February 1, 2025 (in thousands) | August 3, 2024 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------ | :------------------------------ | | Accrued personnel costs | $40,807 | $46,178 | $34,472 | | Deferred revenue - gift cards and other | $88,301 | $98,641 | $82,619 | | Income taxes payable | $11,562 | $6,090 | $29,114 | | Property taxes | $38,714 | $16,833 | $36,425 | | Accrued expenses and other current liabilities | $266,021 | $230,323 | $259,069 | Note 8. Share-Based Compensation Explains the company's share-based compensation plans, including equity compensation expense and shares available for future issuance - Equity compensation expense was $7.6 million for the thirteen weeks ended August 2, 2025, and $15.1 million for the twenty-six weeks ended August 2, 2025. This represents a slight decrease for the thirteen-week period and an increase for the twenty-six-week period compared to the prior year[55] - As of August 2, 2025, there were 3,556,643 shares authorized and available for future issuance under the 2020 Omnibus Incentive Plan and 1,402,072 shares under the 2020 Employee Stock Purchase Plan (ESPP)[53][54] Note 9. Earnings per Common Share Presents basic and diluted earnings per common share, along with the underlying net income and weighted average shares outstanding | Metric | Thirteen Weeks Ended August 2, 2025 | Thirteen Weeks Ended August 3, 2024 | Twenty-Six Weeks Ended August 2, 2025 | Twenty-Six Weeks Ended August 3, 2024 | | :-------------------------------- | :---------------------------------- | :---------------------------------- | :------------------------------------ | :------------------------------------ | | Net income (in thousands) | $125,434 | $142,588 | $171,518 | $219,053 | | Weighted average common shares outstanding - basic (in thousands) | 66,539 | 71,829 | 66,831 | 72,911 | | Weighted average common shares outstanding - diluted (in thousands) | 67,689 | 73,289 | 68,043 | 74,651 | | Earnings per common share - basic | $1.89 | $1.99 | $2.57 | $3.00 | | Earnings per common share - diluted | $1.85 | $1.95 | $2.52 | $2.93 | - Diluted EPS decreased from $1.95 to $1.85 for the thirteen weeks ended August 2, 2025, and from $2.93 to $2.52 for the twenty-six weeks ended August 2, 2025, primarily due to lower net income and a reduction in weighted average common shares outstanding[58] Note 10. Commitments and Contingencies Discloses contractual obligations and potential liabilities from legal proceedings, assessing their potential financial impact - As of August 2, 2025, the Company had $121.5 million in obligations under technology-related, construction, and other contractual commitments, with approximately $63.3 million payable within the next 12 months[59] - The Company is involved in various lawsuits and claims, but management believes the ultimate resolution will not materially impact its financial position, results of operations, or cash flows, considering indemnities, defenses, insurance, and reserves[61][62] Note 11. Segment Information Identifies the company's operating and reportable segments, detailing how resources are allocated and performance is assessed - The Company operates as a single operating and reportable segment, deriving revenues from selling full-line sporting goods and outdoor recreational products through retail stores and online channels[63] - The Chief Executive Officer, as the chief operating decision maker (CODM), allocates resources and assesses performance at a Company level using consolidated net income and evaluates assets as reported on the Consolidated Balance Sheets[64] Note 12. Subsequent Events Reports significant events occurring after the balance sheet date but before the financial statements are issued, such as dividend declarations - On August 28, 2025, the Board of Directors declared a quarterly cash dividend of $0.13 per share for the fiscal quarter ended August 2, 2025, payable on October 9, 2025[65] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's perspective on financial condition and results, covering business overview, key metrics, financial analysis, non-GAAP measures, liquidity, and accounting policies Cautionary Statement Regarding Forward-looking Statements Highlights that the report contains forward-looking statements subject to various risks and uncertainties that are difficult to predict - The report contains forward-looking statements subject to various risks, uncertainties, assumptions, or changes in circumstances that are difficult to predict or quantify, including macroeconomic conditions, industry trends, and business strategy[66][67] Summary of Principal Factors that Make an Investment Speculative or Risky Outlines key risks such as economic decline, supply chain reliance, competition, regulatory changes, and indebtedness impacting investment speculation - Key risks include overall economic decline and consumer spending, reliance on internationally manufactured merchandise (especially from China), ability to manage information systems and inventory, intense competition, supply chain disruptions, and the ability to execute store growth plans[69][73] - Legal and regulatory risks, product safety, climate change, intellectual property protection, and risks related to the Company's indebtedness and common stock ownership are also highlighted as speculative factors[70][71][72][73] Overview Provides a general description of the company's operations, including store count, team members, distribution centers, and product assortment - As of August 2, 2025, the Company operated 306 stores across 21 states, supported by approximately 23,000 team members, three distribution centers, and an e-commerce platform[79] | Period | Beginning Stores | Q1 New Stores | Q2 New Stores | Closed | Ending Stores | | :--------------------- | :--------------- | :------------ | :------------ | :----- | :------------ | | Twenty-Six Weeks Ended August 2, 2025 | 298 | 5 | 3 | — | 306 | | Twenty-Six Weeks Ended August 3, 2024 | 282 | 2 | 1 | — | 285 | - The Company's product assortment focuses on outdoor (28%), sports and recreation (23%), apparel (28%), and footwear (21%) categories, including national and private label brands, with a localized merchandising strategy[77] Tariffs and Other Macroeconomic Trends Discusses the impact of global macroeconomic trends, such as inflation and tariffs, on consumer spending and the company's mitigation strategies - The Company is actively monitoring global macroeconomic trends, including inflation and tariffs, which have impacted consumer spending. Strategies to mitigate impact include adjusting inventory, strategic pricing, diversifying sourcing, and vendor negotiations[81] How We Assess the Performance of Our Business Explains the key metrics and non-GAAP measures used by management to evaluate business performance and guide strategic decisions - Management uses comparable sales, transactions, average ticket, and non-GAAP metrics like Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Adjusted Earnings per Share, and Adjusted Free Cash Flow to evaluate business performance and make strategic decisions[82][83][85][86] - Comparable sales are defined as the percentage increase or decrease for stores open after thirteen full fiscal months and all e-commerce sales, with e-commerce sales (including BOPIS) directly impacting comparable sales results[83] Net Sales Analyzes factors influencing net sales, including new store openings, comparable sales, inventory management, and omnichannel capabilities - Net sales are influenced by new store openings, comparable sales, inventory management, vendor relations, seasonality, weather, consumer preferences, and promotions. The Company opened 21 new stores since the end of the 2024 second quarter, generating $60.8 million in net sales during the 2025 second quarter[88][89][93][103] - The expansion of omnichannel capabilities, including the mobile app, website optimization, and BOPIS/ship-to-store programs, has driven increased sales, with stores facilitating approximately 95% of total sales during the 2025 year-to-date second quarter[92] - A shift in sales mix towards softgoods (apparel and footwear) generally has a positive impact on gross margin due to higher margins compared to hardgoods (outdoors and sports and recreation)[91] Gross Margin Defines gross margin and discusses factors affecting it, such as sales volume, promotional activities, product mix, and inventory costs - Gross margin is net sales less cost of goods sold, influenced by sales volume, promotional activities, product mix (including private label), and control over inventory and logistics costs. Shrinkage can materially negatively impact gross margin[94][95][96] Selling, General and Administrative Expenses Analyzes trends in SG&A expenses, highlighting increases due to strategic investments in new stores and technology - SG&A expenses increased from 24.8% of net sales in the 2024 year-to-date second quarter to 26.9% in the 2025 year-to-date second quarter, primarily due to increased strategic investments, including the addition of 21 new stores[97] | Period | Number of New Stores Opened | Total Pre-opening Expenses Incurred (in millions) | | :-------------------------------- | :-------------------------- | :---------------------------------------------- | | Thirteen Weeks Ended August 2, 2025 | 3 | $5.2 | | Thirteen Weeks Ended August 3, 2024 | 1 | $2.7 | | Twenty-Six Weeks Ended August 2, 2025 | 8 | $8.5 | | Twenty-Six Weeks Ended August 3, 2024 | 3 | $4.7 | Interest Expense Describes the components of interest expense, including regular interest on debt facilities and amortization of deferred loan costs - Interest expense includes regular interest on the Term Loan, Notes, and ABL Facility, along with amortization of deferred loan costs and original issuance discounts[99] Income Tax Expense Explains the primary drivers of fluctuations in income tax expense, mainly changes in income before taxes and equity awards - Income tax expense fluctuates primarily due to changes in income before income taxes and equity awards activity[100] Results of Operations Presents a comparative analysis of financial performance for the thirteen and twenty-six week periods, detailing key revenue and expense changes Thirteen Weeks Ended August 2, 2025 Compared to Thirteen Weeks Ended August 3, 2024 Compares financial results for the thirteen-week periods, highlighting changes in net sales, gross margin, SG&A, operating income, and net income | Metric | August 2, 2025 (in thousands) | August 3, 2024 (in thousands) | Change (Dollars) | Change (Percent) | | :-------------------------------- | :------------------------------ | :------------------------------ | :--------------- | :--------------- | | Net sales | $1,599,838 | $1,548,980 | $50,858 | 3.3% | | Gross margin | $576,733 | $558,725 | $18,008 | 3.2% | | Selling, general and administrative expenses | $404,352 | $368,639 | $35,713 | 9.7% | | Operating income | $172,381 | $190,086 | $(17,705) | (9.3)% | | Net income | $125,434 | $142,588 | $(17,154) | (12.0)% | - Net sales increased by 3.3% to $1,599.8 million, driven by growth across all merchandise divisions (apparel +3.7%, footwear +3.6%, sports and recreation +3.5%, outdoor +2.5%). New stores contributed $60.8 million in net sales[102][103] - Comparable sales increased by 0.2%, primarily due to a 1.5% increase in average ticket, partially offset by a 1.4% decrease in comparable transactions. E-commerce net sales grew to 10.9% of merchandise sales from 9.7% in the prior year[104] - SG&A expenses increased by 9.7% to $404.4 million, mainly due to $26.8 million in increased strategic investments in new stores and technology[106] Twenty-Six Weeks Ended August 2, 2025 Compared to Twenty-Six Weeks Ended August 3, 2024 Compares financial results for the twenty-six-week periods, detailing changes in net sales, gross margin, SG&A, operating income, and net income | Metric | August 2, 2025 (in thousands) | August 3, 2024 (in thousands) | Change (Dollars) | Change (Percent) | | :-------------------------------- | :------------------------------ | :------------------------------ | :--------------- | :--------------- | | Net sales | $2,951,247 | $2,913,200 | $38,047 | 1.3% | | Gross margin | $1,035,602 | $1,014,519 | $21,083 | 2.1% | | Selling, general and administrative expenses | $793,956 | $722,050 | $71,906 | 10.0% | | Operating income | $241,646 | $292,469 | $(50,823) | (17.4)% | | Net income | $171,518 | $219,053 | $(47,535) | (21.7)% | - Net sales increased by 1.3% to $2,951.2 million, driven by growth in footwear (+1.9%), apparel (+1.9%), sports and recreation (+1.3%), and outdoor (+0.6%). New stores contributed $103.8 million in net sales[110][111] - Comparable sales decreased by 1.7%, primarily due to a 3.1% decrease in comparable transactions, partially offset by a 1.5% increase in average ticket. E-commerce net sales increased to 10.5% of merchandise sales from 9.4% in the prior year[112] - Gross margin as a percentage of net sales increased by 30 basis points to 35.1%, primarily due to 50 basis points of favorability in merchandise margin, partially offset by 20 basis points of unfavorability from increased shrink and e-commerce shipping[113] - SG&A expenses increased by 10.0% to $794.0 million, mainly due to $60.2 million in increased strategic investments in new stores, technology, and the Jordan Brand launch[114] Non-GAAP Measures Discusses the use of non-GAAP financial measures like Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Adjusted EPS, and Adjusted Free Cash Flow for performance evaluation - Management uses Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Adjusted Earnings per Share, and Adjusted Free Cash Flow as supplemental non-GAAP measures to evaluate business strategies, make budgeting decisions, and compare performance, excluding items not indicative of core operating performance[118][119] Adjusted EBITDA and Adjusted EBIT Presents adjusted EBITDA and EBIT, providing a clearer view of core operating performance by excluding certain non-recurring or non-cash items | Metric | Thirteen Weeks Ended August 2, 2025 (in thousands) | Thirteen Weeks Ended August 3, 2024 (in thousands) | Twenty-Six Weeks Ended August 2, 2025 (in thousands) | Twenty-Six Weeks Ended August 3, 2024 (in thousands) | | :---------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------------------------------------- | :-------------------------------------------------- | | Net income | $125,434 | $142,588 | $171,518 | $219,053 | | Adjusted EBITDA | $212,484 | $232,490 | $322,248 | $375,068 | | Adjusted EBIT | $181,463 | $203,572 | $261,077 | $317,297 | - Adjusted EBITDA decreased by 8.6% to $212.5 million for the thirteen weeks ended August 2, 2025, and by 14.0% to $322.2 million for the twenty-six weeks ended August 2, 2025, compared to the prior year periods[123] Adjusted Net Income and Adjusted Earnings per Share Details adjusted net income and adjusted earnings per share, offering a normalized view of profitability by excluding specific adjustments | Metric | Thirteen Weeks Ended August 2, 2025 | Thirteen Weeks Ended August 3, 2024 | Twenty-Six Weeks Ended August 2, 2025 | Twenty-Six Weeks Ended August 3, 2024 | | :-------------------------------- | :---------------------------------- | :---------------------------------- | :------------------------------------ | :------------------------------------ | | Net income (in thousands) | $125,434 | $142,588 | $171,518 | $219,053 | | Adjusted Net Income (in thousands) | $131,319 | $148,642 | $182,917 | $230,262 | | Adjusted Earnings per Share: Basic | $1.97 | $2.07 | $2.74 | $3.16 | | Adjusted Earnings per Share: Diluted | $1.94 | $2.03 | $2.69 | $3.08 | - Diluted Adjusted Earnings per Share decreased from $2.03 to $1.94 for the thirteen weeks ended August 2, 2025, and from $3.08 to $2.69 for the twenty-six weeks ended August 2, 2025, compared to the prior year periods[124] Adjusted Free Cash Flow Reports adjusted free cash flow, indicating the cash generated from operations after accounting for capital expenditures | Metric | Thirteen Weeks Ended August 2, 2025 (in thousands) | Thirteen Weeks Ended August 3, 2024 (in thousands) | Twenty-Six Weeks Ended August 2, 2025 (in thousands) | Twenty-Six Weeks Ended August 3, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------------------------------------- | :-------------------------------------------------- | | Net cash provided by operating activities | $78,575 | $91,346 | $236,047 | $291,023 | | Net cash used in investing activities | $(56,911) | $(41,384) | $(107,899) | $(73,739) | | Adjusted Free Cash Flow | $21,664 | $49,962 | $128,148 | $217,284 | - Adjusted Free Cash Flow decreased by 56.6% to $21.7 million for the thirteen weeks ended August 2, 2025, and by 41.1% to $128.1 million for the twenty-six weeks ended August 2, 2025, compared to the prior year periods[126] Liquidity and Capital Resources Examines the company's ability to meet short-term and long-term financial obligations, including sources and uses of cash and debt structure Sources and Uses of Liquidity Identifies the primary liquidity requirements and funding sources, including cash, operating activities, and debt facilities - The Company's primary liquidity requirements are for working capital, capital expenditures, debt obligations, interest expense, dividends, and common stock repurchases. These are funded by cash and cash equivalents, operating activities, debt issuances, and ABL Facility borrowings[127] - As of August 2, 2025, cash and cash equivalents totaled $300.9 million. Management believes current liquidity, including ABL Facility availability, is sufficient for the next 12 months and foreseeable future[127] Long-Term Debt Details the company's long-term debt structure, including fixed and variable rate notes, term loans, and the ABL facility - As of August 2, 2025, the Company's long-term debt included $400 million in 6.00% fixed-rate senior secured Notes due November 2027, and an $87.3 million 8.19% variable-rate Term Loan due November 2027[130] - The ABL Facility has a $1.0 billion commitment with no principal outstanding as of August 2, 2025, maturing March 8, 2029, and an available borrowing capacity of $990.9 million[130][131] | Fiscal Year | Term Loan and related interest (in thousands) | Notes and related interest (in thousands) | ABL Facility and related interest (in thousands) | | :---------- | :------------------------------------------ | :---------------------------------------- | :--------------------------------------------- | | 2025 | $4,691 | $12,000 | $1,243 | | 2026 | $9,159 | $24,000 | $2,500 | | 2027 | $87,725 | $424,000 | $2,500 | | 2028 | — | — | $2,500 | | 2029 | — | — | $268 | | Total | $101,575 | $460,000 | $9,011 | Leases Outlines the company's operating lease obligations for store locations, distribution centers, office space, and equipment | Fiscal Year | Operating Lease Payments (in thousands) | | :---------- | :-------------------------------------- | | 2025 | $103,999 | | 2026 | $251,562 | | 2027 | $239,231 | | 2028 | $222,069 | | 2029 | $205,355 | | After 2029 | $1,130,983 | | Total | $2,153,199 | - The Company predominantly leases store locations, distribution centers, office space, and equipment under operating leases expiring between fiscal years 2024 and 2044, with total remaining obligations of $2,153.2 million as of August 2, 2025[132] Share Repurchases Details the company's share repurchase programs, including authorized amounts, shares purchased, and remaining availability - The Company's Board of Directors approved a new share repurchase program on December 4, 2024, authorizing up to $700 million in repurchases over three years. As of August 2, 2025, $536.5 million remained available[134] | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Amount Repurchased (in thousands) | | :-------------------------------- | :------------------------------- | :--------------------------- | :-------------------------------------- | | First Quarter (Feb 2, 2025 to May 3, 2025) | 2,080,772 | $47.59 | $99,031 | | Second Quarter (May 4, 2025 to Aug 2, 2025) | — | — | — | | Total Share Repurchase Activity | 2,080,772 | $47.59 | $99,031 | Dividends Reports quarterly cash dividends declared and paid, including the per-share amount and payment dates | Quarter | Dividend per Share | Total Dividends Paid (in thousands) | Stockholder Date of Record | | :-------------------------------- | :----------------- | :---------------------------------- | :------------------------- | | First Quarter (Feb 2, 2025 to May 3, 2025) | $0.13 | $8,716 | March 25, 2025 | | Second Quarter (May 4, 2025 to Aug 2, 2025) | $0.13 | $8,649 | June 19, 2025 | | Total Dividends Paid | | $17,365 | | - On August 28, 2025, the Board of Directors declared a quarterly cash dividend of $0.13 per share for the fiscal quarter ended August 2, 2025, payable on October 9, 2025[136] Capital Expenditures Breaks down capital expenditures by category, including new stores, corporate, e-commerce, IT, and existing store updates, along with future forecasts | Category | Twenty-Six Weeks Ended August 2, 2025 (in thousands) | Twenty-Six Weeks Ended August 3, 2024 (in thousands) | | :------------------------------------------ | :------------------------------------------------- | :------------------------------------------------- | | New stores | $49,368 | $37,504 | | Corporate, e-commerce and information technology programs | $20,522 | $21,115 | | Existing stores, distribution centers and other | $37,686 | $14,806 | | Total capital expenditures | $107,576 | $73,425 | - Total capital expenditures increased by $34.2 million to $107.6 million for the twenty-six weeks ended August 2, 2025, primarily driven by increased spending on new stores and updates for existing stores and distribution centers[137][139] - Forecasted capital expenditures for fiscal year 2025 are between $180 million and $220 million, with 60% allocated to new stores, 20% to corporate, e-commerce, and IT programs, and 20% to existing stores, distribution centers, and other[137] Cash Flows for the Twenty-Six Weeks Ended August 2, 2025 and August 3, 2024 Analyzes cash flow activities for the twenty-six-week periods, detailing changes in operating, investing, and financing cash flows | Cash Flow Activity | Twenty-Six Weeks Ended August 2, 2025 (in thousands) | Twenty-Six Weeks Ended August 3, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------------- | :------------------------------------------------- | | Net cash provided by operating activities | $236,047 | $291,023 | | Net cash used in investing activities | $(107,899) | $(73,739) | | Net cash used in financing activities | $(116,217) | $(240,636) | | Net increase (decrease) in cash and cash equivalents | $11,931 | $(23,352) | - Cash provided by operating activities decreased by $55.0 million, primarily due to a $47.5 million decrease in net income and a $42.3 million net decrease in cash flows from operating assets and liabilities, partially offset by a $34.8 million net increase in non-cash charges[139] - Cash used in financing activities decreased by $124.4 million, mainly driven by a $121.3 million decrease in cash outflows for common stock repurchases[139] Critical Accounting Policies and Estimates Highlights key accounting policies and estimates requiring significant management judgment, such as inventory valuation and asset impairment - The preparation of financial statements requires management to make significant estimates and assumptions, particularly concerning the valuation of merchandise inventories and impairment analyses for goodwill, intangible, and long-lived assets[140][142] Recent Accounting Pronouncements Discusses the impact of recently enacted accounting pronouncements, specifically the One Big Beautiful Bill Act, on tax expense - The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, is expected to materially decrease current tax expense and increase deferred tax expense for fiscal year ending January 31, 2026, with no net impact on the effective tax rate[144] Item 3. Quantitative and Qualitative Disclosures About Market Risk Confirms no material changes in the company's primary risk exposures or market risk management since the Annual Report - No material changes in primary risk exposures or market risk management have occurred since the Annual Report[145] Item 4. Controls and Procedures Details the evaluation of disclosure controls and procedures, confirming no material changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures Reports management's conclusion on the effectiveness of the company's disclosure controls and procedures at a reasonable assurance level - Management, with CEO and CFO participation, concluded that the Company's disclosure controls and procedures were effective at a reasonable assurance level as of the end of the reporting period[146] Changes in Internal Control over Financial Reporting Confirms that no material changes in internal control over financial reporting occurred during the reporting period - No changes in internal control over financial reporting occurred during the period that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[147] PART II. OTHER INFORMATION Item 1. Legal Proceedings Confirms no material developments in legal proceedings during the quarter, with no expected adverse financial impact - No material developments in legal proceedings occurred during the fiscal quarter ended August 2, 2025[150] - The Company is not currently party to any legal proceedings believed to have a material adverse effect on its financial position, results of operations, or cash flows[150] Item 1A. Risk Factors Refers to risk factors in the Annual Report, confirming no material changes to those previously disclosed - No material changes to the risk factors discussed in the Annual Report have occurred[151] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds to report[152] Item 3. Defaults Upon Senior Securities Confirms no defaults upon senior securities occurred during the reporting period - No defaults upon senior securities to report[153] Item 4. Mine Safety Disclosures States that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable[154] Item 5. Other Information Reports no director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended August 2, 2025[155] Item 6. Exhibits Lists exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, compensation policy, and certifications - The report includes exhibits such as the Restated Certificate of Incorporation, Amended and Restated Bylaws, Non-Employee Director Compensation Policy, and various certifications (CEO, CFO under Sarbanes-Oxley Act)[156] SIGNATURES