Academy(ASO) - 2025 FY - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a positive comparable store sales growth in Q2, with mid-single-digit increases in stores opened in the past couple of years [4] - E-commerce sales accelerated by nearly 18% in Q2 compared to Q1, indicating a strong performance in the online segment [4] - Gross margin improved by 30 basis points year-to-date, with expectations to be up 10 to 60 basis points for the full year [40][41] Business Line Data and Key Metrics Changes - The introduction of the Jordan brand has contributed to double-digit growth in the combined Nike and Jordan business [15] - The company has expanded its Nike assortment, increasing the square footage dedicated to Nike products by 10-15% across stores [28] - The company has seen a mid-teens acceleration in sales from customers earning over $100,000 annually, indicating a shift towards higher-income consumers [8] Market Data and Key Metrics Changes - Traffic from the lowest two income quintiles has decreased in high single digits, while the middle income quintile remains stable [6][7] - The company has successfully attracted higher-income customers, with a notable increase in sales from those making over $100,000 [8] Company Strategy and Development Direction - The company is focused on new store growth and has plans to expand the Jordan shop concept to all stores over the next two years [16] - The strategy includes a back-to-basics approach for the e-commerce platform, enhancing site functionality to improve customer experience [4] - The company aims to maintain its value proposition while navigating tariff impacts and adjusting pricing strategies accordingly [36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sustaining same-store sales growth, citing successful initiatives and a focus on value [35] - The company is prepared for potential price increases due to tariffs but believes its value offering will continue to attract customers [65] - Management noted that the consumer environment remains stable, with expectations of low single-digit inflation [64] Other Important Information - The company has pulled forward approximately $100 million in inventory at pre-tariff prices to mitigate tariff impacts [39] - The capital allocation strategy remains focused on stability, investing in growth initiatives, and returning value to shareholders through buybacks and dividends [62] Q&A Session Summary Question: Expectations for the consumer environment in FY '26 compared to FY '25 - Management indicated that the environment is expected to be similar, with potential price adjustments due to tariffs impacting consumer behavior [64] Question: Pricing elasticity response to price increases - Management noted varied responses to price increases, with some categories experiencing no unit erosion while others saw a negative reaction when crossing price thresholds [66][67] Question: Expectations for inventory growth in the second half - Inventory is up 8% in dollars and 4.5% in units per store, with adjustments made for unit buys in the second half [73] Question: Margins outlook outside of tariff costs - Management sees upside opportunities in supply chain efficiencies and has launched a new warehouse management system to improve operations [77] Question: Competitive landscape and market share consolidation - Management anticipates some consolidation in the market due to the hidden costs of tariffs affecting companies with weaker balance sheets [81]