Academy(US:ASO)2024-06-11 19:33Financial Data and Key Metrics Changes - Sales for Q1 2024 were $1.36 billion, representing a 1.4% decline compared to Q1 2023, with comparable sales down 5.7% due to a shifted comp sales calculation [6][27] - Gross margin rate for Q1 was 33.4%, a 40 basis point decline year-over-year, primarily due to an 80 basis point decline in merchandise margins [14][28] - Net income for Q1 was $76.5 million, with diluted earnings per share of $1.01, while adjusted net income was $81.6 million or $1.08 per adjusted share [30] Business Line Data and Key Metrics Changes - The hard goods division performed best, with a 2% increase in the outdoor category, while sports and recreation declined by 4% [9][10] - Footwear sales were down slightly by 1%, with athletic footwear showing strong performance, while apparel sales decreased by 3% [12][13] - The .com business saw an 8% sales increase, comprising 9% of total merchandise sales compared to 8.2% last year [8][27] Market Data and Key Metrics Changes - The company noted that customers are facing challenges due to inflation and depleted personal savings, leading to tighter discretionary spending [6][16] - Sequential improvement was observed throughout Q1, with April being the best month [7] Company Strategy and Development Direction - The company plans to open 15 to 17 new stores in 2024, having opened two new stores in Q1, expanding its presence to 19 states [21][22] - The focus remains on building a powerful omni-channel business, with a goal of achieving 15% penetration in the .com business over the next five years [22][23] - A new loyalty program, "My Academy," is set to launch over the summer, aimed at enhancing customer engagement and driving sales [24][80] Management's Comments on Operating Environment and Future Outlook - Management expects the economic environment to remain challenging, but anticipates sequential improvement in sales and margins in Q2 and beyond [32][36] - The company is aligning its assortments and marketing strategies around key shopping events to drive traffic and sales [36][39] Other Important Information - The company generated $200 million in cash from operations during Q1 and has $378 million in cash on hand [27][30] - SG&A expenses as a percentage of sales increased by 130 basis points, reflecting investments in growth initiatives [29] Q&A Session Summary Question: Key drivers for improvement in the second quarter and beyond - Management indicated that Q1 was expected to be the most challenging quarter, with sequential improvement anticipated in Q2 due to aligned assortments and marketing strategies [35][36] Question: Performance of new stores and comp benefits - New stores from the 2022 vintage are comping positively, with expectations that the 2023 vintage will also perform well based on learnings from previous openings [43][44] Question: Gross margin expectations and drivers - Management expects gross margins to improve in the back half of the year, with a focus on distribution center operations and merchandise margins [46][48] Question: Aggressiveness of promotional activity - The company plans to be more promotional during key shopping periods while managing margins carefully to avoid erosion [54][56] Question: Momentum observed in April and future actions - Management noted that while early May was softer due to weather, Memorial Day showed positive results, and they are prepared to adjust strategies based on performance [58][60] Question: New stores and cannibalization concerns - Management clarified that only the 2022 vintage stores are currently comping positively, with no significant cannibalization observed [63][64] Question: Balancing value-oriented customers with promotional strategies - The company plans to emphasize everyday value while strategically using promotions during key calendar events to drive traffic [67][69]