Academy Sports and Outdoors, Inc. (ASO) Earnings Call Transcript & Summary

Good morning. Welcome to the Academy Sports and Outdoors 2023 Analyst and Investor Day. Thank you. My name is Matt Hodges. I'm the Vice President of Investor Relations here at Academy. I'd like to thank everyone for joining us on the live stream, and we really appreciate you guys here in the room for coming to Katy, Texas to see what Academy Sports is all about. If you were with us yesterday, we had a great store tour. You got to see our enthusiastic and experienced product leaders and our excellence in retail operations. You got to mingle with the senior leadership team and have some Texas cuisine prepared just for you guys. How was that crawfish? So before we get started today, we've got to cover a couple of things. Everybody is very familiar with this one. Today's presentation will contain forward-looking statements, and those statements are indicated here. They will reconcile later with our presentation being posted on investors.academy.com. They will include non-GAAP measures, which will also be included. So for today's agenda, we're going to talk about our transformation efforts, we're going to talk about our current and future growth drivers, we're going to talk about optimization initiatives. You're going to hear about our ESG efforts, the Academy team culture, and then we're going to wrap that with financial discussion on the long-range plan. And finally, we'll have a Q&A session with the executive leadership team to wrap it all up. So to get things started today, I'd like to introduce our Chairman, President and CEO, Mr. Ken Hicks.

Thanks, Matt. Welcome to all of you who are in the room and those of you who are joining us virtually. I'm Ken Hicks and Matt gave you all my titles. I've been fortunate enough to lead the terrific team and people that we have here at Academy, and we're very excited about going over what we've done but more importantly, what we're going to do. Today is a day that you all have been looking forward to, I know I have. And there are several important things that I do to take away from today that we are a company positioned for growth through new store expansion, omnichannel advancements and continuing to improve our existing stores. We are one of the best opportunities in sustainable growth in retail today, with a proven model that has been resilient through some of the most challenging times for retail and actually for everybody over in history. We've done that with a focus on our assortment, our value and the customer experiences that differentiate us from the competition and other retailers. This has given us a strong balance sheet, backed by a self-sustaining cash flow that will allow us to fund our future opportunities. You're going to hear a multiyear strategy with some aggressive goals for the future. And we know we can accomplish this because we have a proven team at all levels throughout the company. You saw some yesterday in the store and you're going to see more today up here on the podium. Today's presenters, presenting each of the elements of the strategy. They will introduce themselves when they come up, are a very cohesive team that's been together through thick and thin over the last 5 years. One person you will not hear from, but is just as critical is Manish Maini, our Head of IT. And he's -- his team's efforts are woven through the entire plan. And rather than have him come up and sit down 20x, we thought the others would talk about Manish, but trust me, he is here, and he'll be able to answer questions. As the video said, Academy's got a great history. Started 85 years ago. It's actually older than me. And it started as a tire store on Academy Street in San Antonio, Texas and morphed through the years to Army Surplus Store to a Sports and Outdoor Store. In 2011, the Gochman family sold Academy to KKR. And KKR took the company and invested in it to make it a better company. In 2020, we went public, during the middle of COVID. A lot of people thought we were crazy. Looking back now, timing was good. 2021, we were on the Fortune 500 list, and here we are today. Who is Academy? We're $6.4 billion retailer, operating 268 stores in 18 states and a total addressable market of $175 billion. We have a significant growth opportunity in all 3 elements of our business: new stores, omnichannel and our existing stores. We have a deep consumer connection in our markets. If you've talked to our customers, you talk to people in our markets and ask them about Academy, they usually say, I love Academy. And that is because of what we offer them, and that's fun with a great assortment, strong values and an experience that has given us that durable loyalty, both of our consumers and with our communities. We also benefit from trends that are out there, consumer trends that are moving the customer towards more outdoor activities, more health and wellness and more experiences. We provide all of those and people recognize us, and this is an enduring trend that I think we will see through the years. The business was stuck in neutral during the middle 2000 and teens. We were -- despite opening 70 stores, we could not grow ourselves. We had a goal of drive for $5 billion. We couldn't get there. We hung around $4.6 billion, $4.7 billion, $4.8 billion. We were -- the profitability and performance of the stores went down. We had a very unhealthy debt level that 6 years ago, Standard & Poor's rated us as the most likely retailer to go bankrupt. They had us ahead of a bunch of other retailers and believe me, that's not a list you want to get on, but it is a great opportunity for us to say, you guys were wrong. And the reason we were in the position we were in is we were not strong operators. We really weren't focused on the customer. This was -- had still a lot of roots of the family business, and it was about us. We had -- although we had bought some new systems, as I said, KKR had invested a lot of money, we weren't using them. We didn't have a strong performance culture. Good enough was good enough. We were inefficient in our operations. Inventory, we believed in the theory of pile at high and let it fly. The only problem was we got the first part right. It didn't fly very well, though, but it was piled high. Our e-comm business was that. It was an Internet site, but no business and it wasn't connected to the stores. Our marketing was focused on traditional print. And TV, we just really weren't very good at executing. That said, we had a great bone structure. When I came on the Board a little less than 6 years ago, I knew Academy from when I grew up in Houston as a kid and I knew the affection people had for it. At the time, we had actually 259 stores. This is updated for the current stores, 259 stores in 16 states. And a lot of the states, we only had 1 or 2 stores. We only had a couple of cities, Houston, Dallas, Austin, where we had built out and had a powerful position. I said our real estate strategy was like a butterfly, go here, open a store; go here, open a store. We didn't have a significant position. In our own markets, we had 3 distribution centers that could handle a lot more capacity, but we weren't using it. We were in the fastest-growing markets in the country. We had over 30 million customers that had great loyalty to us. And so the bone structure was there. We were ready and we had a strong team. What we needed was a good strategy and strategy always starts with the vision. And the vision needs to be aspirational. And our vision was aspirational in a number of ways. One, it was to be the best. The second, it was in the country. Here we are in 16 states, but we want to be the best in the country which -- that's important to keep people focused on there's a lot more to this than what we have. Our mission was clear, provide fun for all. Fun is important. That's what people think about us through our strong assortments, value and experience. You're going to hear those 3 pillars over and over again. And we needed to establish values about who we are, what drives and motivates us. What is important to us? The customer, that's our first value. We have to be focused on them. Excellence in all we do. Good enough isn't good enough. We're all leaders from the people on the Executive Committee to our team member in the store who is helping a customer and leading a customer, we need to take initiative. One of the things people know not to say to me is, well, that's the way we've always done it. It probably is not going to be a pleasant conversation from that point forward because we have to take initiative and try new things and be students of the business and learn from what we try and do and have integrity always in all that we do and support the communities that we live and work in. These values motivate and drive us every day. They're what we live by. They're important, and you'll hear them woven through the strategy. The Executive Team here all work together to develop a strategy. What is the plan? The plan was reasonably straight forward, to be a power merchandiser of sports and outdoors, not to sell stuff, to be a power merchandiser, what businesses are we in? How do we compete in those businesses? We are sports and outdoors. We're not electronics. We're not toys. We have to be strong in things, many of which there are only a few people who are in that business, we should own those businesses. We had to make our stores more exciting and productive places for our customer, not make them go on a treasure hunt to find things, go down one of the gondola valleys that we had stuff piled so high literally that you felt like you were on an Indiana Jones mission going through that archive in Washington. We needed to create a meaningful dot-com business and connect that to the stores. Our marketing had to be updated to engage and communicate with the customers to make sure that we use the capabilities that we have by targeting our customers and talking to them when they want to be talked to, how they want to be talked to, about what they want to be talked to. And this will drive us to increase the productivity of our assets. We were big, but we weren't powerful, and we needed to become big and powerful by making our assets more productive. And the only way we can do this is by having the best team in retail and developing our teams. So we have the right people with the right skills, doing the right things. We set some goals. We tried for 5 years to hit $5 billion. So we said in 5 years, we're going to hit $6.5 billion. We set some profitability goals that we're okay, not really industry-leading, return goals that were acceptable and to improve our productivity. This was important because this gave us the targets to know whether our strategy was working or not. We put this in place early in 2018. It started to work. We started to have positive comps after many quarters of negative comps. We started to see the business turn around. And the reason it was turning around was because of our focus. Focus is a critical word in retail on our 3 pillars, the assortment we have, the value we offer and the experience that we give our customers not just in the store. The thing that people know about Academy is not just what they buy, but it's -- that's when my granddad got me my first fishing rod. That's where we bought my daughter the soccer shoes. And she got a goal this weekend. That's where we bought the barbecue grill for the family reunion. And you guys know our barbecue grills that are here today can really turn out some good stuff. So that experience, both in-store and after store, is critical, and we work hard at that. With our assortment, we're fortunate. We have the best brands. We have a powerful position with our brands, the best in sports and outdoors. We have some tremendous private brands. You saw some yesterday in the presentation at the dinner. Several of our brands are multi-hundred million dollar brands. Some are new and developing. But those brands allow us to put together an assortment of the best product. And it's not just the breadth of our assortment, which is significant. You look at all the categories we sell, there's not another retailer that sells all of the different categories. But the depth within those categories, one of the things Steve and his team did during this time was, we were really good at good. We had a little bit of better. We really didn't have best. We now have a strong portion of good, better, best in almost all of our assortments. And where we can't get or don't have the ability to get from the branded market, we have our private label. We view our private label as a growth opportunity, but looking for niches. We're not looking to compete with the brands. We're are looking to complement the brands as an opening price or an element that you can't get elsewhere. And this assortment has carried us well with the improvements. If you saw what we looked like 5 years ago versus what those of you who are here today that saw the store yesterday, you would be amazed. You say this can't be the same company. It is. And with that assortment, we offer a terrific value to our consumer. People know us for the value. In fact, we feel so strongly for our value. We have a very unique price match. We'll not only match the price of the competition, we'll give you 5%. I will tell you this is not very often used because we have the best prices. We have everyday pricing. That's important to us. The customer doesn't have to wait for something or count up points or hold their -- cross their fingers and cross their eyes and we'll give you a discount. We'll give you a discount every day. We have -- we do have promotions though, at key events to drive traffic in and to clear merchandise. And people know that. But if they come to our stores for those limited promotions, for those everyday values and for that clearance and that drives other sales throughout the store. And we have highlighted the values within the key brands. But value isn't just about the price, value is about the services that we offer. Preassembly, how many of you have ever assembled a bicycle? How many have you ever assembled 2 bicycles? No? Once? That's it. We do it for free. And we're at a competitive price, $59.99 for a kid's bike, $99.99 for a starting price adult bike. Grills, free shipping. Free line spooling. People on the floor to help sell you the product, help inform you. Those services are part of the value that we offer, not just price, service and people know that. We also work hard to differentiate the experiences. I talked about the team having people on the floor, the enthusiast program that Sam Johnson started is critical to us being able to sell the better and best product that we have, helping the customer understand that $5.99 share, we sell hundreds of thousands of, that's a great share and it's easy to carry around. But if you want to sit out in the backyard, you need that GCI rocker. That will put you in [indiscernible]. That is important to have those people on the floor, have them trained, train our customers using our Internet site, having local events, being there when it's important, during Mardi Gras, during crawfish cooking, for those of you who enjoyed the crawfish yesterday and understanding what's going on in the community. We have vendor demonstrations in the stores. But most importantly, we have fun. We will talk later about people. We don't have a problem staffing our stores. We pay a competitive wage, that's true. But they have fun. I mean, which would you rather do? Sell a dress shirt for somebody who's going to work or talk to a kid about what the best baseball bat is? Or somebody about, hey, that fish and rod, do you know what I caught with that fishing rod last weekend? I know which most of our associates want to do. They enjoy talking about what they're enthusiastic about and have fun. We also needed to build a true omnichannel. I used to hate that word. I'd say BS. [indiscernible] omnichannel. The customer knows where they are. They know whether they're online or in a store. But we worked to connect the stores and our Internet site to have true omnichannel. We started, first of all, to make a better site. It was kind of like me when I was playing football, the coach at college said "Ken, you're not only -- at the time, you're not only small, you're slow." We've had a lousy site and it was slow. We needed to make it faster. We needed to improve the search capabilities, more payment options. And we introduced an app this past year and then connected to the stores with buy online, pick up in stores, kind of like hitting our drive for $5 billion. We were working on it for 4 years, and we still hadn't done it. I got here and I said, "wait a second, I've put BOPIS in three other retailers in like 4 or 5 months." We've been working on this for years. Well, we're going to have it perfect. And so we're picking out which locker we're going to have. And I said, "have you ever gone to Nordstrom for their BOPIS? It's a rolling rack out front with the hangers on it. Now Nordstrom is a little more upscale than Academy. And if it's good, that's good enough for them, it's good enough for us. So we put in BOPIS. That allowed us during the pandemic to put in customer curbside pickup, and Sam and his team, he'll talk about it later, did that in just a few days because we knew how to do things, initiative with urgency. And then if I see something and I don't have it, that your size in the store, I can now ship to store from our distribution centers. And that is connecting the stores. So, however, the customer wants to shop, I really don't care. You want to go online, come to a store; come to a store, go online; be in a store, go online, I don't care just so long as you buy something. And our omnichannel allows the company to do that. This effort that we put in place with what we were doing with our assortment, the value and the experience our stores online allowed us to achieve the long-range goals we had said in 2018, the 5-year plan in 4 years. We hit the sales plan, profitability, returns and productivity, check, check, check. So I was once asked by analyst, what happens when you hit all your goals? I said, well, we have a really crappy year and then we'll start over again. We're not going to do that. We develop a new plan. We move forward. And by achieving this plan, we set ourselves up with strong financial performance in gross margin, in profitability. We hit our dot-com penetration. And this gives us industry-leading productivity, $340 a foot, doing over almost -- or over $24 million a store with an average EBITDA of $3.7 million. Michael will talk about the EBITDAs in our stores, but every store delivers a lot of profit. Achieving these goals, delivering this performance allowed us to create tremendous value, which is one of the reasons probably why a lot of you are in the room, and on the screen. We've created -- actually, the market was kind to us such that we created $4 billion in market cap since we've gone public. We've returned about $2 billion to our stakeholders, $900 million in share buyback, $1 billion in debt reduction and $25 million in dividends. We've been upgraded numerous times. We're no longer a risk. We're a company that is financially strong, prepared for the future that's benefited its investors. Now some of you ask, say, am I too late to the party? And this is the third time I've done this, did it at Penny's during the good days, did it at Foot Locker and now here. In the other two cases and remember, the disclaimer, the past is no indicator of the future and all that. But in the other 2 cases, they reached a level like how many more Foot Locker stores can you open? Penny's, how much more can you improve the operation because you can't add any more stores? This one, we now have stabilized. We have built that foundation, and we have a tremendous opportunity for growth within our existing markets, as I talked about earlier, in new markets. And everywhere we put stores, we benefit in our omnichannel business. So that will continue to grow significantly. And we still have a lot of room on the things that we've done to improve the stores to make them continue to grow. So we said, what do we do? Our vision, mission and values don't change. We still want to be the best. We still are about fun with the 3 key pillars to grow on. We don't have to go invent a new idea. Our idea works and transfers well. And the values that drive us are important. Values are enduring, and we will continue. So our strategy, reasonably straightforward. I asked when we presented this last week in this room to our organization, I said, "So what do you think our strategy is about?" And one of the planners and the merchandise and organization said growth because that's the next phase. And that -- this growth strategies, it's built on 3 pillars. First, we're going to expand our store base by 50% in our existing and new markets. Second, we're going to develop a powerful -- a more powerful omnichannel business, really make it a critical part of our business that is an asset to the stores and a great capability in and of itself. We're going to continue to drive our existing businesses with many of the things that we put in place, the systems that we've developed, the processes that we have, the people that we've hired. We're going to improve our marketing. We have a great amount of information, data, but it's not connected. We don't use it as effectively as we should. And to do this, we're going to need to leverage and scale our supply chain. And that supply chain is going to be industry leading. The good news is we have a lot of capacity and capability now, and it's held us up well during the great supply chain debacle of the last year. We didn't have a lot of problems, others did. That said, we can improve it and we need to take the capacity, and we will have to expand it. We also will need the best team in retail to execute against this. You've met a number of the people. Those of you who were in the stores yesterday met a number of the people and the team and the consistency of the team and the qualities and how they work together. Throughout all of this, as I said earlier, is our IT, making sure we have the systems and processes throughout all that we do. We've put in place a lot, but we have more to do. This strategy will allow us to move the company forward, but it's only the first step because we have another one and another one. This company can continue to grow and expand well beyond the next 5 years. But for the next 5 years, we look to achieve $10 billion in sales, which is a 10% CAGR. Now that includes the new stores, it includes dot.com and it includes existing stores. So that's not a comp, that's the total growth. But $10 billion in sales with a 10% income margin, an EBITDA margin of 13.5%, return on invested capital of 30%. Inventory turns of 3.7x plus. Net sales per square foot of $365 a foot and leap year, we'll add another $1 and dot-com penetration of 15 plus. Part of the reason that dot.com isn't growing faster because the base of stores is growing so fast. But we will -- these goals will help us measure whether or not our strategy is effective. The team here and a number of other leaders within the company put together this plan and develop these goals. This wasn't something that was -- came down from the mouth, this was something that came up through the organization. And they believe that we can accomplish this. They believe that we are positioned. We now have the foundation to build a truly powerful company and make Academy a great company that it should be to achieve our vision. So today, you're going to hear us talk about each of the strategies in detail and the financials that build up from that strategy. It's an exciting day. It's one that I think that each of you will listen and say, "Yes, they can do that." And if we do that, you think about where this company could be? So those of you who missed out in October of '21, you've got an opportunity now to get in because we're going to continue to grow and develop. Before we start on the strategies, I wanted to have Steve Lawrence, our Chief Merchant, come up and talk about how we're positioned and some of the competitive differentiation that we have so that you understand where we are as we go through the strategies. So Steve?

Thanks, Ken. It's really fine getting out in the stores yesterday with you guys, getting a chance to mingle a little bit. My name is Steve Lawrence. I've been with Academy about 4 years -- a little over 4 years. I spent over 30 years in the industry, primarily in bigger box department stores, but really servicing the moderate customer, which is who we service here at Academy. So I wanted to give you a little background around the industry we're in and how we're positioned there. We'll start with -- and Ken already hit on this. This is a $175 billion addressable market. And we are really excited about this because we see that this industry is projected to grow faster than the GDP rate at about 8% a year. It's a highly fragmented market with lots of opportunity to pick up share. There's really no one dominant player in this space, right? So we think that there's a lot of wide open space here for us. Another thing we're seeing is the trends that started during the pandemic continue through, right? The health and wellness trend, the getting outside trend, the [indiscernible] home trend making your house into an oasis. Those things all continue forward. And we're also well positioned to pick up market share based off of our broad and complete and differentiated assortment as well as the fact that our stores are positioned in some of the fastest-growing DMAs in the country, and you'll hear us talk a little bit about that today. The other thing that gives us confidence is the categories we participate in are having growing participation rates. You look at hunting up 5%, fishing up 4%, outdoor cooking and fitness up 3%, team sports up 2%, right? And you think about the categories and Ken already hit on this, there's limited competition, right? If you want to buy a pair of cleats, to play soccer, play baseball, where do you go? There's just not a lot of places to go to do that. In other cases, we see competitors pulling back on some of the categories we're in, right? We see competitors pulling back on hunting and fishing. And so we think that gives us a lot of room to pick up share there as well. And by the way, there has allowed us to pick up share. When you look at our share here across apparel, footwear, firearms, team sports and fishing, all up, in most cases, double digits over the past couple of years. So you may ask yourself, why does somebody pick Academy? Why would you come shop Academy when you have all these different choices, whether it's [ Mass ], whether it's an online pure play, whether it's a vertical specialty store? It really comes back to these pillars that Ken was hitting on earlier. It's about assortment, value and experience. So from an assortment perspective, we're broader than the assortment you'll find at [ Mass ], but it's not as overwhelming as what you'll find it as a specialty store, right? We also have a strong mix of national brands and private brands that you won't find some of the national brands at specialty or at [ Mass ], and you won't find some of the private brands in specialty. Second reason is value. And we talk a lot about our everyday value pricing, and we'll hit on that a little bit later in the presentation today. It positions us a lot better price-wise relative to these specialty players and really close to [ Mass ] in a lot of cases, some cases better as well as having higher quality. And the third one is experience. We offer a one-stop shop for all the categories we carry. You saw this in categories yesterday like fitness or cooking or camping, right? We also have convenient off-mall locations, easy to get in and out versus regional specialty stores that may be a long drive to get to. You can get it today versus having the wafer to be shipped to you versus an online pure player. And we also have enthusiasts in our stores, right? They really help you find the right gear to get out there and have fun. So a great example of this is fishing, right? You take our fishing assortment, what you guys saw yesterday in the store. If you go to a Walmart, on one end, they basically have one aisle of fishing. And you can find a basic assortment of fishing, and you can get out on the water there. But if you want anything specialized, localize [indiscernible] rebates, better brands, better equipment, you can't really find it there. Conversely, if you want to go to Bass Pro, you can find a better assortment there, but it's overwhelming. We have about 8 to 10 aisles of fishing, they might have 20 aisles of baits alone, right? And that's really overwhelming to try to shop and figure out what you want. They're also not conveniently located, right? In a lot of cases, you got to drive 40 or 50 miles to the local Bass Pro to find one. So that's another advantage for us. And then, of course, we have a better value proposition relative to them. So we fit in that middle of those 2 extremes. We got a broader assortment than [ Mass ] with depth behind key categories. We're more conveniently located and easier to shop versus specialty whilst providing better value and prices. And this idea doesn't just relate to fishing, right? You can -- it plays out across outdoor cooking, it plays out across team sports, it plays out across all the categories we carry, right? So you can replicate this idea more broadly. Two things I want you to take away from this slide. First, diversification and balance is the second one. So from a diversification perspective, we carry a lot of different businesses. You saw this yesterday, right? It's hard for some of you who've never been in one of our stores before to say, okay, they've got these categories like cooking and camping and team sports, how does it all fit in the store together? But I think it all hangs really well together. So you think about we got workwear and work boots, we've got grilling. We got pickleball, right? But no single division makes up more than 31% of our sales, and no vendor makes up more than 11% of our total sales. So we're not over-indexed into one category, one brand. We're also balanced. So you look at our balance of hard goods and soft goods. So we put apparel and footwear together soft goods, it's about 48% and hard goods is 52%. If you look at our breakdown by quarter, it's about even 25% a quarter. Our first half back half split is about 50-50. So it's pretty balanced there. And then also pretty balanced by gender, right? We're a 55% male, 45% female. Now that's really distorted by the outdoor categories, which really skew more male, if you can imagine. If you take that out, we're at a 50-50, which is right at where the industry average is. And the good thing about this is there's always something going on in a -- so when I worked at other places, you'd have these big events at the end of the season. You'd have a Mother's Day or a Father's Day or a holiday at the back end, you're waiting for the sales to come in. We don't have that. I mean we've turned the corner from holiday. We've got fishing kicking off. We got baseball kicking off. We go right into Easter, Mother's Day, Father's day, you're going to back to school, then hunting kicks in. There's always something going on at Academy. We think over time, this different -- this mix of business that we have, this differentiated and ballast assortment really differentiates us from our competition. Next slide really talks about who our customer is. We've done a lot of work to try to understand who our core customer is. And the best thing that I can tell you is they're -- and we're clear takeaway, they are active, young families. A couple of things embedded in here. Our customers are younger than the rest of the market. So if you look at under 55, 83% of our customers are under 55, rest of them are at 74. But they're more likely to have kids, right? 53% of our households have kids in the household under 18 versus the rest of the market at 41. And you see this play out in the household side as well, 3.2% versus the rest of the market, 2.9%. So young families, right? Another thing that we talk a lot about on calls and with different people is -- because we talk so much about value, people think we're tethered to this lowest income quintile. When we quintile and break it out into quintiles, we're really over-indexing against the middle 3. So middle 60%. 65% of our customers make $30,000 to $140,000 versus rest of the market at 62%. And we're obviously under-indexed in the lowest one at under $30,000, 15 versus 18. What does this mean? Well, what it means is the customer is willing to spend on affordable luxury for their family if they think it's going to make their lives better, right? You think about yesterday when we were looking at YETI and people said, "God, how do you reconcile selling $300, $400 coolers?" Well, if they think that, that cooler is going to make their hunting or fishing trip better, they're going to invest in that. Last night, hopefully, you guys had a chance to see some of those ribs off the Pit Boss grill. They think if they can cook ribs like that and it's going to make their family life better, they're going to buy it and invest in it. So that's a really big thing to understand about who our customer is. And then the last thing on this slide that I want to make sure you understand is we over-index with the Hispanic consumer, 26% versus the rest of the market at 17%. And this, as you guys know, projected to be the fastest-growing segment of the population over the next 10 years and we certainly have a sweet spot there. Ken hit on this next one a little bit, I'm going to go into a little greater depth and we'll talk more about this later. In terms of our brand mix, right, you see kind of our private brands, international brands displayed here, we heard us describe ourselves a lot of times is house of brands. What does that mean? We know that our customer wants the best trusted national brands within the space that we play in. And so we try to deliver against that. So about 79% of our business comes from the national branded business, and it really varies by category. So if you're in the athletic footwear apparel business, it's about Nike, Adi, UA, right? Conversely, if you're in the outdoor space, it's about Coleman, The North Face, Columbia, or YETI. We then augment this national brand business with a private brand business, 20 different private brands. You got to see some of those last night. We did over $1.4 billion in sales in private brands, about 21% of our business. And as Ken mentioned, we have 3 power brands within our private brand portfolio that do over $100 million each. That's pretty impressive. You've got Magellan, which is our biggest brand. You've got BCG, which is kind of our opening price point fighter brand. And then you got a brand like Academy, which we put on things like wagons and canopies and chairs. So it sells product for us at great prices, but it also acts as almost an advertising vehicle, right? As you go to tailgater in the fall or you go to a game in the spring, you see our chairs and our canopies and wagons everywhere across the marketplace. At the same time, Ken hit on this as well, we're not trying to develop private brands to compete with national brands. We're trying to augment or supplement. So a great example of this, and you saw some of those yesterday at the store and we had this on display last night. You think of a category like yoga pants, right? We traditionally have always sold a great yoga pant from our BCG fighter brand at $19.99. Conversely, if you went into our upstairs, brands of Nike, Adi, UA, they started $39.99 to $49.99. So there's a gap in there, right, at $29.99. So we went out and said, we're going to build a best-in-class yoga pant that rivals what you can find at Lululemon et cetera at that $29 to $34.99 price point. And that's what we did with Freely. And hopefully, you guys got to see that last night. And then we said we need to replicate that on the men's side and get a pant that's as good as Vuori pant out there at half the price. And I think we really hit the mark on that. And then the third thing we're also leaning into in private brands, and you saw this on display last night as well as there are sometimes categories where it's really hard to break in, right? It's hard to establish credibility. In the shooting sports category, that's optics. That's a very technical category that takes a long time to build up brand equity. So we actually had an opportunity where there is a brand for sale, Redfield that was out there and Leupold, who's 1 of the leading optics manufacturers put it up for sale. So we actually bought the brand from them, brought it in-house, it's private label for us, and we're expanding it more broadly into some other categories that are adjacent like gun safes and cases and things like that. But we'll do that and have added that as a toolbox -- our toolbox going forward. This last slide kind of sums up how all this comes to life, right? And this is our Net Promoter Score. Some of you guys may be familiar with Net Promoter Score, some of you may not be. So it's pretty simple, right? It's a one question survey and customers rates you on a scale of 1 to 10. And I'll read you the question we ask, it's when thinking about sporting goods, fitness and outdoor and other recreational products, how likely are you to recommend the retailers listed to the friends or family? And they can give 1 to 10. And if you're a 9 or a 10, you're considered a promoter. If you're a 7 or 8, you're considered passive. And if you're 6 or below, you're considered detractor. And then all they do is they net out the detractors from the promoters, right? But think about that, 6 points count as detractors and only 2 points count as promoter. So it's a pretty tough measure. And when you look at how we're ranked, we are hitting a 43, which we're pretty proud of, right? So over the past couple of years, we've grown that score by 11 points going from 32 to 43. It's more than double where the industry is, and we maintain an 11 to 17-point gap with our closest competitor. And this is important because when you look at these people who are brand promoters for us, they're best customers, right? We know they shop us more often. They shop about 8x a year. We know they're sticky. They come back a lot. They're omnichannel shoppers. And in a lot of cases, they spend more money. They spend 5x more than an average customer does for us. So we're really excited about having these great customers, and we're always trying to figure out, we'll talk a little bit later how we're going to take these customers and turn into promoters of our brand. So now I'm going to show you a video that I think kind of brings to life how the customer really feels about Academy in our marketplaces. [Presentation]

So for those of you who flew in and maybe caught an Uber, sometimes we're accused of like setting this up. But if you talk to people and you say, where are you going, they say they're going to Academy office, that's what we hear from customers just randomly on the street. So we're pretty excited about this. And we believe that this passion the customer has for our brand tells us 2 things. It tells us our brand is scalable and it's transportable. And one of the things that's kind of endemic to the strategy we're going to roll out is how do we bring this brand to more places and expose it to more people. And that's what Michael Mullican, my friend, is going to come up here and talk to about now. Michael?

I love the video. Thank you. Thank you. I'm Michael, I'm the CFO. I want to start by thanking everybody for being here today. If you're an investor, I want to thank you for your investment in Academy. When you invest your money in a company, we talk about this all the time, that's the ultimate sign of trust. So thank you for your trust. If you're an analyst or a member of the media or anyone else in the room, thank you for your time today, time to get to know us and learn about our story, walk through our stores. Had a lot of fun last night. I'm here -- we're going to turn up the volume, we're going to crank it up and talk about the fun stuff, and that's growth. As Steve talked about, our stores appeal to all ages, all incomes, all aspirations. Our model is portable and scalable. And because of that, we're primed for growth. If you think about the great retail growth stories of the past few decades, the great stocks, not all of them, but most of them had 2 things in common: mass appeal and value -- mass appeal and value. We are the company in this sector that ticks both of those boxes. Because in our current state, we're primarily regional, the entire United States is a growth campus for us. The entire United States is possible for Academy Sports. No one else in this space can say that. So I'm going to talk about the first pillar of our strategy, which is new stores and the path forward there. So our plan, as Ken said, is to open new stores to expand the store base by 50% in existing and new markets. Nothing says leadership or winning in retail more than taking the cash you're generating, investing it back into yourself and multiplying it. And that's what we're going to do. We've grown 30% since 2019 through operational improvements, and through academy.com. We've grown 30% with no new units, imagine what's possible when we start adding units. And so our plan is to open 120 to 140 new stores between now and 2027. And so one more time, that's 120 to 140 new stores between now and 2027. This pillar will be the largest contributor to our growth over the next 5 years and our plan to reach $10 billion in sales by 2027. All right, so why we're doing this? And hopefully you guys know this by now. We generate a lot of cash. So we've got a lot of money to invest and the best returning investment we can make is to add stores, add units. We have a high ROIC. So I went to school and one of the things I learned is when you have a lot of cash and you lead the sector in return on investment and you've got a lots of opportunity and you've got a history of executing your priorities very well. That's a winning formula. Our stores are the most profitable and the most productive in the sector. It's not even close. We do $340 of sales per square foot compared to roughly $290 per square foot at our closest natural competitor. Our average store, that maturity generates about $4 million of 4-wall EBIT a year. The worst stores in our chain, the worst stores, the lowest performers generate roughly the same amount of profit as our competition's average stores. 100% of our mature stores. Every single one of them, those opened prior to 2022 are profitable. The other thing that's great about the store growth initiative, it's accretive to everything that we do as we add stores and go into new markets, we create more awareness for academy.com. We grow into our supply chain. We've got 2 distribution facilities that are at 50% capacity. They've been at 50% capacity or lower for a decade each. And so we get leverage there. We, frankly, are more attractive to vendors as we become more national. So there's a lot of good things that come along with it. Quick peek at the markets we serve. Ken showed this earlier. We're in 260 locations, 18 states. Some of those states, we really aren't in, in a meaningful way, West Virginia, Virginia, Indiana, Illinois, only a handful of stores in those states, so great infill opportunities there. And then again, our store network is supported by 3 distribution facilities. All right. Economics. This is a fun slide for a CFO. We will underwrite our new stores roughly around $80 million in year 1 sales. That's a rule of thumb. Some will be higher, some will be lower. That includes omnichannel sales. If you take the omnichannel sales out, it's about $16 million a store without omnichannel. Really about a 4- to 5-year ramp period before we consider a store mature. And that shape of the ramp is different depending on the type of market. So in a new market, it looks a lot like we'll use analogy here. It looks like a Nike shoe. It starts off higher, dips down a little bit and then it takes a little time to reach its maturity, 5 years. In an existing market, it starts higher. The ramp is deeper and it hits maturity more earlier. It takes about $5 million to $6 million of net capital that is more expensive than in the past due to inflation and labor and materials and real estate. I see John who runs real estate, not in this head back there. It's more expensive than it was a few years ago. And the ROIC on our new store program exceeds 20%. We expect all of our stores to be EBITDA positive in year 1. And if you're in the room and you're wondering from a risk perspective, what's the downside case to these stores? We can make money on $11 million stores and we want them to do better. We don't plan for $11 million stores. We frankly only have, I think, 3 or 4 in the chain doing under $12 million. I'm looking at curve, yes, maybe 3 stores. They're all profitable. But again, you have 3 stores doing under $12 million, you make money on every single one of them underwriting at [ 16 ]. This is a good formula long term. So one of the questions I get all the time is, are you comfortable doing this if there's a downturn? And the answer is yes. Sporting goods is a relatively durable sector. Not all discretionary spend is created equal. This chart, I think, shows that very well. The first dollar that consumers drop typically comes from many other areas, jewelry, furniture, nonathletic apparel. This category in the last recession was down 3.5%. We were much stronger than that. We comped positive in 2008, 2009, 2010. I think we have a lot better set up right now if there were to be a recession than we had the last time around because we had millions and millions of customers pick up new hobbies and interests, and they seem to be sticking with them. So we did well last time. We're set up to do well again. And then frankly, the business is much better. We're running a better business, as Ken talked about. One more slide on the sector, [indiscernible] work here we go. Yes, this is another view that I think shows the consistent sector growth, running a 5.6% CAGR over the past 2 decades compared to a 4.4% CAGR in personal consumption generally. So the category has outgrown personal consumption over the past 2 decades. The chart on the right shows the sector is expected to continue to do that. A couple of other key points I want to make. I think the industry as a whole is much healthier. Our vendors are more rational. We've talked about that. There's less competition. I think our lane is more clearly defined than it was in the past. And look, our competition is better. And I've said it many times on our conference call, retail is a business where other people's problems can become your problems really fast, particularly when inventory gets mismanaged. And I believe our competition as a whole is much better and much healthier. So that should support better margins and better performance going forward. The geographic tailwinds are on our side. If you look at the markets that we're in, our stores were in the fastest growing states and markets in the country. Texas is expected to grow 17% between now and 2030. Florida is expected to go 16%. It's a hell of a lot harder to paddle across the lake than it is to ride down the river with the current, and we are riding down the river with population growth. That should do a lot of the comp work for us. Bottom right chart shows that only 17% of the United States lives within 10 miles of an Academy compared to 60% for DICK'S. We've got a lot of blank space here. Look, our omnichannel business is underpenetrated. Jamey is going to talk about it in a minute, how we're going to close some of that gaps? It's a big opportunity for us. That being said, physical stores will remain a very important part of retail. We all know that. Both stores and academy.com need to work together for us to hit our growth targets on our plan. Academy.com will outgrow the brick-and-mortar business. But the best thing we can do to grow academy.com is to add units because when we add units to new markets, that brings awareness to the sites, we see that in our new markets. I want to repeat what Ken said, we have an omnichannel strategy. Our job is to give the customer frictionless options, let them shop however they want to shop. And our job as a company is to make that as profit neutral to the company as we can. I think we've done a really good job of that. Ken had a lot of momentum. Going forward, we opened 9 stores in 2022. It's been a while since we opened a lot of stores at 1x prior to this year was really, I think, 3 years ago, the last time we opened a store. Many of you were in the newest store in the chain prior of this vintage in '22 last night. So we had to rebuild the pipeline in the opening program. Opened 9 stores, most of them were opened on time. Most of them were opened on budget. We built that muscle back and now we plan to accelerate our openings and do 13 to 15 this year. And Sam has an analogy that I've told him if I stole it before he got to use it, [indiscernible] him credit for it. So I got to speak before you, Sam. This is like teaching a baby how to walk. You stand the baby up and then you move it along a little bit and move its feet and we're walking now. Next year, we're going to run. And then in years 4 and 5, we're going to sprint. So we'll gradually accelerate each year. One of our core values, you see it on the wall over there, Ken mentioned our values being a student of the business. We took a test-and-learn approach to our new store program this year. We tested a lot. We learned a lot. We tried new markets, different store layouts, different marketing approaches. From a preopening marketing approach to a sustainment approach, we tried a lot of different things. We developed the capability to retrofit existing spaces. That's not something this company ever did before. We went into a lot of older spaces and retrofitted in this year. The ability to do that is critical to our growth. There's fewer ground-up developments being constructed for retail. Overall, I'd say we're pleased with the progress of our new store program. Our 2022 stores will clear our 20% ROIC hurdle. When you adopt a test-and-learn mindset, I think if everything you test works exactly as you wanted it to, you probably didn't test enough. And some of these stores did phenomenally well, wildly exceeding our expectations. Some didn't meet our expectations. Again, as a whole, we're happy with them, but we have learnings in both instances, and we're applying them again as we accelerate. We're still learning from the ones that we just opened. Frankly, sometimes it takes 6 months, 9 months, a year, 2 years to learn from them. But we have a lot of things that I think we can do better, gives us a lot of confidence heading to next year. Last thing on the slide I want to show you is when you grow, people take notice, the industry has taken notice of us, got a good turnout today. So clearly, we've got some people interested in what we're doing. Chain Store Age, which is a pretty big publication, particularly in the real estate world, awarded us with the Breakout Retailer of the year award this year, the Breakout Retailer of the year. That's a pretty good list. Chipotle has been on that list. I think [ Fresh Thyme ] and Sprouts both have been on that list. DICK'S was on that list. So we're taking a lot of good momentum in to next year. This is really helpful with our landlords. They see that we're for real in doing this program. All right. Again, our plan is to open 120 to 140 new stores between now and fiscal 2027. This will come from a mix of infill and adjacent areas. We have 268 stores that are in the dark blue area, the South and Southeast, and we'll look to add 50 to 60 stores in that dark blue area. We get out a lot more long term. I think Florida is a good example. We could probably add 40 stores to Florida alone. After that, we still have the majority of the country where we can expand, and we will focus on that light blue adjacent markets for 70, 80 stores over the next 5 years. I think as a leader, half of the whole management team, the exciting thing about this program is not only the financial impact, each store will create jobs. It's about 80 team members a store. So 10,000 more jobs will create over the next few years. We get to make a bigger impact on our community. You're going to see some awesome community stuff from Bill later. We create more leadership positions. And one of the reasons we've been so successful in retaining talent and attracting talent, we've never had these labor shortage issues at Academy that others have dealt with. It's because we're growing. People want to work for growing companies, particularly in retail. You have the opportunity to have a career and see that career accelerate. You can go further faster in retail than in any other career that I can think of, and people want to be a part of that. Lastly, Sherry will talk about it in a little bit here to support this growth, we will need a new distribution facility. We expect that will come online in late 2025 or 2026, and then we'll start the planning probably for a fifth one in the last year or so of the plan. Long term, the next 5 years are just the beginning, and it still leaves about half of the United States where we can grow. And because our model is so profitable and productive, we don't need a new format. We don't need to try anything new or different. We just need to do more of what we're doing. That's the best strategy for us. We're going to enter some very large metropolitan areas to achieve these growth plans. We'll do that in scale. We won't come in 1 or 2 at a time. There'll be -- John, we talked about this last night, we'll come in, hopefully, have several cluster together within a short time period. And the best thing about it we're not going to cannibalize ourselves. We're going to cannibalize the other guys. And at $20 million a store, we take some pretty big bites. They're going to feel it. When we enter our market, the competition feels it. So financials here show you the size of the opportunity of the $3.5 billion in revenue growth that we expect to deliver, roughly $2.5 billion will come from this program, the new store program. So we're excited about it. Key takeaways really quickly, again, store economics, say this is a really good thing to do. We're going to have a balanced approach to serving existing markets and adjacent markets, underserved markets. We got a really strong team that we've built recently that's ready to do this. We learned a lot from the last year. And that's what I have on new stores. Appreciate your time and attention. Jamey, come on up, let's tell them how we're going to do omnichannel.

Appreciate it. Thank you, Michael. Good morning, everyone. I'm Jamey Traywick. I'm responsible for omnichannel at Academy. I've been with Academy for just under 5 years. I'm going to walk you through our strategy to build a more powerful academy.com business. But first, I'm going to do things a little bit differently. We've made a lot of changes to our online business. And I'd like to give you some additional detail on what we've been up to over the last several years. It's a really great story. First, we are now truly an omnichannel retailer. In 2018, that could not be said of our online experience. 5 years ago, academy.com was a stand-alone website, with no true connection to our stores or our store customers. We only cared about online sales, and it was perfectly okay if those sales came out of market and at a cost that didn't make financial sense. Today, we have created a connection between online and in-store. And as a result, have cultivated a business that leverages our greatest asset, our stores to better connect with our customers. There's some great stats on this slide. But I think the most impactful is the one called out on the right. 97% of all of our company sales are fulfilled through our stores. Sam is going to speak to this as well. But to be able to leverage our investment in stores to deliver omnichannel experiences for our customers has been the biggest win for Academy. We've been very focused on transitioning our website to a true omnichannel experience. We've done that using 3 guiding principles. First, we must begin and end with the customer. We use analytics and testing to ensure this. Second, we must design mobile-first. Over 80% of our traffic is from mobile device. And third, we must think omnichannel. Most customers begin their Academy journey online, but they end it in store. We must balance online sales with driving traffic and sales to our stores. Omnichannel means we support both. As a result of this focus, we have made significant progress. We grew customer accounts by almost 260%. In a world where having data on our customers allows us to create a more personalized experience, we recognized early on that it was important to grow the number of customers that are logged in while using academy.com. We made changes like free shipping with sign-in or added account-only features like wish list that gave customers a reason to sign in. We removed friction from checkout by doing a whole lot of little things. Most of our updates were focused on speed, how fast can we get the customer through the checkout process? For example, we moved e-mail address to the top. So if you have an account, we can find it, allow you to sign in and we can pre-fill all your billing and shipping information. We also added a lot of new payment options like Apple Pay that breeze you through checkout. We implemented a new site search engine. We knew we needed a more modern search engine that could dynamically react to our customers and boost the most relevant products. This, coupled with the launch of a new personalization tool, allows us to ingest customer data to deliver personalized results and recommendations based on past behaviors. We added more fulfillment capabilities. The biggest win for us was buy online, pick up in store, which we just launched in 2019. That was our first step toward better connecting to our stores and began to change our relationship with our customers. Since then, we've launched curbside and more recently shipped to store, which has helped us identify demand in local markets that we previously had no visibility to. We launched our mobile app. It is incredible to me that Academy's mobile app didn't even exist until 2021. With the app, we have streamlined the store pickup process. We've also enabled a more robust log-in experience. More than 80% of our customers are logged-in when they place an order. We also display store receipts in my account for easy access to all past purchases as well as easier in-store returns. We have a lot more plan with the app. Our customers' mobile device is the ultimate bridge from online to in-store. And we will continue to deliver capabilities that create reasons for our customers to use the app while in store. And finally, since 2019, we have grown the number of Academy omnichannel customers by 170%. These are customers that shop both online and in store. That's a metric that didn't have a lot of focus 5 years ago. Most importantly, this metric has a ton of upside. As we continue to build out our omnichannel capabilities, we expect this to grow significantly. Our main objectives for the omnichannel experience really revolve around 4 critical goals. One, we want to increase traffic to our digital experiences, either our website or mobile app. Two, we want to increase revenue. We want to drive sales so we continue to see improvement to our penetration, ultimately hitting over 15% in 2027. Three, we want to increase our customer engagement. We don't care how or when our customers engage, but we want to keep them coming back. And four, lastly, we want to be as efficient as possible with the company's resources and look for ways to reduce costs. As you can see on this slide, we have effectively and efficiently managed this business, both from a top and bottom line perspective. This has resulted in sales growth of almost 200% and EBIT growth of over 200%. As a stand-alone business, it has a profitable P&L. We think about our omnichannel experience as a funnel. A lot of traffic is hitting the website and not all of that traffic will ultimately convert. Most of our visitors are checking product information and local store inventory at the top of the funnel. The bottom of the funnel is where customers transact. This is a small percentage of those customers that started at the top of the funnel. As a result, improvements made at the bottom of the funnel might drive much bigger results. So we made the bottom of the funnel, our primary focus over the last few years. This bottom of funnel focus has led us to optimizing capabilities like checkout and fulfillment, as I've already discussed. Now it's time for us to move up the funnel to areas like our navigation, product filtering and the quality of our product data. We will also expand our personalization efforts as we continue to lean in to customer data acquisition. Our go-forward pillars for omnichannel are on this slide. Customer engagement, view of the customer or customer data, products and pricing, enhancing our support of broader merchandising initiatives and fulfillment, which we will continue to optimize. Those 3 principles I talked about at the beginning, still apply here. We must begin and end with the customer. We must design mobile-first, and we must think omnichannel. So let's get into the details a little bit. First is engagement. I talked about the importance of mobile app and the connection it facilitates to our stores. We're highly focused on continuing to deliver app-only capabilities. Engagement will drive loyalty and our mobile app is the best place to deliver this. We have a test right now with Wayfinding and we expect to roll that out to more stores this year. We're also connecting store receipts to my account, so that customers can access their complete purchase history and facilitate in-store returns. The other opportunity we have to deliver is team member mobile capabilities. While we have capabilities associated to order fulfillment, either BOPIS or ship from store, there are a lot of mobile app features that our customers have access to that our team members don't. From having visibility to our endless aisle, defining products and other stores, we need to connect our team members to all the great capabilities we offer our customers so that they can better serve them. Next is view of the customer. As digital plays a bigger role, customer data is going to be a big enabler for the future success of Academy. Connecting all of our systems from marketing to online to in-store to customer care will enable a seamless experience. We can also use customer information, gather from past purchases, online or in-store, to customize the online experience for them. For example, we can preselect sizes or low their favorite teams gear to drive engagement. Steve will touch on this a bit more later. One upcoming deliverable is savings tracker, which is a great example of our focus on engagement. This is coming soon for our account customers on the mobile app exclusively. This functionality came out of interviews with our customers. Customers specifically ask for ways to save money, and they ask for gamification in our app. This is our solution. We will look at all your purchases with us, both online and in-store, and calculate your savings by shopping with us. The savings are based on our price versus MSRP. We will also calculate what you have saved on free shipping. And if you're an Academy credit card holder, we will calculate your savings on purchases with your credit card. This will evolve over time to include other ways we help customers save money, like free assembly. We're excited to roll this out to our customers this year, and we look forward to expanding the service as we go forward. We have a few things -- quite a few things we're going to focus on when it comes to products and pricing. We have just implemented a new drop ship provider who will give us access to a lot of new products to support in less aisle. We'll begin adding products that are a logical extension of our current assortment. We want to give team members access to this, so they can offer even broader assortment while they're serving our customers. We're also highly focused on product content quality. Customers need to be able to find what they're looking for much faster on the site. The filtering on our site is cumbersome, and it doesn't always contain the relevant information in a consistent format. Lastly, we will continue to optimize our fulfillment capabilities to improve reliability. While we are focused on speed, we want to be accurate on inventory and the timing of a delivery. We must keep our promises to our customers. Here's one example of a recent change to our product detail page. We wanted to highlight our value offering on individual products. So we created this experience to incorporate the Academy credit card 5% discount into the price. If you're an Academy credit card holder, we remind you of your price when using the card. If you aren't, this is where the magic happens. We change the messaging to encourage you to apply. As you can see in the chart on the right, customers reacted positively and our applications increased double digits after implementing this change. We also saw positive sales impact and an increased average order value. And that's just one example of how we're focused on products and pricing. So I'd like you take a minute and imagine the future of omnichannel at Academy through the eyes of one of our customers. It's 8:30 a.m. on Saturday. Sarah and her daughter, Emily, are getting ready for Emily's soccer game at 9:00 a.m. Emily can't find her cleats and they start looking all over the house for them. Unfortunately, their dog, Spark, has found them first. Sarah pulls out her phone and opens the Academy app. Once there, she searches her past store purchases and finds the brand and size of cleats she bought at the beginning of the season. She clicks on buy again, and she breezes through the checkout process after selecting the store closest to the soccer field. At 8:35 a.m., Sarah and Emily are in the car ready to go to the Academy store. Sarah wants to make sure that Academy knows she's on her way so they can prioritize her order. So she clicks on, I'm on my way, a perk available to anyone that downloads the Academy app. At 8:45 a.m., Sarah pulls up to the curbside spot and lets the store team know she's there via the app. Meanwhile, Elliott has just picked her cleats when he gets the notification that Sarah is on the curbside parking spot and is waiting on her order. At 8:50 a.m., Elliott brings Sarah's order out to her car. Sarah is thrilled at the speedy service and is off to drop Emily at her soccer game, Emily arrives on time. That is the future of omnichannel at Academy. To close it out, we've accomplished a lot in the last 5 years and then delivered more engaging omnichannel experience for our customers. We are confident that our plans for the next 5 years will deliver even better experiences, both online and in store. This, coupled with our continued store expansion and our focus on the customer, will allow us to deliver a more powerful omnichannel business. Now I'd like to welcome the best partner an omnichannel leader can have, the great Sam Johnson.

Thank you, Jamey. I appreciate all that, but I don't know if I'm that good, but I think we've got a really great team. How's everybody doing today? Did you like the plan so far? All right. We're just getting started. So I'm Sam Johnson. I've been with the company for 6 years. And I look at it as I'm standing up here today representing the 22,000 team members that we have. I'm not ringing the register today they are and we're proud of what they do. I just get the chance to tell the story, but is the 22,000 people that make this company special, it's the hearts inside the shirt and we should never forget that. We talked about growth. And listen, we're going to open new stores. We're going to. You heard Michael talk about it. You've heard Jamey talk about omnichannel. And the third component of it is in these existing stores. It's the engine that fuels the growth of everything we do. And we continue to work each and every day to how to improve in these existing stores, whether through assortment, value and of course, the experience. I get the opportunity today to talk to you about service and really define service of what it means to the customer. And then how do we continue to be productive in our stores? How do we make them more profitable? Because the journey is just beginning. Three things that we land on that we've been working on for a while now. One, improve the customer experience; two, increase operational productivity in our stores and then we're going to talk a lot about enhancing inventory productivity. So there's 3 things I want to talk about, and we'll take you through them in detail. And I think you'll understand why we're working on them. First, when we started 5 years ago, how do we serve customers by investing in our people and the process? First one we learned and you saw it in our stores, if you're streaming online, you've been in stores, you know one thing about is our team members are passionate, but we had to give them the tools to be passionate. We had to go out and make sure that we were hiring passionate people to do what we do. So we started that working with build as -- working on assessment and getting the right people, building diversity and career growth. You heard Michael talk about growing in retail. This is the place to be. We're going to create jobs, but not jobs, we're going to affect lives. And that's what we do is impact the lives of our team and our community. We anchored on customer-first culture. Now if you've gone back 100 years ago, probably talking to a retailer so they were going to focus on the customer. I think things have changed, but one thing that hasn't changed, the customer still likes to be appreciated when they spend their money. And we look at that each and every day to make sure that we are focused on greeting our customer, helping them when they need help and always making sure we thank them for being in our stores. Those little soft things make a difference of customers coming back. And that's why they keep coming back. Our enthusiasts, you met a couple of them yesterday, were passionate about. We hire those individuals. They love what we sell. We're not selling milk and eggs. We're selling fun stuff to get outside and go have fun. And that's what we want to be able to continue to do as we grow. And then we want to make sure that we're giving them training. We do engagement surveys every year. I do roundtables with thousands of team members to get feedback on what they want. They want more training, more communication, so they can become stronger at what they do to support the Academy stores vision of being the best outdoor retailer. To do that, we have to improve processes. I'm going to talk to you about the fast-friendly checkout process. You saw the queuing, but we've also improved even our legacy stores that we have as well. Effective scheduling. We've actually implemented a dynamic labor scheduling tool called UKG Dimensions. We've implemented that over the last few years. And what that does is it allows us to start to understand our transactions, traffic flow. And then also at the same time, we allow our team members, our store directors to be a partner, and we build those schedules to be more effective. We also make sure that we work to have the right product at the right time. You heard Ken talk about it when I walked in here 6 years ago, you literally would just look at the ceiling and you just see brown boxes everywhere. We didn't have the standards in place. And when you have more boxes in the store, you're going to have to spend labor doing that versus spending labor helping customers. And we've been able to shift that dynamic of what we worked on. And so Steve and the team have done a great job. And we're always looking at saying, in the corporate office, always telling me, we make decisions, but then really to see if they're working, got to go out in the field and we get the feedback to make sure we're taking unnecessary tasks out of our stores to do the things we need to do. So when you do that, you focus on the customer experience. Who defines customer experience? Customer, right? I don't define the experience. I listen to the customer to understand what the customer is doing. And I will tell you right now, I've listened to them. You're going to go in our stores, I'm not going to give you a [indiscernible]. I'm not going to give you a fishing tank. But what I am going to do is I'm going to give you experienced team members to help you go out and do what you want to do to have fun. And so you think about it, we listened customer experience, they want knowledgeable, trained team members. They want you to be in stock. It's really easy, right? We make it difficult, be in stock. They want stores that are easy to navigate that you can come through, whether you start to journey on omnichannel and you walk through our stores to be able to find it and get out. They want -- once you're going to take somebody's money, get them out of the store. You go to a lot of other retailers, self-service checkout, you go in there. It's a Saturday, you want to get out and you look at it and say, "Gosh, I got to go stand in line, I got all these people." What we're proud of, and if you walk into our stores on big weekends, our whole ultimate goal is to turn every register on. And you say, well, what's the cost and what's -- how do you do it? We're all about speed. We're going to continue to look at how we get better at POS, whether it's mobile point-of-sale, may even test the self-checkout down the road, but we know we can be better to get our customers in and out of our stores so they can go out and have the fun that they want and will go out and do. We offer the assembly, line winding. We do all of these things because here's the thing, experiences like this. If I walk into a store, I came in, I looked online, I wanted to buy a shoe that was a size 12. I came in to the store. I saw it online, it said you had it. I walked in. I'm greeted, Hi, how are you doing today? Can I point you direction? And then you up going back in the footwear. They go back, they find the shoe, they see the price, there it is. I try it on. I walk out. Somebody says, "Hi, how are we doing?" You find your thing, just great, checkout. It's a pretty good experience. I didn't have to go on the way out, let's go do the rock climbing wall. Now let's go get the cleats so we can get to the soccer field because it's about speed when you get inside the store. So we've done all that and in the last 5 years, we have record customer service scores from our customer database, [ SMG ] that we utilize that use other retailers. We're number -- I should say, we're at a record score of over 80% right now. Now on top of that, since 2017, we're almost $2 billion in revenue. So we've been able to, what I said, take things out, improve customer service and drive revenue. So we're extremely proud of this, and I'm proud of everyone in the stores that continue to do what they do each and every day. A few things that I want to get into, improving the operations that drive productivity. One, I talk a lot about, and you saw it yesterday, is the checkout experience. I am a firm believer that when the customer is ready to check out, you need to get them out of your stores fast. What we've been able to do during the time is open up a queuing. Now here's a little story that goes along with it. You've been to the grocery store, you may have been to other retailers and what happens, you get in the wrong line. And you know you've been there and you like man, my wife's down the car, I got, common, I mean I'm behind something doing a return, open up another register, somebody please open another register up. And that's like pulling teeth. That's not going to happen. So what we looked at it and said differently, we started to say and test and define it. We could put you in, so you're next person up. So when you get up the line, you're ready to go, you move through it. So it's about speed. And I'll walk you through some of the data points that we've seen around the queuing that has made the merchandise sales better, turnover better, service better and our speed better, and it's all a beautiful thing because Michael is real stingy and sometimes if I don't prove points out, he won't give me more money, but we've proven this 1 out, and we're going to continue to grow that. Elevating merchandising standards. When I got here, when Steve got here, we didn't tell stories. We just firmly believed that it was sort of like just to put it in the store. We had pellets on the floor, all those different things. We sold a lot of stuff. We just didn't make a lot of money doing it. So we've gotten better at how to tell stories. We've worked on localized assortments whether it's saltwater fishing in the Gulf or whether it's gas grills in the north or whether it's slip-on boots in Texas or lace-up boots in Kansas. We've got the localized assortments that we've put in play that we continue to work on with Steve and his team. I'm going to speak to you a little bit about stores and how we refresh it. We don't call them remodels, we call them refreshes. We take our capital allocation very seriously and how we spend the money, and we expect that we do the right thing to make sure that we're protecting our capital as we make those investments. Along the way, Jamey got up here and talked about omnichannel. And it is -- it's a spinning flywheel. And if you know the flywheels, you get it moving and you just keep on getting it better and better and better. And we're going to do that because our stores are the driving force behind fulfillment of omnichannel. We'll give the tools to make sure that customer can shop and purchase what they want. Optimizing store labor. I get asked the question a lot. How have you done it? It must have just been a low-hanging fruit. I wish I could sit up here and say it was just easy and it was low-hanging fruit. It's work. And I've been told before people say, "Well, it must be like a marathon." It's not a marathon. You know why? And what's the difference between marathon and what we do every day? Marathon has an ending. We keep working. And so what we do is how do we apply that in our labor model, how we get more efficient. And you're going to see some really cool things up here that we've driven the productivity in our stores. And not only have we serviced the customer better, we've been able to drop that profitability to the bottom line. And when we do that, the flywheel just keeps on spinning, and we love what we get out of it. And of course, we're going to continue to make sure that as we grow our stores and our omnichannel to integrate the experience that we have. We'll go through it real quick, just show you pictures here, pictures are worth a thousand words, dynamic checkout experience. Here's before, sort of a grocery store, I think I was talking to somebody last night and said, well, if you got to be willing to test things and take those risks. Well, we weren't willing to take the risk. We said, "No, no, this is the way the customer has done it. We're going to -- we tried queuing." Here's the thing about it, better merchandise presentation, checkout speeds much faster because if I can improve 5% in the checkout speed, it's worth a lot of money. So speed is critical when they're ready to go. Sales up 8%, customer satisfaction up 1.8%, queuing in 141 stores by the end of this year. We are moving in this direction. We love this. We continue to learn from it because we're able to take one lane and go, okay, for seasonality. You may have seen in the store yesterday Gatorade bottle. So it's baseball season, Gatorade is in. You'll get to back to school and you may see Nike socks that are in there. So we work with our merchants to really say, what are those things that we can put up there to add in the basket to build that average ticket. And that's what we look at because those are the items that we have. If you weren't in my group yesterday, you may have heard we put some things up there to those famous words, "Mommy, can I have, daddy, can I have." And those are the things that we like to put up there. So they grab them. You know what, for a $5 Academy ball, it's got a lot of margin in it, and we put that in the basket. So we love it. We're going to continue to move in that direction with this. Merchandising presentation. Just before, pretty typical of what you would find in a mass merchant. And actually, that's probably a really good picture before, and we were being nice. But now what we have is storytelling. You've seen it in our stores. We want to bring a motion to the product, bring it to life, work with our brands to call out -- to bring it stronger, we work with our vendors, they come in and see this. So we're a very good partner. Steve and the merchants have done an excellent job of working with our brands to be partners as we bring it to life. And of course, for our customers, it's Wayfinding. I see things, brand call out, you may look down the aisle and you see camping. I look down this aisle. I see baseball. It pulls you to it. That's what you want to tell stories, and it also allows them to bring. So we're going to continue this, and we work each and every week and year to get better at it. Now here's elevating merchandise presentation. We're not going to go out and remodel our stores and make them look all like the store yesterday. That would not be wise capital expenditure. But what we do is we do have a brand image, and we are going to elevate our stores to make sure that we can do the right thing to enhance and improve the customer experience. And we focus on key businesses. And so we got to remember who our customer is. And you heard Steve talk about who is the customer and what do we need to do? So in this area, stronger presentations, national brands, private brands, fishing, call it out, sunglasses, power merchandising businesses, the camping flat, workwear shops and stores that can do a workwear because the customer tells us that's what they need in that store. Long queuing and of course, facility updates and everything we do. So we're going to do about 25 to 30 of those a year and the man back there, Michael and his team will work with me, and we'll make sure that we manage that capital effectively. Omnichannel business. Here's a really cool number. Like when you start thinking, about 97% of all company sales were fulfilled through stores. You think about that for a minute and you get your mind, thing is like -- so our stores, along with our omnichannel, what does it do? And it's that fulfillment piece. And then when they come in to pick an item up in the store, what happens? They may buy something else when they're in the store. So we've done a few things over the last year, I'll just touch on what Jamey has already spoken about, BOPIS, that used to give me a hard time because I said BOPIS was like driving the 1974 Pinto. I mean we were finally going to get there, and we finally got there. But we're moving better. We're not into a higher class, but we're driving a Honda now. We're doing a much better job. I won't talk about everything here we've done, but just one thing I just wanted to say, this implemented curbside pickup. We had already laid the foundation before the pandemic, we were moving in. And the pandemic put this organization and looking at things differently. We took curbside from an idea to a full store rollout in 5 days. Now remember, the 1974 Pinto took us a long time. We did it in 5 days in curbside. But the only reason why we did it in 5 days is because our team members in our stores worked with us to figure out how to do it. I can tell you story after story of things that they've done that I had the opportunity to see, and I'm really thankful for all the things we've done and this omnichannel will continue to move at a very fast pace for us. And we -- as you see in the image there, we put even -- we think of our queuing as our omnichannel hub for our in-store pickup. So we'll continue to learn and get better there, I promise that. Here's the cool slide, store labor to serve customers. Thinking about productivity. I told you about we invested in dynamic scheduling. We've increased the productivity. 60% of hours in our stores are dedicated to customer facings, 60%. We've improved process engineering from the time the truck gets to the door, to the back dock, to the floor. My ultimate goal is always product comes off a truck, it goes to the floor. There should be very little in the back room, big ticket things. We need to be efficient with our inventory, and we work hard to think about that every day. And of course, we continue to invest to support our omnichannel. So just 5 years ago, we weren't running out to a car with curbside. We've built that cost into the model. Michael has it in the financial pieces of the 5-year plan. We build the omnichannel what we believe. Here's the 3 takeaways though: one, 16% less hours in stores than in 2017. 47% sales per labor hour up. And as I said earlier, our customer service is at a record high, up 4%. And old, by the way, I like the fact that we've almost done $2 billion more. And you think about that and you start thinking about the future of growth that we have and what we've built. But to do it, we've got to continue to invest in the technology. We got to implement RFID technology. I shared with some of you, and I want to just anchor on this for a moment. RFID technology and what it can do for us, we have it in a few stores now. We're removing a great partner, Manish. We will continue to work to get that right. But here's what it is, inventory accuracy. It's critical in omnichannel. You better have your inventory accuracy right, because you're going to disappoint too many people. It helps with replenishment. So again, Govind can help us replenish so we don't have to have trapped inventory in play. And then guess what? When it's RFID tagged, it allows us to find the merchandise. So a customer buys something that I'm going to ship it from store, I don't have to look everywhere. It's going to help me. It's like a Geiger counter, it take you to the product almost. And you go through all of that and you think how it helps. And so we're excited about it. That is not whole store, but that's more dedicated to the footwear and apparel around our national brands. And so we're working to that. Now I'm going to change and jump down if you'll follow me because I thought about something I want to share with you. RFID technology in an optimized merchandising clearance, they go hand in hand. Steve's worked really hard to making sure we've got the right merchandise at the right time. Sherry talked about getting the product into the stores in a timely manner. And then we make sure that we optimize our clearance execution. And clearance execution is giving the stores tools. We didn't give them the tools in the past. We have a markdown program, the cadence that we follow. We adjust accordingly. And when you have the right inventory in the store, you have less labor having to go tag clearance. Now here's what's really cool about RFID. People ask me, all the time. Well, why do you have clearance in the stores, should you go into another store? Clearance is a value proposition. Customers expect to find clearance in stores. It has been in the business for a long time. Now here's the thing with RFID that's really cool. I want to give you another example. One, I could go -- we could go build another store and say, take all the clearance out -- I'll go through it anyway. Take all the clearance out and all the labor, I got to take this clearance, I got to box it up. I'm going to put it on a truck, I'm going to ship it down the high. Where are we going to unload it off the truck, we're going to get it out and we're going to create a new clearance outlet store. Okay. Or you think about the future, a Nike shoe gets returned. It's a size 12. It's the size 12, but I don't happen to have any more of it. In the old days, you would take it and put it on the shelf in the store and just hope that somebody would come in and find it. Think about the future of RFID is on the box now. I scan it into it and guess what happens? That shoe instantly goes online and now is available for all the omnichannel. I can ship that shoe anywhere. I don't have to take and transfer things. So I utilize our clearance to be able to be more productive omnichannel, but also from an e-comm and also from inside the store. So really cool stuff. Point-of-sale, our mobile POS. We're working on that. We're in the early stages of it, but we're going to get faster to check out because, again, seconds, we create millions of dollars for the company when we approve it. We've got warranty options. We've got delivery options online, on our POS that we're working through endless aisle. I could get in and talk more and more about what we're doing there. And then strengthening our store communication platform. Our stores wanted to hear more from. As you remember, I said earlier when I talked to them is about communicate to me, tell me what the company is doing? They are the culture of the company. When they go out in their community, they are Academy. So we want to communicate both down and up. And so we've given them visibility on workload planning. We give them visibility on their schedules. We give them visibility on all the things that they need to do to do the job well, and then we have a feedback mechanism to tell us what we can do better here in this office. So I'm going to close with 5 things here: growth, growth in new stores, omnichannel in existing stores. One, we are required to maximize the capital investment in new stores and refreshes. The word is required. We just don't do -- we're going to work our tails off to make sure we deliver upon that promise. Two, develop a more exciting productive shopping experience to consistently elevate our stores and standards. We're going to continue to think about how we get better. But remember, as I said earlier in my presentation, the only person that tells us what we should do and we learn from is the customer. That is the finding of the experience. And we'll continue to test and learn as we go. Productivity of our assets through technology and process enhancements. We will work each and every day to learn how we get better. And as I said earlier, it's not a marathon, it's a race that continues to run. And so we constantly go back and lurk. But what I want to make sure everyone is when we think about productivity or any of these, we're laser-focused to achieve our long-term goal. Industry-leading retail team. As I said earlier, I'm just a person that gets a chance to come up here and talk to you. And I'm honored to do that, but I represent the 22,000-plus people at Academy. And in the next 5 years, it'll be over 35,000 people. And the people that sit in this room that I work with each and every day, what we work well together. We have our differences at time, but we have a very strong team that wants to win together because we deliver high performance. We have high standards. And to do that, you have to have that to drive new store growth to drive omnichannel and grow existing. So as I leave you today, before we take a break, and it's all a deserving one is this. All of us go in with a plan, and we want it to be perfection. Everything we want to do is perfection, but no one is perfect. But I will promise you if you look at our values that we have said on these walls, we carry them in our wallets and it's inside of us and it's excellence in all we do. We may not be perfect, but we will damn-sure be excellent in all that we do. And if we're not, we'll be the first to look at them here and say, how do we get better. So I appreciate your time listening to me. It's -- I think it's well deserving to have a little bit of break. And I believe we'll be back in about 10 minutes. So please take a break and grab water and the restrooms, they'll guide you on your way out. Thank you, everybody. [Break]

Okay, everybody, we're ready to start again. So if everybody can take their seats.

Thanks, everybody. If everybody come in, grab their seats, we'll get started with the second portion of the presentation. So think about it so far. We obviously set forward a lot of pretty ambitious goals. We walked you through the first leg of the strategy, which is new store growth. We walked you through the second leg of the strategy, which is driving our omnichannel business. And Sam and I are kind of tag teaming this third leg of the strategy, which is to drive our existing business. Sam covered the store piece, but I'm now going to talk a little bit about merchandising and how we're going to deliver against that as well as marketing. So I think it's always good to kind of level set from where we came. So I do -- I'm not going to drain the slide, but you go back and think about over the past couple of years, from a merchandising perspective, first work was identifying those 3 key pillars we talked about assortment value experience and then really rallying the merchandise teams around delivering against these strategies, right? So we clearly identified who our core customer was, I talked earlier about active young families. We did a lot of editing and focusing our assortment. Ken hit on a couple of these. We were into some businesses that we can't at least or shouldn't have been in like toys, luggage, et cetera. So getting those out of the assortment, building out the good, better, best, pantheon or hierarchy we're just talking about, you define your assortment planning process. We operated as 4 different distinct divisions in the past that each kind of ran independently. And so getting a unified assortment planning process in place. Put in place a new P&A team, an organization and really upgraded our talents there, managing our open to buy, putting in a more professionally managed open-to-buy system is a big deal, allowed us to navigate the pandemic, get inventory here in -- during the pandemic and then adversely controlling it on the backside when the whole thing whipsawed. That's really helped us. Implementing a new disciplined markdown cadence, getting -- that sounds like an easy thing, but it's a very hard thing to get on a markdown cadence, stay on it to keep the inventory fresh as well as rolling out markdown optimization and regular price optimization and size optimization. A lot of benefits came from this, and you see those on the slides. First, it really dramatically reduced the excess average inventory we carry. You heard a lot of people talk about these cardboard boxes stacked to the ceiling, it was pretty daunting before. So we've really squeezed all that inventory out over the past couple of years. It's improved our turnover, helped our cash flow and freed up or improved our turnover 500 basis points. At the same time, making stores more shoppable. It also helped improve the margin by over 600 basis points. So what are we going to do going forward? So first, with the merchandising perspective, you can hear us lean into 3 key things as we kind of go into this next phase of the long-range plan. Leaning in our position is the value leader in our space, improving and refining our localization efforts and distorting and driving outsized growth in our power businesses. So the first one is how we're going to really lean into our position as the value provider in our space? We have a heritage, if you go back to that, that opening video of being a place where people can come in and get great prices. You heard that from the customers earlier. And we're going to lean even more into that over the next couple of years. And there's multiple ways we deliver value to the customers from a price perspective. First, it's the everyday value pricing you saw in the store yesterday, right? So we've got some of the best brands in the space between a Nike and Adi, UA. A lot of cases, the MSRP, their product, right? T-shirt, shorts at $30. And what you saw yesterday in the store was we actually take those at $24.99. So day in and day out, we have the best price because our competition basically lives at the MSRP. And then what you see happen occasionally, anyhow, I touched on this, is they'll drop price for an event for a week or 2, we'll match price during those time periods. But day in and day out, if you find those brands in our store, they're at a better price in the competition. We also take that into our private brands, right? We know we've got these great private brands with these big key items that we really want to deliver value against. And so we make sure we take these categories and price it very aggressively relative to the rest of the market. So if you think about that, Academy chair you've head us talk about, $5.99. That's the price point of the chair. I've been here over 4 years. It's been the same price the whole time I've been here, right? We sell over 2 million of these chairs annually. Think about that, 2 million chairs. And it's better than candidly anybody else in the marketplace where at least $1 or $2 on everybody else, and we purposely stay there because we know when we want to sell these and use them almost as a marketing vehicle as we talked about. Think about kids' bikes. We want to be the place where you buy your first kid's bike. Our opening price point in kids is $59.99. That's tied with Walmart. And by the way, as I said yesterday in the store, that's a much better bike than they're selling for $59.99. And then we tried to do the same thing on the adult side at $99.99. Or you think about the Magellan fishing shirt. That's ubiquitous in our marketplace. Anybody ever gets in the Southwest flight, I guarantee you about half the plane is going to be wearing a Magellan fishing shirt. We sell those for $19.99. We sell 1.3 million units of those things a year versus competition at $40 to $50 on like-to-like items. So first is everyday value pricing. Second is promotional pricing. So it seems counterintuitive for an everyday value retailer to talk about promotional pricing, but it is part of our process and how we deliver value. So what we tend to do is promote around those must-win market share time periods like Easter, Mother's Day, Father's Day, back-to-school, holiday. And where you see us build the promotions in on or those categories that are seasonal in nature that we've got to work our way out of at some point. You see us lean in and use those from a promotional perspective. The third way and Sam touched on this earlier is clearance. There is a deep value customer who wants to shop clearance on a regular basis. And we've done a much better job of managing this and keeping it as a consistent presence in our stores. It helps drive traffic candidly, particularly in some of the wall in the calendar, you think about a September or February, there's not a lot going on in retail. Clearance is a big driver for us. So that's the third way. And then Ken already mentioned this, sitting on top of all, this is our price match guarantee, right? And that's more of a safety net. If we do our job right, if we deliver great everyday value pricing, if we have our clearance marked and we promote at the right times, really shouldn't need to utilize this much, right? But it is in place because occasionally, there are some small regional competitors who might try to go deep on an item, and we don't want them to be able to have a better price in that. So we give the stores the ability to match and then sell up 5% lower. So that's kind of a safety net for us. And then the last way is really these 3 value-added services that Ken hit on, whether it's building bikes and grills, whether it's the line spooling we talked about, free shipping if you had a certain threshold or the knowledgeable associates we have. Second big push for us is refining localization. So obviously, we've made a lot of progress on this front. But one of the things when you're primarily in the Southern band of the United States, you don't have to worry about seasonality. So we started pushing up north. We've had to get better at building Northern climate assortment. So we've developed climate bands for Northern stores and then kind of the middle is kind of our existing footprint and then even deep Southern stores as we push more into Florida. So as you think about Northern stores, they have to have a heavier weight of outerwear. They have to have snow toys. They need some sports like hockey, which traditionally haven't supported. So we're building out those assortments. At the same time, as you go deeper into Florida, they may not need outerwear. They may need beach stuff year round. They may not -- or they may need pool toys, things like that year round. So expanding those businesses, saltwater fishing, a much more expanded assortment there. Those are all things that we're working on from a localization perspective based off the climate banding. And then sitting on top of this is how we deliver it when we mark it down, right? We need to deliver outerwear a month or 2 earlier to the Northern stores, a little bit later for the Southern stores. And then we need to start the markdown cycle at different time periods and mark down at different level. So we put in place all that discipline. Another one is size profiling. This is something that we put in place, but as we've been really focused more on the South and the border. And on the border, you need more small and mediums, but as we push into the upper Midwest, it's big and tall country, plus size country. We need to have the right sizing for those stores and building that out. So we worked with that, and we're putting in place much more robust prepack optimization strategy that's going to support that. And then lastly, it's taking advantage of these regional local moments. [indiscernible] talked a little bit yesterday about State Pride or he talked a little bit about what we do for the Houston livestock and Rodeo. We do that same thing for Mardi Gras in Louisiana, right? Or as we pushed into Kentucky, they do a big Pink Festival around the Kentucky Derby and having wagons and canopies and chairs and apparel and pink distorted there has been a big push for us. And so as we go into new markets, we do a ton of research to understand what the local things are, that are going on and make sure that we lean into those so that we are perceived as understanding what's important to that community. Third one is distorting growth in power businesses. Now we've used this term a lot, I don't think we've really done a good job of defining it for you so far. Power businesses for us are those businesses that are almost in our name, right, sports and outdoor, it's what customers come to look for us for where we're the destination. So you think sporting goods, hunting, fishing, camping, apparel and all the footwear you need that supports all this. We tend to carry them year round. They have larger assortments and footprints in our stores to get more marketing and they have much more developed localized strategies. So our focus here is to really lean into these categories for growth over the next 5 years. We're going to driven them at a faster rate of growth. So the first one is apparel and footwear. We talked a little bit earlier about our mix of hard goods and soft goods being 48-50 -- I'm sorry, 48-52. If you go back pre-pandemic, we're actually at a 50-50 spread. And so we're going to start growing apparel and footwear at a much faster rate with a focus in women's, kids' and workwear and work boots. And by the way, this is going to be a gross margin tailwind for us because those businesses have a higher margin profile. So growing at a disproportionate rate, making a bigger percent of total, it's going to help us from a margin perspective. Second, you're going to see us lean into our team sports business. This is also in our name. So we have a pretty good foothold and build up great assortments in baseball and football and soccer and basketball. But there's a lot of strength still in building out some of those categories as well as some of the new sports like pickleball, Lacrosse, Hockey, where we don't have a presentation. And so we're building out our best -- our good, better, best hierarchy there as well. And then the third one is capturing market share in the outdoor categories. We know our competition is pulling back. They're pulling back on the hunting category, they're pulling back on the fishing category, and they're leaving the lane wide open for us. So we're really going to lean into those and make sure our localization efforts work there. You see this, by the way, in the story yesterday. Like, we're really invested in the fishing business, right? We gave it primo floor space in the front of the store, and we're going to really stand for that going forward. And then embedded in all this is growth in private label. So private label, as I mentioned earlier, is about 21% of our business. As we lean in and grow these categories, these power businesses, the private label piece of that is going to grow at a faster rate as well. So we're going to take private label from about 21% to about 25% of our total business, by filling in white space with the brands that we've already talked about and adding some new brands in some cases. So you're going to see outsized growth in brands like Freely and R.O.W. And we're going to continue to seek out new and innovative brands and maybe we could add to our portfolio similar to Redfield that I talked about earlier. Okay. Turning on to marketing here. Much like merchandising, we were on a journey in marketing, right? So we've upgraded our marketing over the past couple of years in multiple ways. First, reduced our reliance on traditional media such as print and broadcast. When I started with the company, we ran newspaper inserts almost 52 weeks a year and I'm sure if a took a poll and ask how many people take a newspaper, probably virtually nobody in this room reads the newspaper, right? So we've pulled back on that. We pulled back on our broad blasted messaging on broadcast. We've shifted to a digital-first approach, and we've improved our targeted marketing. If you go back to 2018 or prior, less than 5% of our marketing was targeted, right? So now we're over 50% over the past 4 years. So that's the progress we've made. And we really focused our brand messaging around being much more focused across all the touch points. So as you think about marketing, very similar to merchandising, 3 focuses, right, growing our customer base, driving increased traffic to our stores in academy.com as well as increasing our brand awareness to help launch new stores. So let's talk about growing our customer base. This is a big 1 for us, right? We've got multiple ways we're going to do this. The first best way we can add new customers is opening new stores. I mean it makes sense, right? We're not in the marketplace. They probably never shopped an Academy for. So opening new stores and capturing that customer data when they come in is a big deal for us, and we're going to add a ton of customers that way as well as going into existing markets because in the end, we're going into new neighborhoods in some cases where they don't shop us regularly. Second, we're going to expand our media investment in reach. So we traditionally, over the last couple of years, if you look at marketing as a spend of sales, it's been about 2%. We're going to take that up to 2.3% on an annual basis, and I'll talk a little bit about we're going to use the incremental 30 basis points more in a second. We're also going to shift our mix out of traditional print and broadcast into more digital. And another thing we're working beneath the scenes is to reduce our nonworking media so we can spend more money on working media. So you may ask yourself, what's nonworking media? So think about all those newspaper ads I talked about or all those TV ads were running before. There's a lot of production money put into creating those, right? So if we don't spend as much effort working on those, that's money we can free up to buy more advertising media, and that's what we're doing over time. And how we're going to do that is by being better captures of the content we have. We showed you some videos and talked about all the things we do, and Bill is going to show you some videos up here in a minute about give backs that we do on a local basis. The new store openings, the player appearances we have, hot market events that we run. These are all great content moments that we should capture and haven't done a great job of in the past. We're unleashing our regional marketing team to start capturing those, and that's really going to fuel our social media as we go forward, and we're going to see that as a big push for us. So going forward, we're also going to grow our targeted marketing to over 70% by reinvesting all that money out of nonproductive assets into digital channels and ramping up our spend in social media. And then, of course, we're putting in place new tools to measure this to make sure we're spending the money wisely and are being very effective in it. Next one, driving increased traffic to our stores and dot.com. This is a big one for us. If you look at today where we sit, we have customer data, but it resides in a lot of different places throughout the company, and those systems don't talk to each other. So we might have a customer who shops in brick-and-mortar who also shops in dot.com, but we may not have synced them up in our databases. So we don't know that, right? So one of the things that we've put in place or putting in place right now is a new customer data platform. We signed up with a company called Treasure Data. They do customer data platform for big companies like Lululemon, Mattel, InBev, and we're in the process of installing that right now. So it should be done by the end of Q2, which should put us in a place where we can start utilizing that as we go into the back half of the year. It's going to give us a much more dynamic real-time interface. So in the past, if we wanted to create an audience like somebody who shopped kayaks in the past 6 months, we would have to go to our old data provider, and it may take a week or 2 to get that list back and then we can send them an e-mail. This is more real time. We can ask for the list, generate in a couple of minutes and then send it out almost instantaneously. We think this is going to drive higher engagement and reactivation rates through increased targeted marketing. And it's really driven by improved, increased customer segmentation. And it's also setting up or serving up more relevant content and personalized interactions. Second phase of this is and we've heard some questions around loyalty. Now I would tell you, we have a loyalty program. We've had a couple of loyalty programs in place. First, the Academy credit card that we have right now, you can get 5% off your purchases every day, right? That's a pretty big discount and a pretty big value. So that's one piece of our loyalty program that's already in place. At the same time, we do discount programs at different times of the year. So we offer a military first responder discount around Memorial Day and Veterans Day. We do teachers' discounts around certain time periods as they go back to school. We do HBCU discounts during black history months. So we already have kind of a discounting element of loyalty program in place. As we build out our customer database, we're going to start working on an expanded loyalty effort. And we're putting in place a couple of guardrails. First, the mobile app that Jamey talked about is going to be kind of the hub for all this. This is where we want to interact and engage with them. Second, as Ken mentioned, we don't want to make this overly complex points based, and we also don't want to make it discount based because we don't want to undermine your current discount programs we already have as well as our everyday value pricing, right? Because the more you layer on discounts, the more people -- the merchants start trying to price around it to account for it. We don't want to do that. So what we are going to do is lean to ideas that make the shopping experience more easy and more enjoyable. So think about things like earlier access to product or hot markets. We presell shoes from books. If you were a loyalist, maybe you get early access to that. If there's a hot market event happening, maybe there's a separate line that you can get in so you can get your product first. Maybe streamline returns, maybe it's in rich content that we can serve up. Anything that we can do to remove friction from the transaction, that's what we're going to lean into as kind of the next phase of loyalty. So our plan here is to build a pilot once we get the CDP in place. We'll pilot this in the back half of this year with an idea to roll it out in 2024, pending results and success of that program. Third strategy is increasing brand awareness to help us launch new stores. I already mentioned we're going to take our marketing spend up from 2% to 2.3%. That extra 30 basis points in marketing spend is really devoted to supporting our new stores. That was probably one of the learnings we had over the past years. We tried to fund the new store launches out of the existing budget, and we kind of were jack of all trades master of none. So we said we've got to have a devoted program and money set aside to launch these new stores. So if you think about it right now, there's really 3 phases of a new store launch. We do a seeding phase a month or two in advance of the store opening where we're trying to build up the buzz that we're coming. There's about a 1 week to 2-week time period, which is the grand opening and then there's a sustainment phase. So this past year, generally, as we worked out the program for each of these stores, it was about 20 to 26 weeks. We need a full year program for these stores. So that's what we're going to do with that extra 30 basis points as we're going to have a full year, longer seeding time period. We feel like we've got the grand opening piece nailed pretty well, but much longer sustainment on the back end before we fold it into the base. And as we do this, we're building out very personalized bespoke marketing plans for each of the new stores. And it's based off of 4 factors: brand awareness in the marketplace, seasonality, which is a big deal. It really matters when we open up, stores that open up around back-to-school, do a little better when they don't. Expensive media in the market as well as the competitive landscape in the market. And then lastly, we're going to also expand on all of our grill and marketing activities around this. So as Michael said, 2022 is a year of learning for us. We're taking those learnings, we're applying to the stores in 2023, and then we'll learn things in '23, and plan '24 and beyond. So with all that, between Sam's presentation, my presentation, a couple of key takeaways. We've got a much more sophisticated way in terms of how we manage our stores, how we build our assortments and how we go to market. That being said, we're still in the middle innings here, right? We've still got a long way to go. There's a lot of meat on this bone. But when you add all these initiatives up, it takes you to another $500 million to $700 million in opportune for us as a company over the next couple of years. And I thought here, I'd play one more video that kind of sums up all the work that Sam's team does, the marketing team does, the merchandising team does in terms of building our brand and who we really are to our customer. So if we could play that video now, I'd appreciate it. [Presentation]

So obviously, as we open these stores, we put in place all these localization efforts, it's going to put a lot of pressure on supply chain. We're going to have to get a lot better at how we move goods through the whole process. And that's my friend, Sherry Harriman is going to come up now and talk to you about as how we upgrade our supply chain and really set ourselves up for the next phase of growth. Sherry?

Thank you, Steve. Hello, my name is Sherry Harriman, and I have the privilege of leading Academy's Logistics and Supply Chain. I've been with the Academy about 5 years. Before that, I spent over 20 years with Walmart in different capacities, spanning distribution, stores, Sam's Clubs and transportation operations. Almost hesitated because I mentioned that last night, and someone said, "You must have started when you were 30, then they quickly said, mainly 3. I thought this has been a really long week. I do have a lot of experience, though, across the spectrum from best-in-class, where I've piloted innovative technology all the way to building and repairing and rebuilding operational foundations in both transportation and distribution operations. Prior to the pandemic, many of us in the supply chain enjoyed operating behind the scenes, collaborating and supporting our businesses. However, as you know, the pandemic strained our supply chain industry and put us out in the forefront. Supply chain has become quite the topic of conversations over these past few years. Quite frankly, many companies either succeeded or failed as a result of their supply chains. I'm a firm believer that being adaptive, yet maintaining strong operational disciplines was a key differentiator. We commonly refer to it here at Academy as being students of the business. Our supply chain continues to be one of our strategic priorities here at Academy. To support our growth plans, we're committed to leveraging and supplying -- scaling our supply chain. I've heard that many of you have expressed interest in our supply chain. So I thought that I would give -- start by giving you an overview. Starting upstream, our transportation network extends around the globe. We currently import from over 20 different countries, landing product, primarily through our Houston and Charleston ports, avoiding the complexities associated with the West Coast ports. Our import network has expanded rapidly over the past 3 years to support the growth of our private brand business. Domestically, we transport product throughout the United States from points of origin in over 30 states. Our domestic transportation team handles most of our inbound, with only a smaller portion being handled directly by our suppliers. The domestic team also supports our outbound network of store deliveries and manages the carriers for our e-comm business. While we currently only have stores in 18 states that we service from our distribution centers, our outbound network, including our e-comm business, extends to almost every state and we are working hard to provide coverage to all states, including Alaska and Hawaii. But before we talk too much about our future plans, let's take a step back and provide context on our focuses and achievements over the last 5 years. Our mission has been clear from day 1, and that is to create an efficient and effective supply chain for Academy. We focused on building a strong foundation of operational disciplines and a culture of excellence where our teams have worked to become better students of the business. That framework has helped guide us through a rapidly evolving period where we handle tremendous volatility in our business. We are extremely proud of the accomplishments our supply chain teams have achieved. First, we captured consistent improvement in our team member productivity, which specifically focuses on each team member's unit per hour productivity. This has been achieved in part by standardizing the processes across our distribution network. Historically, our teams operated somewhat uniquely based upon tribal knowledge versus standard operating procedures. Along with standardized processes, we implemented pay-for-performance, where our team members could earn an additional $2 per hour. Pay-for-performance is a win-win for both Academy and our team members. Academy gets improved performance and throughput while our team members increase their wages. The productivity of our team members has been extremely valuable given the increase in throughput, helping -- ultimately helping us deliver what was needed to support the business. Second, we continue to improve our asset utilization. To this point, we've done a good job leveraging our DC footprint with minimal investment, which has enabled us to drive an additional 15% in throughput since 2018. Our next area of focus has been on our cycle time. We have spent a lot of time working cross-functionally to deliver an improved and consistent cycle time. The impact a day has on our product flow within our business showcases how important it is to minimize touches and the amount of time our product sits within our distribution facilities. From a progress standpoint, we have reduced our cycle time by over a day or 14% -- 15% but our goal continues to drive us for more. Within our transportation business, we have been focused on streamlining and optimizing operational excellence. Our team has done a great job ensuring our strategy fits our business needs. Over the last 5 years, we have seen exponential growth in our international demand and our transportation team has done an excellent job of building out the muscle to not only deliver but to do it efficiently in a very dynamic environment. This has built a foundation of support and has enabled us to lower the cost to serve our internal partners, which has ultimately helped us to deliver value back to the customer. Our distribution network has been referenced by Ken and some of the other executives, but it's composed of 3 distribution centers where we use a blended inventory model to support product distribution to our stores as well as our e-comm business. Our distribution centers are primarily located throughout the Southeast with the largest DC from a volume standpoint located right here in Katy, Texas. Overall, we have approximately 4.8 million square feet of the space across those 3 facilities, which we believe can handle our current growth plans. However, we will continue leveraging future initiatives to drive additional capacity in our current network. Now looking at this chart, you can see that Academy has added a distribution center about every decade since 1990. We're planning to continue to add distribution capacity as needed to support our growth. We will have a fourth distribution center on the horizon. Our current plans are to have it operational by late 2025, early 2026. We have built a strong foundation of operational disciplines and a culture of excellence within our supply chain. We've developed a strategic road map and have identified 4 categories of critical actions we must execute on to deliver what is needed in our long-range plan. We need to expand our capacity and capabilities to not only service our current stores, but to also enable our future growth plans. We must deliver consistent standards and execution to provide efficient and effective flow throughout our supply chain and reduce cycle time. Through enhanced supply chain visibility, we will continue to improve our forecasting and planning. And finally, we must build and develop our talent to ensure that we have the right structure and talent in place to scale our supply chain and to deliver operational excellence where our team members continue to be students of the business. To deliver our long-range plan, we have developed detailed actions to support each category with specific business impacts and measurable business case expectations. These actions have not been created in a silo, but in collaboration across the organization to ensure alignment and support key initiatives. Our first critical action involves expanding our capacity and capabilities. As we evolve during this growth, our role as a supply chain is to continue to change and adapt to support those initiatives. The accelerated growth in both e-comm and new stores will stretch our supply chain. For us to handle the demands within our distribution centers and transportation network, we will need to integrate new solutions. One of our primary technology investments is implementing a new warehouse management system. We've partnered with Manhattan Active, an industry-leading solution provider, to support us in more efficiently managing our warehouse inventory and distribution processes. With this investment, we will be able to more effectively handle our product flow through our -- through improved directed put-away logic and more effectively optimize our distribution footprint through slot optimization. I thought I'd bring an example. This tackle box, a fairly simple product sample, but in twigs, we had 1,400 units stored in 254 different locations. However, if properly directed for efficient flow and improved slot optimization, should have only required a maximum of 3 slots. This simple example represents the value -- the valuable unlock and potential of leveraging systemic logic versus manual decision-making to better leverage our footprint. We anticipate a 5% saving from slotting and task interleaving functionality within our new distribution or new warehouse management system. You might ask, what is task interleaving? It is simply directing work assignments to support our team members as they go from assignment to assignment in the most efficient path. Other actions include scaling our transportation programs. We've built strategic partnerships by effectively leveraging our portfolio for business optimization, creating win-win scenarios with our key partners. We work together to make each other's business better, creating a foundation for growth. We also have upstream consolidation opportunities to improve our container utilization. We will continue to optimize our DC footprint and evaluate our equipment. We have implemented high-density racking here in Katy DC where we expect an 8% increase in pallet positions. This is a quick win outcome that was identified in partnership with Deloitte, where we identified that 51% of our DC slot locations were occupied with only 10% of our SKUs. We plan to continue adding new distribution capabilities into our network as needed. We anticipate at least a 20% increase in DC capacity simply from expanding our footprint. Next, we are focused on ensuring consistent standards and execution across the network. A model we are leaning into here at Academy is the best way principle. Our goal is to drive our business to operate in the same framework and reduce the variability in our processes. This will lead to network efficiency as well as uniformity of service across all stores. This will drive value downstream at our stores and improve the customer experience by having the right product at the right time. Through process standardization and gaining parity within our DC operations, we have plans to achieve a 40% increase in twigs productivity. That's leveling twigs productivity to 128 units per hour by 2027. We'll increase our dock-to-dock flow by leveraging prepacks and pre-allocation. We're currently only around 20%, but we have plans to increase our cross-dock flow by 15% and increase our pre-allocation flow to greater than 35%. This will not only reduce our lead times, but it will also improve our capacity with at least 10% increase in unit throughput. We will leverage improved accuracy within our item dimensions to improve our DC and transportation planning. We plan to leverage item dimensions, to not only optimize our DC space, but also to unlock transportation savings as we utilize our containers across both the inbound and outbound businesses. Third, we need to continue to invest and enhance our end-to-end supply chain visibility across the supply chain. By leveraging tools like T-44 an industry-leading visibility platform, we will have real-time visibility to product, which will drive more real-time, actionable insights and eliminate unnecessary costs. We expect a 25% reduction in accessorial charges like detention and demurrage as a result. The benefits are foundational, and we've already seen positive financial results. Improve visibility to real-time product flow will allow us to be able to enhance our labor and capacity planning. A benefit we realized early on in leveraging real-time data was with our Shiner Magellan launch. We identified a 10-day variance between our previous EDI capture and the real-time p44 data of where the product was within the supply chain. This allowed us to dynamically adapt and adjust our organizational plans. We partnered with our merchants and stores to create a better plan -- we made adjustments to more appropriately reflect where the product when the product was scheduled to arrive. This helped eliminate inefficient store spend and better align the launch activities with when the product would arrive in the stores. We were also able to repurpose that space in the interim to drive sales productivity. We will continue to review our network, our transportation network. We currently have a door per store operating model within our distribution centers with upgraded warehouse management technology we can optimize our outbound store routes and handle more stores servicing them from the closest DC. This will reduce our outbound transportation costs by simply realigning a handful of stores, we expect a 5% decrease in outbound costs. For example, an Oklahoma store currently serviced by our Cookeville distribution center over 800 miles away, could be realigned to KDDC about 450 miles apart. We also have actions underway to optimize our backhaul lanes and increase our multistop deliveries or combo loads, which will reduce our empty miles by approximately 10%. And simply ensuring that all our loads are delivered efficiently, maximizing container utilization, whether it is inbound to our distribution centers or outbound to our stores. Every mile counts and shipping air is expensive. Our final but very important initiative is focused on building and enhancing our talent within the supply chain organization. We will continue investing in our team members with flexible staffing and enhancing our pay-for-performance program by unlocking new capabilities in our systems like gamification where we can create a fun, competitive environment with real-time performance data. These efforts support our plans to increase our productivity and achieve greater than 95% labor standards. We continue to identify meaningful ways to engage with our team members. For example, quarterly, I record 2 videos, one in English and one in Spanish to connect with our large Spanish-speaking population. We expect these initiatives to deliver a 10% reduction in turnover. We will upgrade our positions as merited and align our organizational structures with outcomes that will help enable our strategic initiatives. An example of an area within our flow team that we are currently building out is a new group of merchandise logistics leaders or MLLs as we refer to them internally. The focus of this group is to collaborate with the merchandising organization and partner to drive optimized product flow. We are growing our data analytics capabilities. We're transforming from being simply data-rich to data savvy, where we will help us deliver improved and consistent cycle time performance. And we will build a talent pool for our future distribution centers. So what do all these critical actions actually mean? Ultimately, over 100 basis points of profitability improvement over the next 5 years. These actions unlock benefits that offer tremendous value across a lot of different aspects. First, we expect a 20% improvement in unit productivity over the next 5 years. Just a reminder, when we talk about unit productivity, we're talking about the units per hour through our distribution center. Second, we expect a 30% improvement in e-commerce fulfillment. We believe fulfillment efficiency is a strategic unlock for us to lower the cost to serve while enhancing the customer experience, increasing our competitiveness in the market. Third, we expect to decrease the lead time in our distribution centers by 45%, which means we will be able to flow product out of our distribution centers in less than 2.5 days. We expect the gains in lead time to drive increased in-stocks and bolster the stores' inventories with products they need when they need -- which they need to service the customer. And finally, we expect a 15% leverage in our transportation cost to serve. We are focused on leveraging our transportation strategy to identify synergies across our network that allows us to flow goods more efficiently and drive value across the chain. We are working to balance both cost and service to deliver organizational value. We will continue gaining capacity within our existing footprint with our road map initiatives like increasing our dock-to-dock flow and collaborating cross-functionally to effectively leverage prepacks and increase our pre-allocation. Let me recap our alignment on supporting the long-term goals of our business to ensure we achieve success. First, we will service our existing stores by creating a more efficient and effective supply chain, continuing to be students of the business and adapting as necessary. Second, we will support new store and omni-channel growth with our expanded capacity. We are enhancing processes to allow us to leverage our existing assets in our current footprint, while we plan for the deployment of DC #4 to support future expansions geographically. Third, we remain focused on building out our network to support our private brand growth. Our merchants and sourcing teams have done a tremendous job building brands such as R.O.W and Freely over the past couple of years. We will provide flexibility in sourcing to unlock additional opportunities to grow. Fourth, our plan is to continue to drive inventory efficiency, which we plan to do so by decreasing our lead times. We believe this will provide an improved customer experience by ensuring we have the right product at the right time. Ultimately, all of these will improve the profitability of our stores and e-com by lowering our cost to serve while increasing our customer experience. Supporting both our stores and e-com growth is key to unlocking many of our goals over the next 5 years. We have to invest in and improve our cost to serve in our e-com operation and continue to gain cost efficiencies within our stores so we can reinvest those savings and remain a value player. Our supply chain is committed to not only delivering the cross-functional support to enable Academy's growth, but also to drive the cost leverage needed to deliver our long-range plan. Thank you for your time. Now I'd like to turn it over to Rene Casitas to discuss our commitment to ESG. Rene?

Thank you, Sherry. Good morning. I am Rene Casares, Senior Vice President and General Counsel. I've been with Academy for just about 10 years. And among other duties that I have, I'm responsible for overseeing our ESG program. I'm going to brief you on our ongoing commitment to ESG, which is an essential part of supporting this long-range plan. Academy has been pursuing ESG initiatives for many years, and we've been making positive strides along the way. And recently, we've been reporting our ESG progress in our ESG report and other related disclosures that are available on our Investor Relations web page. As part of our ongoing ESG journey, we're launching -- we are launching a new ESG purpose statement, which is reflected here. This purpose statement provides us with a framework for how we will continue to approach our ESG efforts going forward. So let me walk you through it. At Academy, we believe that practicing corporate responsibility strengthens the accountability and performance of our Board of Directors and our executive leadership team. It supports the long-term interest of our stockholders and our other stakeholders, including our team members, our customers and their communities. And it furthers the achievement of our vision to be the best sports and outdoors retailer in the country. Our ESG strategy is focused on 3 pillars, which guide our ESG efforts at all levels of the company, including sustaining our planet, empowering our communities and operating with integrity. So let's take a closer look at each of these pillars. The first pillar is sustaining our planet. We're committed to being an environmentally responsible corporate citizen and we seek thoughtful opportunities to minimize our environmental impact and capture-related cost savings. Under this pillar, we're focused on understanding our climate and managing our carbon footprint, increasing our offerings of sustainable products and packaging and improving our facility construction efficiency, recycling and waste management. The second pillar is empowering our communities. We believe that investing in our team members, workplaces and retail environment is essential to our success. We strive to provide our customers with the gear and the fun in -- with the gear and competence they need to have fun while being safe and responsible. And we further serve our communities by supporting local organizations and responding to crisis when needed. Under this pillar, we're focused on providing our team members with growth opportunities with supporting diversity, equity and inclusion and strengthening the culture throughout the organization, creating safer and stronger workplaces, shopping experiences and communities and ensuring the safe, compliant and responsible sale of all of our products. The third pillar is operating with integrity. At Academy, we've built our reputation by adhering to the basic principles of integrity, which include honesty, fairness, ethics, compliance, safety and respect. So under this pillar, we're focused on engaging in responsible corporate governance, practicing ethics and compliance to ensure that we're always doing the right thing. Ensuring the security of privacy and privacy of the data that we're entrusted to protect and requiring that our vendors also operate responsibly. Going forward, our ongoing ESG efforts will be guided by this new purpose statement and its pillars. And now let me share a few of our recent achievements and some of our priorities across each pillar. We continue to find ways to reduce the environmental impact of our operations. As we expand all of our new stores will be equipped with environmentally friendly design elements that help us conserve resources and reduce carbon emissions. We expect to open our first store that will be supported with solar power generation later this year. Last year, we analyzed and reported our scope 1 and 2 greenhouse gas emissions for 2021. And that analysis serves as a baseline for managing and reporting our ongoing GHG emissions efforts going forward. With regard to private label offerings, we're increasing the use of recycled materials and the recyclability of our products and packaging. We've set measured goals for product sustainability that we're on track to achieve by the end of 2024. We've also made operational improvements to minimize our energy use and emissions, to use water more efficiently and to divert waste from landfills. We've improved the recycling programs at each of our facilities, and we've developed a sustainable solution for processing the hazardous waste that we generate at our facilities. Now one way we empower our communities is by hiring great people, providing them with a rewarding environment, investing in our talent and encouraging diversity, equity and inclusion. Our CHRO, Bill Ennis, will cover these areas in greater detail a little later in our presentation. The health and safety of our team members, our customers and our communities is also one of our top priorities. We strive to provide safe environments and promotes health and safety practices to help us prevent injuries and illnesses. We also support our communities through partnerships and sponsorships with organizations like schools sports teams, conservationists and law enforcement agencies. These partnerships and sponsorships represent the largest investment we make externally in our communities. We support many of these organizations through donations of cash, merchandise and discounts. And we've also helped our communities deal with natural disasters by selling them essential products. And by donating critical supplies and support when they need it the most. We also strive to be the most responsible seller of firearms in the country, and we take important measures to ensure that we meet this goal. We entrust the sale of firearms only to team members who are well qualified, highly trained and who have undergone enhanced background checks. We maintain strict compliance processes that help us ensure that we are transferring firearms only to eligible customers. We follow, and in many cases, exceed all applicable regulations. For example, we will not transfer a firearm to a customer until after the federal background check system gives us a green light to proceed. And our team members know that they are empowered to stop the sale process whenever it's necessary to ensure safety and compliance. We also educate and support our customers on the responsible ownership of firearms. We offer them gun safes at a discount and lock boxes at our own cost. We give away 3 trigger locks or cables for all firearms, and we provide them with information on responsible gun ownership, with every transfer. These are many other measures that we're taking to ensure the safe and compliant transfer of firearms are covered in greater detail in our ESG report. Now our Board of Directors has made a lot of great progress over the last few years. Since our IPO, our Board has achieved greater independence and has increased the skill and diversity of its membership. Another important topic is cybersecurity and data privacy, which we take very seriously. We continue to invest in people, processes, technology and training to improve the protection of data and our systems. And several of our Board members bring valuable cybersecurity oversight experience to enhance our program. As Ken mentioned earlier, responsible leadership and integrity always are key values at Academy. So we expect our team members to conduct our business responsibly, and we expect our more than 1,400 vendors to do the same. Our vendors are required to comply with our vendor code of conduct, which requires them to operate responsibly and follow all applicable laws and regulations. ESG oversight is performed by the Board and its committees as outlined here. Our governance committee is primarily responsible for monitoring our ESG practices. While the Board oversees ESG as part of its oversight of our business and our strategy. So going forward, we will continue to focus on these initiatives here. We've already achieved a great deal, but we know that there's a lot more we can do to support the interest of our stakeholders, and we look forward to sharing our ESG progress with you in the future. Thank you very much. And now I'm going to turn it over to our CHRO, Bill Ennis.

Thanks, Rene. Good morning. My name is Bill Ennis. I'm the CHRO for Academy. This month, I've been with Academy for 15 years in retail for over 30-plus years. Today, I'm going to spend a few minutes talking about supporting our growth with the best team in retail. Our culture is one of our keys to our success. Ken made reference to our vision and values earlier. When the team built our first long-range plan 4 years ago, a key part of our process was to refine these values, which you can see behind me. They define the expectations we have for our team members. We have active mind of team members who by living our values in all that they do every day and providing outstanding customer service to all of our customers, puts our vision within reach as we continue to build the best team in retail. As we look to the future, you can see how we're going to build the best team in retail. Our growth plans will be supported by a blend of internal talent development, external recruitment of key roles and retention of our top talent. We'll provide product training and selling skills training for all frontline workers to deliver the best customer experience. We will invest in leadership development to ensure all of our team members have an opportunity for growth. We strive to be the best team in retail and to offer a positive, fun and inclusive place to work. I'm going to take a few minutes and walk through how we're going to deliver on these commitments. There is a war for talent out there and it's real. And our team is doing a hell of a job fight that war. Because of the work this team has done, we're not dealing with issues like bringing people back to the office or cutting jobs like many of the companies you're hearing about in today's environment. We have a great growth story to tell. You heard Michael, you heard Sam talk about it. Growth is a powerful magnet for talent. People get it genuinely excited to join Academy. We pay a competitive wage in all our markets and at all levels of the company. And since 2018, we've increased our average hourly rate in stores 29% and in our DC is 21%. Our stores are consistently 100% staffed. You heard Ken mentioned that earlier. Our DCs, even with stiff competition, have been fully staffed over the last 2 years. We invest in our team members' health and financial wellness and we keep our environment fun. We have an industry-leading 401(k) plan with a 6% dollar-for-dollar match. We offer team members strong benefit options. And over the last 2 years, we paid out over $1 million in tuition reimbursement. As we grow, we'll continue to make Academy a great place to work. Another important part of our building the best team in retail is developing our own internal talent. We provide a wide range of career paths for personal growth and strong leadership training. Just a couple of examples. Years ago, great companies used to have internal development programs that they created many of the top leaders in retail today. In fact, many of us, myself included on this executive team, have been in some form of executive training programs that taught us how to analyze the business and become leaders. Over the last 10 years, most companies have cut costs and eliminated internal development programs and more resorts are outbidding people for talent versus developing their own talent. We've resurrected our executive training program. We've developed partnerships with key colleges. We've gone to campuses and built relationships with the professors and told our story to the students through what we call ASO night. After a series of interviews with merchants, we hire the top candidates, and they become part of a class of 10 to 15 students. We then put them through a 10-week immersive program. It gives them foundational training to be assistant buyers. You can see here on the screen, the 11 most recent executive training program graduates and now have the tools to become our future leaders. Second example is in our stores. We have a manager and training program that prepares in-store team members for advancement through shadowing experiences and case studies in a training store environment. This will be key as we open 120 to 140 stores that Michael talked about over the next 5 years. An important part of our culture is our diversity inclusion and belonging. We are a diverse company, and our team members reflect the customers and markets that we serve. We created team member resource groups and Academy networking groups that allow our team members to connect and meet people with similar interests. But instead of me telling you about it, take a look at our team members' perspective on diversity and inclusion along. [Presentation]

That video is a great representation of who we are. Finally, we are connected to our communities because we are more regional, you may not all be aware of what we do. Our customers and team members depend on us being there for them in times of need, and we don't let them down as we make sure we support all of our communities. Hurricane Ida was a significant storm that caused flooding, loss of power and structural damage throughout Louisiana and Mississippi. Academy deployed several trailers of water and ice to the impacted areas. And as we were setting up in our parking lots to distribute the free water and ice, we looked across and saw our competitors in their parking lots, and they were selling bottles of water for $5 a piece. We even get a tanker of gasoline -- in Hurricane Katrina,we got a tanker of gasoline for our customers and our team members, and we let them fill their tanks for free, so they could go and start their cars. And it wasn't to go somewhere. It was to start their cars because they needed air to stay cool because it was so hot and there was no electricity. It also allowed them to charge their phones. But there are numerous examples like that of cities that we serve. Just last week, we sent a trail of water to Mississippi to assist with the recovery from tornadoes. And this week, we've already got assistance in route to Little Rock, Arkansas and Terra Hot Indiana for the recent severe weather that they've experienced. We also take care of our own because we've given over $1.8 million in team member assistance since 2019. It's not just disaster situations that we assist in. We also go above and beyond, and we replace equipment when local teams and scouting troops have their equipment stalling. But we want to show you 1 more quick video. It will give you a feel for how important our communities are to us and we are to them. [Presentation]

Thank you all for your time today. I'm going to hand it back to Michael.

That is what it's all about right there. I love seeing that stuff. Great videos, Bill. I appreciate that. I hope by now, you've got a great sense of our potential, our culture, the tremendous role that we play in our communities and the building blocks for this plan that we're going to deliver. I have to tell you, Bill's video brings back a lot of great memories in the first time I saw it was just a couple of days ago. And I honestly got a little emotional when I saw it. It reminds me of all of the things that we've been through as a company. My first week on the job was that we Hurricane Harvey hit this community. And the whole community was underwater. And we were running our business out of the ABL at that time. We had a lot of debt and we had to cancel our call, our debt call. And I know people in the room remember that, I see Joe, I see Asma, I see Shanda. You probably didn't feel good when we had all that debt and we canceled our call and the business was under water, but you stuck with us. I mean, in incredible memory. Houston Astros, being there to support the home team and our communities. And I remember the first time they won Manish and I went down to the store, it was 11:30 at night, remember that? And to get to the store where we're going to get it passed by a Kroger that was about 0.25 mile from our store. And we're both relatively new to Houston and the end of the company. We drove by that Kroger and I turned it Manish said, "Mike, can you believe Kroger is selling Astro's gear? " The line was wrapped from Academy around the Kroger quarter mile away all the way around the back of the building, a half mile long of people waiting to celebrate. And it was at that moment that I realized what a special place this is for our customers, how we help them have fun, how we help them congregate a lot of stuff that we did last night, managing through COVID. As a team, huddled in the room in the early days, it was really scared. We all remember that. Real galvanizing, I think, effect for our company, managing through that. Obviously, that's something Well, there's no work from home for this management team. We didn't go home. We had to make this thing work with all those challenges, taking the company public. You all know this, not a lot of retail companies were going public before Academy Sports. We're kind of the OG of that in the past few years, right? We were the first to do it. We did it on Zoom. There's no ring in the bell. It was a very difficult thing to do. But those are great accomplishments. I think they're special accomplishments -- but the reason why they're so special is because of the people that I shared them with, the team, the culture that we've created in the entire company, not just in this room, but in the stores. And that team turned the most levered underperforming business in retail into a winner. Ken referenced it earlier. Also not first week on the job, there was a report sitting on the desk. I got it over there. I carried around my bag. I carried in my drawer. Goes from the S&P ratings agencies. They had every retailer rated on the matrix between most vulnerable and most highly levered. We were behind Gymboree, J.Crew, Guitar Center, JOANN Store, JCPenney, Coldwater Creek, Tailored Brands, Belk, Bon Ton. We were rated lower than they were. They've all restructured we're thriving. And so the team that did created this culture was able to do this. Absolutely trouncing the market, a 5-bagger creating $4 billion of market cap. We've got big goals that we've set out today. But if you're betting against this team to deliver those goals and the culture that we've created, I would make that bet. So I'm going to quickly recap our historical financials. I'm going to talk about our 2023 guidance, and then we're going to talk about the future. So those are all 3 topics I think everybody is interested in. You'll learn from me, I'm very direct individual. I'm very honest with my friends, and so I'll be honest right now. We went public with a $1.1 billion valuation, big miss. Okay? We've generated nearly $2.5 billion of free cash flow since that time. I don't think you'll see this again for a really long time, a company generating twice as much cash as their valuation within 2 years. We've returned every penny of that cash back to you. We've also invested in our business, positioning us to grow and do the things we've talked about today. Again, creating $4 billion in market cap. Let me give us a quick run through the historical financials here. Significant level up from where we've been in terms of sales, margin, EBIT dollars and EBIT rate, 6% sales CAGR over the past 5 years, nearly 600 basis points of improvement in gross margin. A 1,000 basis points improvement in adjusted EBIT rate. This change in trajectory really started pre-COVID. We sat in this room in 2018, we had the Investor Day for our debt investors. We laid out a strategy, we hung it on the wall. We executed against it. We benefited from COVID, but these results are not happenstance, it's not luck. The strategies that we executed in 2018, the same team that those created the sale that allowed us to capture all of these tailwinds from COVID. That's what allowed us to leverage and benefit from, frankly, the things that happened to the pandemic. Take a quick look with net income and EPS, same story here, more net income in 2022 than in 2015 through 2019 combined. One thing we haven't really talked about today is the lower interest expense. Overall, we have less debt, but we're paying $60 million, $65 million less in interest per year. That's kind of been a game changer for the P&L, just taking the interest expense away alone would have doubled our net income essentially from 2019, 2018. One of the managerial competencies. We've got great teams throughout the business here. I think we've got a wonderful team in the finance department. Thank you for what you do and helping make me look smart. One of the competencies that we've developed across the organization is to be able to generate substantial incremental flow-through on sales beats. When we beat our plan, we've taken more of that profit to the bottom line, I think, than most others. We've also been able to maintain strong profits on decreases. We've shown that in the last 2 quarters, had to shake out the way we like the 2, but we've been able to show some growth. Good leaders adjust, good businesses adjust. We've got great command of the business, and we can pivot where necessary to maintain strong profitability. Cash flow, Slide 121 here, on the right side, best in sector cash flow as a rate to sales. We don't have a peer. We are the best in the sector in terms of generating cash from our sales. This is our superpower as a business. It's why we've got, I think, a lot of great things ahead of us, not all superpowers are created equal. If you're in business, this is a darn good super power to have. Our ROIC, near the top of our retail peers. Most of our capital that we invest is in inventory. So this reflects, I think, really solid management of that asset. And Steve team have done a great job. You got a chance to meet Govind last night. We've done this, I think, as well as anybody in the industry lately. I said it earlier, you got lots of cash, you have a high return on that cash. You have lots of opportunity in blank space, and you've got a history of execution, that's a darn good formula. Our balance sheet is a competitive advantage for us. little net debt, $1 billion less net debt than we had in 2019. We've got $1 billion line of credit that's been untapped since COVID. I don't want to disappoint my ABL friends in the audience here in the crowd, but we don't have any plans to draw on it and we don't need to draw on it to execute the -- got some frowny faces back there. We don't have any plans to draw on it to achieve the goals under this plan. No debt maturities until 2027. This gives us a lot of flexibility. In 2019, we didn't have a lot of flexibility. We had 1 option to refinance our debt and now we've got a lot of choices with all of the capital we have to deploy. All right. So our outlook. We are reaffirming our outlook for 2023. You're not going to let me get out of here without talking about 2023, I know that here we are. We're reaffirming our outlook for 2023. That's net sales of $6.5 billion to $6.7 billion. That's comp from down 2% to up 1%. We're planning gross margin between 34% and 34.4%, 13 to 15 store openings. We've got that many leases signed to open next year. We're not running that down. We've looking at John, we got that one. I think feel good pretty good about that one. Earnings per share on a GAAP basis from $6.70 to $7.45. And A couple of things, and I want to emphasize these. First, this is still a very tough environment to read. We've got some businesses that are really working for us. We've got some that are more challenged, and in particular, particularly in the first half of the year. We've got some businesses that really benefited from COVID that have come back a little bit. We've got some, frankly, that are still on fire. Second, I want to reiterate, the first quarter will be tough. We've got a tough first quarter right now. We're in the middle of that. The second quarter will also be tough. We expect the year to get better as we go. Lastly, this guidance does not include the impact of any buybacks. All right. Looking forward here, the good stuff. Here's the walk to $10 billion, start with $6.4 billion in sales in fiscal 2022. The new store program should add between $2.4 billion, $2.8 billion. Our omni-channel business should add $700 million to $900 million. In the existing store, the improvement programs that Steve and Sam talked about should add another $500 million to $700 million. I'll honestly be a little disappointed in that last number, given the population growth that we had, and we talked about earlier, but that's the plan. Keep in mind, we do have tailwinds from GDP population growth, category growth, sector growth, less competition, those kinds of things. Comp sales along this path will be low mid-single digits, and that combined result gives you a 10% top line CAGR. These are big goals. No doubt about it. We've had big goals before in this company. One of the things that I always like to talk about when you have big goals is study the plan. Does the plan make sense? Do the building blocks make sense? And if the building blocks make sense, focus on what's in front of you and take care of that, take care of what's in front of you. Next year, what's in front of us, 13 to 15 new stores. We can do that. We did 9 this year, and we just started it up. We can do 13 to 15 new stores. I promise you, Sherry is going to put all those tackle boxes in 2 to 3 places in the D.C. She knows how to do it, and we're going to do it. Manish promised me, he's going to take 5 seconds out of our transaction time. These are things that we can do this year. You take out what's in front of you and you move on to the next thing. It's like run a foul lag. You block your man. You block your man, you run a good route. You have a good play. So that's what we're going to do. Margins. A lot of questions on sustainability and margins. It seems like all we talked about last night. I work with Ken, he's got a lot of great quotes. Some of them are his, not all of them but 1 that I really like is from patent. We're not giving up ground we've already gained. We're not going to recapture the same territory twice. Planning gross margins above 34% every year of this plan. So we'll spend more time. Our gross margins, we expect to be above 34% every year of this plan. We expect about 40 basis points of merch margin improvement. And that's through better planning and allocation, better buying optimization, more localization, better clearance strategy. We'll have a merchandise mix benefit as apparel outgrows outdoor. And we do more private label apparel. You've heard about Steve's goal to take that to 25%. Now we talked a little bit last night, Nobody believes that, right? They do people don't believe we're going to expand our merchandise margins. I haven't believed this before, that's fine. Supply chain will also provide pretty substantial margin benefit, 100 basis points, cross-stock, multi-stop delivery the directed put away, that's the Tackle Box example that Sherry gave you. We're going to leverage as we grow into our facilities. We really didn't talk about that a lot today. We've got 2 facilities that are half utilized. That alone should allow us to leverage costs there. And all of this will be supported by a new warehouse management system. Here's the EBIT -- walk to the EBIT margins. Moving from 13.9% this year. We think long term in 2027 to 13.5%. Again, we expect gross margin improvement from merchandise margins from the supply chain. There will be some offsets. We do expect to land substantially higher than what we've been in the past, a little down from where we're at today. New DC will delever us about 40 basis points as we roll it out. There will be some additional deleverage in the last year as we plan for [ 50 C ]. E-comp fulfillment will delever us 40 basis points as that business grows and outgrows the rest of the chain. New stores and depreciation from new stores combined will be about 60 basis points. That's rent marketing, those kinds of things, the stores. We're planning them to mature around $20 million as opposed to the $25 million average that we have today. So there'll be some natural deleverage from that. All of this growth will be self-funded from operations. So expect about $1.5 billion in capital over the next 5 years against self-funded from operations, moving from 3.4% of sales to 4.2% of sales at the peak to fund the accelerated store growth and DCs. I want to call away by a relatively unique model in that as a retailer, we generate cash in all 4 quarters. First quarter is typically the lowest as we're building for a big second quarter, which is a large quarter for us. We don't run the business for 10 months and then wait for it to rain in November and December as the cash comes in. We generate cash really in all 4 quarters for the most part. And so this gives us a lot of flexibility. We could speed at that, we can slow it down. Capital allocation. We're going to maintain our balanced approach. We speak about this almost on every call, prioritize stability and flexibility. We're going to self-fund our growth. And then we're going to return capital through buybacks, dividends and debt paydowns. Plan to generate $6 billion of EBIT over the life of this plan. You take the $1.5 billion of CapEx that we're going to invest we'll need another $1 billion in working capital, and that's inventory to support the growth, those kinds of things. If we do what we're saying we're going to do today, if we execute this the way we believe we can do it, with the team that we put together, we're going to have $3.5 billion of cash to get back to you, which we've given the cash that we've generated back to you. So that would be the plan. With that, I want to thank everybody for their time and attention today. I want to thank the events team for putting this together and doing a great job. And Ken, bring it home.

So we're pretty excited about where we are in the plan we have. Hopefully, we've been able to communicate to you in here. And on the screen, what we're doing and the plan of how we're going to do it. It's not a complicated plan because we have a great model that has shown resilience and capability. It's focused on growth, in stores through omni-channel, and we'll have to support that. We set some aggressive goals. One of America's great philosophers said, "everybody has a plan until they're hitting the nose." That was Mike Tyson. And so the question is, is it all going to work? No. But this team, this company, all the people through it have proven that we can deliver even in the toughest of times, even when things are changing, Will it be exactly like this? The one thing I know, probably not. But will we be able to achieve the goals that we set forth, I'm very confident that we will. 2.5 years ago, I tried to convince many of you, "Hey, we're a deal at 13". You guys were smarter than me. You didn't think so. Some of you did, some of you didn't. So then when we finally got the last offering at 40, so this is a deal at 40. Many of you said, no. A lot of you said, yes. We've been able to demonstrate that we have the capability to generate tremendous value. This plan and some of you are updating your models now that Michael has given you the numbers. We'll be able to deliver tremendous value going forward. Tremendous opportunity for our team and fun for a lot more people. So everybody benefits. We are confident that we are on a path for growth, that we will be able to generate the performance that you come to expect from us. I appreciate the attention and to some degree in the endurance that you've had to go through for the last couple of hours. But we've got a hell of a story. And we're still shorter than John Wick 4. So that was a pretty good story, too. But remember, even John Wick used her tagline and his latest movie, have fun out there, and that's what we sell. We've got the consumer behind us, a great trend. We've got a fantastic team. We have a strong plan and like all plans, the secret is in the execution. We've demonstrated our ability to do that. And so I encourage all of you, you have to evaluate where you are and what you're doing. But I think this is a great story. Now let me change it. I know this is a great story. And we will continue to do the best that we can to support all of our communities, our customers, our team, our stakeholders, and the communities that we live in because that's what Academy does. And I appreciate, again, thank you for your time and attention. We're going to take a couple of minutes to set the stage and give an opportunity to answer any questions that you all may have here, I think we have the capability to take some from the outside world. So we'll take just a minute to set up the stage, and we'll get to the Q&A. Thank you very much. [Presentation]

So we're just going to have a quick break, a quick bio break, and then we'll get started on the Q&A. So just give us like 5 minutes. [Break]

Okay. We're ready to begin the Q&A portion of the event. We've got all of our presenters up here. And we'll take one question from everybody kind of like an earnings call. No follow-up so we can get through with everybody. But so please raise your hand and somebody will come to you. Please state your name and firm, and we'll get started. Here.

Brian Nagel from Oppenheimer. So first off, thanks for the great day and information. It's very helpful. Two-part question. First of, this is -- we look towards the new store openings. Maybe you could describe a bit more what you saw in the 9 stores you opened in '22? And then how should we think about the 13 to 15 that are opening to '23. How do those compare just I guess, maybe in focus to the 9 opened in '22? And then a second question, bigger picture, the plan you laid out the 5-year plan here, which seems quite compelling. What are the greatest -- what are the most significant risks to that? Where could you be wrong, so to say, in that intermediate-term financial plan?

Yes. I think on the new stores, again, as I said, we really took this year to take the opportunity to try a number of different things. We've got some different formats that we tried. We have 1 year in town in different format. Though anybody want to see it down in the [indiscernible] part of town. We try new markets in existing markets. I can't say everything that we learned -- because we don't want to give some of those secrets away, but a lot of around marketing intensity and sustainment and go-to-market approach there. One of the things we know that we want to do when we enter a big markets is do it in scale, and that will be something I think you see us do more going forward when we enter larger metros. And what we don't want to do is do what we did in Raleigh, North Carolina, 1 store and then not follow up with another store for 4 or 5 years. That will be something that you see that's much different.

I think with regard to the plan, the biggest risk is probably, time. Will it occur in the -- as fast or like we plan, will it take a little longer? We feel pretty confident about the plan. We've got a number of hedges in there. As we look at, for example, we still have opportunities left on a number of the systems and processing we put in place for planning allocation. And that really wasn't a part of the plan as much this plan as it is was the last plan but there's still more there, the localization, still more to come with that. But with regard to the elements, this is not trying a new format and will it work or won't it work? This is an execution plan. So the biggest challenge is within execution. And within execution, usually the biggest challenge is time and being able to ramp up to get to where you want to be. But overall, we feel pretty confident about the plan and what we're doing and our ability to execute it. Now you try to look at things and is there -- where is the real hole. It's reasonably straightforward. I am not a complicated person and try to keep things focused in what we're doing. And this is a very focused plan on things we have and have shown we have the ability to do.

One of the things that we learned from the new stores, we learn from what works and what doesn't work and one of the things that we learned that works is we can go into markets where we don't have a lot of awareness upfront, if it's the right customer for us and do really, really well. I mean one of the new states that we're in, we've got a store there, that's frankly barely 6 months old. It's already flipping a pretty nice profit and customer awareness heading into that market was pretty low. So if we have the right marketing approach, this is as Steve said and I love it, it's a model that's scalable and portable. We've got a very broad customer base we can pull from. So...

Oliver?

Oliver Wintermantel, Evercore ISI. So over the last couple of years, we had a lot of moving parts in basket size and mix and inflation. If you -- and I think Mike, you said the plan is for low to mid-single-digit comp growth over the next 5 years. If you could break that down into maybe traffic versus ticket inflation. How -- what is the plan if you could break that out a little bit more?

Well, we haven't given that level of detail. I do tell you, we do plan to grow transactions. That's a big piece of this. It's a lot of the work that Steve and his team are doing in the marketing function, transaction growth will be a part of it. Obviously, we spoke at the top of the presentation today that we have the tailwinds on our sides with GDP growth in general. I don't think that there's any special input we have that you don't have. We're looking at all the same inputs very low single-digit GDP growth, which should fuel frankly, a lot of that comp growth, the population growth on top of that really gets you most of the way there from a macro perspective. Basket, Steve, do you want to talk on.

Yes. I mean, obviously, as we add more apparel footwear, we expect that to add more units to the transaction size. From an inflation perspective, we have that baked in at about what the average is estimated out there. So it's included in there, but it's going to be combination of all 3 metrics.

I think one of the things that you'll see, and this is the challenge with a plan that's over 5 years, that what you see at one point may be different from the other. For example, right now, we're all -- everybody is well aware of inflation. And the Fed and everybody, all the smart people have said that inflation will tamper down. And I believe them, I think it will over time, that's what history shows. And as that tapers down, then UPTs and transactions go up. So they kind of have a tendency to offset each other because it's the same money and it's how people spend the money. If I have money and things cost more. I buy fewer things, but I pay more for them. If I have money and things cost less I buy more things. And so I think we'll see that transition over the life of the plan because the environment will change.

Atul Maheswari from UBS on behalf of Michael Lasser. As you grow more stores, you're going to increasingly be overlapping with your largest competitor. Do you believe that could raise the competitive intensity and maybe raise promotions? And could that have margin implication? And then related to that question, how are the margins for your stores that do not overlap your largest competitor versus those that do?

Yes. Well, I'll start with the first one. In every market we're in today, we've got a competitor, I mean, our largest competitor is in every service single market we're in today. So we're already competing with them head-to-head. I think our margins have held up really well in the head-to-head fight. And like, I think there's room for both of us to be successful, frankly. This is a $170 billion addressable market. We could each double the size of our companies and still only have a 25% share between us. And so I think there's more segmentation than there was. We want to beat them. They want to be us. They're good at what they do. We're good at what we do, but we can both be successful.

I think that was a flaw kind of in our strategy before like we -- prior to kind of getting here, specifically, one of our real estate strategies was to not locate near our competition. And of course, then that would sometimes push us in the secondary spaces, which isn't great, right? And then by the way, when they came in to market, they pop up right next to us, we end up being next to them anyway. We feel like we -- with our value proposition, with our assortment, the customer we address, we feel like we compete very favorably, and that there is room for both of us to co-exist and survive. In terms of the margin relative, we haven't seen a differential by store. It's not like where we bump up against Dick's or Hibbett or something like that, that we see different margin profile, they're all fairly consistent.

I would just tag on to that is that -- our model is somewhat different than Dick's. And so when we go in, you think about when you walk that story after day that outside of that race track, that's the secret sauce and a lot of things that we're playing and they're not playing in. And so if we execute on the plan, I mean, I think there's an opportunity to be able to deliver the margin but also take market share throughout the proper store set.

Daniel? In the middle, Jesse.

Daniel Imbro from Stephens. I want to go back to the comp outlook. You don't feel like kind of low to mid-singles. I think a comment gets out there is just category reversion. You mentioned we're seeing some of that like in ammo. We're not seeing it in other categories. I guess as you look out over a couple of years, are you assuming there's further reversion still to come, are you assuming different growth rates by category? Kind of what does the mix look like between outdoor and the different categories you guys report in that steady-state multiyear outlook? And what that means for market?

I'll let Steve frankly talk about the category level, what we look at from a planning perspective is the change and the rate of the change. And a lot of these business that gave background that curve is sorting to flatten out. And so that gives us great comfort in the overall business that we've leveled up to a higher degree. By category is probably more appropriate that you address some of that.

Yes. So not all businesses are created equal, right? So we talked about an aggregate, we lump all the surge categories together, whether it's ammo or [ammo] or kayaks or fitness equipment or bikes. In aggregate, they're still well above the average versus 2019, but they all have different kind of shapes of their business. So some categories like -- and we talk about long replacement cycle businesses like fitness equipment or kayaks, those seem to be continue to be a little tougher, and we extrapolated that out and accounting for those to be tougher as we go forward. Conversely other categories like fishing. We've seen flatten out and start moving in the right direction. So each one has a different curve to it. All of them are kind of equalizing at a higher rate than where they were. And we got that plan in our business. And that's kind of the big difference [indiscernible] between this year and last year. If you went back a year ago, as we came in from '21 into '22, we didn't know what was going to happen with a lot of businesses, right? Where all of them were all pumping at the same level at that time. And so when we spent the last year really kind of studying these and as Michael said, kind of looking at the rate of change and I think we got a lot better at understanding when and which ones are going to flatten out and which ones are going to be tough and then planning for offsets around them.

One of the great things about our business and having been both the general merchandiser and a specialty store retailer. In our business, we can offset, if the business is down, I've got other businesses that are up. And I've talked to some people last night that I say, none of our businesses are important, but all of our businesses are important because when business is down, we have another business that can offset that. So they're all important because they all contribute, but none of them really hurt us. And I was in the specialty store business, and he had 1 thing like shoes and the shoe business is tough, you're going to [indiscernible] there's nothing you can do about it. Here, we've been able to offset, and that's a skill that the merchandising team, the stores team have in been able to -- business is good here, take it up, business is bad, take it down. And so one day, this is -- we're depending on this business and another day, it might be something else.

Yes. And I've talked about this a lot, frankly, in follow-up calls from time to time. We're probably never going to have the highest highs of others. We also shouldn't have the lowest of lows, as Ken said, we are not a kayak business, we are not outdoor cooking business, we're not a footwear business, not apparel business, we're not a team -- we're in everything that have fun at their business. And so different things carry us at different times, different things are slower. And we've got a lot of mobility to offset some of those challenging categories.

John?

John Heinbockel of Guggenheim. So 2 things. Can you talk about the opportunity with the 30 million or existing customers that you have, right, to data mine and capture wallet share because that would seem like that could represent maybe the bulk of the existing store opportunity. And then secondly, it sounds like maybe in the last year of the plan, you're up around, I don't know, 40 openings or something like that. Assuming real estate is not an issue. Maybe talk about gating factor in terms of people and the ability to get to the 40 million and then beyond that in the out years.

Yes. So from a customer data perspective, you're exactly right. I mean, we have -- one of the things that really helped us during pandemic was we had a lot of new customers who shop this particularly when we're the only game in town, right? And then we also saw in some cases that as other stores opened up, they went back and shop at the retailers, right? But we have their information now. And so the fact that we're putting in place this new CDP, it is going to be much more robust capabilities. We're really confident in our ability to reactivate a lot of those customers. And in fact, we've seen some of that happen over the past couple of years. That's been one of our strong suits is reactivating customers. So we're really excited about that and think that is a huge opportunity for us.

With respect to the scaling in the workforce, I think corporately, obviously, a lot of that development occurs. We can handle 25, 30, 35 stores a year right now, and so we don't have to solve that problem until the later date. I hope that's when we are solving. We can kind of scale that relatively easily. In the stores, and we've been able to attract talent to our real estate department from all over the country. We've got [indiscernible] who runs construction, spent some time with Lifetime Fitness, Best Buy. He was at the gap, to the line, John Craniag joined us from L Brands and some other retailers. We've got 2 folks that frankly joined us from Dick's. So we're getting good talent in our department. They want to be with a growing -- if you are growing stores and retailer, that's what you do, this is the place. The deals are fun. They're big, they're complicated, they require development, which is a cool thing because our stores are big. And people we talked about. We haven't had that challenge yet. Even if some new markets we go to open in the store in Illinois here very soon.

And one of the things Sam has done a great job with the leaders is they've been talking about the growth in the different places that we're going to go. So through our talent, the talent that we spend -- people go after growth. They say, "Oh, if I can be a manager in 2 years then I can be store director in 4 years". They get very excited about that. And we we've seen that run.

And Sam's putting some programs to develop people so that we can put them in to build those stores.

John, I mean, the thing we think about is we'll open 9 stores this year. Every store director came internally. Now as we grow and start getting forward, it becomes differently. But we have in place not only just -- we have lean trainings to management training. We also are implementing a store director and training program. And so we believe that we'll have a talented plan placement to do the right thing. And we're seeing that we're opening in markets people want to go and grow with us. But we're cautious because at the same time, we're going to look externally for talent as well. We want a good blend. But it's something Bill and I, and his team and my team work on at least once a quarter, we're sitting down looking the talent for the future.

Justin?

Justin Kleber of Baird. A question on the new store growth. A big chunk of that is coming in the adjacent markets. You're moving out of the South, Southeast. Arguably the less favorable population growth dynamics in these northern markets. So how have you factored that into your new store AUV targets relative to...

Yes. I think certainly, they'll mature at a lower -- again, our average store today is doing $25 million if you open at '16 and '18, we expect them to mature lower total volumes on that, still good returns, obviously. So we look at that. Again, there is some of the things we tested this year where new markets in markets that, frankly, aren't growing in population. One of those is Barbarasville, West Virginia stores, they're really nice store, again, out of market, good customer. So as long as the customer is right, we can -- and the market is large enough, we can capture a lot of share. Yes.

One of the important things to keep in mind is the population growth is important where we already are because we need -- we've already got the population. So the growth -- when we go to a new market, it's all new. Everybody is a new customer. And so the development of customers in that market is what provides the growth.

John?

This is John Kernan, TD Cowen. So 2022 and I think the first quarter and first half of 2023 has seen a big give back in terms of gross margin, merchandise margin, some of your peers in retail and many of your vendors have given back a lot of the merchandise margin and gross margin expansion they've seen since the pandemic. Academy has held on to nearly all of its gross margin since the pandemic. And what's your confidence level in maintaining this gross margin? What's the biggest driver in getting to that 34.5% gross margin and staying there?

Well, I'd say our confidence level is high because we just presented to you, right? We would not put it out there if we didn't think it was achievable. I think the difference is we talk a little bit about the story yesterday is, I think sometimes people look at the gross margin improvement over the past couple of years they are attributed to pulling back on promotions. I mean that's a piece of it, but candidly it's a small piece of it. For us it's being better managers of our inventory, better managers of our inventory receipt flow. We talked a lot about at the store and today about having a lot of trapped inventory in the old Academy. That was a big problem for us. I mean we had a lot of inventory that was off floor that sat in cardboard boxes on top of top stock shelves. And we're taking our mark on some timely basis. Was creating a bad omnichannel experience because we show that we own the goods in the store, but they couldn't find it right because they're in all these top stocks. So squeezing that inventory out and being better managers for that and getting on a disciplined markdown cadence of doing the work we've done around, markdown optimization and regular price optimization. All those things that we put in place really are what uplifted our margin. And so that's what gives us confidence that we're not going to go backwards on that because most of the gains came from that. So we talked about -- we think that the promotional environment the last few years has been fairly benign and that it's going to start creeping back in to some of the different competitors we work with. And we candidly, we talked about it in Q4 call, our merch margins were down about 100 basis points, and that was to put a little more promotionality in there. And we've accounted for that in the plan going forward. And that why we have the offsets that we have. By growing talen at faster rate, growing the private brand business at rates. So we feel like we've got it accounted for and that we're really not going to go backwards any more.

One of the biggest things the reason you saw the margins down. People screwed up. I mean, it's as simple as that. They bought too much, way too much. They were thinking this probably is going to go on forever. And Steve, [indiscernible], his team, they manage it, and we manage it on expenses. Same thing because we saw it coming. Some of us have seen that train before, and we didn't want to get hit by it. So I think actually, you'll start to see some improvement in some of the competition because they're going to be past the screw up at some point, and they'll be passive. But very few people want to go on a call and say, why is this down and they'll come up with some b******* reason, because they don't want to say, we screwed up, guys.

And they're talking on the merch margin side. The big unlock we have is the supply chain. Sherry talked a lot about that. That is we build these business cases from the ground up, from the bottoms up. They're very scientific when I don't have to drive -- when a human being doesn't have to drive a forklift half a mile in a distribution facility to find tacco boxes in 17 locations. It's pretty easy to apply science of that and say how much can we really pick up. We think the 100 basis points is real, and that will take us 3 to 4 years to get there, but that 100 basis points is real, and we expect to harvest it.

All right. We have time for one more.

We've got a couple -- we got to get Alex.

I know it's going to get Alex last.

Just so you know, Alex. When we were doing the rehearsals in the Q&A, you were asking all the questions.

I always take somebody. This time I say I am Alex and back from America. We didn't get bear for sure but... you were the one this time to make it tough.

Yes. So I think it will be. So at the time -- I think you gave out a low single-digit percent revenue CAGR, 2023, 3.5% at the midpoint. The outer years implies sort of an acceleration from that. I guess what are the large -- biggest buckets that gives you the confidence there? And then my margin question is, if you think about calendar 2019, you've done over 90 bps of EBIT margin expansion versus that time sort of what you view as structural within that increase? And then if we think about the 40 bps of decline in EBIT margin, like what are the biggest opportunities to maybe drive upside on a go forward?

Yes. That's the one question that turns in the 5 questions, Alex. But let me start with I think the comp growth -- look, the comp waterfall is going to kick in as these new stores come online. And so that will contribute to some of that -- those larger comp year in out years because the waterfall kicks in when we opened the 20 stores and 30 stores. You got a larger volume that are now outcomping the rest of the chain. So I think the first part of your question. In terms of the opportunities on the EBIT givebacks, Look, I think we planned those the right way. I think we're going to spend more marketing to growing the stores. I wouldn't want to change that. I don't think that the new store program would benefit from that. I think it's unrealistic to expect rents to go down in markets that we're going in. That's why we plan that deleverage. We are going into areas with higher rents. And so we baked that into the plan. I don't know -- I'm trying to think maybe is there anything else I'm missing there that. I think we've been pretty thoughtful around it. I would expect that leveraged to cure. I don't know if we're going -- we will obviously try to do better. I think if you take it all the way down to the EBIT line, store labor and our SG&A is going to be about where it is today. I think we've done a lot of good work there. I don't see big changes there. So really, everything happens at merch margin in the supply chain. That's the work.

Okay. John would like the last question. Over here. Yes, right.

Okay. So I think the comp and margin questions have been asked. So I'm going to move on and I'm just going to harp on one little item -- sorry, John Zolidis, Quo Vadis Capital. There was a data point in one of the slides that you had reduced labor hours per average week by 16%. And it was combined with a stat that your productivity per average labor hour it was up, I think, 50% or something on that basis. But my question is, reducing labor hours per average week could be a risk even to do from a customer service standpoint and from an execution standpoint in the stores. It does help to offset wage rate inflation. But why is -- why were labor hours per average store down so much? Is that sustainable? Do you have to add back those hours in any comp environment that's going to be driven by traffic? How are you thinking about wage inflation together with managing the labor force in the stores? And what is that -- what's -- how do you think about that going forward relative to what's just happened?

Yes. I would say going back, first of all, I'd use 2 words, speed and expertise. When we looked in 2017, the amount of hours we were using were unproductive hours, as I said in my statement, and what I meant was that we had too much inventory on our stores. We weren't able to schedule trucking right exactly how we would flow the merchandise. We didn't have process engineering standards around cash here and what was the speed. [indiscernible] wasn't given us the time that we need on the POS improvements and enhancements. So those were a lot of just unnecessary labor hours that were happening. As you heard, we have shifted to 60% of those hours back then, probably I would have been more like 30% of our hours were being customer-facing. So though we're down 17% hours. We're at 60% of our hours are customer-facing now, which when you think about it in the state that we're in, you want to sell more product, it's about if you want to control labor, sell more product.

Well, I would say the 2 words I would use in the past were inefficient and work. We were very inefficient. We had a very long checkout time. We kept -- we would take things -- bring things into the store, put a box up and then they have to bring it down rather than bring it straight to the floor.

Well the trucks when you schedule 3 people to unload a truck and the truck doesn't show up.

Truck doesn't show up and you scheduled the people. We had -- and so that's inefficient -- and then the work. We would allow the merchants to merchant each buyer can make a decision that they wanted to change their shelves. And so they would say, this month, I want it like this. Next month, I want it like this and like -- and you'd say, what was the benefit? Did it change sales. No, I just wanted to see if something would happen. And so we created a ton of work with no value. And so by being more efficient and eliminating work, as Sam said, we've increased the number of facing hours. That's why the customer service score has gone up, but decrease the hours we needed to staff a store.

The other thing that is critical, when we put the first plan together in '18, we started with the initiatives that would be creative to other initiatives. And the big one is inventory management. When you manage your inventory well, it's less stuff to move around the store, it saves your labor and you can give that -- those hours to the customer. So the total hours in the store are rather down, to point, but the hours that we get to the customer have increased because we took all that work out. So it's one of those sustainable sticky things that you asked about. I don't see us going backwards on that one.

One last thing. And we continue to look at the peak demand of having team members at the right time in our stores. And so -- when you walk into our store on Saturday, we want to make sure there's some in the fishing department, in cooking department because the more we can sell, the more people that we can put on the floor to take care of it. So we're very cautious about it, and we want to manage it. We want to do the right thing.

That's a very good point because when we first got here, Sam changed it. We have the same number of hours on a Tuesday or Wednesday as we did on a Saturday or Sunday. That's not the way the business works. I mean Saturday and Sunday are much bigger days. But you know what, a lot of people said, "Well, I prefer to work on Tuesday, I don't want to work on Saturday" . And unfortunately, we haven't got the customers convince to that mindset. So we had to make adjustments in how we schedule and what we do. But that's the dynamic scheduling system, which, by the way, one of the things that dynamic scheduling system allows. It allows the team member to pick and adjust their shifts. And so that has created people saying, okay, if I was going to have a call off. I wasn't going to come in. I now kind of just -- I'm not going to work on Saturday because I was going to the beach. I can -- somebody else can come in for me.

In the engagement survey Sam has done that was one of the biggest issues with their flexibility of their schedule, and that helped that significantly.

So we've got fewer hours in the store overall, more customer-facing hours where we'll be able to take that money and invest it back into the employee wages, get people, everybody got a raise this year. Most people in the company from an hourly perspective. And even with the fewer hours, in the sales substantially over 2019, and it's the 30% higher, best customer service scores we've had. And they keep doing better.

Ken, Do you want to wrap again.

We've got one more...anymore, I thought we have one more.

It was Cole I think.

Nathan Friedman, Wedbush Securities. Two questions. Maybe just in terms of long-term operating margin trajectory. Can you provide maybe some clarity around the cadence of improvement you're expecting? Is it more back weighted? And then secondly, maybe one more short-term in nature. Can you provide more clarity on what you meant by 1Q will be tough and 2Q will also be tough and maybe frame that relative to your full year guidance expectations? From a sales and margin perspective.

I'll start with the last one. Tough. It's going to be tough. We guided for the year, down 2 to up 1. And if the first quarter is tough and the tougher than the second quarter and the second quarter is not as -- a little tougher than the third. It would imply the first half is going to be down. And in the back half, we expect to be positive, and that's what we can share at this time. In terms of operating margins, again, we plan over the long-range plan to get from that 13.9% to 13.5%, so actually deleverage over time, but still very healthy compared to where we were. Pretty satisfied with that. We'll be given high fives and... throw more corn holes five years from now.

Yes, healthy sales but also the deleverage is because of the growth and that's what we're funding the growth. And long term, that's a big benefit. All right. Well, I want to thank everybody here and on the screen, it's been a terrific couple of days. Hopefully, everybody had fun. I know I had fun. Those of you who weren't here, sorry, you missed out on a pretty good feast last night and a terrific store. Team did a really great job there. The team up here did I think, an excellent job telling our story. And as I said, it's a great story with a great future, and we're all excited about it. This team here put it together, along with a lot of people that you talked with yesterday and I've talked to in the past. This was not something that was given to them, this was something they came up with that has the buy-in that gets us why we think we can execute it. And will it be exactly like this. No, but we've demonstrated that we can adjust and move to make sure that we get the results that we've said we were going to get. So you all have a great day, travel safe and really appreciate your interest and support in Academy. Thank you.