Academy Sports and Outdoors, Inc. ($ASO)

Good morning, and welcome to the Academy Sports and Outdoors First Quarter 2026 Earnings Conference Call. This call is being recorded. [Operator Instructions] I will now turn the call over to your host, Dan Aldridge, Vice President, Investor Relations for Academy Sports and Outdoors.

Good morning, everyone, and thank you for joining the Academy Sports and Outdoors first quarter fiscal 2026 financial results call. Participating on today's call are Steve Lawrence, Chief Executive Officer; and Carl Ford, Chief Financial Officer. As a reminder, today's earnings release and the comments made by management during this call include forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in today's earnings release and in our most recent Form 10-K and Form 10-Q filings. The company undertakes no obligation to revise any forward-looking statements. Today's remarks also refer to certain non-GAAP financial measures. Reconciliations to the most comparable GAAP measures are included in today's earnings release, which is available on our website at investors.academy.com. This morning, we will review our financial results for the first quarter of fiscal 2026, provide an update on our strategic initiatives and discuss our outlook for the year. After we conclude prepared remarks, there will be time for questions. With that, I'll turn the call over to Steve.

Good morning, everyone, and welcome to our first quarter 2026 earnings call. Our plan this morning is to discuss our Q1 results, while also updating you on the progress we're making against our long-term growth initiatives. Turning to our first quarter results. We were pleased to move back to comp store growth in Q1, with sales coming in at $1.44 billion, which was up 6.7% in total sales and translated into a 2.9% comp increase. Both the comp and total sales were on the high side of the range we communicated in our press release issued on April 7, 2026, and in advance of our Analyst Day where we gave an update to our long-range plan and goals. These results were driven by a combination of a low single-digit positive traffic, coupled with a high single-digit AUR increase. Units per transaction were down slightly, which we would attribute to the increased AUR. Positive results were broad-based with our dot-com business comping up 17% and all four of our divisions running increases for the quarter. Outdoor was our best performing category at up 12%, driven by strength in fishing and Shooting Sports categories. Meet the surface, our animal business, which was a headwind for us most of last year turned positive in February and accelerated after the contemplate in the Middle East began. Our firearms business also continues to be a bright spot and utilizing mix checks data as a proxy, we have grown market share in this category for 8 consecutive quarters. To help build on the momentum in the Shooting Sports business, we launched the suppressors category into a limited door count during the first quarter with a gold rolled amount to over 100 stores by the end of the year. This is a rapidly growing category in the industry with a strong attachment rate to firearms and high EURs. Since suppressors are totally new to our assortment, this business should be 100% accretive and provide an additional tailwind for the Shooting Sports category throughout the remainder of this year and next. Sports & Recreation was our second best business at plus 6%, with the increase driven by solid gains in baseball, which fueled our team sports business during the first quarter. We also saw a double-digit growth in our front-end business. Normally, we don't call out front end, but we're seeing rapid growth in this area driven by the collectible trading card business, which has benefited from our increased investment in its category. In addition, we continue to see solid improvements in our outdoor secrets business driven by the leadership position we've taken in [indiscernible] box. Apparel sales were also positive at plus 5%, with particular strength in our outdoor and work businesses, supported by expanded assortments from Carhart, Murli [indiscernible], Levi's and our Magellan Outdoors brand. We will continue to lean into the Work Western lifestyle trend with the addition of roughly 100 areas shops in the back half of the year. On the athletic side of the business, gains were driven by continued momentum in the Nike and Jordan brand, coupled with double-digit increases in our better private brands are freely enrolled. In the second quarter, we plan to add 55 Jordan brand shops on our apparel pads, which will take our Jordan Brand shop count to 100 stores and continue to fuel the growth in this business. Footwear sales were up 3% for the quarter. Key drivers of growth in Q1 were our cleated business driven by baseball along with our summer seasonal businesses, driven by Crocs and Birkenstock. We also remain encouraged by the momentum we're seeing in the performance running category fueled by key platforms such as the Mikeva Mero, the Adidas EOS, the New Balance Ellipse and the Brooks [indiscernible]. Our plan is to continue to build out our assortment and space devoted to this category as we progress throughout the remainder of the year. Based on the solid start to the year, we saw growth in market share across all of our businesses, both for the quarter and on a rolling 12-month basis. We've also driven a positive comp over that same 12-month period. We would create the momentum with building in the business and the market share gains to the continued progress we're making against our three core growth strategies, which I'll now give you a brief update on. New store expansion remains our #1 growth lever, and we're starting to build critical mass behind the strategy. We began the year with 39 stores from our 2022 through 2024 vintages in our comp base. This tranche of stores continues to perform well with sales comping in the high single digits. We anticipate this tailwind should accelerate as the 24 stores from our 2025 in start to flow into the comp base as we crossed through the year. During the first quarter, we opened up two new stores in Canton, Ohio and Asco, Oklahoma, but of which support our strategy to grow in midsized markets. These are underserved communities and tend to over our core customer the always game family. During second quarter, we will open up three more stores with locations in [indiscernible], Pennsylvania, North Knoxville, Tennessee and Morristown, Tennessee. The remaining 15 to 20 stores are expected to open in the back half of the year with a heavy focus in legacy and existing markets. As we head into 2027 and beyond, we'd expect to have a more balanced mix of openings between the first half and the second half of each year. Our second growth strategy is to improve the productivity of our existing businesses. There are multiple initiatives focused on driving comps in our legacy stores and improving the core business during the second quarter. Initiatives that will have the biggest impact on our comp sales through the remainder of the year with the relaunch of our my Academy Rewards program, which is being integrated into our loyalty ecosystem. The newly integrated program features a three-tiered structure. The base tier is my Academy Rewards and does not require a credit card to access savings. The key element of the value proposition at this level includes both a $15 welcome offer and birthday reward, the $25 of award in the $500 spend threshold and preshipping on all dot-com orders over $25. The middle tier Macadam Rewards requires a economy private label credit card, which gives you access to 5% of the purchases and Academy. It's important to note that the customer gets these savings instantaneously at point of sale versus having to wait for award certificate that they can redeem against future purchases, which is the case with most of the competitive office in the marketplace. This tier also qualifies for free shipping on all conferences with momentum purchase requirement. The top tier is unlocked by our new co-branded myAcademy Rewards Mastercard, which we call the official car fund. Customers in this year hit all the benefits from the other tiers while also getting a higher credit limit, coupled with the best in market, 2% MAC on all spend outside of the Academy and the former rewards can only be redeemed at a category. We're in the process of reissuing new cars to solve our current cardholders and plan to be complete by the end of June. We're already seeing an uplift in sales from this initiative driven by increased enrollment and in card utilization. We believe customers are leveraging our best-in-market value proposition as a way to offset the rising costs we're dealing with in their everyday lives. Enrollment in myAcademy awards is up double digits year-over-year, with our goal being to add an additional 2 million new members this year, which will grow our total loyalty program to over 15 million members. As we shared before, summer is one of our prime selling season, and we're well positioned this year to help fuel the fund for our customers. Our in-stocks continue to run up over 200 basis points versus last year, driven by our standard utilization of RFID. In addition, we have several non-comp tailwinds this year including World Cup being played in venues across our footprint, coupled with America's 250th birthday. We are well stocked at World Cup year, summer essentials and all things read white blue, so we can maximize the opportunities ahead of us in the second quarter. Shifting gears to our omnichannel business. We continue to make solid progress, which is evidenced by the 17% growth in sales and the 100 basis point expansion and penetration we experienced in Q1. We have two key focuses during second quarter. First, we're expanding our same-day delivery platforms to include Uber Eats and Instacart is a complement to our existing partnership with DoorDash. Our research shows there is minimal overlap between the customer bases for each of these services. So expanding our online presence to include these additional same-day delivery platforms should be mostly accretive and expose our brand and product categories to a broader audience. In addition, we plan to migrate the search platform from our site to be powered by Google's AI commerce search and Gemini Enterprise customer experience as we turn the corner into back-to-school. We believe customers are increasingly utilizing AI agents to aide them as they shop online. So moving our search to be powered by AI is a natural evolution and will be intuitive for them. As we continuously evolve our online capabilities, we expect the sales mode we've built over the past years business will continue to provide a strong comp tailwind to our overall sales. In summary, our belief is high gas prices and other inflationary pressures will persist and continue to negatively impact discretionary spending for the American consumer throughout the remainder of the year. In the face of this pressure, we are committed to remaining a steward of value for our customers while we methodically execute against our long-range plan and objectives. As our strategies mature, and we build critical mass across each of them, we believe this will provide a strong tailwind, which will allow us to sustain the positive momentum we built in the first quarter. Based on the solid start to the year, we're raising our annual sales guidance to be plus 3% to plus 5%, which would translate into a flat to plus 2% comp sales increase for fiscal 2026. Now I will turn it over to Carl, who will give you a deeper dive into the Q1 financial results along with the additional information on our updated 2026 guidance. Carl?

Thanks, Steve. Net sales for the first quarter were $1.44 billion, an increase of 6.7% with comparable sales up 2.9%. The E-commerce remained a strength in the quarter with over 17% growth, which accelerated versus fiscal 2025 levels. We expect e-commerce to remain a tailwind throughout the year as we continue to expand our endless aisle, enhance search functionality and expand same-day delivery. As expected, gross margin for the quarter was 33.2%, down 71 basis points year-over-year. The decline was driven by tariffs and was partially offset by favorability in freight and shrink. We expect the first quarter to be the largest tariff impact for the year and for the pressure to subside as we move through 2026. SG&A was 28.1% of sales, an improvement of 77 basis points, primarily driven by the 2.9% comp. Additionally, we are lapping $7.5 million related to the NIKE expansion and Jordan brand rollout from the prior year. The improvement was partially offset by a $3.6 million increase in stock compensation expense year-over-year. Operating income for the quarter was $74.7 million. Diluted earnings per share was $0.80, an increase of 17.6% and adjusted earnings per share, which excludes stock compensation, was $0.93 and an increase of 22.4%. From a balance sheet and cash flow standpoint, we remain in a position of strength. Our inventory has continued to improve versus last year. with total inventory dollars per store down 0.8% and units per store down 6.8%. We ended the quarter with strong liquidity and generated healthy free cash flow of $121.6 million, representing a 14.2% increase year-over-year. This allows us to continue investing in the business while returning capital to shareholders. Our cash balance was $338 million at the end of the first quarter, and we have an untapped $1 billion revolver. Our capital allocation philosophy has not changed. Approximately 50% of cash flow from operations is reinvested back into the business, and we expect to return the remainder to shareholders through dividends and share repurchases. During the first quarter, we repurchased approximately 1.7 million of our shares, representing about 2.5% of our shares outstanding, paid $9.6 million in dividends and continued to fund strategic investments, including new stores, omnichannel capabilities and technology initiatives. At the end of the first quarter, we had $338 million remaining on our share repurchase authorization. In May, we refinanced our outstanding long-term debt at a 5.875% rate and amended and extended our ABL, which will generate approximately $2.5 million in annual interest savings for the next 5 years. The maturity date on each is 2031, and additional details were provided in our May 14 press release, which can be found on our Investor Relations site. Before getting into guidance, I wanted to share a few thoughts on the consumer and how ongoing trends played into how we think about the shape of the year. The consumer environment remains pressured as high gas prices largely offset the benefit of tax refunds in the first quarter, particularly for lower-income households which continues to weigh on discretionary spending. At the same time, we continue to see higher income consumers, which are our largest and fastest-growing cohort trade into Academy in search of value. During the first quarter, trips from consumers who make over $100,000 grew by mid-single digits. Consumer confidence remains bifurcated with materially higher confidence levels among upper-income households versus lower income cohorts, where there is less optimism about their future financial prospects. This dynamic continues the derisking of our consumer base that began at the end of 2024 and and reinforces confidence in Academy's value-driven positioning. Turning to guidance. We are updating select elements of our full year outlook to reflect the first quarter sales performance while also planning for higher gas and freight prices, tariff dynamics and the timing of new store openings. We now expect sales to be in the range of $6.23 billion to $6.35 billion, or growth of 3% to 5% and comp sales of flat to up 2%. We are maintaining our gross margin rate guidance of 34.5% to 35.0% for the year. We are raising the midpoint of our net income guidance and now expect a range of $390 million to $415 million. We expect earnings per share of $5.95 to $6.35 and adjusted earnings per share to be in the range of $6.40 to $6.80. At the midpoint, we expect comp sales to be approximately 1%, gross margin to be roughly flat and modest SG&A leverage for the full year. resulting in EPS growth of over 10% when compared to fiscal year 2025. This EPS guidance does not include any impact from future share repurchases. Looking at the shape of the year, we expect our strategic initiatives to drive positive sales. As a reminder, we had no IIFA tariff impact to gross margin in the first quarter of 2025 and costs attributable to tariffs increased throughout the year as we use the weighted average method of inventory accounting, with their full impact hitting average unit cost in the fourth quarter of 2025. We continue to expect modest gross margin pressure in the first half of 2026, followed by modest expansion in the back half, resulting in approximately flat gross margin at the midpoint of our full year guidance. On SG&A, we continue to expect leverage in the first half with potential deleverage in the back half as new store openings accelerate, ultimately arriving at modest leverage for the full year at the midpoint of our outlook. To close, we continue to operate in a bifurcated consumer environment. Higher income consumers are increasingly trading into Academy in search of value, while lower income consumers remain under pressure. Against this backdrop, we are executing a rock-solid plan with clear growth tactics, supported by our strong balance sheet, disciplined expense management, and relentless focus on value. Together, these position us well to navigate the current environment and drive long-term value for our shareholders. With that, we're ready for Q&A. Operator?

[Operator Instructions] Our first question comes from Jeff Lick with Stephens.

Congrats on the nice quarter. I guess I'd throw this out to anyone. I'm just curious, since the Analyst Day, maybe you could just comment on what has surprised you in either direction, what's been incremental, and are you -- how are you seeing the gas prices manifest itself and consumption patterns? And then just my follow-up would be, given the World Cup and America 250 is in 2Q. I think you've mentioned previously you were expecting 2Q to be the weakest quarter in terms of comp. Is that only going to be the case.

Yes, I'll start. Thanks for the question. So yes, gas prices definitely are a headwind for the American consumer. I saw an article, I think, a week or so ago that said, on a monthly basis, it's pulling out about $17.5 million dollars of consumer discretionary spending each month. So that definitely is impacting the consumer. I'd say, as we've gotten into Q2, we've seen a little bit of a slowdown from the consumer, which we would attribute to gas prices. That being said, we kind of look at the quarter as three legs of a race. The first leg is getting through Memorial Day, which is our first big event. Total sales for Memorial Day are tracking up low single digits, roughly flat comp. And while we'd like to be playing with the lead, what we're excited about is we still have a lot of the initiatives that we're counting on to drive business ahead of us. We've got the World Cup, as you just said, kicks off on Thursday. We got our credit card relaunch, which is taking place right now. And we're issuing new class to consumers, and that should be in people's hands, and that has a reactivation reward associated with it. So we think that will help drive business for the next leg of the race with Father's Day. And then, of course, we've got Americas 250 ahead of us. So definitely seeing an impact, a little bit of a slowdown from what we saw in Q1 with the consumer, tracking flat through Memorial Day, but optimistic about the opportunity still ahead of us with a lot of initiatives still to play out.

You asked about what surprised us from our April 7 Analyst Day. I would say this quarter generally came in as expected. We were at the high side of the guidance that we gave from a top line perspective. We had indicated that we knew that there would be gross margin pressure associated with anniversary-ing last year's Q1 that didn't have that IIFA-tariff burden in it. And from an expense management standpoint, we knew that we weren't reanniversary-ing the Jordan launch costs and the Nike expansion cost that was $7.5 million. So I would generally say that the quarter played out like we thought that it would, but it was towards the high side of the guidance that we put out there.

Our next question comes from Kate McShane with Goldman Sachs.

We wanted to focus on gross margins. with the strength in AMO just being a lower-margin category. Did that contribute at all to some of the pressure or the GPM shortfall that we saw in the quarter? And just how should we think about the cadence of some of the tariff pressures that we saw in the first quarter for the rest of the year?

Yes, I'm going to answer this very directly. So if you look at the 71 basis points of gross margin degradation to Q1 of last year, 110 basis points was driven by tariffs essentially having the full burden of that IIFA impact in Q1 of this year versus really nothing last year. And that 110 basis points of tariff headwind was offset by 20 basis points of good news in shrink and 10 basis points as it relates to shipping. So I think of transportation, e-commerce shipping things of that nature. That's how you kind of arrive at the big components of it. From an ammo perspective, total field was up 12% during the quarter. And so field carries a lower margin profile. Amos certainly in the overall outdoor category. And so it was a headwind as it related to, but I would say it was offset by other puts and takes in the mix.

Our next question comes from Chris Horvers with JPMorgan.

So my first question is on Decker's latest earnings call, they talked about planning to continue to selectively expand wholesale distribution with a few thoughtfully chosen tests with new partners this fall. Just curious if you can comment if you're a part of that plan tests.

Yes. I'll give you the same answer I give every time I'd ask this question. If and when we're ready to announce something, you guys aren't going to have to ask us, we'll tell you nothing new to announce at this moment in time.

Got it. And then I guess just stepping back, as you think about how you think about the balance of the year, I guess what changed versus what you initially thought? Is [indiscernible] expected to be a continued tailwind for the balance of the year more than you originally thought. What's your read on Memorial Day weekend and what that says about Father's Day and July 4 and the 250th anniversary as well as World Cup. So can you maybe take us through like the puts and takes of maybe how you're more optimistic versus something that's more balanced because you basically kept the balance of the year on the comp side.

Yes, I would say what we saw happen across through the quarter is I think it's pretty widely documented that increased tax returns were out there feeling sort of spending. And I think that helped kind of mute the impact of gas prices as we go through Q1. I think we're kind of past that now. And as we've seen kind of the exit rate coming out of the quarter. Move from an up 3-ish comp to more of a flat. I think that's kind of what we've seen happen with the health of the consumer. What gives us confidence about the remainder of the year is a lot of the initiatives that we have, right? We've talked about our credit card relaunch and kind of integrating that with our loyalty program. We think that's a big deal for us. It's probably going to have the most impact on our business moving forward. We think it's well timed, particularly in an environment where consumers looking for value, the fact that we're going to give the 5% off every day with the Academy credit card, which we've had before, but now 2% back on upside spend I think, is a big deal. I think we've got other things that we've created, self-created kind of tailwinds like leaning into that work -- western work category, rolling out area shops, leaning into newness with brands like High Rocks and Brunt coming into the assortment. The dot-com growth we're seeing, I think all those things kind of provide a little bit of a tailwind for us that helps us overcome some of the headwinds. But I think it's going to be a cautious consumer out there. They're clearly being very cautious about when they shop and choiceful about buying more on promotion or in clearance. And so that's something we're going to have to think about. [ Amal ] specifically, I think, was a tailwind for us before the conflict with Iran happened, accelerated a little bit in Q2. That's sort of -- or Q1, I'm sorry, that's sort of died off as we've gotten deeper into the conflict. I think it will move from being a pretty good tailwind. It still being a tailwind throughout the remainder of the year. We're lapping a pretty tough animal business. But we believe in is that the initiatives we put in place the self-help initiatives are going to be the things that are going to help us continue to drive the business throughout the remainder of the year.

Our next question comes from Jonathan Matuszewski with Jefferies.

My first question was on Nike and Jordan. I think last year, there were a couple of quarters where kind of that combined business is growing somewhere between high single and maybe low double digits I think we're at maybe a point where we've maybe lapped the initial kind of rollouts of converse in Jordan. So maybe just an update on how your -- the trends you're seeing in that combined business and what type of growth is embedded for the remainder of the year and the updated guide?

Yes. So if we're still in a place we launched Jordan, if I remember, last year, in April, that being said, we did have product on the floor in March. So if you look at the combined Nike, Jordan business for us, that was up mid-single digits. We lapped the launch and ran an increase that week, which we're excited about. So it's still healthy for us, and we consider or expect that the trend that we're seeing first quarter to continue throughout the remainder of the year. We think Nike is a growth engine for us. We're really excited about some of the expansion we're going to have in some of the performance running categories like [indiscernible], we're going to have that and roughly 150 doors going into back-to-school, which is about double the door count we had last year. And it feels like they're just starting to get their innovation pipeline really moving.

Great. That's helpful. And then just a follow-up. I guess just regional trends, NBA championship spurs, maybe if you could give some commentary on kind of related fan wear, implications for demand and maybe kind of dispersion you're seeing in Texas versus other markets would be great.

Yes. I would say the licensed team business for us has been a tailwind for us, and we'll probably be a tailwind throughout the summer. That's where a lot of the World Cup product lives, and we expect that obviously to continue into July as the World Cup plays out. The spurs is certainly a little bit of a tailwind force. You got to remember, though, we're also up against last year, the thunder winning the championship, and so that's in our geography. And while we have fewer stores in Oklahoma City, kind of whole state activates [ probably 1, ] so it's pretty similar to what we're seeing with the spurs. So we hope that spurs win, we don't have any stores in the [indiscernible] area, so the next winning wouldn't be a good thing for us. But we're pretty happy so far with the license business and expect it to be a tailwind, primarily driven by the world cut throughout the remainder of the quarter.

Our next question comes from Joseph Civello with Truist Securities.

I just wanted to see if you could provide any color on early June post Memorial Day. And if anything, in recent trends, like you mentioned with the gas prices has impacted your view on what the World Cup might deliver?

Yes. So the world up, it's still early. We just set that at the start of -- or at the front of our stores in the markets where the World Cup naturally played is saying it's roughly 40 doors. And we've seen an acceleration in that product once we set it. We set it right after Memorial Day weekend. So I think it's still early, but initial signs are pretty good. In terms of trends, I'll stick with what I told you, we kind of are looking at Q2 as kind of a three-legged race, right? First leg is Memorial Day. We came out of that running flat comps up low single digits. The next one is Father's Day. Father's Day is a week later on the calendar. So we're still kind of in the middle of that. And then from there, we move into Fourth of July with kind of back-to-school at the tail end of the quarter. So so far, so good, lots still ahead of us.

Yes, from a fuel specific standpoint, we think that fuel prices at an elevated level are going to be persistent throughout the majority of this year. We talked a little bit about the sensitization that we did at that on our last call. So I would now say that we've encapsulated that within our gross margin guidance. As it relates to weighing on the consumer, $4 plus gas, what we think being a steward of value is a really good thing in times like these, and we continue to see customers, the upper income levels, [indiscernible] 4 and 5 transacting more with us year-over-year. That trend has been consistent in the back part of 2024, and we saw a lessening of that somewhat in Q1, which we think could be a turning point.

Got it. And then just a follow-up on the tariff assumptions that are in for the guidance. How should we think about rates and refunds and stuff like that through the rest of the year, what's baked in?

Yes. From a tariff perspective, we have disclosed to you guys that we sold our right to a refund for a portion of the EPA tariffs from last year. We disclosed it in the 10-K last year as well as in the third quarter. And so that -- we monetized about $10.5 million included in our guidance for this year is recognition of that $1.5 million. There's also for the portion that we did not sell the rights to. We have included that in our tariff guidance, and that's what's included.

So the portion that you didn't sell is also embedded, got it. Okay.

I guess just for clarity there, we did not receive any tariff refunds in the first quarter. There is nothing associated with refunds in the first quarter. We have started to see those low in the second quarter. And so what's embedded in our guidance is what we monetize as well as what we expect to receive.

Our next question comes from Paul Lejuez with Citi.

Just to clarify on the last tariff point, did you guys record a receivable that is flowing through the P&L? And I guess, does this represent a change versus what you had baked in the guidance as of last quarter?

No. In order to book a receivable from an accounting standpoint, we would have had to recognize that. Last year, we did not -- we put it on our balance sheet, essentially as a contingent liability, pending clarification from the administration associated with how refunds will play out. I think we're seeing some clarity in that. So the $10.5 million that was in our cash flow and our balance sheet and spoken to at year-end within our 10-K. We are anticipating that being recognized this year versus recognizing it last year with the receivable, if that makes sense?

Yes. And which quarter is benefiting from that 10.5% running through the P&L?

We don't give quarterly guidance. I will tell you that there was no recognition in the first quarter, but it is in our annual guidance, that $1.5 million.

Got it. And then just relative to the updated comp guidance range that you gave today, can you just talk about where you expect each quarter to fall relative to that range, specifically interested in how you're thinking about 2Q, but would love to hear your thoughts on each quarter relative to the full year range.

Yes. We don't -- obviously, as Carl just said, we don't give quarterly guidance. As was noted earlier, I think by somebody, Q2 is our best quarter last year. We're up against a modest comp gain. I think it was up 0.2% last year. As we mentioned earlier, we're tracking flat through Memorial Day. We still got a lot ahead of us. We're optimistic that the remainder of the year, we're going to be somewhere between that flat to up to comp, and that would be inclusive of what we think is going to happen in Q2.

Got it. And then just last one on World Cup-related product, do you view those sales as incremental? Or do you feel that, that's a substitute for something else in the store?

I think it's mainly incremental. Obviously, having the world's largest soccer tournament in the U.S. soil and having people cheer for their team that they do once every 4 years come in and celebrate that. I think that's mostly incremental. I don't see that as a trade-off from a college or a pro football fan, I think it's incremental.

Our next question comes from Ike Boruchow with Wells Fargo.

Two from us. the gross margins inflecting in the back half. Can you just comment on the drivers there? Is that just effectively the tariff headwinds kind of rolling off or getting less bad? Or is there something else within the model that's kind of shifting as you kind of move through the year?

That is absolutely the main thing that you should be thinking about. We bore the full burden of that weighted average cost impact of IIFA tariffs towards the back part of last year. Q1 was -- you're up against something where there was none of that. You'll see that tariff burden moderate throughout the year. And so I think my hope is that the shrink improvement that we saw in the first quarter will continue. I think fuel will be a for the year is what it's looking like. But I think the main driver of that inflection will be the diminishment of the Q1 tariff headwind that we experienced in Q1 of '26.

Got it. On the store -- just two more. The store count, the ramp through the year, I think it's 3 in the second quarter. Can you just give us 3Q versus 4Q, the plan for the [ 15 to 20. ]

We haven't broken that down. We're a little more back weighted this year than we wanted to be. If you remember, when we were kind of looking at the class of 2026 stores, is right when the whole tariff situation kind of changed, and we weren't sure what the impact was going to be in terms of steel, construction costs, et cetera. So we're more back half weighted. Our goal is obviously to get all the new stores opened up prior to Thanksgiving, but it will be fairly balanced across both quarters, more back half weighted than we initially would like next year, expect it to be more balanced.

Got it. And then last one from us, just the commentary on the flat comp to Memorial Day, I understand that. But can you just comment the last two weeks, I assume they've slowed a little more considering your comments on the consumer. But can you just give us either the last two weeks or the quarter-to-date in totality. I'm sorry to harp on it, but I feel like it's relevant.

Well, we're in a period right now where father says a week later, so it's a little murky, but we're happy with the trends we're seeing, and we're still optimistic about being somewhere between that flat to up 2% for the year.

Our next question comes from Simeon Gutman with Morgan Stanley.

This is Pedro Gil on for Simeon. Nice quarter. I wanted to ask you about the comp guidance for the rest of the year and the shape of the quarter. Should we expect the second quarter to be sort of the strongest quarter in the year as you have World Cup and the 250th anniversary and the rollout of the loyalty program? Or is it more of an even cadence for the remaining three quarters in the year?

Pedro, sitting where I'm at today, I think the 2.9% comp that we experienced in the first quarter, it's obviously outside the range of the 0 to 2%. I think it's going to be the strongest quarter. I think we've got a difference in the year-over-year base related to Q1 versus Q2 of last year. We're excited about the credit card relaunch. We're excited about the World Cup and the 250th, and some of the new brand launches that we have. But I think the rest of the quarters will be within those navigational beacons.

Okay. That's helpful. As a follow-up, I wanted to ask you about the work you're doing in supply chain. Can you give us an update on the efficiencies you're driving? And how should we think about transportation cost for the rest of the year?

Yes. Some brought in a new Chief Supply team Officer, Rob Howe, who are back on with Cisco Foods? How long ago was that now? He seems like you about two years ago. I think he's doing omens work. I think he's balancing capacity. If you look at our store count growing by 8% last year, it will probably be in that 7% this year. He's got to make a lot of room in the distribution center. He's got a factor in the type of units that we're flowing. We're continuing to see unit per hour productivity and cost per productivity as it relates to distribution center operations. I don't expect that to change. I think as it relates to transportation, net transportation was a 10 basis point tailwind. And improvement year-over-year from Q1 this year versus Q1 of last year. That reflects freight and sort of inbound supply chain, if you will, as well as e-commerce shipping. And so I think that fuel will be a bigger headwind as it relates to Q2 and perhaps Q3 and beyond. But I think the team is doing great work, and they're increasing their productivity year-over-year, and that's what we expect, and that's what we're seeing.

Our next question comes from John Heinbockel with Guggenheim Partners.

Steve, why don't we start with -- given what's going on with gas prices and just macro in general, do you think that amplifies the peaks and valleys around holidays and maybe deeper valleys. And is that -- if you think that's true, is that sort of -- have you made tactical adjustments when you think about how you want to spend promotional dollars and communicate with the customer for the rest of the year?

Yes. I think your instincts are spot on. I mean we definitely have seen that play out a little bit as we progress through Q2, and I expect that's going to happen. And customers are looking for value, right? And I think they're looking for waste to offset higher gas prices. And I think we've seen them in this happen a little bit in Q1, and we've seen it continue into Q2 where they're amplifying purchases during the promotional windows that we have on the calendar or pulling back a little bit in the walls we have definitely adjusted our forecast and our plans moving forward to account for that.

All right. And secondly, I think you want to add, when you look at the membership, and I think you said you want to add 2 million members in I think get to 15 million by year-end. When we think about how that breaks down between rewards members, proprietary credit card, Mastercard, relative sizes of that, and do you think will all -- will most of the growth come from the new Mastercard offering?

Yes. We haven't broken it down between credit loyalty, et cetera, like that. What I will tell you is that we're seeing a meaningful acceleration in take rate on the new credit card. We rolled that out in advance of issuing new plastics. So new customers apply for the credit card pretty much since the middle of March, I would say, have been eligible for either the private label credit card or the co-branded Mastercard. We've seen applications up double digits pretty much since we've done that. We expect that to continue. And we think it's a great value proposition, and it's a great way for customers to stretch their spending power. And so I think the 15 million we set as a goal by the end of the year, I'm fairly confident we're going to beat that number this year.

Our next question comes from Anna Glaessgen with B. Riley Securities.

I'd like to follow up on the Jordan, Nike performance. Nice to see that you're expanding into more stores. I guess could you comment on if there's any structural reason that it wouldn't be able to be expanded through the whole suite? And then a follow-up on, I think you said you expected mid-single-digit growth through the year following the 1Q performance. Was that on a comp store sales basis because given the attention, I just want to understand what are the terms [indiscernible].

So I'll start with. We do have elements of Jordan stores right now. We've expanded out things like slides and backpacks and sports equipment out to all stores. The shop concept is going out to an additional 55 stores, taking us to 200, which is about 2/3 of the store base, which is obviously a meaningful chunk of our volume. I think you'll see us continue to expand that methodically over time. And I don't see any reason why ultimately, we won't have all elements of Jordan in all stores at some point, but it's just more of a methodical rollout. The growth we're seeing in terms of mid-single-digit comp with Jordan and Nike combined, we do expect that to continue forward. I believe that's a comp number that I'm citing. So I don't see any reason why we're going to see that slow in the back half, but that's the trend we saw in the first half of the year based on how we plan the business.

Anna, do you want to take the opportunity to recall in Q1 of last year, we expanded Nike and then roll that shop concept out to 135 doors in Q1 of last year. It's 55 doors, but the timing, obviously, is not Q1, it's Q2. So there's some costs associated with that. But we saw enough benefits in the shop concept versus just having the Jordan elements and disperse them up of the store that we wanted to roll out those additional 55 doors this year. There's some costs that will hit in Q2 there.

Great. That's super helpful. And then I wanted to follow up on the introduction of suppressors. I guess, why historically have you not had the category? And what signals were you seeing that gave us the confidence to expand as a lot of competitors are exiting or diminishing the category.

So I would tell you that suppressors has been a change in law, and it's a little easier to procure than it used to be. It's still a pretty arduous process, but the industry has seen an expansion in suppressors since the loss have changed really at the start of the new year. We've got it in roughly, I think, 30, 35 stores right now. We're going to roll it out to over 100 stores throughout the remainder of this year. It's as we said on the call, it's really for hearing protection for the person who enjoys shooting sports going to the range, et cetera. It's a little quieter and a little safer for them to use. We see a high attachment rate. It's not just a suppressor. It's all the cleaning equipment and other things you need to purchase when you buy [ suppressor ] also has tailwinds into [ ammo ] because it requires a different type of ammo that you shoot. So we think that this is a good noncomp thing for us that we're going to see expansion in fueling the shooting sports category for us throughout the remainder of this year and the next as we expanded into doors. And we're excited about it. I think it's a growing part of the shooting sports category, and we're participating in it.

Our next question comes from Brian Nagel with Oppenheimer.

This is Andrew [ Chasinov ] on for Brian Nagel. Just the first one, Q1 comp was driven by both ticket and traffic, which is a sharp reversal from the Q4 transaction decline. And so just given your commentary about the 50,000 and under cohort remaining under pressure, just trying to understand how dependent full year comp guidance is on the lower income cohort improving versus just continued outperformance by the higher income cohorts?

Yes. So going back to Q3 of 2024, we saw Quintiles 4 and 5, so households above $100,000 in flex. But it was being offset by less transactions by $50,000 and below. That trend continued in 2025. But what we saw in Q1 of 2026 is those above $100,000 customers up mid-single digits, but the below $50,000 were only down low single digits. So I'll say it was less bad -- some of that may have been rebates on taxes -- tax refunds, excuse me. But we do see that those were offset by higher fuel. What I'm interested to look at is how does that lower income cohort does it go -- does it stay at low single digits? Does it go to zero? Does it go back to being a more meaningful full down? Our highest and fastest growing customer cohort is at above $100,000. I think that is going to continue, and that is what is embedded within the forward guidance. I think some of the differentiation between the low and high end is -- of our guidance range is how that lower income cohort. We saw something less bad in Q1 of 2026. TBD on whether that continues into Q3 and beyond -- or Q2 and beyond.

That's really helpful. I appreciate that. And if I could just get a follow-up. Just how you're thinking about some of the halo effects around World Cup. I know you've talked a lot about stores where the games are going to be in market. But I just wanted to get your thinking on potential traffic uplift for stores that are in markets where games are not necessarily being played.

Yes. So we have World Cup products in all stores, right? We moved it to the front of our stores at the entrance in the markets where the games are being played. But if you go into our -- any other stores are outside of those markets, you'll see a meaningful presentation at World Cup, Jersey, U.S.A., Mexico, couple of their teams depending upon where -- which region those teams are playing in on the license team pad. So we expect to see growth not just in those stores, but broadly across the chain. I think we'd see that persist through the summer months. I also think there's probably a generic red, white and blue opportunity out there as people chair for Team USA that maybe is a little less license driven. And then longer term, what we've seen in the past is kind of a halo effect of this in terms of driving net participation in soccer well past the event itself. So we're expecting and believe we'll see more use soccer participation in the back half of this year and into the spring of 2027.

Our next question comes from Michael Lasser with UBS.

I'm curious what you think happened in the first quarter that may not necessarily repeat over the course of the year. So if we take your 2.9% same-store sales increase in 1Q, and if we want to get to the midpoint of the guide, it would imply it's somewhere in the neighborhood of 50 to 100 basis points comp for 2Q, 3Q and 4Q, understanding that the comparison is a little tougher in 2Q, but you will have the benefit of the World Cup during this time. So should we assume that the difference between a nearly 3% comp in 1Q and, call it, a 50 to 100 basis point comp for the rest of the year. Would simply be a function of; a, the tax refunds; and b, the macro getting a little bit more difficult such that if it doesn't get more difficult, you could do better than what's embedded in your guidance?

I think there's a lot wrapped up in that question. Simplistically, what we saw happen in the first quarter was increased tax returns blunting the impact of much higher gas prices. I think as we've gotten further away from that, we've seen the business move to more of a flattish comp, up low single digits in total. So that's where we kind of feel the natural run rate of the business is sitting today. What gets us from that flattish to that up 1% or up 2% in point our guidance for remainder of the year are the impact of the initiatives and how well they're received, and how will they impact the consumer. So that's really what we're seeing in the business, Michael. We've got a lot of initiatives that we think will play out. A lot of them are targeted at activating consumers who are under pressure with the new credit card rollout and the value delivery that in there. That's the thing that's going to take us somewhere between the flat top to.

Yes. And you explained it to Michael, but I do want to be specific. Last year's Q1 comp of negative 3.7% was the easiest compare. Q2 of last year was up 0.2%. Q3 was down 0.9%. Q4 was down 1.6%. So I would encourage you to look at 2-year stacks as you think through the modeling aspect of it. I agree with everything that Steve said, but the prior year compares do weigh in on how we guide for the current year.

Those points are all very helpful. So it sounds like in addition to the 2-year stacks, you are expecting about 200 basis points of same-store sales contribution from your initiatives. And to the extent that you would comp below that over the next few quarters, that would simply be a function of either the compare or the macro getting a little tougher. So a, that's fair. And just to clarify on your full year guidance, you took up the low end of the profit outlook, the profit dollar outlook by about $5 million. What drove that change? Was it simply incorporating the updated expectation around tax tariff rebate into your guidance, or was there -- is there something else that you're seeing that drove that change?

Yes. So as I would speak to initiatives. They get us to the midpoint of the comp guidance. So a plus 1% comp halfway between 0 and 2% for the full year is all initiatives. We think e-com is going to be a tailwind. I am very pleasantly pleased associated with the new stores when they get in the comp base. I'm liking that high single-digit comp that is above how we model them when we additionally -- when we did their pro forma, I think the credit card relaunch we baked in growth associated with that. So our initiatives alone get us to the midpoint. I think the delineation between what drags us down to the low of a flat comp or the high of the 2%. I think some of that relates to the magnitude of these external events, World Cup 250th, things of that nature and the health of the overall consumer. Do we see that low? And I'm really focused primarily on that below customer 50,000. Do they -- are we at an inflection point there? Is it moderating? Are we at a trough? I think there is the delineation between the high and the low point of the guidance. But I do want you to come away thinking that our initiatives alone get us to the midpoint. As it relates to the low end, I think the easiest way to think about why did we take the low end of the annual guidance up, and why is the low end of profit. It's because Q1 came in towards the high side versus the low side. So we're taking that Q1 low side off the table and keeping Q2, 3 and 4 ranges exactly how we had them contemplated it when we guided the full year.

We've reached the end of the question-and-answer session. I'd now like to turn the call back over to Steve Lawrence for closing comments.

Thanks. We started to see momentum shift in the business last year, which continued to build into the first quarter and resulted in a positive comp. While inflationary pressures persist, we're confident in our ability to execute through a range of environments. We have a thoughtful, straightforward strategy. Our goal is to continue to build momentum in the business by methodically executing against this strategy while also providing our customers with compelling assortments at a strong value. We know that if we do this, our key stakeholders, we're pleased with the results. I'd like to close with a heartfelt thanks to our 22,000-plus Academy team meet delivered a solid start to the year. I'm confident he will keep the momentum rolling as we head into the remainder of 2026. Thanks for joining our call today, and have a good rest your day.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.