What changed in this filing

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Item 1A. Risk Factors

2022-03-29 compared with 2021-04-07 · 225 added, 256 removed, 466 unchanged (51% of the section changed)

Investing in our securities involves a high degree of risk.

In addition to the other information contained in this report, you should consider the following risk factors before investing in our securities.

In addition to the other information contained in this Annual Report, you should consider the following risk factors before investing in our securities.

Risks in this section are grouped in the following categories:

(1) Risks Related to Our Business and Industry;

(2) Legal and Regulatory Risks;

(3) Risks Related to Our Indebtedness;

and (4) Risks Related to the Ownership of Our Common Stock.

Many risks affect more than one category, and the risks are not in order of significance or probability of occurrence because they have been grouped by categories.

Risks Related to Our Business and Industry

Our results of operations are highly dependent on the U.S.

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• wages, jobs and unemployment trends;

• public health pandemics (including, the coronavirus disease ("COVID-19")) on our customers, team members, vendors/suppliers and other stakeholders;

• public health pandemics (including the coronavirus ("COVID-19") pandemic) and their effect on our customers, team members, vendors/suppliers and other stakeholders;

• the housing market, including real estate prices and mortgage rates;

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The ongoing pandemic could adversely affect the economies and financial markets of many countries, including the United States, resulting in an economic downturn that could affect demand for our products, materially adversely affect our business operations, our team members, facilities, partners, suppliers, distributors or customers, decrease traffic to our stores, create delays and inefficiencies in our supply chain, and make it difficult or impossible for us to deliver products to our customers.

Our comparable sales, net sales per square foot, customer traffic or average value per transaction may be adversely affected if, for example, our customers reduce their purchases with us due to job losses, foreclosures, bankruptcies, higher consumer debt and interest rates, higher taxes, reduced access to credit, falling home prices and lower consumer confidence.

A reduction in overall consumer spending which causes customers to shift their spending to products other than those sold by us or to products sold by us that are less profitable could result in lower net sales, decreases in inventory turnover or a reduction in profitability due to lower margins, which could make it more difficult for us to generate cash flow sufficient to satisfy our obligations under our indebtedness.

Our comparable sales, net sales per square foot, customer traffic or average value per transaction may be adversely affected if, for example, our customers reduce their purchases with us due to inflation, job losses, foreclosures, bankruptcies, higher consumer debt and interest rates, higher taxes, reduced access to credit, falling home prices and lower consumer confidence.

obligations under our indebtedness.

A prolonged period of depressed consumer spending could have a material adverse effect on our business.

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• state, local and federal government budget cuts on facilities and activities, such as school athletic budgets, parks, ball fields, recreational sports leagues, hunting and fishing services, etc.;

• weak economic conditions, recession, inflation or other factors, such as global or local pandemics;

• legal and regulatory changes in federal and state hunting and fishing seasons, bag limits and firearm and ammunition restrictions;

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The success of sporting teams is highly uncertain and difficult to predict.

In addition, macro factors, such as the COVID-19 pandemic, may significantly affect whether or not certain sports leagues are able to host their games in their usual seasons, and if they are, whether or not spectators can attend.

In addition, macro factors, such as the ongoing COVID-19 pandemic, may significantly affect whether or not certain sports leagues are able to host their games in their usual seasons, and if they are, whether or not spectators can attend.

Our licensed apparel is significantly more popular when spectators are able to attend the games of the sports teams featured on such apparel.

If we are not successful in managing our inventory balances, our results of operations may be negatively affected.

The impact of COVID-19 may adversely affect our business and financial results.

The worldwide COVID-19 pandemic has negatively impacted the global and U.S.

The impact of COVID-19 has, and may continue to, impact our business and financial results.

The ongoing COVID-19 pandemic and measures taken in response have negatively impacted the global and U.S.

economies, disrupted consumer spending and global supply chains, and created significant volatility and disruption of labor and financial markets.

The COVID-19 pandemic may have an adverse impact on our business and financial performance, including an economic downturn that adversely affects demand for our products, adversely affects our business operations, our customers, team members, facilities, partners, suppliers or distributors, decreases demand for our products, creates delays and inefficiencies in our supply chain, causes shortages of popular merchandise we sell, and makes it difficult for us to timely provide products to our customers.

The extent of the impact of the COVID-19 pandemic on our business and financial performance, including our ability to execute our near-term and long-term business strategies and initiatives in the expected time frame, will depend on future developments, including the continued duration and severity of the pandemic, as well as the rollout and effectiveness of the COVID-19 vaccines, which are uncertain and cannot be predicted.

As a result of the COVID-19 pandemic, various governmental authorities and we have imposed and may further impose numerous requirements and restrictions on the operations of our facilities that are intended to protect the health and safety of our team members, consumers and communities, including temporary full or partial closures of our stores, distribution centers and corporate headquarters, restrictions on our goods and services eligible for sale, restrictions on the ability of customers and team members to reach our stores and other facilities and the neighboring businesses upon which we rely to drive traffic to our stores, and the closures of schools and businesses that our team members may rely upon for childcare while they work.

In response to the pandemic, various governmental authorities and we have from time to time imposed, and may further impose, numerous requirements and restrictions on the operations of our facilities that are intended to protect the health and safety of our team members, consumers and communities, including temporary full or partial closures of our stores, distribution centers and corporate headquarters, restrictions on our goods and services eligible for sale, restrictions on the ability of customers and team members to reach our stores and other facilities and the neighboring businesses upon which we rely to drive traffic to our stores, and the closures of schools and businesses that our team members may rely upon for childcare while they work.

Additionally, vaccine mandates or such other measures that may be announced in jurisdictions in which our business operates could result in disruptions to our current and potential future workforce and may result in increased attrition, as well as increased costs in connection with retaining our workforce.

The situation also has necessitated the imposition of significant new safety measures to which we must adhere to safely serve our customers while also providing for the safety of our team members and suppliers, including limitations on the number of customers and team members allowed in our stores at any given time, shorter operating hours, and increased distancing, face covering, cleaning and sanitization protocols.

Each of these necessary measures has substantially increased our operating costs, including, but not limited to, costs incurred to implement the operational changes described above and certain payments to or other costs relating to team members who are not working during the pandemic.

These limitations, requirements and decreases, which are unprecedented, unexpected, ongoing and indefinite, have adversely impacted our business and results.

For example, during the first quarter 2020, we closed our corporate headquarters, temporarily furloughed a significant portion of our corporate team members, and most of our active corporate team members worked from home due to local shutdown orders.

We began partially reopening our corporate headquarters during May 2020 to a limited number of team members and the remainder of our corporate team members returned to our corporate headquarters on June 8, 2020, in accordance with local guidelines.

Any need to take these actions again in the future may negatively impact productivity and cause other disruptions to our business.

Our information technology systems and cybersecurity could also be adversely affected due to any significant increase in remote working of our corporate team members due to any quarantines or future closing of our corporate headquarters and in online orders due to a significant increase in online transactions.

The operations of our stores, distribution centers, and corporate headquarters could be further restricted, if we deem it necessary or if recommended or mandated by authorities and these measures could have an adverse impact on our sales and profits.

As a result of the COVID-19 pandemic, we may have fewer resources to operate our business and we could also see deterioration in macroeconomic factors that typically affect us.

In addition, consumer or team member fears about becoming ill with the disease may continue, which will adversely affect traffic to our stores or supply of labor.

Each of these measures has substantially increased our operating costs, including, but not limited to, costs incurred to implement the operational changes described above and certain payments to or other costs relating to team members who are not working during the pandemic.

These limitations, requirements and decreases, which are unprecedented, unexpected, ongoing and indefinite, have adversely impacted our business and results and are expected to continue to do so for the duration of the pandemic.

In addition, despite any precautions, consumer or team member fears about becoming ill with the disease may continue, which will adversely affect traffic to our stores or supply of labor.

Any significant reduction in consumer willingness to visit stores, levels of consumer spending at our stores or team member willingness to staff our facilities, or the further temporary closure of our facilities, relating to the pandemic or its impact on the economy, consumer sentiment or health concerns, could result in a loss of sales and profits and other material adverse effects.

Consumer spending generally may also be negatively impacted by general macroeconomic conditions and consumer confidence, including the impacts of any recession, resulting from the COVID-19 pandemic.

Any decreased spending at stores or online caused by decreased consumer confidence and spending following the pandemic could result in a loss of sales and profits and other material adverse effects.

Also, if we do not respond appropriately to the pandemic, or if customers do not perceive our response to be adequate for a particular region or our company as a whole, we could suffer damage to our reputation and our brand, which could adversely affect our business in the future.

The COVID-19 pandemic also has the potential to significantly impact our supply chain if the vendors or factories that manufacture our products, the distributors that distribute our products, the distribution centers where we manage our inventory, or the operations of our logistics and other service providers are disrupted, temporarily closed or experience worker shortages.

Our information technology systems and cyber-security could also be adversely affected due to any significant increase in remote working of our corporate team members due to any quarantines or future closing of our corporate headquarters and in online orders due to a significant increase in online transactions.

As a result of the ongoing COVID-19 pandemic, we may have fewer resources to operate our business and we could also see deterioration in macroeconomic factors that typically affect us.

We may also see further disruptions or delays in shipments and negative impacts to pricing of certain components of our products.

The COVID-19 pandemic has already impacted the suppliers of products we sell, particularly as a result of mandatory shutdowns in locations where our products are manufactured and in some cases due to extreme demand for certain popular or necessary goods or raw materials.

A significant amount of our merchandise is produced in China, and the COVID-19 outbreak in China has resulted in significant governmental measures being implemented in China to control the spread of the virus, including, among others, restrictions on manufacturing and the movement of team members in many regions of the country.

The ongoing COVID-19 pandemic has already impacted the suppliers of products we sell, particularly as a result of mandatory shutdowns in locations where our products are manufactured and in some cases due to extreme demand for certain popular or necessary goods or raw materials.

A significant amount of our merchandise is produced in China, and the ongoing COVID-19 pandemic in China has resulted in significant governmental measures being implemented in China to control the spread of the virus, including, among others, restrictions on manufacturing and the movement of team members in many regions of the country.

These measures in China have resulted in, and may result in further, disruptions to our supply chain, including the temporary closure of third-party manufacturer facilities, interruptions in labor and/or product supply, or restrictions on the export or shipment of our products.

As a result, our third-party manufacturers may not have the materials, capacity, or capability to manufacture our products according to our schedule and specifications.

If our third-party manufacturers’ operations are curtailed, we may need to seek alternate manufacturing sources, which may be more expensive.

If our third-party manufacturers’ operations remain curtailed, we may need to seek alternate manufacturing sources, which may be more expensive.

Alternate sources may not be available or may result in delays in shipments to us from our supply chain and subsequently to our customers, each of which would affect our results of operations.

While the disruptions and restrictions on the ability to travel, quarantines, and temporary closures of the facilities of our third-party manufacturers and suppliers, as well as general limitations on movement in the region, are expected to be temporary, the duration of the production and supply chain disruption, and related financial impact, cannot be estimated at this time.

The duration of the production and supply chain disruption, and related financial impact, cannot be estimated at this time.

Should the production and distribution closures continue for an extended period of time, the impact on our supply chain in China and globally could have a material adverse effect on our results of operations and cash flows.

The extent to which COVID-19 impacts our results, financial position and liquidity will depend on future developments, including new information which may emerge concerning the severity of the pandemic and any actions or inactions to contain COVID-19 or mitigate its impact, among others, which are highly uncertain and cannot be predicted.

The extent of the impact of COVID-19 on our business and financial results will also depend on the duration and spread of the outbreak, including whether there are additional periods of increases or spikes in the number of COVID-19 cases, further mutations or related strains of the virus (or even the threat or perception that this could occur), within the markets in which we operate and the related impact on consumer confidence and spending, labor supply or product supply, all of which are highly uncertain.

Actions we have taken or may take, or decisions we have made or may make, as a consequence of the COVID-19 pandemic may result in the Company becoming a party to litigation claims and/or legal proceedings, including claims relating to our customers or team members getting ill after visiting or working in our stores and other facilities, which could consume significant financial and managerial resources, result in decreased demand for our products and injury to our reputation.

We may also face further closure requirements and other operational restrictions with respect to some or all of our facilities for prolonged periods of time due to, among other factors, evolving and increasingly stringent governmental restrictions including public health directives, quarantine policies or social distancing measures.

An extended period of ongoing disruption could materially affect our business, results of operations, access to sources of liquidity and financial condition.

Moreover, during the pandemic we have observed an increase in the popularity of isolated recreation, outdoor and leisure activity products, which has benefited our business and financial results.

However, we are unable to predict how long this increased popularity will last or how significant it will be.

To the extent the popularity of isolated recreation, outdoor and leisure activity products declines, our sales could be adversely impacted.

The extent to which the ongoing COVID-19 pandemic impacts our results, financial position and liquidity will depend on future developments, including whether there are additional periods of increases or spikes in the number of COVID-19 cases, further mutations or related strains of the virus (or even the threat or perception that this could occur), within the markets in which we operate and the related impact on consumer confidence and spending, labor supply or product supply, all of which are highly uncertain.

Additionally, the direct and indirect effects of the ongoing COVID-19 pandemic may give rise to risks that are currently unknown or have the effect of heightening many of the other risks set forth in these "Item 1A.

Risk Factors" in this Annual Report.

Intense competition in the sporting goods and outdoor recreation retail industries could limit our growth and reduce our profitability.

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In addition, as the popularity and use of Internet sites and free merchandise shipping continue to increase, our business faces increased competition from various domestic and international sources, including our suppliers.

Additionally, the ability of consumers to compare prices on a real-time basis through the use of smartphones and digital technology puts additional pressure on us to maintain competitive prices vis-à-vis our competitors.

Additionally, the ability of consumers to compare prices on a real-

time basis through the use of smartphones and digital technology puts additional pressure on us to maintain competitive prices vis-à-vis our competitors.

We may require significant capital in the future to sustain or grow our business, including our store and e-commerce activities, due to increased competition, and there is no assurance that cash flow from operations will be sufficient to meet those needs or that additional sources of capital will be available on acceptable terms or at all.

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In addition, data and security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breach by our team members or by persons with whom we have commercial relationships that result in the unauthorized release of confidential personal or business information.

Any such breach, access, misappropriation, loss or other unauthorized or inadvertent disclosure of confidential information, whether by us or our vendors, could attract a substantial amount of media attention, damage our relationships with our customers, team members and vendors and cause a loss of confidence in us, violate applicable privacy laws and obligations and expose us to costly government enforcement actions or private litigation and financial liability (possibly beyond the scope or limits of our insurance coverage), increase the costs we incur to protect against or remediate such breaches and comply with consumer protection and data privacy laws and obligations or disrupt our operations and distract our management and other key

personnel from performing their primary operational duties, any of which could adversely affect our reputation, business, results of operations and financial condition.

Despite our security measures, it is possible that computer hackers or other parties might defeat these security measures and obtain sensitive or confidential data that we hold relating to us and our customers, team members and vendors.

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Foreign imports subject us to the risks of changes in import duties, quotas, loss of “most favored nation” status with the United States for a particular foreign country, delays in shipment, shipping port and ocean carrier constraints, supply and demand constraints, labor strikes, work stoppages or other disruptions, freight cost increases and economic uncertainties (including the United States imposing anti-dumping or countervailing duty orders, tariffs, safeguards, remedies or compensation and retaliation due to illegal foreign trade practices).

To the extent that any foreign manufacturers from whom we purchase products directly or indirectly employ labor, environmental, corruption, workplace safety, or other business practices that vary from those commonly accepted in the United States, we could be hurt by any resulting negative publicity or, in some cases, potential claims of liability.

To the extent that any foreign manufacturers from whom we purchase products directly or indirectly employ labor, environmental, corruption, workplace safety, or other business practices that vary

from those commonly accepted in the United States, we could be hurt by any resulting negative publicity or, in some cases, potential claims of liability.

Merchandise or raw materials purchased from alternative sources may be of lesser quality or more expensive than the merchandise or raw materials we currently purchase abroad.

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Factors that could negatively affect our business include a potential significant revaluation of the Chinese Yuan, which may result in an increase in the cost of producing products in China, labor shortages and increases in labor costs in China, and difficulties in moving products manufactured in China through the ports on the western coast of North America, whether due to port congestion, labor disputes, product regulations and/or inspections or other factors, and natural disasters or health pandemics impacting China.

General trade tensions between the United States and China began escalating in 2018, with multiple rounds of U.S.

tariffs on Chinese goods taking effect.

The Trump administration, over the past few years, imposed multiple rounds of tariffs on imports from China, where we and many of our vendors source commodities.

General trade tensions between the United States and China began escalating in 2018, with the Trump administration ultimately imposing multiple rounds of tariffs on imports from China, where we and many of our vendors source commodities.

As a result, we have experienced rising inventory costs on owned brand products we directly source from China, as well as national brand products from China that we source through our vendors.

These higher inventory costs have resulted in higher prices and/or lower margins, thus resulting in a negative impact to sales and/or gross margin.

Additionally, these tariffs have resulted in and could result in further retaliatory tariff actions by China and could ultimately result in further tariffs on merchandise that we, and many of our vendors, import

These tariffs have had an adverse effect on our business, financial condition and results of operations.

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As of our report date, no significant modifications have been enacted relative to the escalated tariffs which impact our business.

We are subject to costs and risks associated with laws and regulations affecting our business, including those relating to the sale, manufacture and import of consumer products and other matters, and such laws may change or become more stringent.

We operate in a complex regulatory and legal environment that exposes us to regulatory, compliance and litigation risks that could materially affect our operations and financial results.

We are subject to regulation by numerous federal, state and local regulatory agencies and authorities, including the U.S.

Consumer Product Safety Commission, Equal Employment Opportunity Commission, Department of Labor, Occupational Safety and Health Administration, Department of Justice, Department of Treasury, Federal Trade Commission, Customs and Border Protection, Bureau of Alcohol, Tobacco, Firearms and Explosives, SEC, Internal Revenue Service, or IRS, and Environmental Protection Agency and comparable state and local agencies.

Laws and regulations affecting our business may change, sometimes frequently and significantly, as a result of political, economic, social or other events.

Some of the federal, state or local laws and regulations that affect us include but are not limited to:

• consumer product safety, product liability or consumer protection laws;

• laws related to advertising, marketing, pricing and selling our products, including but not limited to firearms, ammunition, and related accessories;

• labor and employment laws, including wage and hour laws;

• tax laws or interpretations thereof, including collection of state sales tax on e-commerce sales;

• data protection and privacy laws and regulations;

• environmental laws and regulations;

• hazardous material laws and regulations;

• customs or import and export laws and regulations, including collection of tariffs on product imports;

• intellectual property laws;

• antitrust and competition regulations;

• banking and anti-money laundering regulations;

• Americans with Disabilities Act, or ADA, and similar state and local laws and regulations;

• website design and content regulations;

• securities and exchange laws and regulations.

We sell firearms, ammunition, and related accessories.

Firearms represented less than 8% of our net sales in 2020.

Numerous federal, state and local laws and regulations govern the procurement, transportation, storage, distribution and sale and marketing of firearms, ammunition, and related accessories, including the regulations governing the performance of federally and state mandated procedures for determining customer firearm purchase eligibility (such as age and residency verification, background checks and proper completion of required paperwork).

In the future, there may be increased federal, state or local regulation affecting the sale of firearms, ammunition, and related accessories, including taxation or restrictions on the type of firearms and ammunition available for retail sale, which could reduce our sales and profitability.

A failure by us to follow these laws or regulations may subject us to claims, lawsuits, fines, penalties, adverse publicity and government action (up to and including the possible revocation of licenses and permits allowing the sale of firearms and ammunition), which could have a material adverse effect on our business and results of operations.

Another significant risk relating to our operations is compliance with the FCPA, the UKBA, and other anti-corruption laws applicable to our international operations.

In many foreign countries, particularly in those with developing economies, it may be a local custom that businesses operating in such countries engage in bribery and other business practices that are prohibited by the FCPA, the UKBA or other U.S.

and foreign laws and regulations applicable to us.

We have internal policies, procedures and standards that we require all of our team members, agents and vendors to meet.

Although we have implemented policies, procedures and standards of conduct designed to ensure compliance with the laws or regulations affecting our business, there can be no assurance that all of our team members, agents and vendors will comply with such laws, policies, procedures and standards of conduct.

discontinue conducting business with the agent or vendor and we or they may be subject to claims, lawsuits, fines, penalties, loss of a license or permit and adverse publicity or other consequences that could have a material adverse effect on our business, results of operations and financial condition.

We are, and may in the future, be subject to claims, demands and lawsuits, and our insurance or indemnities may not be sufficient to cover damages related to those claims and lawsuits.

From time to time we may be involved in lawsuits, demands or other claims arising in the ordinary course of business.

For example, we are, and may in the future, be subject to claims, demands and lawsuits, and we may suffer losses and adverse effects to our reputation, related to:

• injuries or crimes associated with merchandise we sell, that has been associated with an increased risk of injury, including but not limited to firearms, ammunition, firearm accessories, air pistols, crossbows and other archery equipment, knives, deer stands and other hunting equipment, trampolines, wheeled goods such as bicycles and ride-on toys, certain merchandise qualifying as hazardous material and other products;

• product liability claims from customers or actions required or penalties assessed by government agencies relating to products we sell, including but not limited to products that are recalled, defective or otherwise alleged to be harmful;

• the design, purchase, manufacture, import, distribution and sale of our owned brand products;

• the procurement, transportation, storage, distribution and sale of firearms and ammunition, including improper performance of federally mandated procedures for determining customer firearm purchase eligibility (such as age and residency verification, background checks and proper completion of required paperwork);

• municipalities or other organizations attempting to recover costs from firearm manufacturers and retailers, relating to the use of firearms and ammunition;

• the operations of a fleet of trucks for distribution purposes, including transportation of hazardous materials by such fleet;

• the procurement and ownership, leasing or operation of property for retail stores, distribution centers and other corporate needs;

• the alleged infringement upon intellectual property rights to merchandise we sell or technology or services we use, including information technology, marketing and advertising services;

• global sourcing, including international, customs and trade issues;

• real estate issues, including construction, leasing, zoning and environmental issues;

• employment issues, including actions by team members, the Equal Employment Opportunity Commission, the Department of Labor, the Occupational Safety and Health Administration and other federal and state employment agencies;

• commercial disputes, including contractual and business disputes with vendors, landlords, or competitors;

• tort, personal injury and property damage claims related to our stores, e-commerce, distribution centers or corporate headquarters;

• regulatory compliance, including relating to consumer protection, marketing and advertising, product safety, workplace safety, firearms, ammunition and related accessories, knives, import/export customs, taxes, tariffs, duties, and surcharges, data security and privacy, food and other regulated products, accounting, labor and employment, environmental matters, and hazardous materials.

We sell firearms, ammunition, and related accessories.

These products are associated with an increased risk of injury and related lawsuits with respect to our compliance with Bureau of Alcohol, Tobacco, Firearms and Explosives and state laws and regulations.

Any improper or illegal use by our customers of firearms, ammunition, or related accessories sold by us could have a negative impact on our reputation and business.

We are, and may in the future also be, subjected to claims and lawsuits, including potential class actions, relating to our policies and practices on the sale of firearms, ammunition, or related accessories.

We are, and may in the future also be, subjected to claims and lawsuits relating to the improper use of firearms, ammunition, or related accessories sold by us, including lawsuits by victims or municipalities or other organizations attempting to recover losses or costs from manufacturers and retailers of firearms, ammunition, and related accessories.

Due to the inherent uncertainties of claims and lawsuits, we cannot accurately predict the ultimate outcome of any such matters.

These claims and lawsuits could cause us to incur significant expenses and devote substantial resources to defend against them and, in some cases, we could incur significant losses in the form of settlements, judgments, fines, penalties, injunctions or other orders, as well as negative publicity, that could have a material adverse effect on our business, results of

operations and financial condition.

Even if a claim is unsuccessful or is not fully pursued, the negative publicity surrounding any such assertions could adversely affect our reputation.

We maintain insurance coverage with third-party insurers.

However, not every risk or liability is or can be protected by insurance, and, for those risks we insure, the limits of coverage we purchase or that are reasonably obtainable in the market may not be sufficient to cover all actual losses or liabilities incurred.

Liability insurance coverage is expensive and there is a risk that commercially available liability insurance will not continue to be available to us at a reasonable cost, if at all.

If we or other industry participants sustain significant losses or make significant insurance claims, our ability to obtain future insurance coverage at commercially reasonable rates could be materially adversely affected.

An inability to obtain liability insurance, significant increases in the cost of insurance we obtain, or losses in excess of our liability insurance coverage could have a material adverse effect on us.

Any insurance we carry, including the aforementioned insurance coverage, reflects deductibles, self-insured retentions, limits of liability and similar provisions that we believe are prudent based on our operations.

To offset negative insurance market trends, we may elect to self-insure, accept higher insurance deductibles or reduce the amount of insurance coverage in response to market changes.

Additionally, we self-insure a portion of expected losses under our workers’ compensation, general liability, Academy, Ltd.

Texas Work Injury Benefit Plan, and group health insurance programs.

We use the services of independent actuaries for loss adjustment expense reserve analyses for the aforementioned lines of insurance.

Liabilities associated with these lines of insurance are based on actual claim data and estimates of incurred but not reported claims, developed using actuarial methodologies, and may be based on historical claim trends, industry factors, claim development, as well as other actuarial assumptions.

Unanticipated changes in any applicable actuarial assumptions and management estimates underlying our recorded liabilities for these losses, variability in inflation rates, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, insolvency of insurance carriers, and changes in discount rates could result in materially different expenses than expected under these programs, which could have a material adverse effect on our results of operations and financial condition.

We require many of our vendors to carry their own insurance, and we have indemnity agreements with many of our vendors, but we cannot be assured that (1) any specific claim or lawsuit will be subject to a vendor’s insurance or indemnity agreement, (2) our vendors will carry or maintain such insurance coverage or meet their indemnity obligations or (3) we will be able to collect payments from our vendors sufficient to offset liability losses or, in the case of our owned brand products, where almost all of the manufacturing occurs outside the United States, that we will be able to collect anything at all.

With all claims and lawsuits, however, there is a risk that liabilities, fines and losses may not be covered by insurance or indemnity or may exceed insurance or indemnity coverage.

Problems with operating, updating or implementing our information technology systems could disrupt our operations and negatively impact our business operations and materially and adversely affect our financial results.

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As a result, these suppliers could modify the terms of these relationships due to general economic conditions or otherwise.

If there is a disruption in supply from a principal supplier (which can occur for various reasons in or out of the control of these suppliers, including the measures taken by the Chinese government or other governments in response to the recent COVID-19 coronavirus outbreak), we may experience merchandise out-of-stocks, delivery delays or increased delivery costs, or otherwise be unable to obtain the same merchandise from other suppliers in a timely and efficient manner and on acceptable terms, or at all, which could materially affect our results of operations and our customers’ confidence in us.

Changes in our relationships with our suppliers (which can occur for various reasons in or out of our control) also have the potential to increase our expenses and adversely affect our results of operations.

If there is a disruption in supply from a principal supplier (which can occur for various reasons in or out of the control of these suppliers, including as a result of public health emergencies, such as the ongoing COVID-19 pandemic, and measures taken by the Chinese government or other governments in response to such events), we may experience merchandise out-of-stocks, delivery delays or increased delivery costs, or otherwise be unable to obtain the same merchandise from other suppliers in a timely and efficient manner and on acceptable terms, or at all, which could materially affect our results of operations and our customers’ confidence in us.

For example, during fiscal 2021 we observed increased competition across the industry for resources throughout the supply chain, which resulted in disruptions to the flow of products from our vendors, labor shortages, reduced shipping container availability, and longer delays at the port.

These factors negatively impacted transportation costs, and required us to pay higher rates to maintain our inventory levels, and we expect such supply chain challenges to continue at least in the near term.

Additionally, changes in our relationships with our suppliers (which can occur for various reasons in or out of our control) also have the potential to increase our expenses and adversely affect our results of operations.

The formation and/or strengthening of business partnerships between our suppliers and our competitors could directly alter the available supply of merchandise we desire to sell, which could have a material adverse effect on the level of customers purchasing merchandise from us and, thus, our results of operations.

Moreover, many of our suppliers provide us with merchandise purchasing incentives, such as return privileges, volume purchasing allowances and cooperative advertising, and a decline or discontinuation of these incentives could severely impact our results of operations.

Moreover, many of our suppliers provide us

with merchandise purchasing incentives, such as return privileges, volume purchasing allowances and cooperative advertising, and a decline or discontinuation of these incentives could severely impact our results of operations.

Harm to our reputation could adversely impact our ability to attract and retain customers, team members, vendors and/or other partners.

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There also can be no assurance that we will be able to continue our expansion plans successfully or continue to manage our growth effectively, or that our new stores will generate sales levels necessary to achieve store-level profitability or profitability comparable to that of our existing stores.

Our continued growth also depend in large part, upon our ability to open new stores in a timely manner and to operate them profitably.

In 2020, we stopped our store openings and have maintained a cautionary approach toward store expansion in the current retail environment, and we may not open another new store until 2022.

Our continued growth also depends in large part, upon our ability to open new stores in a timely manner and to operate them profitably.

In 2020 and 2021, in response to the then-current retail environment, we temporarily stopped new store openings, before announcing a planned resumption in 2022.

A slower than expected pace of new store openings may negatively impact our net sales growth and operating income.

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A disruption in the operation of our distribution centers would affect our ability to deliver merchandise to either our stores or customers, which could adversely impact our revenues and harm our business and financial results.

We operate three distribution centers located in Katy, Texas, Twiggs County, Georgia, and Cookeville, Tennessee, to manage the receipt, storage, sorting, packing and distribution of our merchandise to the appropriate stores or to the customer directly.

We operate three distribution centers located in Katy, Texas;

Twiggs County, Georgia;

and Cookeville, Tennessee, to manage the receipt, storage, sorting, packing and distribution of our merchandise to the appropriate stores or to the customer directly.

We depend in large part on the orderly operation of our receiving and distribution process, which depends, in turn, on adherence to shipping schedules, proper functioning of our information technology and inventory control systems and overall effective management of our distribution centers.

As a result of damage to, or prolonged interruption of, operations or inventory at any of these facilities, or with respect to third-party transportation providers, due to a work stoppage, labor shortage, operations significantly below historical efficiency levels, supply chain disruption, inclement weather, natural or man-made disasters, system failures, slowdowns or strikes, acts of terror or other unforeseen events in the areas or regions of these facilities could impair our ability to adequately stock our stores, process returns of products to vendors and ship product to our e-commerce customers, thereby adversely affecting our sales and profitability.

In addition, we could incur significantly higher costs and longer lead times associated with distributing our products to our stores and customers during the time it takes for us to reopen or replace these distribution centers.

As a result of damage to, or prolonged interruption of, operations or inventory at any of these facilities, or with respect to third-party transportation providers, due to a work stoppage, labor shortage, operations significantly below historical efficiency levels, supply chain disruption, inclement weather or natural or man-made disasters (including events that may be caused or exacerbated by climate change), system failures, slowdowns or strikes, acts of terror or other unforeseen events in the areas or regions of these facilities could impair our ability to adequately stock our stores, process returns of products to vendors and ship product to our e-commerce customers, thereby adversely affecting our sales and profitability.

In addition, we could incur significantly higher costs and longer lead times associated with

distributing our products to our stores and customers during the time it takes for us to reopen or replace these distribution centers.

Although we maintain business interruption and property insurance for these facilities, there can be no assurance that our insurance coverage will be sufficient, or that insurance proceeds will be timely paid to us, if our distribution centers are shut down or interrupted for any unplanned reason.

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• consumer confidence in the economy;

• unseasonal or extreme weather conditions, natural or man-made disasters (such as snow storms, hurricanes, tornadoes, floods, pandemics, and civil disturbances);

• catastrophic or tragic events (such as tragedies involving firearms or public health pandemics) in or affecting our markets;

• unseasonal or extreme weather conditions, natural or man-made disasters or public health emergencies (such as snow storms, hurricanes, tornadoes, floods, pandemics, and civil disturbances);

• catastrophic or tragic events (such as tragedies involving firearms);

• changes in demand for the products that we offer in our stores;

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The occurrence of severe weather events, catastrophic health events, natural or man-made disasters, social and political conditions or civil unrest could significantly damage or destroy our retail locations, could prohibit consumers from traveling to our retail locations or could prevent us from resupplying or staffing our stores or distribution centers or fulfilling out e-commerce orders, especially during peak shopping seasons.

Unforeseen events, including public health issues such as contagious viruses, natural disasters such as earthquakes, hurricanes, tornadoes, snow or ice storms, floods and heavy rains, and man-made disasters such as an oil spill closing large areas of hunting or fishing, could disrupt our operations or the operations of our suppliers, as well as the behavior of our consumers.

Unforeseen events, including public health emergencies, such as pandemics, natural disasters, such as earthquakes, hurricanes, tornadoes, snow or ice storms, floods and heavy rains, and man-made disasters, such as an oil spill closing large areas of hunting or fishing, could disrupt our operations or the operations of our suppliers, as well as the behavior of our consumers.

For example, frequent or unusually heavy snowfall, ice storms, rainstorms or other extreme weather conditions over a prolonged period could make it difficult for our customers to travel to our stores and thereby reduce our sales and profitability.

In addition, extreme weather conditions could result in disruption or delay of production and delivery of materials and products in our supply chain and cause staffing shortages in our stores.

Socio-political factors, such as civil unrest or other economic or political uncertainties that contribute to consumer unease or harm to our store base, may also result in decreased discretionary spending, property damage and/or business interruption losses.

Global climate change may result in significant natural disasters occurring more frequently or with greater intensity, such as drought, wildfires, storms, sea-level rise, and flooding.

Socio-political factors, such as foreign wars, civil unrest or other economic or political uncertainties that contribute to consumer unease or harm to our supply chain or store base, may also result in decreased discretionary spending, property damage and/or business interruption losses.

For example, we may face losses related to the civil unrest in the United States, such as the civil unrest that occurred in late May 2020 in response to reported incidents of police violence.

To the extent these events result in the closure of one or more of our distribution centers, a significant number of stores, or our corporate headquarters or impact one or more of our key suppliers, our operations and financial performance could be materially adversely affected through an inability to support our business, resupply or staff our stores, distribution centers or corporate headquarters or fulfill our e-commerce orders, especially during peak shopping seasons, and through lost sales.

We believe that we take reasonable precautions to prepare particularly for unforeseen catastrophic or weather-related events;

however, our precautions may not be adequate to deal with such events in the future.

As these events occur in the future, if they should impact areas in which we have our corporate headquarters, a distribution centers or a concentration of retail stores or vendor sources, such events could have a material adverse effect on our business, financial condition and results of operations.

Our failure to protect our intellectual property or avoid the infringement of third-party intellectual property rights could be costly and have a negative impact on our results of operations.

We believe that our trademarks, service marks, copyrights, patents, processes, trade secrets, domain names and other intellectual property, including our Academy Sports + Outdoors brand, our owned brands, such as Academy Sports + Outdoors, Magellan Outdoors, BCG, O’rageous and Outdoor Gourmet, and our goodwill, designs, names, slogans, images and trade dress associated with these brands, are valuable assets, essential to our success and our competitive position due to their name recognition with customers.

The unauthorized use or other misappropriation of our intellectual property could diminish the value of our brands or goodwill and cause a decline in our sales.

In addition, any infringement or other intellectual property claim made by or against us, whether or not it has merit, could be time-consuming, result in costly litigation, cause product delays, cause us to discontinue affected products, distract key resources from our core business or require us to enter into royalty or licensing agreements.

As a result, any such claim made by or against us or our failure to protect our intellectual property could have an adverse effect on our results of operations.

Our business is significantly dependent on our ability to meet our labor needs.

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We are also dependent on the team members who staff our distribution centers, many of whom are skilled.

We may be unable to meet our labor needs and control our costs due to external factors such as the availability of a sufficient number of qualified persons in the work force of the markets in which we operate, competition, unemployment levels, demand for certain labor expertise, prevailing wage rates, wage inflation, changing demographics, health and other insurance costs, adoption of new or revised employment and labor laws and regulations, and the impacts of man-made or natural disasters, such as tornadoes, hurricanes, and the COVID-19 pandemic.

Recent or potential future legislative initiatives may seek to increase the federal minimum wage in the United States, as well as the minimum wage in a number of individual states.

We have experienced, and expect to continue to experience, a shortage of labor for certain functions, including concerns around the ongoing COVID-19 and other factors, which has increased our labor costs and negatively impacted our profitability.

The extent and duration of the effect of these labor market challenges are subject to numerous factors, including the continuing effect of the ongoing COVID-19 pandemic, vaccine mandates that may be announced in jurisdictions in which our businesses operate, availability of qualified persons in the markets where we and our contracted service providers operate and unemployment levels within these markets, behavioral changes, prevailing wage rates and other benefits, inflation, adoption of new or revised employment and labor laws and regulations (including increased minimum wage requirements) or government programs, safety levels of our operations, and our reputation within the labor market.

Recent or potential future legislative initiatives may seek to increase the federal minimum wage in the United States, as well as the minimum wage in a number of individual states or markets.

As federal or state minimum wage rates increase, we may need to increase not only the wage rates of our minimum wage team members, but also the wages paid to our other hourly team members as well.

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Any increase in the cost of our labor could have an adverse effect on our operating costs, financial condition and results of operations.

If we are unable to hire and retain store-level team members capable of providing a high

level of customer service, skilled distribution center team members or other qualified personnel, our business could be materially adversely affected.

If we are unable to hire and retain store-level team members capable of providing a high level of customer service, skilled distribution center team members or other qualified personnel, our business could be materially adversely affected.

Although none of our team members are currently covered under collective bargaining agreements, we cannot guarantee that our team members will not elect to be represented by labor unions in the future.

If some or our entire workforce were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements or work practice, it could have a material adverse effect on our business, financial condition and results of operations.

Additionally, on November 5, 2021, the U.S.

Department of Labor’s Occupational Safety and Health Administration (“OSHA”) issued an Emergency Temporary Standard on Vaccination and Testing (the “ETS”) regarding workplace safety relating to COVID-19, generally requiring employers with more than 100 employees, like Academy, to mandate either regular testing and face covering-wearing or COVID-19 vaccinations for unvaccinated employees beginning on January 4, 2022.

Shortly thereafter, enforcement of the ETS was stayed by the federal courts, and on January 13, 2022, the Supreme Court of the United States upheld the stay pending the final disposition of litigation.

Effective January 26, 2022, OSHA withdrew the ETS, but retained it as a proposal for a permanent rule.

If a rule substantially similar to the ETS is ultimately enforced, we may experience adverse impacts on our workforce, across all functional areas, at our stores and distribution centers in particular, and the workforce of our vendors to the extent that any of these workers are unavailable to work because they either fail the weekly testing requirement or fail to vaccinate in compliance with the rule, which could require us to adapt our operations.

We may also experience increased expenses relating to any support pay we must make in compliance with such a rule to employees who need time to get vaccinated and recover from vaccination during work hours.

The requirements of such a rule and the potential adverse impact on our workforce, and that of our vendors, could have a material adverse effect on our financial position, results of operations or cash flows.

We depend on key personnel in order to support our existing business and future initiatives and may not be able to retain or replace these team members recruit additional qualified personnel or effectively manage succession.

Our future success may be adversely impacted if we are not able to attract, retain and develop talent and future leaders, including our senior executives and team members.

Our senior executive team closely supervises all major aspects of our business, including the design and development of our strategy, and procurement of merchandise;

operation of our information technology platforms, supply chain, and store network;

development and retention of critical talent;

and financial planning, reporting and compliance.

Our senior executive team has substantial experience and expertise in our retail business, and serves an integral role in the growth and support of our various initiatives.

If we were to lose the leadership of senior executives or other key team members, our business could be adversely affected.

In addition, if significant unexpected turnover occurs at the team member level, the loss of the services of these individuals, or any resulting negative perceptions of our business, could damage our reputation and our business.

Competition for such qualified talent is intense, and we cannot be sure we will be able to find suitable successors promptly, or at all, or to successfully integrate any successors, or that we will be able to attract, retain, and develop a sufficient number of qualified individuals in future periods.

Our stores are located primarily in the southern United States which could subject us to regional risks.

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The price of fuel and demand for transportation services has fluctuated significantly over the last few years, and has resulted in increased costs for us and our vendors.

Additionally, during fiscal 2021, we observed increased competition across the industry for resources throughout the supply chain, which resulted in disruptions to the flow of products from our vendors, labor shortages, reduced shipping container availability, and longer delays at the port.

In addition, changes in regulations may result in higher fuel costs through taxation, transportation restrictions or other means.

Fluctuations in transportation costs and availability could adversely affect our results of operations.

Labor shortages in the transportation industry could negatively affect transportation costs and our ability to supply our stores in a timely manner.

Labor shortages in the transportation industry have and are expected to continue to negatively affect transportation costs and our ability to supply our stores in a timely manner.

In particular, our business is highly dependent on the shipping and trucking industry to deliver products to our distribution centers and our stores.

Our results of operations may be adversely affected if we, or our vendors, are unable to secure adequate transportation resources at competitive prices to fulfill our delivery schedules to our distribution centers or our stores.

Difficulties in moving products manufactured overseas and through the ports of North America, whether due to port congestion, government shutdowns, labor disputes, product regulations and/or inspections or other factors, including natural disasters or health pandemics, could negatively affect our business.

Our future success may be adversely impacted if we are not able to attract, retain and develop talent and future leaders, including our senior executives and team members.

Our senior executive team closely supervises all major aspects of our business, including the design and development of our strategy, and procurement of merchandise;

operation of our information technology platforms, supply chain, and store network;

development and retention of critical talent;

and financial planning, reporting and compliance.

Our senior executive team has substantial experience and expertise in our retail business, and serves an integral role in the growth and support of our various initiatives.

If we were to lose the leadership of senior executives or other key team members, our business could be adversely affected.

Difficulties in moving products manufactured overseas and through the ports of North America, whether due to port congestion, government shutdowns, labor disputes, product regulations and/or inspections or other factors, including man-made or natural disasters and public health emergencies, could negatively affect our business.

We are subject to payment-related risks.

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If we are unable to continue to develop successful marketing and advertising strategies, especially for online and social media platforms, or if our competitors develop more effective strategies, we could lose customers and sales could decline.

Legal and Regulatory Risks

We operate in a complex regulatory and legal environment that exposes us to regulatory, compliance and litigation risks that could materially affect our operations and financial results.

We are subject to regulation by numerous federal, state and local regulatory agencies and authorities, including the U.S.

Consumer Product Safety Commission, Equal Employment Opportunity Commission, Department of Labor, Occupational Safety and Health Administration, Department of Justice (DOJ), Department of Treasury, Federal Trade Commission, Customs and Border Protection, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), SEC, Internal Revenue Service, or IRS, and Environmental Protection Agency and comparable state and local agencies.

Laws and regulations affecting our business may change, sometimes frequently and significantly, as a result of political, economic, social or other events.

Some of the federal, state or local laws and regulations that affect us include but are not limited to:

• consumer product safety, product liability or consumer protection laws;

• laws related to advertising, marketing, pricing and selling our products, including but not limited to firearms, ammunition, and related accessories;

• labor and employment laws, including wage and hour laws;

• tax laws or interpretations thereof, including collection of state sales tax on e-commerce sales;

• data protection and privacy laws and regulations;

• environmental laws and regulations;

• hazardous material laws and regulations;

• customs or import and export laws and regulations, including collection of tariffs on product imports;

• intellectual property laws;

• antitrust and competition regulations;

• banking and anti-money laundering regulations;

• Americans with Disabilities Act, or ADA, and similar state and local laws and regulations;

• website design and content regulations;

• securities and exchange laws and regulations.

We sell firearms, ammunition, and related accessories.

Firearms represented approximately 6% of our net sales in 2021.

In June 2021, the DOJ announced a new policy to underscore zero tolerance for willful violations of the law by federally licensed firearms dealers that put public safety at risk.

In the future, there may be increased federal, state or local regulation or enforcement affecting the sale of firearms, ammunition, and related accessories, including taxation or restrictions on the type of firearms and ammunition available for retail sale, which could reduce our sales and profitability.

A failure by us to follow these laws or regulations may subject us to claims, lawsuits,

fines, penalties, adverse publicity and government action (up to and including the possible revocation of licenses and permits allowing the sale of firearms and ammunition), which could have a material adverse effect on our business and results of operations.

Another significant risk relating to our operations is compliance with the FCPA, the UKBA, and other anti-corruption laws applicable to our international operations.

and foreign laws and regulations applicable to us.

We have internal policies, procedures and standards that we require all of our team members, agents and vendors to meet.

If we or one of our domestic or foreign agents or vendors fails to comply with a law or regulation, including any of the foregoing laws or regulations, or if we or one of our domestic or foreign agents or vendors fails to comply with our required policies, procedures or standards of conduct, then we may be forced to discontinue conducting business with the agent or vendor and we or they may be subject to claims, lawsuits, fines, penalties, loss of a license or permit and adverse publicity or other consequences that could have a material adverse effect on our business, results of operations and financial condition.