What changed in this filing

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Item 1. Business

2023-03-16 compared with 2022-03-29 · 54 added, 90 removed, 276 unchanged (34% of the section changed)

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Known material factors that could affect our financial performance and actual results, and could cause actual results to differ materially from those expressed or implied in any forward-looking statements included in this discussion or otherwise made by our management, are described in the "Risk Factors" section of this Annual Report.

All statements in this Annual Report concerning our current and planned operations are modified by reference to our discussion of recent developments related to the COVID-19 pandemic, and our ability to carry out our current and planned operations are dependent on further developments associated with the COVID-19 pandemic.

Academy Sports + Outdoors is one of the leading full-line sporting goods and outdoor recreation retailers in the United States.

Academy Sports + Outdoors is a leading full-line sporting goods and outdoor recreation retailers in the United States.

Originally founded in 1938 as a family business in Texas, we now operate 268 stores across 18 contiguous states.

Our mission is to provide “Fun for All” and we fulfill this mission with a localized merchandising strategy and value proposition that deeply connect with a broad range of consumers.

Our product assortment focuses on key categories of outdoor, apparel, sports & recreation and footwear (representing 32%, 27%, 22% and 19% of our 2021 net sales, respectively) through both leading national brands and a portfolio of 20 owned brands, which go well beyond traditional sporting goods and apparel offerings.

Our product assortment focuses on key categories of outdoor, apparel, sports & recreation and footwear (representing 31%, 28%, 21%, and 20% of our 2022 net sales, respectively) through both leading national brands and a portfolio of 20 private label brands, which go well beyond traditional sporting goods and apparel offerings.

We believe the following attributes differentiate us from our competitors:

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Sporting goods shoppers consistently rate us as the top retailer for offering sporting and outdoor recreation products for a wide range of customers and being a one-stop shop.

We carefully curate our products to provide the right assortment that appeal to beginners, experts, families and casual participants.

Our access to national brand and owned brand merchandise creates a comprehensive portfolio of value-based and diversified products, spanning various price-points, that differentiates our assortment from our peers.

We carefully curate our products to provide the right assortment that appeals to customers from beginners to experts, including families and casual participants.

Our access to national brand and private label brand merchandise creates a comprehensive portfolio of value-based and diversified products, spanning various price-points, that differentiates our assortment from our peers.

Our category, brand and price-point mix is unique to Academy and difficult to replicate at other retailers.

Approximately 80% of our 2021 merchandise sales was comprised of national brand products, with the remainder coming from exclusive products in our portfolio of 20 owned brands.

We have minimal product overlap with direct-to-consumer brands and competitors.

Approximately 80% of our 2022 merchandise sales was comprised of national brand products, with the remainder coming from exclusive products in our portfolio of private label brands.

No single brand we carry accounted for more than 11% of our 2022 sales.

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Our average customer visits our stores anywhere from two to three times per year.

Strategic Priorities

We made tremendous progress against our 2021 key business priorities.

For omnichannel, we implemented improved search capabilities, increased check-out speed, added more payment options and launched a new mobile app.

To enhance our customer shopping experience, we focused on better service, better looking stores, and better products.

We continued to enhance our merchandise planning and allocation capabilities to increase our inventory efficiency and optimize our markdown strategy to increase sales and expand gross margin.

In addition, we have taken measures to protect and strengthen our supply chain.

In 2022, we are continuing our efforts to be the best sports and outdoors retailer in the country.

We expect to do this by executing on these key priorities:

• Creating a consistent and meaningful omnichannel business that delivers a true omnichannel experience for the customer;

• Providing a great customer experience across all of our points of contact that drives loyalty and long-term growth;

• Growing our store base to strengthen existing markets and enter new ones successfully;

• And we expect to foster our continued growth by:

◦ Strengthening the efficiency and effectiveness of our supply chain;

◦ Developing and retaining an industry leading retail team;

◦ Maintaining and scaling our IT capabilities.

The retail business is highly competitive based on many variables including price, product assortment, customer service, omnichannel experience and store locations.

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• Catalogue & Internet retailers (examples:

Amazon and eBay) do not typically operate brick and mortar stores and primarily rely on delivery of goods.

Amazon, eBay, and Fanatics) do not typically operate brick and mortar stores and primarily rely on delivery of goods.

Sporting goods merchandise and apparel and outdoor recreation products may represent a small portion of the total merchandise on their websites.

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Merchandising

Our merchandise consists of national brand products that we purchase and license from various vendors, owned brand products that we brand with our internal brands and exclusive license products that we purchase and license from vendors and carry exclusively.

Our merchandise consists of national brand products that we purchase and license from various vendors, private label brand products that we brand with our internal brands and exclusive license products that we purchase and license from vendors and carry exclusively.

We have long-standing relationships with many of our suppliers and have partnered with them to grow our business over time.

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For 2022, 2021 and 2020 no vendor represented more than 11%, 11%, and 12% of our total purchases, respectively.

We have premium access to hundreds of well-recognized national brands, such as Nike, Under Armour, adidas, Winchester, Brooks, Crocs, Wilson, Spaulding, Yeti, the North Face, and Columbia Sportswear, which are critical to our market penetration.

These and some of our other national brands rely on us to broaden their consumer reach, which fosters a mutually beneficial relationship when it comes to pricing and assortment.

We play a critical role in delivering customer volume for these brands, especially as mall-based retailers face further headwinds and our industry consolidates.

Our national brand assortment spans across each brand’s price spectrum beyond those of our competitors and we expand below the national brand price spectrum by complementing the assortment with our owned brands.

As such, we receive favorable product exclusivity from leading suppliers.

Our owned brand portfolio consists of 20 brands, including Magellan Outdoors, BCG, Academy Sports + Outdoors, Outdoor Gourmet and Freely.

Our owned brand strategy focuses on in-filling categories and price points that our national brand products may not satisfy.

Our owned brand offerings support and complement our overall merchandising strategy due to limited price-point overlap with national brands.

Additionally, our owned brands generate strong brand equity and drive significant customer loyalty.

Approximately 57% of our customers purchased an owned brand from us in 2021.

We have preferred access to hundreds of well-recognized national brands, such as Nike, Under Armour, adidas, Winchester, Brooks, Crocs, Wilson, Spaulding, Yeti, the North Face, and Columbia Sportswear, which are critical to our market penetration.

These and some of our other national brands rely on us to broaden their consumer reach, which fosters a mutually beneficial relationship when it comes to pricing and assortment, and we play a critical role in delivering customer volume for these brands.

Our national brand assortment spans across each brand’s price spectrum, which we complement with an assortment of our private label brands priced below the national brand price spectrum.

As such, we receive favorable product allocations from leading suppliers.

Our private label brand portfolio consists of 20 brands, including Academy Sports + Outdoors, Magellan Outdoors, BCG, O'rageous, Game Winner, Outdoor Gourmet and Freely.

Our private label brand strategy focuses on in-filling categories and price points that our national brand products may not satisfy.

Our private label brand offerings support and complement our overall merchandising strategy due to limited price-point overlap with national brands.

Additionally, our private label brands generate strong brand equity and drive significant customer loyalty.

Approximately 56% of our customers purchased a private label brand from us in 2022.

As of January 28, 2023, we generally organized our merchandise in four divisions made up of sixteen categories as follows:

Division Category (1)

Primary product types (1)

Division Category Primary product types

Outdoors Camping Coolers and drinkware, camping accessories, camping equipment, sunglasses, backpacks and sports bags

Fishing Marine equipment and fishing rods, reels, baits and equipment

Shooting sports Firearms, ammunition, archery and archery equipment, camouflage apparel, waders, shooting accessories, optics, airguns and hunting equipment

Hunting Firearms, ammunition, archery and archery equipment, camouflage apparel, waders, shooting accessories, optics, airguns and hunting equipment

Sports and Recreation Fitness Fitness equipment, fitness accessories and nutrition supplies

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Team sports footwear Team and specialty sports footwear and slides

(1) Certain products and categories were reclassified amongst categories and divisions, respectively, during 2021 as compared to prior years in order to better align with our current merchandising strategy and view of the business.

Changes in management's merchandise strategy and viewpoints could result in future reclassifications.

The following table sets forth the approximate amount of sales (all of which are based in the U.S.) by merchandise divisions for the periods presented (amounts in thousands):

Fiscal Year Ended

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Merchandise sales

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Net sales $ 6,395,073 $ 6,773,128 $ 5,689,233

(1) Certain products and categories were re-categorized amongst various categories and divisions, respectively, during 2021 as compared to prior years in order to better align with our current merchandising strategy and view of the business.

As a result, we have reclassified sales between divisions for 2020 and 2019 for comparability purposes.

This reclassification is in divisional presentation only and did not impact the overall net sales balances previously disclosed (see Note 2 to the accompanying consolidated financial statements).

(1) E-commerce sales consist of 10.7%, 9.3% and 10.4% of merchandise sales for 2022, 2021 and 2020, respectively.

(3) Other sales consists primarily of the sales return allowance, gift card breakage income, credit card bounties and royalties, shipping income, net hunting and fishing license income and other items.

(2) Other sales consists primarily of the gift card breakage income, credit card bounties and royalties, shipping income, net hunting and fishing license income, sales return allowance and other items.

Our stores, all of which are based in the U.S., are designed to provide our customers with an easy-in, easy-out shopping experience.

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Other than stores that we may temporarily own, and for which we are in the process of executing sale-leaseback transactions, we do not own our retail locations.

We are active members of the communities in which we operate.

We have a strong and growing presence in some of the fastest-growing MSAs in the United States, including Austin, Raleigh, Orlando, Houston, San Antonio, Dallas and Charlotte.

Our long-time customers have grown up with the Academy brand over time and pass their passion for us on to the next generation, enabling us to benefit from strong customer loyalty and shopping frequency in our embedded regional markets.

We are active members of the communities in which we operate, and our long-time customers have grown up with Academy and passed their passion for us on to the next generation, enabling us to benefit from strong customer loyalty and shopping frequency.

As of January 28, 2023, the number of stores that we operated, exclusively in the U.S., by state was as follows:

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Mississippi 8

We have significant growth opportunities in both our core markets and outside our footprint.

West Virginia 1

We have a strong and growing presence in some of the fastest-growing MSAs in the United States, including Austin, Atlanta and Raleigh, which we believe presents significant growth opportunities in both our core markets and outside our footprint.

We believe our real estate strategy has positioned us well for further expansion, and our track record has demonstrated that we can open and operate stores profitably.

We believe there is significant near-term opportunity for expansion with stores in in-fill markets, where we already have an established presence, and in adjacent markets, markets nearby to current locations which are not fully represented.

We expect to open at least eight stores in 2022.

Our marketing strategy is designed to reinforce our broad selection of merchandise and value prices.

We rely on various media to communicate with our customers including printed advertisements, television and radio commercials and digital marketing campaigns, among others.

Our print advertisements are primarily comprised of newspaper and direct mail circulars.

These print advertisements consist of a broad assortment of merchandise tailored to the season of the distribution.

Our television and radio advertisements are typically themed to represent the current selling season and often feature certain merchandise related to that selling season.

Our digital engagement includes communicating with our customers through paid search results, various social media platforms and email.

We often create events at our stores to drive customer traffic.

These events include large grand opening celebrations to commemorate new store openings that offer various activities, food and games and often feature local celebrities.

We also create championship events when professional or collegiate sports teams in our markets win league titles.

At these events we extend our store hours and offer certain commemorative merchandise.

We are active members in the communities we serve and sponsor over 3,000 local sports teams and enter into sponsorship agreements with local professional sports teams, associations, events, networks, players and collegiate programs.

We utilize data obtained from our customer relationship management, or CRM, tools, which enable us to create effective customer-targeting strategies.

Our current CRM programs focus on welcoming our first-time customers, thanking our big spenders, reactivating our lapsed customers and cross-selling our category customers (including our hunting, sports equipment and recreation categories).

We also utilize customer demographic data that we capture to know when our customers buy from us and what items they purchase.

We expect to open 13 to 15 stores in fiscal 2023.

Our marketing strategy is designed to reinforce our fun brand, broad selection of merchandise, and our value offering.

We regularly analyze consumer trends on media consumption and rely on various media channels to communicate with our customers.

We are continually expanding our targeting and personalization capabilities to deliver the right products and messages at the right time and in the media channel they prefer.

Our media mix is a blend of digital and traditional, including paid search, email, affiliate, and social media along with linear and streaming broadcast and radio, print, outdoor and direct mail.

Our advertising features a broad assortment of products and messaging tailored to the current selling season.

We utilize certain customer data obtained from our customer relationship management, or CRM, platform, which enable us to create effective customer-targeting strategies.

Our current CRM programs focus on welcoming our first-time customers, recognizing our top spenders, reactivating our lapsed customers and cross-selling our category customers.

We also utilize customer demographic data that we capture to better localize our marketing, to know when our customers buy from us and what items they purchase.

With over 45 million customers in our database, there is ample opportunity to increase our communication directly with our customers via one-on-one marketing.

In addition to our CRM tools, our Academy Credit Card program also provides data to track our customers’ purchases across all channels, giving us the ability to better serve and target those customers.

We often create events at our stores to drive customer traffic.

These events range from small, private local league shopping nights to large grand opening celebrations to commemorate new store openings that offer various indoor and outdoor activities, athlete and celebrity appearances, fun activities to test our products and meet our suppliers along with food and games.

We also leverage sports championship moments when professional or collegiate sports teams in our markets win league titles.

At these events we extend our store hours and offer official commemorative merchandise and may also host autograph signings and/or meet-and-greet events with players or coaches from the championship team.

We are committed to making a positive impact on the communities we serve and partner with over 700 organizations, including youth sports leagues that reach more than 500,000 participants.

We also partner with school districts, Historically Black Colleges and Universities (HBCUs), local parks, hunting and fishing organizations, military bases and local first responders.

Distribution Centers

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Third-party trucking companies are used to disburse inventory from the distribution centers to and from our stores.

These distribution centers are strategically located throughout our footprint to efficiently serve our retail locations, and have an ability to service up to an average of 110 locations each.

These distribution centers are strategically located throughout our footprint to efficiently serve our retail locations and have the capacity to service up to approximately 120 stores per distribution center.

Information Technology

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As of January 28, 2023, we employed approximately 22,000 team members in the U.S.

and 11 team members in Hong Kong.

and ten team members in Hong Kong.

Of those team members, approximately 50% were full-time and 50% were part-time.

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We require all team members to complete unintentional bias training to help eliminate biases from recruiting, hiring, promotions, job assignments and opportunities, evaluations, compensation, and customer service.

In 2020, we established our Diversity, Inclusion and Belonging Committee, and they led the organization in the creation of the following formal Diversity, Inclusion and Belonging Statement to further demonstrate our commitment:

At Academy Sports + Outdoors, we promote a culture of diversity, inclusion and belonging, which should be reflected in the actions and behavior of our team members.

Diversity is inviting all players to join the team.

Inclusion and belonging are when everyone gets to play the game.

Every player is key, and we are only successful when everyone has an equal opportunity to play and win.

In 2020, we established our Diversity, Inclusion and Belonging Committee, and they led the organization in the creation of our team member led Diversity, Inclusion and Belonging groups throughout the Company.

These groups provide a forum for team members with common interests and/or backgrounds to connect, network, and provide input on issues related events while helping educate and celebrate our team members' diverse backgrounds and experiences.

Talent Management.

The best way to serve our customers is to invest in top talent, be open to innovation, and have the vision to succeed.

We believe the best way to serve our customers is to invest in top talent, be open to innovation, and have the vision to succeed.

We are focused on creating a winning team by recruiting and retaining great people, promoting teamwork, and fostering an enjoyable and rewarding work environment.

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participation in the Company’s 401(k) Plan with a six percent dollar for dollar match up to the IRS deferral limit;

participation in the Company’s Employee Stock Purchase Plan which provides a 15 percent discount on the lower of the stock price at the beginning or the end of the each offering period;

participation in the Company’s Employee Stock Purchase Plan which provides a 15 percent discount on the lower of the stock price at the beginning or the end of each offering period;

paid time off and paid vacations;

the ability for team members to get a portion of their earnings paid daily;

tuition reimbursement programs;

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and a 20 percent team member discount on most all of our merchandise, to name a few.

We also provide, in all our distribution centers and our Katy corporate office, subsidized meals for all team members.

We also provide, in all our distribution centers and our Katy corporate office, subsidized meals for all team members at our onsite café and an annual health and benefits fair.

Specific to our Katy corporate office, we engage our team members through the opportunity to participate in intramural sport teams, 5K fun walk/run events, subsidized membership in the company gym and exercise classes (this is also open to our Katy distribution team members);

“food truck Fridays”;

onsite car wash;

“food truck Thursdays”;

onsite dental and car wash service;

and a company holiday party and other team member appreciation events.

In 2021, we paid over nine million dollars in thank you and retention bonuses to our hourly team members to reward them for their effort and support during a unique and challenging year.

In 2022, the Company increased the annual merit and adjustment pool over prior years to recognize and reward our team member’s efforts and support in a unique and challenging year.

Workplace, Health and Safety.

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We continue to focus on developing and driving our safety-first culture through awareness, training, and actions to reduce the frequency and severity of safety incidents.

During 2021, we continued our COVID-19 safety precautions based on Centers for Disease Control guidelines, including requiring all team members in stores, distribution centers, and the corporate office to socially distance;

wear face coverings if they were not fully vaccinated or at-risk except when alone, eating or drinking;

maintain proper hygiene;

stay home if they did not feel well or test positive for COVID-19;

and promptly notify their leader if they received a positive COVID-19 test result or developed symptoms of COVID-19.

We also encouraged all team members to obtain a COVID-19 vaccination and booster and facilitated several free onsite vaccination events to offer team members a convenient way to get vaccinated.

We have taken many additional actions in our stores based on the needs, risks, and regulations present in each community and facility, including cleaning stores professionally on a regular basis, equipping stores with hand sanitizer stations and signage illustrating how to socially distance within the store, limiting the number of customers admitted at one time, monitoring and sanitizing fitting rooms and sampled clothing, installing protective shields at cash registers and other countertops, and providing a cash incentive to our hourly population to get vaccinated.

We have also provided free masks and hand sanitizer and may take team members’ temperatures when they report to work.

We have taken similar actions to mitigate the spread of COVID-19 in our distribution centers and corporate office.

We continue to monitor the rapidly evolving situation and expect to continue to adapt our operations to address federal, state, and local requirements as well as to implement standards or processes that we determine to be in the best interest of our customers, team members, and communities.

Information about our Executive Officers

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Intellectual Property

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, Game Winner, Outdoor Gourmet and Freely, and our designs, names, slogans, images and trade dress associated with these brands, are valuable assets that are critical to our success.

Our trademarks, service marks, copyrights, patents, processes, trade secrets, domain names and other intellectual property, including our Academy Sports + Outdoors brand, our private label brands, such as Academy Sports + Outdoors, Magellan Outdoors, BCG, O’rageous, Game Winner, Outdoor Gourmet and Freely, and our designs, names, slogans, images and trade dress associated with these brands, are valuable assets that are critical to our success.

We also enter into intellectual property agreements whereby the Company receives the right to use third-party owned trademarks typically in exchange for royalties on sales.

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• 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;

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

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

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• securities and exchange laws and regulations.

We sell firearms, ammunition, and related accessories.

We are a federally licensed firearms dealer, and we sell firearms, ammunition, and related accessories.

Firearms represented approximately 6% of our net sales in 2022.

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 June 2021, the United States Department of Justice 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 and 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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business