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Item 2. Management’s Discussion and Analysis

2023-08-31 compared with 2023-06-06 · 132 added, 79 removed, 346 unchanged (38% of the section changed)

64 unchanged sentences

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, our actual results may vary in material respects from those projected in these forward-looking statements.

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited financial statements and related notes included elsewhere in this Quarterly Report for the thirteen weeks ended April 29, 2023 and our audited financial statements for the fiscal year ended January 28, 2023 and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Annual Report.

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited financial statements and related notes included elsewhere in this Quarterly Report for the thirteen and twenty-six weeks ended July 29, 2023 and our audited financial statements for the fiscal year ended January 28, 2023 and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Annual Report.

All references to "Academy," "Academy Sports + Outdoors," "ASO, Inc.," "we," "us," "our" or the "Company" in this Quarterly Report refer to Academy Sports and Outdoors, Inc., a Delaware corporation and the current parent holding company of our operations, and its consolidated subsidiaries.

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References to any year, quarter, or month mean our fiscal year, fiscal quarter, and fiscal month, respectively, unless the context requires otherwise.

References to the "current quarter," "2023 first quarter," or similar reference refers to the thirteen week period ended April 29, 2023, and any reference to the "prior year quarter," "2022 first quarter" or similar reference refers to the thirteen week period ended April 30, 2022.

References to the "current quarter," "2023 second quarter," or similar reference refers to the thirteen week period ended July 29, 2023, and any reference to the "prior year quarter," "2022 second quarter" or similar reference refers to the thirteen week period ended July 30, 2022.

Any reference in this Quarterly Report to "current year-to-date," "year-to-date 2023" or similar reference represents the twenty-six week period ended July 29, 2023, and any reference in this Quarterly Report to "prior year-to-date," "year-to-date 2022" or similar reference represents the twenty-six week period ended July 30, 2022.

Unless otherwise specified, all comparisons regarding the current period of 2023 are made to the corresponding period of 2022.

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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 outdoors, apparel, sports and recreation and footwear (representing 28%, 25%, 25% and 22% of our 2023 first quarter net sales, respectively) through both leading national brands and a portfolio of private label brands, which go well beyond traditional sporting goods and apparel offerings.

Our product assortment focuses on key categories of apparel, outdoors, sports and recreation and footwear (representing 28%, 27%, 25% and 20% of our 2023 second quarter net sales, respectively) through both leading national brands and a portfolio of private label brands, which go well beyond traditional sporting goods and apparel offerings.

We sell a range of sporting and outdoor recreation products, including sporting equipment, apparel, footwear, camping gear, patio furniture, outdoor cooking equipment, and hunting and fishing gear, among many others.

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We provide locally relevant offerings, such as crawfish boilers in Louisiana, licensed apparel for area sports fans, baits and lures for area fishing spots, and beach towels in coastal markets.

As of April 29, 2023, we operated 269 stores that range in size from approximately 40,000 to 130,000 gross square feet, with an average size of approximately 70,000 gross square feet, throughout 18 contiguous states located primarily in the southern United States.

As of July 29, 2023, we operated 270 stores that range in size from approximately 40,000 to 130,000 gross square feet, with an average size of approximately 70,000 gross square feet, throughout 18 contiguous states located primarily in the southern United States.

Our stores are supported by approximately 22,000 team members, three distribution centers, and our e-commerce platform, which includes our website at www.academy.com and our mobile app.

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The following table summarizes store activity for the periods indicated:

Thirteen Weeks Ended

April 29, 2023 April 30, 2022

Twenty-Six Weeks Ended

July 29, 2023 July 30, 2022

Beginning stores 268 259

Q1 new stores 1 1

Q2 new stores 1 1

Ending stores 270 261

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and the number of stores that have been in operation for more than 13 months.

We experienced a decrease in comparable sales in the prior year, which continued with a decline of 7.3% for the 2023 first quarter.

We experienced a decrease in comparable sales in the prior year, which continued with a decline of 7.4% for the year-to-date 2023.

See the discussion on Net Sales below for some contributing factors to these changes.

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In recent years we have experienced higher sales related to the outdoors and sports and recreation merchandise divisions, as our customers turned to us for isolated recreation and outdoor and leisure activities during the pandemic.

As our business begins to normalize, we are experiencing a shift in our sales mix from the outdoors and sports and recreation merchandise divisions to the footwear and apparel merchandise divisions, which would generally have a positive impact on our gross margin rate.

As our business has normalized, we have experienced a shift in our sales mix from the outdoors and sports and recreation merchandise divisions to the footwear and apparel merchandise divisions, which has generally had a positive impact on our gross margin rate.

The expansion and enhancement of our omnichannel capabilities has resulted in increased sales in recent years, and we expect that it will continue to be a driver of growth in our net sales.

We continue to invest in initiatives that will increase traffic to our e-commerce platform, which includes our website and mobile app, and drive increased online sales conversion.

We have recently improved our omnichannel capabilities by implementing several innovative features to enhance the customer shopping experience, including outfitting, express check-out and enabling biometric security measures.

We have recently improved our omnichannel capabilities by implementing several innovative features to enhance the customer shopping experience, including a redesigned home page, additional BOPIS features, and enhanced shipment notifications.

Our improved e-commerce platform supports our stores with digital marketing and our BOPIS and ship-to-store programs.

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We believe it is important that we continue to grow our omnichannel capabilities, which, together with recent enhancements made to our website and omnichannel capabilities, contributed to the increase in e-commerce sales during 2022.

During the 2023 first quarter, stores facilitated approximately 95% of our total sales, including ship-from-store, BOPIS and in-store retail sales.

During the 2023 second quarter, stores facilitated approximately 95% of our total sales, including ship-from-store, BOPIS and in-store retail sales.

We expect to continue to invest in expanding and enhancing our omnichannel capabilities, including our mobile app, optimizing the web site experience and upgrading our fulfillment capabilities, which will continue to require significant investments by us.

We expect that new stores will be a key driver of growth in our net sales in the future as we execute our new store opening growth plans of 13 to 15 new stores in 2023 and 120 to 140 new stores over the next five years.

We expect that new stores will be a key driver of growth in our net sales in the future as we execute our new store opening growth plans of 13 to 14 total new stores in 2023 and 120 to 140 total new stores over the five fiscal year period ending with 2027.

Our results of operations have been and will continue to be materially affected by the timing and number of new store openings.

We are continually assessing the number of locations available that could accommodate our preferred size of stores in markets we would consider, and during the 2023 first quarter we opened one new store.

We are continually assessing the number of locations available that could accommodate our preferred size of stores in markets we would consider, and during the 2023 second quarter we opened one new store.

We expect most of our stores to achieve profitability within the first twelve months of opening.

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These expenses are both variable and fixed in nature.

SG&A expenses as a percentage of sales increased from 21.5% in the 2022 first quarter to 24.6% in the 2023 first quarter.

SG&A expenses as a percentage of sales increased from 20.8% in the prior year-to-date to 23.4% in the current year-to-date.

We track and measure operating expenses as a percentage of net sales in order to evaluate our performance against profitability targets.

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Pre-opening expenses represent non-capital expenditures associated with the opening of new stores and distribution centers prior to sales generation or start of operations, which consist primarily of occupancy costs, marketing, payroll and recruiting costs, and are expensed as incurred.

As we execute our new store opening growth plans of 13 to 15 new stores in 2023 and 120 to 140 new stores over the next five years, we expect our pre-opening expenses to increase and result in a negative impact to SG&A as a percentage of sales.

We opened one new store and incurred pre-opening expenses of $1.6 million during the 2023 first quarter.

We opened one new store and incurred pre-opening expenses of $1.0 million during the 2022 first quarter.

As we execute our new store opening growth plans of 13 to 14 total new stores in 2023 and 120 to 140 total new stores over the five fiscal year period ending with 2027, we expect our pre-opening expenses to increase and result in a negative impact to SG&A as a percentage of sales.

The following table summarizes our pre-opening expense activity for the periods presented:

Thirteen Weeks Ended Twenty-Six Weeks Ended

July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022

Number of new stores opened 1 1 2 2

Pre-opening expenses (in millions) $ 2.3 $ 1.9 $ 3.9 $ 2.8

Interest Expense.

Interest expense includes regular interest payable related to our Term Loan, Notes and ABL Facility (see Note 4 to the accompanying financial statements) and the amortization of our deferred loan costs and original issuance discounts associated with the acquisition of the debt.

However, during 2022 and 2023 first quarter, the Federal Reserve increased the federal funds benchmark rate, which resulted in increased interest rates on our Term Loan and led to higher interest expense in the 2023 first quarter relative to the prior year quarter.

In December of 2022, we utilized cash on hand to voluntarily prepay $100 million of outstanding borrowings on our Term Loan (see Note 4 to the accompanying financial statements), however, during the year-to-date 2022 and 2023, the Federal Reserve increased the federal funds benchmark rate, which resulted in increased interest rates on our Term Loan and led to higher interest expense in the year-to-date 2023 relative to the year-to-date 2022.

Income Tax Expense.

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Results of Operations

Thirteen Weeks Ended April 29, 2023 Compared to Thirteen Weeks Ended April 30, 2022

Thirteen Weeks Ended July 29, 2023 Compared to Thirteen Weeks Ended July 30, 2022

The following table sets forth amounts and information derived from our unaudited statements of income for the periods indicated as follows (dollar amounts in thousands):

Thirteen Weeks Ended Change

April 29, 2023 April 30, 2022 Dollars Percent

July 29, 2023 July 30, 2022 Dollars Percent

Net sales $ 1,583,077 100.0 % $ 1,686,915 100.0 % $ (103,838) (6.2) %

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Interest expense, net 11,313 0.7 % 11,157 0.7 % 156 1.4 %

Other (income), net (3,713) (0.3) % (697) (0.0) % (3,016) NM

Other (income), net (3,623) (0.2) % (1,441) (0.1) % (2,182) 151.4 %

Income before income taxes 203,273 12.8 % 247,018 14.6 % (43,745) (17.7) %

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*Percentages in table may not sum properly due to rounding.

**NM - Not meaningful

Net sales decreased $84.1 million, or 5.7%, for the 2023 first quarter compared to the 2022 first quarter as a result of decreased comparable sales of 7.3%, which were partially offset by increased sales generated from new locations.

As of the end of the 2023 first quarter, we operated nine additional stores as compared to the end of the 2022 first quarter, and we had the full benefit of one store opened during the 2022 first quarter.

Collectively, these stores accounted for a net $22.9 million increase in net sales for the 2023 first quarter.

The decrease of 7.3% in comparable sales was driven by lower sales across all merchandise divisions as a result of a decrease in transactions of 6.7% and a decline in average ticket of 0.6%.

The outdoors merchandise division sales declines were led by the hunting and fishing categories.

The sports and recreation merchandise division sales were primarily driven by decreased sales in fitness equipment, water sports, bikes and outdoor games, partially offset by sales increases in team sports, including baseball, golf and racquet sports.

The footwear merchandise division sales decreased due to lower sales in athletic footwear, partially offset by increased sales in team sports footwear.

The apparel merchandise division was relatively flat compared to the prior year.

E-commerce net sales represented 8.2% of merchandise sales in the 2023 first quarter compared to 9.5% in the 2022 first quarter.

Net sales decreased $103.8 million, or 6.2%, in the 2023 second quarter over the prior year second quarter as a result of decreased comparable sales of 7.5%, which were partially offset by additional net sales generated by new locations.

As of the end of the 2023 second quarter, we operated nine additional stores as compared to the end of the 2022 second quarter, and we had the full benefit of one store opened during the 2022 second quarter.

Collectively, these stores accounted for a $24.2 million increase in net sales for the 2023 second quarter.

The decrease of 7.5% in comparable sales was driven by lower sales across all merchandise divisions as a result of a decrease in transactions of 8.3%, partially offset by an increase in average ticket of 0.8%.

The outdoors merchandise division sales declines were primarily as a result of a decrease in the hunting category, driven by decreases in firearms and ammunition sales over the prior year second quarter.

The apparel merchandise division sales decreased due to lower sales in athletic and outdoor apparel, partially offset by increased sales in licensed apparel.

The footwear merchandise division sales decreased due to lower sales in athletic footwear and team sports footwear categories, which were partially offset by increased sales in the casual footwear category.

The decline in the sports and recreation merchandise division sales was primarily driven by decreased sales in water sports, fitness equipment, and bikes, partially offset by sales increases in team sports, including golf and racquet sports and baseball.

E-commerce net sales represented 9.4% of merchandise sales for the 2023 second quarter compared to 10.0% for the prior year second quarter.

Gross Margin.

Gross margin decreased $54.3 million, or 10.4%, to $467.1 million for the 2023 first quarter from $521.4 million for the 2022 first quarter.

As a percentage of net sales, gross margin decreased 1.7% from 35.5% in the 2022 first quarter to 33.8% in the 2023 first quarter.

Gross margin decreased $32.6 million, or 5.5%, to $563.4 million in the 2023 second quarter from $596.1 million in the 2022 second quarter.

As a percentage of net sales, gross margin increased 0.3% from 35.3% in the 2022 second quarter to 35.6% in the 2023 second quarter.

The increase of 30 basis points in gross margin is primarily attributable to:

• 88 basis points of favorability in import and domestic freight due to lower freight costs per unit;

partially offset by

• 37 basis points of unfavorability as a result of increased shrink;

• 21 basis points of unfavorability in merchandise margin as a result of increased promotional activity compared to the 2022 second quarter.

Selling, General and Administrative Expenses.

SG&A expenses increased $13.2 million, or 3.9%, to $352.5 million in the 2023 second quarter as compared to $339.3 million in the 2022 second quarter.

As a percentage of net sales, SG&A expenses increased 2.2% to 22.3% in the 2023 second quarter compared to 20.1% in the 2022 second quarter.

The increase of 220 basis points in SG&A is primarily attributable to deleverage from decreased sales.

SG&A costs also increased $13.2 million primarily as a result of:

• Employee compensation costs increased $8.2 million, primarily due to increased equity compensation and increased wages expense over the prior year, partially attributable to the addition of nine new stores since the end of the second quarter of prior year;

• Property and facility fees increase of $6.0 million primarily due to the addition of new stores.

Interest Expense.

Interest expense increased $0.2 million, or 1.4%, in the 2023 second quarter when compared with the 2022 second quarter, resulting from increased interest rates on our Term Loan, which were partially offset by a lower outstanding balance on our long-term debt as a result of a voluntary prepayment of $100.0 million in December 2022.

Other (Income), net.

Other (income), net, increased $2.2 million in the 2023 second quarter when compared with the 2022 second quarter, primarily driven by higher interest rates on money market investments in the current year.

Income Tax Expense.

Income tax expense decreased $12.0 million to $46.2 million for the 2023 second quarter as compared to $58.2 million in the 2022 second quarter, resulting primarily from a decrease in pre-tax income.

Twenty-Six Weeks Ended July 29, 2023 Compared to Twenty-Six Weeks Ended July 30, 2022

The following table sets forth amounts and information derived from our unaudited statements of income for the periods indicated as follows (dollar amounts in thousands):

Twenty-Six Weeks Ended Change

July 29, 2023 July 30, 2022 Dollars Percent

Net sales $ 2,966,686 100.0 % $ 3,154,645 100.0 % $ (187,959) (6.0) %

Cost of goods sold 1,936,125 65.3 % 2,037,158 64.6 % (101,033) (5.0) %

Gross margin 1,030,561 34.7 % 1,117,487 35.4 % (86,926) (7.8) %

Selling, general and administrative expenses 693,402 23.4 % 655,260 20.8 % 38,142 5.8 %

Operating income 337,159 11.4 % 462,227 14.7 % (125,068) (27.1) %

Interest expense, net 22,543 0.8 % 22,077 0.7 % 466 2.1 %

Other (income), net (7,336) (0.2) % (2,138) (0.1) % (5,198) 243.1 %

Income before income taxes 321,952 10.9 % 442,288 14.0 % (120,336) (27.2) %

Income tax expense 70,907 2.4 % 103,681 3.3 % (32,774) (31.6) %

Net income $ 251,045 8.5 % $ 338,607 10.7 % $ (87,562) (25.9) %

*Percentages in table may not sum properly due to rounding.

Net sales decreased $188.0 million, or 6.0%, for the year-to-date 2023 compared to the year-to-date 2022 as a result of decreased comparable sales of 7.4%, which were partially offset by increased sales generated from new locations.

As of the end of the 2023 second quarter, we operated nine additional stores as compared to the end of the 2022 second quarter, and we had the full benefit of two stores opened during the year-to-date 2022.

Collectively, these stores accounted for a $47.1 million increase in net sales for the year-to-date 2023.

The decrease of 7.4% in comparable sales was driven by lower sales across all merchandise divisions as a result of a decrease in transactions of 7.6%, while the average ticket remained relatively flat.

The outdoors merchandise division sales declines were primarily as a result of the hunting category driven by decreases in firearms and ammunition sales over the prior year-to-date.

The sports and recreation merchandise division decrease was a result of decreased sales in water sports, fitness equipment, bikes and outdoor games, partially offset by sales increases in team sports, including baseball, golf and racquet sports.

The footwear merchandise division sales decreased due to lower sales in athletic footwear, partially offset by increased sales in casual and seasonal footwear.

The apparel merchandise division sales decreased due to lower sales in athletic and outdoor apparel, partially offset by increased sales in licensed apparel.

E-commerce net sales represented 8.8% of merchandise sales in the year-to-date 2023 compared to 9.8% in the year-to-date 2022.

Gross Margin.

Gross margin decreased $86.9 million, or 7.8%, to $1,030.6 million for the year-to-date 2023 from $1,117.5 million for the year-to-date 2022.

As a percentage of net sales, gross margin decreased 0.7% from 35.4% in the year-to-date 2022 to 34.7% in the year-to-date 2023.

The decrease of 70 basis points in gross margin is primarily attributable to:

• 110 basis points of unfavorability in merchandise margin as a result of increased clearance and promotional activity compared to the 2022 first quarter;

• 62 basis points of unfavorability in merchandise margin as a result of increased clearance and promotional activity compared to the 2022 year-to-date;

• 55 basis points of unfavorability as a result of increased inventory shrink;

• 43 basis points of unfavorability in inventory overhead expenditures as a result of higher absorption rates from lower inventory turnover rates;

partially offset by

• 90 basis points of favorability in import and domestic freight due to lower freight costs per unit.

Selling, General and Administrative Expenses.

SG&A expenses increased $25.0 million, or 7.9%, to $340.9 million for the 2023 first quarter from $315.9 million for the 2022 first quarter.

As a percentage of net sales, SG&A expenses increased 3.1% to 24.6% in the 2023 first quarter compared to 21.5% in the 2022 first quarter.

The increase of 310 basis points is primarily attributable to deleverage from increased costs on decreased sales.

SG&A costs increased $25.0 million primarily as a result of:

• Employee compensation costs increased $12.0 million primarily due to increased equity compensation and an increased wages expense over the prior year, partially attributable to the addition of nine new stores since the end of the prior year first quarter;

• Advertising spend increase of $7.0 million;

SG&A expenses increased $38.1 million, or 5.8%, to $693.4 million for the year-to-date 2023 from $655.3 million for the year-to-date 2022.

As a percentage of net sales, SG&A expenses increased 2.6% to 23.4% in the year-to-date 2023 compared to 20.8% in the year-to-date 2022.

The increase of 260 basis points is primarily attributable to deleverage from decreased sales.

SG&A costs also increased $38.1 million primarily as a result of:

• Employee compensation costs increased $20.2 million primarily due to increased equity compensation and an increased wages expense over the prior year, partially attributable to the addition of nine new stores since the end of the prior year second quarter;

• Property and facility fees increase of $10.3 million primarily due to the addition of new stores;

• Advertising spend increase of $5.5 million.

Interest Expense.

Interest expense increased $0.3 million, or 2.8%, for the 2023 first quarter when compared to the 2022 first quarter, resulting from an increase in interest rates in recent months on our Term Loan, which was partially offset by a lower outstanding balance on our long-term debt as a result of a voluntary prepayment of $100.0 million in December 2022.

Interest expense increased $0.5 million, or 2.1%, for the year-to-date 2023 when compared to the year-to-date 2022, resulting from an increase in interest rates on our Term Loan, which were partially offset by a lower outstanding balance on our long-term debt as a result of a voluntary prepayment of $100.0 million in December 2022.

Other (Income), net.

Other income, net, increased $3.0 million in the 2023 first quarter when compared to the 2022 first quarter due to higher interest rates on money market investments in the current year.

Other income, net, increased $5.2 million in the year-to-date 2023 when compared to the year-to-date 2022 due to higher interest rates on money market investments in the current year.

Income Tax Expense.

Income tax expense decreased $20.8 million to $24.7 million for the 2023 first quarter as compared to $45.5 million for the 2022 first quarter, resulting primarily from a decrease in pre-tax income.

Income tax expense decreased $32.8 million to $70.9 million for the year-to-date 2023 as compared to $103.7 million for the year-to-date 2022, resulting primarily from a decrease in pre-tax income.

Non-GAAP Measures

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The following table provides reconciliations of net income to Adjusted EBITDA and to Adjusted EBIT for the periods presented (amounts in thousands):

Thirteen Weeks Ended

April 29, 2023 April 30, 2022

Thirteen Weeks Ended Twenty-Six Weeks Ended

July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022

Net income $ 157,075 $ 188,801 $ 251,045 $ 338,607

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(b) Effective January 28, 2023, we no longer exclude pre-opening expenses from our computations of Adjusted EBITDA and Adjusted EBIT.

Adjusted EBITDA and Adjusted EBIT for the thirteen weeks ended April 30, 2022 have been revised to the current period computation methodology.

Adjusted EBITDA and Adjusted EBIT for the thirteen and twenty-six weeks ended July 30, 2022 have been revised to the current period computation methodology.

See the section entitled Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview - Selling, General and Administrative Expenses for details of our pre-opening expenses for the periods presented.

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The following table provides a reconciliation of net income to Adjusted Net Income and Adjusted Earnings per Share for the periods presented (amounts in thousands, except per share data):

Thirteen Weeks Ended

April 29, 2023 April 30, 2022

Thirteen Weeks Ended Twenty-Six Weeks Ended

July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022

Net income $ 157,075 $ 188,801 $ 251,045 $ 338,607

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(a) Represents non-cash charges related to equity-based compensation, which vary from period to period depending on certain factors such as timing and valuation of awards, achievement of performance targets and equity award forfeitures.

(b) For the thirteen weeks ended April 29, 2023 and April 30, 2022, this represents the estimated tax effect (by using the projected full year tax rates for the respective years) of the total adjustments made to arrive at Adjusted Net Income.

(b) For the thirteen and twenty-six weeks ended July 29, 2023 and July 30, 2022, this represents the estimated tax effect (by using the projected full year tax rates for the respective years) of the total adjustments made to arrive at Adjusted Net Income.

Adjusted Net Income for the thirteen weeks ended April 30, 2022 has been revised to the current period computation methodology.

Adjusted Net Income for the thirteen and twenty-six weeks ended July 30, 2022 has been revised to the current period computation methodology.

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The following table provides a reconciliation of net cash provided by operating activities to Adjusted Free Cash Flow for the periods presented (amounts in thousands):

Thirteen Weeks Ended

April 29, 2023 April 30, 2022

Thirteen Weeks Ended Twenty-Six Weeks Ended

July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022

Net cash provided by operating activities $ 191,431 $ 161,309 $ 243,566 $ 258,406

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We fund these liquidity requirements through cash and cash equivalents, cash generated from operating activities, issuances of debt (such as the Notes) and borrowings under our ABL Facility.

On April 29, 2023, our cash and cash equivalents totaled $295.5 million.

On July 29, 2023, our cash and cash equivalents totaled $311.3 million.

We believe our cash and cash equivalents, as well as our availability under the ABL Facility, will be sufficient to fund our cash requirements for at least the next 12 months.

Long-Term Debt

As of April 29, 2023, the Company's long-term debt and interest rates consist of (see Note 4 to the accompanying financial statements):

As of July 29, 2023, the Company's long-term debt and interest rates consist of (see Note 4 to the accompanying financial statements):

• Notes - 6.00% fixed rate senior secured notes with $400 million in principal outstanding and full principal maturing November 15, 2027;

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Liquidity information related to the ABL Facility is as follows for the periods shown (dollar amounts in thousands):

Thirteen Weeks Ended

April 29, 2023 April 30, 2022

Twenty-Six Weeks Ended

July 29, 2023 July 30, 2022

Average funds drawn $ — $ —

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Liquidity information related to the ABL Facility (amounts in thousands) as of:

April 29, 2023 January 28, 2023 April 30, 2022

July 29, 2023 January 28, 2023 July 30, 2022

Outstanding borrowings $ — $ — $ —

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We lease store locations, distribution centers, office space and certain equipment under operating leases expiring between fiscal years 2023 and 2043.

Operating lease obligations include future minimum lease payments under all of our non-cancelable operating leases at April 29, 2023.

Operating lease obligations include future minimum lease payments under all of our non-cancelable operating leases at July 29, 2023.

The following table summarizes our remaining operating lease obligations by fiscal year:

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(1) Minimum lease payments have not been reduced by sublease rentals of $0.3 million due in the future under non-cancelable sub-leases.

(2) These balances include stores where we have an executed contract but have not taken possession of the location as of April 29, 2023.

In the thirteen weeks ended April 29, 2023, we opened one new location and we intend to open 13 to 15 new locations in 2023.

(2) These balances include stores where we have an executed contract but have not taken possession of the location as of July 29, 2023.

In the twenty-six weeks ended July 29, 2023, we opened two new locations and we intend to open 13 to 14 total new locations in 2023.

Share Repurchases

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The 2022 Share Repurchase Program does not obligate the Company to acquire any particular number of common shares, and the program may be suspended, extended, modified or discontinued at any time.

As of April 29, 2023, we had approximately $249.4 million available for share repurchases pursuant to the 2022 Share Repurchase Program (see Note 2 to the accompanying financial statements).

The following table summarizes our share repurchases for the 2023 first quarter (dollar amounts in thousands, except per share amounts):

As of July 29, 2023, we had approximately $143.0 million available for share repurchases pursuant to the 2022 Share Repurchase Program (see Note 2 to the accompanying financial statements).

The following table summarizes our share repurchases for the 2023 second quarter (dollar amounts in thousands, except per share amounts):

Total Number of Shares Purchased Average Price Paid per Share (1)

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First Quarter (January 29, 2023 to April 29, 2023) 750,010 $ 66.69 $ 50,015

Second Quarter (April 30, 2023 to July 29, 2023) (2)

1,994,064 53.37 106,432

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(1) Excludes the impact of excise taxes.

(2) See Part II, Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds for further detail on the 2023 first quarter share repurchases.

The following table summarizes our quarterly dividend payments for the 2023 first quarter (amounts in thousands, except per share amounts):

(2) See Part II, Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds for further detail on the 2023 second quarter share repurchases.

The following table summarizes our quarterly dividend payments for the year-to-date 2023 (amounts in thousands, except per share amounts):

Dividend per Share Total Dividends Paid Stockholder Date of Record

First Quarter (January 29, 2023 to April 29, 2023) $ 0.09 $ 6,929 March 23, 2023

Second Quarter (April 30, 2023 to July 29, 2023) 0.09 6,896 June 15, 2023

Total Dividends Paid $ 13,825

On June 1, 2023, the Company's Board of Directors declared a quarterly cash dividend with respect to the fiscal quarter ended April 29, 2023, of $0.09 per share of the Company's common stock, payable on July 13, 2023, to stockholders of record as of the close of business on June 15, 2023.

On August 30, 2023, the Company's Board of Directors declared a quarterly cash dividend with respect to the fiscal quarter ended July 29, 2023, of $0.09 per share of the Company's common stock, payable on October 11, 2023, to stockholders of record as of the close of business on September 13, 2023.

Capital Expenditures

The following table summarizes our capital expenditures for the thirteen weeks ended April 29, 2023 and April 30, 2022 (amounts in thousands):

Thirteen Weeks Ended

April 29, 2023 April 30, 2022

The following table summarizes our capital expenditures for the twenty-six weeks ended July 29, 2023 and July 30, 2022 (amounts in thousands):

Twenty-Six Weeks Ended

July 29, 2023 July 30, 2022

New stores $ 53,793 $ 16,151

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We review forecasted capital expenditures throughout the year and will adjust or our capital expenditures based on business conditions at that time.

Cash Flows for the Thirteen Weeks Ended April 29, 2023 and April 30, 2022

Cash Flows for the Twenty-Six Weeks Ended July 29, 2023 and July 30, 2022

Our unaudited statements of cash flows are summarized as follows (in thousands):

Thirteen Weeks Ended

April 29, 2023 April 30, 2022

Twenty-Six Weeks Ended

July 29, 2023 July 30, 2022

Net cash provided by operating activities $ 243,566 $ 258,406

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Typically, cash flows from operations are used to build inventory in advance of peak selling seasons, with the fourth quarter pre-holiday season inventory increase being the most significant.

Cash provided by operating activities in the 2023 first quarter decreased $45.0 million, compared to 2022 first quarter.

Cash provided by operating activities in the year-to-date 2023 decreased $14.8 million, compared to year-to-date 2022.

This decrease in cash was attributable to:

• $87.6 million decrease in net income;

• $5.2 million net decrease in non-cash charges;

partially offset by a

• $78.0 million net increase in cash flows provided by operating assets and liabilities.

• $1.0 million net increase in non-cash charges.

The increase in cash flows from operating assets and liabilities was primarily attributable to:

• $49.1 million increase in cash flows from merchandise inventories, net related to a reduction in inventory replenishment in the 2023 first quarter when compared to the prior year period;

• $34.8 million increase in cash flows from a decrease in performance compensation payments made in the 2023 first quarter relative to the prior year quarter;

• $107.2 million increase in cash flows from merchandise inventories, net related to a reduction in inventory replenishment in the year-to-date 2023 when compared to the prior year period;

partially offset by a

• $58.9 million decrease in cash flows from accounts payable primarily due to decreased inventory receipts relative to the prior year first quarter.

• $44.0 million decrease in cash flows from accounts payable due to decreased inventory receipts relative to the prior year second quarter.

Investing Activities .

Cash used in investing activities increased $23.2 million in the 2023 first quarter compared to the 2022 first quarter.

Cash used in investing activities increased $59.7 million in the year-to-date 2023 compared to the year-to-date 2022.

The increase in cash used in investing activities is primarily due to:

• $23.2 million higher capital expenditures driven by increased investments in new stores in the 2023 first quarter.

• $61.7 million higher capital expenditures, primarily driven by increased investments in new stores in the year-to-date 2023.

Financing Activities .

Cash used in financing activities decreased $40.2 million in the 2023 first quarter, compared to the 2022 first quarter.

Cash used in financing activities decreased $134.9 million in the year-to-date 2023, compared to the year-to-date 2022.

The primary drivers of the decrease were:

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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-Q

Item 2. Management’s Discussion and Analysis