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Item 2. Management’s Discussion and Analysis

2024-09-10 compared with 2024-06-11 · 132 added, 86 removed, 339 unchanged (39% of the section changed)

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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 May 4, 2024 and our audited financial statements for the fiscal year ended February 3, 2024 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 August 3, 2024 and our audited financial statements for the fiscal year ended February 3, 2024 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," "2024 first quarter," or similar reference refers to the thirteen week period ended May 4, 2024, and any reference to the "prior year quarter," "2023 first quarter" or similar reference refers to the thirteen week period ended April 29, 2023.

References to the "current quarter," "2024 second quarter," or similar reference refers to the thirteen week period ended August 3, 2024, and any reference to the "prior year quarter," "2023 second quarter" or similar reference refers to the thirteen week period ended July 29, 2023.

Unless otherwise specified, all comparisons regarding the current period of 2024 are made to the corresponding period of 2023.

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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 outdoor, sports and recreation, apparel, and footwear (representing 28%, 26%, 25%, and 21% of our 2024 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 outdoor, sports and recreation, apparel, and footwear (representing 25%, 26%, 28%, and 20% of our 2024 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 May 4, 2024, we operated 284 stores that range in size from approximately 40,000 to 137,000 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 August 3, 2024, we operated 285 stores that range in size from approximately 40,000 to 137,000 gross square feet, with an average size of approximately 70,000 gross square feet, throughout 19 contiguous states located primarily in the southern United States.

Our stores are supported by approximately 21,000 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

May 4, 2024 April 29, 2023

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

Beginning stores 282 268

Q1 new stores 2 1

Q2 new stores 1 1

Ending stores 285 270

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Increases or decreases in e-commerce between periods being compared directly impact the comparable sales results.

Various factors affect comparable sales, including consumer preferences, buying trends and overall economic trends;

Various factors affect comparable sales, including the relative condition of the U.S.

economy, consumer preferences, buying trends and overall economic trends;

our ability to identify and respond effectively to customer preferences and local and regional trends;

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

The Company's 2024 fiscal year is a 52-week year, whereas the 2023 fiscal year was a 53-week year, which created a one week shift.

The comparable sales metric for the 2024 first quarter compares the 13 weeks ended May 4, 2024 versus the 13 weeks ended May 6, 2023.

The prior year rate of decline in comparable store sales slowed in the 2024 first quarter with a 2024 first quarter comparable sales decrease of 5.7%, compared to 6.4% and 6.5% in 2022 and 2023, respectively.

Additionally, the U.S.

macroeconomic environment in which we operate remains challenging as the result of numerous factors, including continued high inflation, higher consumer debt and interest rates, reduced access to credit, employment and income uncertainty, and lower consumer sentiment, which are impacting consumer discretionary spending behavior and the promotional landscape in which we operate.

The Company's 2024 fiscal year is a 52-week year, whereas the 2023 fiscal year was a 53-week year, which created a o ne week shift.

The comparable sales metric for the 2024 second quarter compares the thirteen and twenty-six weeks ended August 3, 2024 versus the thirteen and twenty-six weeks ended August 5, 2023.

The prior year rate of decline in comparable store sales slowed in year-to-date 2024 compared to the two prior year periods, with a decrease of 6.4% compared to 7.4% and 6.7% in 2023 and 2022, respectively.

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

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Net sales are derived from in-store and e-commerce merchandise sales, net of sales tax and an allowance for merchandise returns.

Net sales fluctuations can be driven by new store openings, comparable sales increases or decreases including e-commerce sales, our ability to adjust inventory based on sales fluctuations, our management of vendor relations and meeting customer demand, allowances and logistics, seasonality, unseasonal or extreme weather, changes in consumer shopping preferences, consumer discretionary spending, and market and sales promotions.

demand, allowances and logistics, seasonality, unseasonal or extreme weather, changes in consumer shopping preferences, consumer discretionary spending, and market and sales promotions.

We must maintain sufficient inventory levels of merchandise that our customers desire to successfully operate our business.

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These platforms allow us to connect further with our customers for marketing and product education and assists us in introducing customers to the Academy brand by reaching customers outside of our current store footprint.

During 2024 first quarter, stores facilitated approximately 95% of our total sales, including ship-from-store, BOPIS and in-store retail sales.

During the 2024 year-to-date 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 further investments by us.

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Our gross margin depends on a number of factors, such as net sales increases or decreases, our promotional activities, product mix including private label merchandise sales, and our ability to control cost of goods sold, such as inventory and logistics cost management.

Our gross margin is also impacted by variables including commodity costs, freight costs, shrinkage (discussed below) and inventory processing costs and e-commerce shipping costs.

Our gross margin is also impacted by variables including commodity costs, freight costs, shrinkage (discussed below), inventory processing costs and e-commerce shipping costs.

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

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These expenses are both variable and fixed in nature.

SG&A expenses as a percentage of sales increased from 24.6% in the 2023

first quarter to 25.9% in the 2024 first quarter, primarily attributable to the addition of new stores.

SG&A expenses as a percentage of sales increased from 23.4% in the 2023 year-to-date second quarter to 24.8% in the 2024 year-to-date second quarter, which was primarily attributable to our store growth strategy as well as deleverage from decreased sales, partially offset by favorable reductions in equity compensation .

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

Thirteen Weeks Ended

May 4, 2024 April 29, 2023

Thirteen Weeks Ended Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023

Number of new stores opened 1 1 3 2

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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.

Interest expense includes regular interest payable related to our Term Loan, Notes and ABL Facility (see Note 4 to our unaudited consolidated financial statements included under Part I, Item 1 of this Quarterly Report) and the amortization of our deferred loan costs and original issuance discounts associated with the acquisition of the debt.

During the fourth quarter of 2023, we utilized cash on hand to voluntarily prepay $100 million of outstanding borrowings on our Term Loan.

This pay down has resulted in decreased interest expense in the 2024 first quarter relative to the prior year first quarter, and we anticipate it will result in decreased interest expense throughout the remainder of 2024.

This pay down resulted in decreased interest expense in year-to-date 2024 as compared to the prior year period, and we anticipate it will result in decreased interest expense compared to 2023 throughout the remainder of 2024.

Income Tax Expense.

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Results of Operations

Thirteen Weeks Ended May 4, 2024 Compared to Thirteen Weeks Ended April 29, 2023

Thirteen Weeks Ended August 3, 2024 Compared to Thirteen Weeks Ended July 29, 2023

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

May 4, 2024 April 29, 2023 Dollars Percent

August 3, 2024 July 29, 2023 Dollars Percent

Net sales $ 1,548,980 100.0 % $ 1,583,077 100.0 % $ (34,097) (2.2) %

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Interest expense, net 9,071 0.6 % 11,313 0.7 % (2,242) (19.8) %

Other (income), net (5,531) (0.4) % (3,623) (0.2) % (1,908) 52.7 %

Income before income taxes 186,546 12.0 % 203,273 12.8 % (16,727) (8.2) %

Income tax expense 43,958 2.8 % 46,198 2.9 % (2,240) (4.8) %

Net income $ 142,588 9.2 % $ 157,075 9.9 % $ (14,487) (9.2) %

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

Net sales decreased $34.1 million, or 2.2%, in the 2024 second quarter from the prior year second quarter as a result of decreased comparable sales of 6.9% , partially offset by additional sales generated by new locations.

As of the end of the 2024 second quarter, we operated 15 additional stores as compared to the end of the 2023 second quarter, and we had the full benefit of one store opened during the 2023 second quarter.

Collectively, these stores accounted for a $41.7 million increase in net sales in the current quarter compared to the 2023 second quarter, not including e-commerce sales fulfilled from these locations.

The decrease of 6.9% in comparable sales was driven by lower comparable sales across all merchandise divisions as a result of a 7.4% decrease in comparable transactions, partially offset by an increase in average ticket of 0.5%.

The decrease of 2.2% in net sales was driven by decreased sales of 7.3% in the sports and recr eation merchandise division and 2.2% in the apparel merchandise division, partially offset by increased sales of 1.3% in the footwear merchandise division and 0.8% in the outdoors merchandise division.

The decrease in net and comparable sales primarily reflected challenging macroeconomic conditions.

Additionally, a temporary reduction in outbound shipments at our Georgia distribution center related to a new warehouse management information system resulted in a decrease of approximately 2% in both net and comparable sales and several regional severe weather events resulted in a decrease of approximately 1% in both net and comparable sales.

E-commerce net sales represented 9.7% of merchandise sales for the 2024 second quarter compared to 9.4% for the prior year second quarter.

Gross Margin.

Gross margin decreased $4.7 million, or 0.8%, to $558.7 million in the 2024 second quarter from $563.4 million in the 2023 second quarter.

As a percentage of net sales, gross margin increased 50 basis points from 35.6% in the 2023 second quarter to 36.1% in the 2024 second quarter.

The increase in gross margin was primarily attributable to product cost management, including lower transportation costs.

These improvements were partially offset by increased planned promotional activity compared to the 2023 second quarter.

Selling, General and Administrative Expenses.

SG&A expenses increased $16.2 million, or 4.6%, to $368.6 million in the 2024 second quarter as compared to $352.5 million in the 2023 second quarter.

As a percentage of net sales, SG&A expenses increased 150 basis points to 23.8% in the 2024 second quarter compared to 22.3% in the 2023 second quarter.

The increase in SG&A is partially attributable to deleverage from decreased sales.

SG&A costs also increased $16.2 million primarily as a result of our increased strategic investments of $17.1 million in new stores and technology, which was partially offset by favorable reductions in equity compensation.

Interest Expense.

Interest expense decreased $2.2 million, or 19.8%, in the 2024 second quarter when compared with the 2023 second quarter, resulting from a lower outstanding balance on our long-term debt driven by a voluntary prepayment of $100.0 million made on February 1, 2024, slightly offset by higher interest rates.

Other (Income), net.

Other (income), net, increased $1.9 million in the 2024 second quarter when compared with the 2023 second quarter, primarily driven by higher interest rates on increased money market investments in the current year.

Income Tax Expense.

Income tax expense decreased $2.2 million to $44.0 million for the 2024 second quarter as compared to $46.2 million in the 2023 second quarter, resulting primarily from a decrease in pre-tax income.

The Company's effective income tax rate was 23.6% in the second quarter of 2024 compared to 22.7% in the second quarter of 2023.

The increase in effective tax rate is primarily the result of a reduction in excess tax benefits for share-based compensation in 2024 compared to 2023.

Twenty-Six Weeks Ended August 3, 2024 Compared to Twenty-Six Weeks Ended July 29, 2023

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

August 3, 2024 July 29, 2023 Dollars Percent

Net sales $ 2,913,200 100.0 % $ 2,966,686 100.0 % $ (53,486) (1.8) %

Cost of goods sold 1,898,681 65.2 % 1,936,125 65.3 % (37,444) (1.9) %

Gross margin 1,014,519 34.8 % 1,030,561 34.7 % (16,042) (1.6) %

Selling, general and administrative expenses 722,050 24.8 % 693,402 23.4 % 28,648 4.1 %

Operating income 292,469 10.0 % 337,159 11.4 % (44,690) (13.3) %

Interest expense, net 18,557 0.6 % 22,543 0.8 % (3,986) (17.7) %

Write off of deferred loan costs 449 — % — — % 449 NM

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

Net sales decreased $19.4 million, or 1.4%, in the 2024 first quarter over the prior year first quarter as a result of decreased comparable sales of 5.7%, which were partially offset by additional net sales generated by new locations.

As of the end of the 2024 first quarter, we operated 15 additional stores as compared to the end of the 2023 first quarter, and we had the full benefit of one store opened during the 2023 first quarter.

Collectively, these stores accounted for a $35.2 million increase in net sales for the 2024 first quarter, which does not include e-commerce sales fulfilled from these locations.

The decrease of 5.7% in comparable sales was driven by lower comparable sales across all merchandise divisions as a result of fewer comparable transactions of 4.6% and a 1.2% decline in average ticket.

The decrease of 1.4% in net sales was driven by lower sales across the sports and recreation, footwear and apparel merchandise divisions, partially offset by an increase in the outdoors merchandise division.

The outdoors merchandise division sales increases were primarily as a result of an increase in the camping category, driven by increases in coolers and drinkware sales over the prior year first quarter.

The apparel merchandise division sales decreased primarily due to lower sales in licensed apparel.

The footwear merchandise division sales decrease was led by lower sales in the work footwear and team sports footwear categories, partially offset by an increase in sales in the athletic footwear category.

The decline in the sports and recreation merchandise division sales was primarily driven by decreased sales in fitness equipment and accessories and outdoor cooking.

E-commerce net sales represented 9.0% of merchandise sales for the 2024 first quarter compared to 8.2% for the prior year first quarter.

Net sales decreased $53.5 million, or 1.8%, for the year-to-date 2024 over the year-to-date 2023 as a result of decreased comparable sales of 6.4%, which were partially offset by additional net sales generated by new locations.

As of the end of the 2024 second quarter, we operated 15 additional stores as compared to the end of the 2023 second quarter, and we had the full benefit of two stores opened during the year-to-date 2023 second quarter.

Collectively, these stores accounted for a $76.9 million increase in net sales for the year-to-date 2024, not including e-commerce sales fulfilled from these locations.

The decrease of 6.4% in comparable sales was driven by lower comparable sales across all merchandise divisions as a result of a 6.1% decrease in comparable transactions while the average ticket remained relatively flat.

The decrease of 1.8% in net sales was driven by decreased sales of 5.9% in the sports and recreation merchandise division and 2.5% in the apparel division, partially offset by an increase of 1.6% in the outdoors merchandise division, while footwear sales remained relatively flat.

The decrease in net and comparable sales primarily reflected challenging macroeconomic conditions.

Additionally, a temporary reduction in outbound shipments at our Georgia distribution center related to a new warehouse management information system resulted in a decrease of approximately 1% in both net and comparable sales and several regional severe weather events resulted in a decrease of approximately 0.5% in both net and comparable sales.

E-commerce net sales represented 9.4% of merchandise sales for the year-to-date 2024 compared to 8.8% for the year-to-date 2023.

Gross Margin.

Gross margin decreased $11.3 million, or 2.4%, to $455.8 million in the 2024 first quarter from $467.1 million in the 2023 first quarter.

As a percentage of net sales, gross margin decreased 40 basis points from 33.8% in the 2023 first quarter to 33.4% in the 2024 first quarter.

The decrease in gross margin is primarily attributable to:

• 80 basis points of unfavorability in merchandise margin as a result of a higher sales mix of hard goods and increased planned promotional activity compared to the 2023 first quarter;

• 23 basis points of unfavorability as a result of increased inventory valuation adjustments;

partially offset by

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

• 18 basis points of favorability related to decreased inventory shrinkage.

Gross margin decreased $16.0 million, or 1.6%, to $1,014.5 million for the year-to-date 2024 from $1,030.6 million for the year-to-date 2023.

As a percentage of net sales, gross margin increased 10 basis points from 34.7% for the year-to-date 2023 to 34.8% for the year-to-date 2024.

The increase in gross margin was primarily attributable to product cost management, including lower transportation costs.

These improvements were partially offset by increased planned promotional activity compared to year-to-date 2023.

Selling, General and Administrative Expenses.

SG&A expenses increased $12.5 million, or 3.7%, to $353.4 million in the 2024 first quarter as compared to $340.9 million in the 2023 first quarter.

As a percentage of net sales, SG&A expenses increased 130 basis points to 25.9% in the 2024 first quarter compared to 24.6% in the 2023 first quarter.

SG&A expenses increased $28.6 million, or 4.1%, to $722.1 million for the year-to-date 2024 as compared to $693.4 million for the year-to-date 2023.

As a percentage of net sales, SG&A expenses increased 140 basis points to 24.8% for the year-to-date 2024 compared to 23.4% for the year-to-date 2023.

The increase in SG&A is partially attributable to deleverage from decreased sales.

SG&A costs also increased $12.5 million primarily as a result of:

• Increased investments primarily related to our store growth strategy of $16.3 million, which was partially offset by favorable reductions in equity compensation.

SG&A costs also increased $28.6 million primarily as a result of our increased strategic investments of $33.6 million in new stores and technology, which was partially offset by favorable reductions in equity compensation.

Interest Expense.

Interest expense decreased $1.7 million, or 15.5%, in the 2024 first quarter when compared with the 2023 first quarter, resulting from a lower outstanding balance on our long-term debt driven by a voluntary prepayment of $100.0 million made on February 1, 2024, slightly offset by higher interest rates.

Interest expense decreased $4.0 million, or 17.7%, for the year-to-date 2024 when compared with the year-to-date 2023, resulting from a lower outstanding balance on our long-term debt driven by a voluntary prepayment of $100.0 million made on February 1, 2024, slightly offset by higher interest rates.

Other (Income), net.

Other (income), net, increased $1.5 million in the 2024 first quarter when compared with the 2023 first quarter, primarily driven by higher interest rates on money market investments in the current year.

Other (income), net, increased $3.4 million for the year-to-date 2024 when compared with the year-to-date 2023, primarily driven by higher interest rates on increased money market investments in the current year.

Write off of Deferred Loan Costs.

Write off of Deferred Loan Costs increased by $0.4 million in the 2024 first quarter when compared with the 2023 first quarter, in connection with the amendment that led to the write off of deferred loan costs on the ABL Facility in the 2024 first quarter.

Write off of Deferred Loan Costs increased by $0.4 million for the year-to-date 2024 when compared with the year-to-date 2023, in connection with the amendment in the 2024 first quarter that led to the write off of deferred loan costs on the ABL Facility for the year-to-date 2024.

Income Tax Expense.

Income tax expense decreased $3.5 million to $21.2 million for the 2024 first quarter as compared to $24.7 million in the 2023 first quarter, resulting primarily from a decrease in pre-tax income.

The Company's effective income tax rate was 21.7% in the first quarter of 2024 compared to 20.8% in the first quarter of 2023.

Income tax expense decreased $5.8 million to $65.1 million for the year-to-date 2024 as compared to $70.9 million for the year-to-date 2023, resulting primarily from a decrease in pre-tax income.

The Company's effective income tax rate was 22.9% for the year-to-date 2024 compared to 22.0% for the year-to-date 2023.

The increase in effective tax rate is primarily the result of a reduction in excess tax benefits for share-based compensation in 2024 compared to 2023.

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

May 4, 2024 April 29, 2023

Thirteen Weeks Ended Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023

Net income $ 142,588 $ 157,075 $ 219,053 $ 251,045

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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

May 4, 2024 April 29, 2023

Thirteen Weeks Ended Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023

Net income $ 142,588 $ 157,075 $ 219,053 $ 251,045

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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.

For the thirteen weeks ended May 4, 2024 and April 29, 2023, 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.

For the thirteen and twenty-six weeks ended August 3, 2024 and July 29, 2023, 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 Free Cash Flow

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

May 4, 2024 April 29, 2023

Thirteen Weeks Ended Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023

Net cash provided by operating activities $ 91,346 $ 191,431 $ 291,023 $ 243,566

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Our principal liquidity requirements are for working capital, capital expenditures and cash used to pay our debt obligations and related interest expense.

We also use cash to pay dividends and to repurchase common stock.

We also use cash to pay dividends and repurchase common stock.

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 May 4, 2024, our cash and cash equivalents totaled $378.1 million.

On August 3, 2024, our cash and cash equivalents totaled $324.6 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 the next 12 months and the longer term foreseeable future.

Long-Term Debt

As of May 4, 2024, the Company's long-term debt and interest rates consist of (see Note 4 to the accompanying financial statements):

As of August 3, 2024, 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

May 4, 2024 April 29, 2023

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

Average funds drawn $ 64 $ —

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

May 4, 2024 February 3, 2024 April 29, 2023

August 3, 2024 February 3, 2024 July 29, 2023

Outstanding borrowings $ — $ — $ —

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We predominantly lease store locations, distribution centers, office space and certain equipment under operating leases expiring between fiscal years 2024 and 2044.

Operating lease obligations include future minimum lease payments under all of our non-cancelable operating leases at May 4, 2024.

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

Operating lease obligations include future minimum lease payments under all of our non-cancelable operating leases at August 3, 2024.

The following table summarizes our remaining operating lease obligations by fiscal year (amounts in thousands):

2024 2025 2026 2027 2028 After 2028 Total

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(1) Minimum lease payments have not been reduced by sublease rentals of $2.0 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 May 4, 2024.

(2) These balances include stores where we have an executed contract but have not taken possession of the location as of August 3, 2024.

Share Repurchases

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The Share Repurchase Programs do not obligate the Company to acquire any particular number of common shares, and the programs may be suspended, extended, modified or discontinued at any time.

As of May 4, 2024, the Company had $574.3 million remaining for share repurchases under the Share Repurchase Programs.

(see Note 2 to the accompanying financial statements).

The following table summarizes our share repurchases for the 2024 first quarter (dollar amounts in thousands, except per share amounts):

As of August 3, 2024, the Company had $476.4 million remaining for share repurchases under the Share Repurchase Programs (see Note 2 to the accompanying financial statements).

The following table summarizes our share repurchases for the 2024 first and second quarters (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 (February 4, 2024 to May 4, 2024) 1,983,967 $ 61.71 $ 122,425

Second Quarter (May 5, 2024 to August 3, 2024) (2)

1,809,856 54.09 97,900

Total Shares Repurchased 1,983,967 $ 61.71 $ 122,425

Total Share Repurchase Activity 3,793,823 $ 58.07 $ 220,325

(1) Excludes the impact of unpaid excise taxes.

(2) See Part II, Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds for further detail on the 2024 first quarter share repurchases.

The following table summarizes our quarterly dividend payments for 2024 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 2024 second quarter share repurchases.

The following table summarizes our quarterly dividend payments for 2024 first and second quarters (amounts in thousands, except per share amounts):

Dividend per Share Total Dividends Paid Stockholder Date of Record

First Quarter (February 4, 2024 to May 4, 2024) $ 0.11 $ 8,182 March 26, 2024

Second Quarter (May 5, 2024 to August 3, 2024) 0.11 7,921 June 20, 2024

Total Dividends Paid $ 16,103

On June 6, 2024, the Company's Board of Directors declared a quarterly cash dividend with respect to the fiscal quarter ended May 4, 2024, of $0.11 per share of the Company's common stock, payable on July 18, 2024, to stockholders of record as of the close of business on June 20, 2024.

On September 5, 2024, the Company's Board of Directors declared a quarterly cash dividend with respect to the fiscal quarter ended August 3, 2024, of $0.11 per share of the Company's common stock, payable on October 17, 2024, to stockholders of record as of the close of business on September 19, 2024.

Capital Expenditures

The following table summarizes our capital expenditures for the thirteen weeks ended May 4, 2024 and April 29, 2023 (amounts in thousands):

Thirteen Weeks Ended

May 4, 2024 April 29, 2023

The following table summarizes our capital expenditures for the twenty-six weeks ended August 3, 2024 and July 29, 2023 (amounts in thousands):

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

New stores $ 37,504 $ 53,793

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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 May 4, 2024 and April 29, 2023

Cash Flows for the Twenty-Six Weeks Ended August 3, 2024 and July 29, 2023

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

Thirteen Weeks Ended

May 4, 2024 April 29, 2023

Twenty-Six Weeks Ended

August 3, 2024 July 29, 2023

Net cash provided by operating activities $ 291,023 $ 243,566

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Net cash used in financing activities (240,636) (161,529)

Net increase (decrease) in cash and cash equivalents $ 30,225 $ (41,609)

Net decrease in cash and cash equivalents $ (23,352) $ (25,809)

Operating Activities.

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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 2024 first quarter increased $147.5 million, compared to 2023 first quarter.

Cash provided by operating activities for the year-to-date 2024 increased $47.5 million, compared to the year-to-date 2023.

This increase in cash was attributable to:

• $17.5 million decrease in net income;

• $2.6 million net increase in non-cash charges;

• $76.9 million net increase in cash flows provided by operating assets and liabilities;

partially offset by

• $32.0 million decrease in net income.

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

• $59.7 million decrease in cash flows from merchandise inventories, net due to higher sales in the prior year period;

• $52.5 million increase in cash flows from accrued expenses and other current liabilities, primarily driven by a $43.5 million increase in accrued personnel costs related to bonuses and timing of payments, $5.7 million change in accrued self-insurance due to timing of payments in the 2023 first quarter compared to the 2024 first quarter, and a $1.7 million increase in accrued other liabilities in the year-to-date 2024 relative to the prior year;

• $159.7 million increase in cash flows from accounts payable, due to timing of payments relative to the prior year first quarter.

• $22.4 million increase in cash flows from accrued expenses and other current liabilities, primarily driven by a $21.1 million increase in accrued personnel costs related to bonuses and timing of payments;

• $166.1 million increase in cash flows from accounts payable, due to timing of payments for increased merchandise inventories relative to the prior year period;

partially offset by

• $146.9 million decrease in cash flows from merchandise inventories, net due to lower sales in the current year period.

Investing Activities .

Cash used in investing activities decreased $34.1 million in the year-to-date 2024 compared to the year-to-date 2023.

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

The decrease in cash used in investing activities was primarily attributable to:

• $36.3 million lower capital expenditures, primarily driven by decreased spending related to Corporate, E-commerce, and information technology programs in the year-to-date 2024 compared to the year-to-date 2023;

partially offset by

• $2.1 million decrease in proceeds from the sale of property and equipment.

Financing Activities .

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• $63.9 million increase in cash outflows primarily caused by an increase in repurchases and simultaneous retirement of common stock in the current year;

• $8.1 million decrease in proceeds from the exercise of stock options;

• $5.7 million increase in debt issuance fees paid during the current year as part of the ABL Amendment;

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This management's discussion and analysis of our financial condition and results of operations is based upon our unaudited financial statements, which have been prepared in accordance with GAAP.

The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.

revenues and expenses during the reporting period.

Our management bases its estimates on historical experience and other assumptions it believes to be reasonable under the circumstances.

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Recent Accounting Pronouncements

The information set forth in Note 2 to our unaudited consolidated financial statements under Part I, Item 1 of this Quarterly Report is incorporated herein by reference.

The information set forth in Note 2 to our unaudited consolidated financial statements included under Part I, Item 1 of this Quarterly Report is incorporated herein by reference.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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