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Item 7. Management’s Discussion and Analysis

2025-03-20 compared with 2024-03-21 · 141 added, 138 removed, 335 unchanged (45% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report for the fiscal year ended February 3, 2024 (this "Annual Report").

The following discussion and analysis of our financial condition and results of operations for the year ended February 1, 2025 (“2024”) and the year ended February 3, 2024 (“2023”) should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report for the fiscal year ended February 1, 2025 (this “Annual Report”).

Year-to-year comparisons between 2023 and 2022 have been omitted from this Annual Report, but may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended February 3, 2024.

This discussion contains forward-looking statements that involve risks and uncertainties.

See the section of this Annual Report entitled “Cautionary Statement Regarding Forward-Looking Statements.” When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that characterize our business.

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.

Risk Factors” section of this Annual Report.

Any reference in this Annual Report to “year” or any year in particular refers to our fiscal year, which represents the fifty-two or fifty-three week period ending on the Saturday closest to January 31.

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2024 February 1, 2025 52

2022 January 28, 2023 52

2023 February 3, 2024 53

2022 January 28, 2023 52

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A significant portion of our net sales and profits is driven by summer holidays, such as Memorial Day, Father’s Day and Independence Day, during the second quarter.

Our net sales and profits are also impacted by the November/December holiday selling season, and in part by the sales of cold weather sporting goods and apparel during the fourth quarter.

As of February 3, 2024, we operated 282 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.

Our net sales and profits are also impacted by the August/September back-to-school selling season during the third quarter, the November/December holiday selling season, and in part by the sales of cold weather sporting goods and apparel during the fourth quarter.

As of February 1, 2025, we operat ed 298 sto res that range in size from approximately 40,000 to 130,000 gross square feet, with an average size of approxima tely 70,000 gro ss square feet, through out 19 cont iguous states located primarily in the southern United States.

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

Additionally, we are deepening our customer relationships, further integrating our e-commerce platform with our stores and driving operating efficiencies by developing our omnichannel capabilities, such as our mobile app, optimizing the website experience and upgrading our fulfillment capabilities.

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Fiscal Year Ended

February 3, 2024 January 28, 2023 January 29, 2022

February 1, 2025 February 3, 2024 January 28, 2023

Beginning stores 282 268 259

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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 other factors affect comparable sales, including 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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a shift in the timing of a holiday between comparable periods;

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

The comparable sales metric for 2023 (53 week fiscal year) compares the 52 weeks ended January 27, 2024, against the 52 weeks ended January 28, 2023 (52 week fiscal year).

The 2023 53rd week ended February 3, 2024, is not included in comparable sales for 2023.

Merchandise net sales for the 2023 53rd week ended February 3, 2024, were $73.3 million.

We have seen significant comparable sales fluctuations in recent years from increases of 16.1% and 18.9% in 2020 and 2021, respectively, followed by decreases of 6.4% and 6.5% in 2022 and 2023, respectively.

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

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

The comparable sales metric for 2024 (52 week fiscal year) compares the fiscal year ending February 1, 2025 to the final 52 weeks of the fiscal year 2023 ended February 3, 2024.

Fiscal year 2023 was a 53 week year.

Merchandise net sales for the 2023 53rd week were $73.3 million.

Transactions and average ticket.

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Transactions are influenced by customer traffic, the amount of customers that visited our stores or website, and sales conversion, the percent of those customers that made a purchase.

We define average ticket as total comparable sales divided by the number of transactions during a given period, which tells us the average amount the customer is spending on a purchase.

We define average ticket as total sales divided by the number of transactions during a given period, which tells us the average amount the customer is spending on a purchase.

Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Adjusted Earnings Per Share and Adjusted Free Cash Flow.

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A shift in sales mix toward softgoods would generally have a positive impact on gross margin and a shift in sales mix towards hardgoods would generally have a negative impact on gross margin.

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 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.

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These initiatives include investments in our new customer data platform and the development of strategies, which focus on customer segmentation with the intention of improving customer identification and increasing customer engagement.

Additionally, we recently implemented several innovative website features to enhance the customer online shopping experience, including a redesigned home page, additional BOPIS features, and enhanced shipping notifications.

Additionally , we continue to implemen t several innovative website features to enhance the customer online shopping experience, including a redesigned home page, additional BOPIS features, and enhanced shipping 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 expect that new stores will be a key driver of growth in our net sales and gross margin in the future as we execute our new store opening growth plans.

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 2023 we opened 14 new stores.

We believe our real estate strategy has positioned us well for further expansion.

Our growth strategy encompasses both deepening our presence in existing markets as well as entering new markets, leveraging enhanced brand awareness and operational efficiencies.

Our new store model favors off-mall locations within power centers or stand-alone buildings.

We utilize comprehensive demographic and trade data to guide our real estate site selection.

During the fiscal year 2024, we opened 16 new stores.

We plan to open 20 to 25 stores in fiscal year 2025 and we are continuously evaluating available locations that meet our size requirements and market criteria.

Our strategic real estate approach, including the 39 stores opened since fiscal year 2021, has positioned us effectively for continued expansion.

Gross Margin.

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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 brand 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 duties, tariffs, 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.

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

As a result, we experienced a period of decreased or delayed supply and high inflation which negatively impacted transportation and inventory costs.

Over the past year, we have seen improvement to these constraints, resulting in decreased freight costs.

We refer to loss or theft of inventory as "shrinkage" or "shrink".

Over recent years, the United States retail industry, including Academy, has experienced a significant increase in inventory shrink, which has resulted in a negative impact to our gross margins.

A prolonged period of significant increased shrink could have a material negative impact on our gross margin and results of operations.

We refer to loss or theft of inventory as “shrinkage” or “shrink.” A prolonged period of significant increased shrink could have a material negative impact on our gross margin and results of operations.

Selling, General and Administrative Expenses.

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Fiscal Year Ended

February 3, 2024 January 28, 2023 January 29, 2022

February 1, 2025 February 3, 2024 January 28, 2023

Number of new stores opened 16 14 9

Pre-opening expenses (in millions) $ 13.9 $ 8.3 $ 5.5

During the fourth quarter of 2024, we closed on a sale-leaseback agreement involving a store property in Cypress, Texas.

We determined that the sale-leaseback transaction qualifies as a sale in accordance with ASC 842 (See Note 11).

In connection with the sale-leaseback transaction, we recognized a net gain of approximately $7.1 million in Selling, General, and Administrative expenses on the Consolidated Statements of Income.

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.

In May of 2021, we entered into an amendment to our Term Loan which reduced the applicable margin on our LIBOR rate by 1.25%, and paid down $99 million.

In December of 2022, we utilized cash on hand to voluntarily prepay $100 million of outstanding borrowings on our Term Loan.

However, this prepayment in principal on our Term Loan was largely offset by increases made by the Federal Reserve to the federal funds benchmark rate during 2022 and 2023, resulting in a small decrease in interest expense in 2023 compared to 2022.

In February of 2024, we made an additional prepayment of $100 million on our Term Loan, which we anticipate will result in decreased interest expense in fiscal 2024.

In 2022 and 2023, we utilized cash on hand to voluntarily prepay $100 million of outstanding borrowings on our Term Loan.

However, this prepayment in principal on our Term Loan was largely offset by increases made by the Federal Reserve to the federal funds benchmark rate during 2022 and 2023, resulting in a decrease in interest expense in 2024 compared to 2023.

Income Tax Expense.

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federal, state, and local income tax purposes and accordingly, a provision for income taxes has been recorded for the anticipated tax consequences of our reported results of operations for federal, state and local income taxes.

Recent fluctuations in income tax expense have been primarily as a result of changes in income before income taxes.

Recent fluctuations in income tax expense have been primarily a result of changes in income before income taxes.

Results of Operations

A discussion regarding Results of Operations and Analysis of Financial Condition for the fiscal year ended January 28, 2023, as compared to the fiscal year ended January 29, 2022, is included in “Part II – Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” to our Annual Report on Form 10-K for the fiscal year ended January 28, 2023.

A discussion regarding Results of Operations and Analysis of Financial Condition for the fiscal year ended February 3, 2024, as compared to the fiscal year ended January 28, 2023, is included in “Part II – Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” to our Annual Report on Form 10-K for the fiscal year ended February 3, 2024.

2024 (52 weeks) Compared to 2023 (53 weeks)

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

Fiscal Year Ended Change

February 3, 2024 January 28, 2023 Dollars Percent

Fiscal Year Ended (a)

February 1, 2025 February 3, 2024 Dollars Percent

Net sales $ 5,933,450 100.0 % $ 6,159,291 100.0 % $ (225,841) (3.7) %

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Loss on early retirement of debt

— 0.0 % 1,525 0.0 % (1,525) (100.0) %

Write off of deferred loan costs

449 0.0 % — 0.0 % 449 100.0 %

Other (income), net (36,908) (0.6) % (32,877) (0.5) % (4,031) 12.3 %

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Net income $ 418,447 7.1 % $ 519,190 8.4 % $ (100,743) (19.4) %

Fiscal year 2023 consisted of 53 weeks compared with 52 weeks in fiscal year 2024.

Merchandise net sales for the 53rd week in 2023 were $73.3 million.

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

Net sales decreased $235.8 million, or 3.7%, in 2023 over the prior year as a result of decreased comparable sales of 6.5%, which were partially offset by additional net sales generated by new locations.

As of the end of 2023, we operated 14 additional stores as compared to the end of 2022, and the full benefit of nine stores opened during 2022.

Collectively, these stores accounted for a $113.5 million increase in net sales for 2023, which does not include e-commerce sales fulfilled from these locations.

Additionally, merchandise net sales from the 53rd week, which is not included in comparable sales for 2023, increased net sales by $73.3 million in 2023.

The decrease of 6.5% in comparable sales was driven by lower sales across all merchandise divisions as a result of fewer transactions of 7.0%, partially offset by an increase in average ticket of 0.5%.

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.

The apparel division sales decreased due to lower sales in athletic and outdoor apparel.

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

The sports and recreation merchandise division decrease was a result of decreased sales in fitness equipment and bikes.

E-commerce sales represented 10.7% of merchandise sales for 2023 and 2022.

Net sales decreased $225.8 million, or 3.7%, in fiscal year 2024 (a 52 week year) over fiscal year 2023 (a 53 week year).

This is primarily a result of decreased comparable sales, which was partially offset by $88.5 million of net sales, including e-commerce, generated by 16 new stores opened since the end of the 2023 fiscal year.

Since re-launching our new store program in 2022, we have opened 39 new stores, 23 of which have been open for at least twelve months.

Over the last twelve months, those 23 stores have averaged approximately $13 million in net sales per store, including e-commerce.

We believe that performance of new stores in year one is partially affected by the season in which the new store opens and the brand awareness in the region the new store opens.

Comparable sales decreased 5.1% driven by lower sales across all merchandise divisions as a result of a 6.3% decrease in comparable transactions, partially offset by an increase in average ticket of 1.2%.

The decrease of 3.7% in net sales was driven by decreased sales of 6.5% in the sports and recreation merchandise division, 5.8% in the apparel division and 3.9% in the footwear division, partially offset by an increase of 0.7% in the outdoor merchandise division.

Fiscal year 2024 was a 52 week year compared to fiscal year 2023, which was a 53 week year.

Merchandise net sales for the 53rd week in 2023 were $73.3 million.

E-commerce sales represented 10.5% of merchandise sales for 2024 compared to 10.7% for 2023.

Gross Margin.

Gross margin for 2023 decreased $102.3 million, or 4.6%, when compared to 2022.

Our gross margin, as a percentage of net sales, was 34.3% in 2023 compared to 34.6% in 2022, a decrease of 30 basis points.

This decrease is primarily due to:

• 57 basis points of unfavorability in merchandise margin as a result of increased planned promotional activity compared to the prior year;

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

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

partially offset by

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

Gross margin decreased $98.8 million, or 4.7%.

As a percentage of net sales, gross margin decreased 40 basis points from 34.3% in 2023 to 33.9% in 2024.

The decrease of 40 basis points in gross margin was primarily attributable to:

• 30 basis points of unfavorability due to increased supply chain costs associated with our transition to a new warehouse management system at our Georgia distribution center and increased freight costs;

• 10 basis points of unfavorability in merchandise margin as a result of a higher sales mix of hard goods

Selling, General and Administrative Expenses.

SG&A expenses increased $66.4 million, or 4.9%, to $1,432.4 million in 2023 from $1,366.0 million in 2022.

As a percentage of net sales, SG&A expenses increased 1.9% to 23.3% in 2023 compared to 21.4% in 2022.

The increase of 190 basis points is partially attributable to deleverage from decreased sales.

SG&A costs also increased $66.4 million primarily as a result of:

• Property and facility fees increase of $34.7 million primarily due to investments in long-term growth initiatives, which includes the addition of 14 new stores since the end of the prior year and increased technology expense;

• Employee compensation costs increased $22.7 million primarily due to increased wages expense over the prior year, partially attributable to the addition of new stores;

• Advertising spend increase of $9.4 million.

SG&A expenses increased $40.5 million, or 2.8%, to $1,472.8 million in 2024 from $1,432.4 million in 2023, primarily as a result of our increased strategic investments of $66.4 million in new stores and technology and deleverage from decreased sales.

This was partially offset by an additional week of SG&A expense in the prior year of approximately $17.1 million as fiscal year 2023 was a 53-week year.

Loss on early retirement of debt.

We utilized cash on hand to voluntarily prepay $100 million of outstanding borrowings under the Term Loan in February of 2024.

In December of 2022, we also voluntarily prepaid $100 million of outstanding borrowings under the Term Loan.

These prepayments resulted in losses on early retirement of debt of $1.5 million and $2.0 million for 2023 and 2022, respectively.

We utilized cash on hand to voluntarily prepay $100 million of outstanding borrowings under the Term Loan in February of 2024, which resulted in a loss on early retirement of debt of $1.5 million for 2023.

Write off of Deferred Loan Costs.

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.

Interest Expense.

Interest expense decreased $0.4 million, or 0.8%, to $46.1 million in 2023 from $46.4 million in 2022 resulting primarily from higher capitalized interest due to increased construction of new stores and a lower outstanding balance on our long-term debt, driven by a voluntary prepayment of $100.0 million made in December 2022, partially offset by an increase in interest rates on our Term Loan.

Interest expense decreased $9.2 million, or 19.9%, to $36.9 million in 2024 from $46.1 million in 2023 resulting primarily from a lower outstanding balance on our long-term debt, driven by a voluntary prepayment of $100.0 million under the Term Loan made on February 1, 2024.

Other (Income), net.

Other income increased $12.7 million in 2023, primarily driven by the recognition of a $15.9 million gain pertaining to the settlement of a credit card company litigation matter, which occurred in the fourth quarter of 2023, and higher interest rates on money market investments in the current year, both of which were partially offset by the receipt of $7.2 million in business interruption insurance proceeds relative to a winter storm in 2022 and $3.7 million in proceeds relative to a sale in which we factored rights to pursue a legal matter pertaining to the overpayment of certain tariffs.

Other (Income), net, increased $4.0 million in 2024 when compared to 2023, primarily driven by increased money market investments in the current year.

Income Tax Expense.

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ASO, Inc.'s effective tax rate for 2024 was 22.3% compared to 21.7% in 2023.

The decrease in effective tax rate was largely driven by the inclusion of certain research and development tax credits relative to 2022 and 2023 in the current year results, as well as increased permanent adjustments resulting from the vesting of a higher number of stock compensation awards during 2023.

The increase in effective tax rate was largely driven by the decrease in pre-tax income in the current year, as well as decreased permanent adjustments related to stock compensation awards during 2024.

Non-GAAP Measures

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Additionally, these measures are not intended to be a measure of free cash flow available for management’s discretionary use as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements.

Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income and Adjusted Earnings per Share should not be construed to imply that our future results will be unaffected by unusual or non-recurring items.

Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income and Adjusted Earnings per Share should not be construed to imply th at our future results will be unaffected by unusual or non-recurring items.

In evaluating Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Adjusted Earnings per Share and Adjusted Free Cash Flow, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation.

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Fiscal Year Ended

February 3, 2024 January 28, 2023 January 29, 2022

February 1, 2025 February 3, 2024 January 28, 2023

Net income (a) $ 418,447 $ 519,190 $ 628,001

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Loss on early retirement of debt — 1,525 1,963

Payroll taxes associated with the 2021 Vesting Event (c) — — 15,418

Other (d) — — 3,118

Write off of deferred loan costs 449 — —

Adjusted EBITDA $ 720,246 $ 846,045 $ 994,661

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Adjusted EBIT $ 602,176 $ 735,109 $ 887,899

(a) Net income for the year ended February 3, 2024, includes a $15.9 million net gain relative to a credit card fee litigation settlement which occurred in the fourth quarter of 2023.

(a) Net income for the year ended February 1, 2025, includes a $15.0 million gain pertaining to a litigation settlement and a $7.1 million gain on a sale-leaseback transaction, both of which occurred in the fourth quarter of 2024.

Net income for the year ended February 3, 2024, includes a $15.9 million net gain relative to a credit card litigation settlement which occurred in the fourth quarter of 2023.

Net income for the year ended January 28, 2023, included a $7.2 million gain from a business interruption insurance recovery and a $3.7 million gain from the sale of a tariff relief litigation claim, both of which occurred in the fourth quarter of 2022.

All of these items are included in their respective years within Other (income), net on the Consolidated Statements of Income and are disclosed within Note 2 of the accompanying financial statements.

(b) Represents non-cash charges related to equity based compensation, which vary from period to period depending on certain factors such as the 2021 Vesting Event (see Note 1 to the accompanying financial statements), timing and valuation of awards, achievement of performance targets and equity award forfeitures.

(d) Other adjustments include (representing deductions or additions to Adjusted EBITDA and Adjusted EBIT) amounts that management believes are not representative of our operating performance, including installation costs for energy savings associated with our profitability initiatives.

See Note 2 of the accompanying financial statements.

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

Adjusted Net Income and Adjusted Earnings per Share

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Fiscal Year Ended

February 3, 2024 January 28, 2023 January 29, 2022

February 1, 2025 February 3, 2024 January 28, 2023

Net income (a) $ 418,447 $ 519,190 $ 628,001

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Loss on early retirement of debt — 1,525 1,963

Payroll taxes associated with the 2021 Vesting Event (c) — — 15,418

Other (d) — — 3,118

Tax effects of these adjustments (e) (5,621) (5,382) (14,884)

Write off of deferred loan costs 449 — —

Tax effects of these adjustments (c)

(6,038) (5,621) (5,382)

Adjusted Net Income $ 439,487 $ 539,471 $ 645,757

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Diluted 73,048 77,469 83,895

(a) Net income for the year ended February 3, 2024, includes a $15.9 million net gain relative to a credit card fee litigation settlement which occurred in the fourth quarter of 2023.

Net income for the year ended February 3, 2024, includes a $15.9 million net gain relative to a credit card litigation settlement which occurred in the fourth quarter of 2023.

All of these items are included in their respective years within Other (income), net on the Consolidated Statements of Income and are disclosed within Note 2 of the accompanying financial statements.

(b) Represents non-cash charges related to equity based compensation, which vary from period to period depending on certain factors such as the 2021 Vesting Event, timing and valuation of awards, achievement of performance targets and equity award forfeitures.

(d) Other adjustments include (representing deductions or additions to Adjusted Net Income) amounts that management believes are not representative of our operating performance, including installation costs for energy savings associated with our profitability initiatives.

(e) Represents the tax effect of the total adjustments made to arrive at Adjusted Net Income at our historical tax rate.

See Note 2 of the accompanying financial statements.

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

Represents the tax effect of the total adjustments made to arrive at Adjusted Net Income at our historical tax rate.

Adjusted Free Cash Flow

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Fiscal Year Ended

February 3, 2024 January 28, 2023 January 29, 2022

February 1, 2025 February 3, 2024 January 28, 2023

Net cash provided by operating activities

$ 528,082 $ 535,779 $ 552,005

Net cash used in investing activities

(186,120) (206,139) (108,806)

Adjusted Free Cash Flow $ 341,962 $ 329,640 $ 443,199

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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 occasionally use cash to repurchase common stock.

We may fund our 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.

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

We may fund our liquidity requirements through cash and cash equivalents, cash generated from operating activities, and borrowings under our ABL Facility (as defined below).

On February 1, 2025, our cash and cash equivalents totaled $288.9 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.

We believe our existing cash and cash equivalents, cash flows from operations, as well as availability under the ABL Facility, will be sufficient to fund our cash requirements for the foreseeable future.

Long-Term Debt

As of February 3, 2024, the Company's long-term debt and interest rates consists of:

As of February 1, 2025, the Company's long-term debt consists of:

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

• Term Loan - 9.19% variable rate term-loan with $91.8 million in principal outstanding maturing November 6, 2027 and quarterly principal payments of $750 thousand;

• ABL Facility - $1.0 billion commitment on a variable rate secured asset-based revolving credit facility with no principal outstanding maturing November 6, 2025.

• Term Loan - 8.38% variable rate term-loan with $88.8 million in principal outstanding maturing November 6, 2027 and requiring quarterly principal payments of $750 thousand through September 30, 2027;

• ABL Facility - $1.0 billion commitment on a variable rate secured asset-based revolving credit facility with no principal outstanding maturing March 8, 2029.

See Note 4 to the accompanying financial statements for further disclosure regarding our debt agreements.

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(3) Assumes a minimum revolving credit commitment of $1.0 billion and no balances drawn on our ABL Facility.

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

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

Fiscal Year Ended

February 3, 2024 January 28, 2023 January 29, 2022

February 1, 2025 February 3, 2024 January 28, 2023

Average funds drawn $ 32 $ — $ —

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

February 3, 2024 January 28, 2023

February 1, 2025 February 3, 2024

Outstanding borrowings $ — $ —

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Available borrowing capacity $ 955,495 $ 881,445

On March 8, 2024, the Company issued a press release announcing that the Company entered into an amendment which among other things, extended the maturity of Academy’s asset-based revolving credit facility to March 8, 2029.

See Note 17 to the accompanying financial statements.

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

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Share Repurchases

On June 2, 2022, the Board of Directors of the Company authorized a share repurchase program (the "2022 Share Repurchase Program") under which the Company may purchase up to $600 million of its outstanding shares during the three-year period ending June 2, 2025.

On November 29, 2023, the Board of Directors authorized a new share repurchase program (the “2023 Share Repurchase Program”) under which the Company may purchase up to $600 million of its outstanding shares during the three-year period ending November 29, 2026.

The 2022 Share Repurchase Program and the 2023 Share Repurchase Program are collectively referred to as the "Share Repurchase Programs".

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 February 3, 2024, the Company had $696.7 million remaining for share repurchases under the Share Repurchase Programs.

Under the 2023 Share Repurchase Program, repurchases can be made using a variety of methods, which may include open market purchases, block trades, privately negotiated transactions, accelerated share repurchase programs and/or Rule 10b5-1 or other a non-discretionary trading plans, all in compliance with the rules of the SEC and other applicable legal requirements.

The timing, manner, price and amount of any common share repurchases under the 2023 Share Repurchase Program are determined by the Company in its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions.

The 2023 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.

On December 4, 2024, the Company's Board of Directors authorized a new share repurchase program under which the Company is authorized to purchase up to $700 million of its outstanding shares during the three-year period ending December 4, 2027 (the “2024 Share Repurchase Program”), and which replaces the 2023 Share Repurchase Program.

Under the 2024 Share Repurchase Program, repurchases can be made using a variety of methods, which may include open market purchases, block trades, accelerated share repurchase programs , privately negotiated transactions and/or Rule 10b5-1 or other non-discretionary trading plans, all in compliance with the rules of the SEC and other applicable legal requirements.

The timing, manner, price and amount of any common share repurchases under the 2024 Share Repurchase Program will be determined by the Company in its discretion and will depend on a variety of factors, including legal requirements, price and economic and market conditions.

The 2024 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.

The following table summarizes our share repurchases for the fiscal year ended February 1, 2025 (dollar amounts in thousands, except per share amounts):

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Total Amount Repurchased (1)

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

Second Quarter (April 30, 2023 to July 29, 2023) 1,994,064 53.37 106,432

Third Quarter (July 30, 2023 to October 28, 2023) 863,631 50.51 43,625

Fourth Quarter (October 29, 2023 to February 3, 2024) (2)

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) 1,809,856 54.09 97,900

Third Quarter (August 4, 2024 to November 2, 2024) 1,044,027 51.19 53,441

Fourth Quarter (November 3, 2024 to February 1, 2025) (2)

1,706,487 53.41 91,146

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Dividends Paid 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

Third Quarter (July 30, 2023 to October 28, 2023) $ 0.09 6,718 September 13, 2023

Fourth Quarter (October 29, 2023 to February 3, 2024) $ 0.09 6,675 December 13, 2023

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

Third Quarter (August 4, 2024 to November 2, 2024) $ 0.11 7,739 September 19, 2024

Fourth Quarter (November 3, 2024 to February 1, 2025) $ 0.11 7,621 December 18, 2024

Total Dividends Paid $ 31,463

On March 7, 2024, the Company issued a press release announcing that the Board of Directors declared a quarterly cash dividend with respect to the quarter ended February 3, 2024 of $0.11 per share of common stock, payable on April 18, 2024, to stockholders of record as of the close of business on March 26, 2024.

On March 6, 2025, the Company announced that the Board of Directors declared a quarterly cash dividend with respect to the quarter ended February 1, 2025 of $0.13 per share of common stock, payable on April 17, 2025, to stockholders of record as of the close of business on March 25, 2025.

Capital Expenditures

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Fiscal Year Ended

February 3, 2024 January 28, 2023 January 29, 2022

February 1, 2025 February 3, 2024 January 28, 2023

New stores and relocations $ 107,703 $ 100,419 $ 42,735

Corporate, e-commerce, information technology programs and other 81,992 50,019 44,967

Corporate, e-commerce, and information technology programs 70,474 81,992 50,019

Updates for existing stores and distribution centers 21,412 25,359 15,550

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New stores 60 %

Corporate, e-commerce, information technology programs and other 25 %

Corporate, e-commerce, and information technology programs 20 %

Updates for existing stores and distribution centers 20 %

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Fiscal Year Ended

February 3, 2024 January 28, 2023 January 29, 2022

February 1, 2025 February 3, 2024 January 28, 2023

Net cash provided by operating activities $ 528,082 $ 535,779 $ 552,005

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• $100.7 million decrease in net income;

• $23.1 million net decrease in non-cash charges;

partially offset by

• $28.0 million net increase in non-cash charges offset by a $7.1 million gain, net of fees, on a sale-leaseback transaction in the fourth quarter of fiscal year 2024 (see Note 11);

• $71.7 million net increase in cash flows provided by operating assets and liabilities.

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

• $201.1 million increase in cash flows from merchandise inventories, net related to a reduction in inventory replenishment to align with 2023 sales patterns when compared to the prior year;

partially offset by a

• $86.9 million decrease in cash flows from accounts payable, primarily driven by a reduction in inventory replenishment and lower import and domestic freight costs relative to the prior year fourth quarter.

• $208.1 million increase in cash flows from accounts payable, due to timing of payments for increased merchandise inventories relative to the prior year period;

• $40.1 million increase in cash flows from prepaid expenses and other current assets primarily due to an increase of $25 million related to a legal settlement in the fourth quarter of 2024 as well as timing of payments relative to the prior year period;

• $38.7 million increase in cash flows from accrued expenses and other current liabilities, partially offset by

• $204.0 million decrease in cash flows from merchandise inventories, net due to lower sales in the current year period;

• $22.9 million decrease in cash flows from income taxes payables, due to timing of payments relative to the prior year period

Investing Activities .

Cash used in investing activities increased $97.3 million in 2023 compared to 2022.

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

• $99.5 million higher capital expenditures, primarily driven by increased investments in new stores in 2023.

Cash used in investing activities decreased $20.0 million in 2024 compared to 2023.

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

• $8.2 million decrease in 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;

• $14.2 million increase in cash inflows from proceeds from a sale-leaseback transaction related to our retail store in Cypress, TX (see Note 11).

Financing Activities .

Cash used in financing activities decreased $273.2 million in 2023, compared to 2022.

The primary driver of the decrease was a:

• $286.7 million decrease in cash outflows caused by a reduction in repurchases and retirement of common stock in the current year.

Cash used in financing activities increased $82.1 million in 2024, compared to 2023.

The primary drivers of the increase were:

• $162.1 million increase in cash outflows primarily caused by an increase in repurchases and simultaneous retirement of common stock in the current year;

• $12.3 million decrease in proceeds from the exercise of stock options;

partially offset by

• $100 million decrease in cash outflows due to the prepayment of $100 million on our Term Loan in fiscal year 2023

Future Liquidity

We expect our existing cash balances, internally generated cash flows and available borrowings under our ABL Facility will fulfill anticipated obligations such as capital expenditures, dividends, stock repurchases, working capital needs and scheduled debt maturities over at least the next twelve months.

We expect our existing cash balances, internally generated cash flows and available borrowings under our ABL Facility will be fulfill anticipated obligations such as capital expenditures, dividends, stock repurchases, working capital needs and scheduled debt maturities for the foreseeable future.

As of February 1, 2025, we had $955.5 million of available capacity under our ABL Facility and $288.9 million of cash and cash equivalents.

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The Company believes the following are its critical accounting estimates:

Merchandise Inventories, net

Merchandise Inventories

Merchandise inventories are stated at the lower of weighted average cost and net realizable value.

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Judgments and Uncertainties:

We record an inventory reserve for the estimated shrinkage between physical inventories on a by location basis.

We generally perform a full physical inventory count for each store at least once a year, throughout the year, after which our shrinkage accrual rate to sales for each store is updated based on historical results.

We record an inventory reserve for the estimated shrinkage between physical inventories on a location by location basis.

We perform a full physical inventory count for each store at least once a year, throughout the year, after which our shrinkage accrual rate to sales for each store is updated based on historical results.

For vendor allowances based on contractual provisions, we develop accrual rates for receivables as determined by the agreements, which are typically linked to purchase volumes.

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Additionally, for slow moving or obsolete inventory, we book reserves based on historical margins received for marked down inventory with similarly slow historical sell-through rates.

A twenty percent decrease in assumed margins would not have a material impact to our financial statements.

A 20% decrease in assumed margins would not have a material impact to our financial statements.

We believe our long history of operations has given us sufficient data to enable us to accurately predict these reserves.

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The output of this assessment is an estimated fair value for our reporting unit that is compared to its carrying value to determine whether an impairment charge is necessary.

The income approach uses a discounted cash flow analysis of our projected long-term future company income, and the market value approach is based on earnings multiples for a comparable set of public companies.

These approaches use key input assumptions such as our projected future operating results, the discount rate, the weighting for each valuation approach and the comparable set of companies.

These approaches use key input assumptions such as our projected future operating results, the discount rate, the weighting for each valuation approach and the comparable set of companies and transactions.

Impact of Assumptions:

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In addition to variables considered in developing projected long-term company income, assumptions are made to develop the discount rate, which is based on an assumed risk-free rate, and an equity risk premium developed from general historical market data and comparable companies.

The earnings multiples used in the market approach can vary dependent on which companies are selected in our comparable set.

The earnings multiples and control premiums used in the market approach can vary dependent on which companies and guideline transactions are selected in our comparable set.

A history of declining trends in our operating results such as comparable sales, gross margin, net income and cash flow from operations could impact these assumptions and serve as indicators of future impairment.

There is significant judgment used in determining these assumptions used in the assessment of goodwill impairment and variability in the assumptions could cause us to reach a different conclusion on impairment.

In 2023, we performed a qualitative impairment assessment and determined a quantitative assessment was not necessary.

In 2024, we performed a quantitative impairment assessment and determined that the fair value of the reporting unit exceeded its carrying amount by a significant margin.

The Company has not recorded any impairment charges related to goodwill during fiscal 2024, fiscal 2023, or fiscal 2022.

Intangible Assets

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There is significant judgment used in determining these assumptions on intangible asset impairment and variability in the assumptions could cause us to reach a different conclusion on impairment.

In 2023, we performed a qualitative impairment assessment and determined a quantitative assessment was not necessary.

In 2024, we performed a quantitative impairment assessment and determined that the fair value of Trade Name exceeded its carrying amount by a significant margin.

The Company has not recorded any impairment charges related to intangible assets during fiscal 2024, fiscal 2023, or fiscal 2022.

Recent Accounting Pronouncements

For discussion of recent accounting pronouncements, see Note 2 to the accompanying financial statements.

For a discussion of recent accounting pronouncements, see Note 2 to the accompanying financial statements.

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 7. Management’s Discussion and Analysis