What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-06-10 compared with 2024-12-10 · 132 added, 180 removed, 291 unchanged (52% of the section changed)

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Forward-looking statements include all statements that are not historical facts, including statements reflecting our current views with respect to, among other things, our operations and financial performance.

These forward-looking statements are included throughout this Quarterly Report, including this "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and in the section entitled "Risk Factors," and relate to matters such as macroeconomic conditions, our industry, business strategy, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information.

These forward-looking statements are included throughout this Quarterly Report, including in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and in the section entitled “Risk Factors,” and relate to matters such as macroeconomic conditions, our industry, business strategy, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information.

We have used the words “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “future,” “will,” “seek,” “foreseeable,” the negative version of these words or similar terms and phrases to identify forward-looking statements in this Quarterly Report.

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However, there can be no assurance that management’s expectations, beliefs and projections will result or be achieved.

We believe that these factors include but are not limited to those described under "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2024 (the "Annual Report"), as filed with the Securities and Exchange Commission (the "SEC") on March 21, 2024, as such risk factors have been updated from time to time in our periodic filings with the SEC, and are accessible on the SEC's website at www.sec.gov.

Actual results may differ materially from these expectations due to changes in global, regional or local economic, business, competitive, market, regulatory and other factors that could affect overall consumer spending or our industry, including the possible effect of ongoing macroeconomic challenges, inflation and higher interest rates, trade policy changes or additional tariffs or changes in tariffs, geopolitical tensions, or changes to the financial health of our customers, many of which are beyond our control.

We believe that these factors include but are not limited to those described under the “Risk Factors” section in the Company's Annual Report, as such risk factors may be updated from time to time in our periodic filings with the SEC which are accessible on the SEC's website at www.sec.gov.

Any forward-looking statement made by us in this Quarterly Report speaks only as of the date of this Quarterly Report and are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report.

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• overall decline in the health of the economy and consumer discretionary spending;

• our ability to predict or effectively react to changes in consumer tastes and preferences, to acquire and sell brand name merchandise at competitive price s and/or to manage our inventory balances;

• risks associated with our reliance on internationally manufactured merchandise, including in China, which exposes us to various international risks, including potential tariffs, that could have a material adverse effect on our business and results of operations;

• our ability to safegua rd sensitive or confidential data relating to us and our customers, team members and vendors;

• intense competition in the sporting goods and outdoor recreation retail industries;

• risks associated with our reliance on internationally manufactured merchandise, including in China, which exposes us to various international risks, including additional tariffs and our ability to successfully reduce our direct cost exposure to China;

• our ability to operate, update or implement our information systems;

• our ability to manage our inventory balances;

• risks associated with our e-commerce business;

• our ability to safeguard sensitive or confidential data relating to us and our customers, team members and vendors;

• intense competition in the sporting goods and outdoor recreation retail industries;

• risks associated with disruptions in our supply chain and losses of merchandise purchasing incentives;

• harm to our reputation;

• any failure of our third-party vendors of outsourced business services and solutions;

• our ability to successfully continue our store growth plans or manage our growth effectively, or any failure of our new stores to generate sales and/or achieve profitability;

• risks associated with our e-commerce business;

• risks related to our private label brand merchandise;

• any disruption in the operation of our distribution centers;

• quarterly and seasonal fluctuations in our operating results;

• the effectiveness of our marketing and advertising programs;

• our ability to attract, train and retain quality team members in sufficient numbers, increases in wage and labor costs, and changes in laws and other labor issues;

• our ability to protect against inventory shrink;

• payment-related risks;

• the occurrence of severe weather events, catastrophic health events, natural or man-made disasters, social and political conditions or civil unrest;

• any failure to attract, train and retain quality team members in sufficient numbers, increases in wage and labor costs, and changes in laws and other labor issues;

• our ability to retain key personnel;

• the geographic concentration of our stores;

• our ability to attract, retain and train key personnel;

• fluctuations in merchandise (including raw materials) costs and availability;

• payment-related risks;

• the effectiveness of our marketing and advertising programs;

• our ability to protect against inventory shrink;

• any disruption in the operation of our distribution centers;

• our reliance on key personnel to support our existing business and future initiatives;

• our reliance on suppliers to supply us with merchandise that we purchase for resale;

• risks related to our private label brand merchandise;

• any failure of our third-party vendors of outsourced business services and solutions;

• harm to our reputation;

• quarterly and seasonal fluctuations in our operating results;

• our ability to successfully pursue strategic acquisitions and integrate acquired businesses.

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• our ability to comply with laws and regulations affecting our business, including those relating to the sale, manufacture and import of consumer products;

• risks related to climate change and other sustainability-related matters;

• claims, demands and lawsuits to which we are, and may in the future, be subject and the risk that our insurance or

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• risks related to product safety;

• risks related to climate change and other sustainability-related matters;

• our ability to protect our intellectual property and avoid the infringement of third-party intellectual property rights.

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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 and thirty-nine weeks ended November 2, 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 weeks ended May 3, 2025 and our audited financial statements for the fiscal year ended February 1, 2025 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.

We conduct our operations through our subsidiaries, including our indirect subsidiary, Academy, Ltd., an operating company which is doing business as "Academy Sports + Outdoors." All of the Company's sales and business operations occur at Academy, Ltd., and Academy, Ltd., is also the borrower and/or issuer of the Company's long-term debt and lessee of facilities.

We conduct our operations primarily through our indirect subsidiary, Academy, Ltd., a Texas limited partnership doing business as “Academy Sports + Outdoors”, or Academy, Ltd .

All of the Company's sales and business operations occur at Academy, Ltd., and Academy, Ltd., is also the borrower and/or issuer of the Company's long-term debt and lessee of facilities.

We operate on a retail fiscal calendar pursuant to which our fiscal year consists of 52 or 53 weeks, ending on the Saturday closest to January 31 (which such Saturday may occur on a date following January 31) each year.

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 third quarter," or similar reference refers to the thirteen week period ended November 2, 2024, and any reference to the "prior year quarter," "2023 third quarter" or similar reference refers to the thirteen week period ended October 28, 2023.

References to the “current quarter,” “2025 first quarter,” or similar reference refers to the thirteen week period ended May 3, 2025, and any reference to the “prior year quarter,” “2024 first quarter” or similar reference refers to the thirteen week period ended May 4, 2024.

Unless otherwise specified, all comparisons regarding the current period of 2025 are made to the corresponding period of 2024.

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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 32%, 21%, 26%, and 21% of our 2024 third 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 28%, 26%, 24%, and 22% of our 2025 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.

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 November 2, 2024, we operated 293 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.

As of May 3, 2025, we operated 303 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 21 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:

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

Thirteen Weeks Ended

May 3, 2025 May 4, 2024

Beginning stores 298 282

Q1 new stores 5 2

Q2 new stores 1 1

Q3 new stores 8 5

Ending stores 303 284

Relocated stores — —

How We Assess the Performance of Our Business and Recent Trends

Tariffs and Other Macroeconomic Trends

We continue to monitor global macroeconomic trends and uncertainties such as inflation, existing and potential tariffs, and other shifting trade policies, which have impacted consumer spending and could adversely affect our ability to grow sales and merchandise margin.

We have worked diligently to reduce our exposure related to products imported from China.

The Company reduced its cost exposure to approximately 9% of total cost of goods sold directly related to China for its private label business, and we plan to further accelerate our efforts to diversify our global supply chain.

The impact of the evolving macroeconomic environment on our financial results is uncertain.

We are closely monitoring the evolving environment with respect to tariffs and other trade policy developments and will continue to adjust plans as needed, including, but not limited to, inventory purchase quantities and timing, strategic pricing and promotional adjustments to maintain value for our customers, alternating sourcing to reduce receipts from China, and vendor negotiations.

How We Assess the Performance of Our Business

Our management considers a number of financial and operating metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, determine the allocation of resources, make decisions regarding corporate strategies and evaluate projections.

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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 the relative condition of the U.S.

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

Various 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.

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 third quarter compares the thirteen and thirty-nine weeks ended November 2, 2024 versus the thirteen and thirty-nine weeks ended November 4, 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 5.9% in 2024 compared to 7.6% and 6.9% in 2023 and 2022, respectively.

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

The comparable sales metric for the 2025 first quarter compares the thirteen weeks ended May 3, 2025 versus the thirteen weeks ended May 4, 2024.

The prior year rate of decline in comparable store sales slowed in the 2025 first quarter with a 2025 first quarter comparable sales decrease of 3.7% compared to 5.7% in the 2024 first quarter.

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

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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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We have also continued to add private label brand products to our assortment of products, which we generally price lower than the national brand products of comparable quality that we also offer.

A shift in our sales mix in which we sell more units of our private label brand products and fewer units of the national brand products would generally have a positive impact on our gross margin but an adverse impact on our total net sales.

Furthermore, our softgoods merchandise divisions, which consist of apparel and footwear, have higher margins than our hardgoods merchandise divisions, which consist of outdoors and sports and recreation.

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These initiatives include investments in our new customer data platform and the development of strategies that 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.

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 the 2024 year-to-date third quarter, stores facilitated approximately 95% of our total sales, including ship-from-store, BOPIS and in-store retail sales.

During the 2025 first 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.

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 2024 we opened 11 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 2025 first quarter, we opened 5 new stores.

Our strategic real estate approach, including the 44 stores opened since fiscal year 2021, has positioned us effectively for continued expansion.

Gross Margin.

Gross margin is our net sales less cost of goods sold.

Our cost of goods sold includes the direct cost of merchandise and costs related to procurement, warehousing and distribution, which consist primarily of payroll and benefits, distribution center occupancy costs and freight and are generally variable in nature relative to our sales volume.

Our cost of goods sold includes the direct cost of merchandise and costs related to procurement, warehousing and distribution, which consist primarily of transportation, payroll and benefits and distribution center occupancy costs and are generally variable in nature relative to our sales volume.

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 includi ng duties, c ommodity costs, freight costs, shrinkage (discussed below), 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.

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.

Selling, General and Administrative Expenses.

Selling, general and administrative ("SG&A") expenses include store and corporate administrative payroll and payroll benefits, equity-based compensation, store and corporate headquarters occupancy costs, advertising, credit card processing, information technology, pre-opening costs and other store and administrative expenses.

Selling, general and administrative (“SG&A”) expenses include store and corporate administrative payroll and payroll benefits, store and corporate headquarters occupancy costs, advertising, credit card processing, information technology, pre-opening costs and other store and administrative expenses.

These expenses are both variable and fixed in nature.

SG&A expenses as a percentage of sales increased from 23.8% in the 2023 year-to-date third quarter to 25.5% in the 2024 year-to-date third 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 .

SG&A expenses as a percentage of sales increased from 25.9% in the 2024 first quarter to 28.8% in the 2025 first quarter, primarily attributable to the addition of new stores.

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 Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023

Thirteen Weeks Ended

May 3, 2025 May 4, 2024

Number of new stores opened 5 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 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 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.

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.

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 a result of changes in income before income taxes.

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

Results of Operations

Thirteen Weeks Ended November 2, 2024 Compared to Thirteen Weeks Ended October 28, 2023

Thirteen Weeks Ended May 3, 2025 Compared to Thirteen Weeks Ended May 4, 2024

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

November 2, 2024 October 28, 2023 Dollars Percent

Net sales $ 1,343,330 100.0 % $ 1,397,777 100.0 % $ (54,447) (3.9) %

Cost of goods sold 886,617 66.0 % 915,136 65.5 % (28,519) (3.1) %

Gross margin 456,713 34.0 % 482,641 34.5 % (25,928) (5.4) %

Selling, general and administrative expenses 365,239 27.2 % 345,910 24.7 % 19,329 5.6 %

Operating income 91,474 6.8 % 136,731 9.8 % (45,257) (33.1) %

Interest expense, net 9,149 0.7 % 10,930 0.8 % (1,781) (16.3) %

Other (income), net (6,406) (0.5) % (4,146) (0.3) % (2,260) 54.5 %

Income before income taxes 88,731 6.6 % 129,947 9.3 % (41,216) (31.7) %

Income tax expense 22,968 1.7 % 29,969 2.1 % (7,001) (23.4) %

Net income $ 65,763 4.9 % $ 99,978 7.2 % $ (34,215) (34.2) %

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

Net sales decreased $54.4 million, or 3.9%, in the 2024 third quarter from the prior year third quarter.

This is primarily a result of decreased comparable sales, which was partially offset by $34.6 million of net sales, including e-commerce, generated by 18 new stores opened since the end of the 2023 third quarter.

Since re-launching our new store program in 2022, we have opened 34 new stores, 16 of which have been open for at least twelve months.

Over the last twelve months, those 16 stores have averaged approximately $13 million in net sales per store, including e-commerce.

Performance of new stores in year one is highly dependent on which season the new store opens and the brand awareness in the region the new store opens.

Comparable sales decreased 4.9% driven by lower comparable sales across all merchandise divisions, except outdoor, as a result of a 7.1% decrease in comparable transactions, partially offset by an increase in average ticket of 2.4% .

The decrease of 3.9% in net sales was driven by decreased sales of 8.8% in the sports and recr eation merchandise division, 8.6% in the apparel merchandise division and 7.5% in the footwear merchandise division, partially offset by increased sales of 7.0% in the outdoor merchandise division.

Additionally, we experienced a challenging month in October 2024 with unseasonably warm temperatures across our footprint along with lapping the Rangers World Series run in the prior year, which collectively resulted in a decrease of 2.7% in net sales and 2.6% in comparable sales for the 2024 third quarter .

E-commerce net sales represented 8.8% of merchandise sales for the 2024 third quarter compared to 9.4% for the prior year third quarter.

Gross Margin.

Gross margin decreased $25.9 million, or 5.4%, to $456.7 million in the 2024 third quarter from $482.6 million in the 2023 third quarter.

As a percentage of net sales, gross margin decreased 50 basis points from 34.5% in the 2023 third quarter to 34.0% in the 2024 third quarter.

The decrease of 50 basis points in gross margin was primarily attributable to:

• 30 basis points of unfavorability in merchandise margin as a result of 40 basis points of margin deleverage due to increased penetration of our outdoor merchandise division from a 7.0% increase in outdoor net sales ;

• 20 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.

Selling, General and Administrative Expenses.

SG&A expenses increased $19.3 million, or 5.6%, to $365.2 million in the 2024 third quarter as compared to $345.9 million in the 2023 third quarter, primarily driven by our increased strategic investments of $17.5 million in new stores and technology as well as deleverage from decreased sales.

Interest Expense.

Interest expense decreased $1.8 million, or 16.3%, in the 2024 third quarter when compared with the 2023 third 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.

Other (Income), net.

Other (income), net, increased $2.3 million in the 2024 third quarter when compared with the 2023 third quarter, primarily driven by increased money market investments in the current year.

Income Tax Expense.

Income tax expense decreased $7.0 million to $23.0 million for the 2024 third quarter as compared to $30.0 million in the 2023 third quarter, resulting primarily from a decrease in pre-tax income.

The Company's effective income tax rate was 25.9% for the third quarter of 2024 compared to 23.1% for the third quarter of 2023.

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

Thirty-Nine Weeks Ended November 2, 2024 Compared to Thirty-Nine Weeks Ended October 28, 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):

Thirty-Nine Weeks Ended Change

November 2, 2024 October 28, 2023 Dollars Percent

May 3, 2025 May 4, 2024 Dollars Percent

Net sales $ 1,351,409 100.0 % $ 1,364,220 100.0 % $ (12,811) (0.9) %

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Interest expense, net 9,044 0.7 % 9,486 0.7 % (442) (4.7) %

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

Write off of deferred loan costs — — % 449 — % (449) (100.0) %

Other (income), net (2,807) (0.2) % (5,204) (0.4) % 2,397 (46.1) %

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

Net sales decreased $107.9 million, or 2.5%, year-to-date 2024 compared to year-to-date 2023.

This is primarily a result of decreased comparable sales, which was partially offset by $89.0 million of net sales, including e-commerce, generated by 18 new stores opened since the end of the 2023 third quarter.

Net sales decreased $12.8 million, or 0.9%, in the 2025 first quarter over the prior year first quarter, which was primarily a result of decreased comparable sales.

We opened 19 new stores since the end of the 2024 first quarter, 5 of which opened throughout the 2025 first quarter.

During the 2025 first quarter, these 19 stores generated $45.3 million of net sales, including e-commerce.

Since re-launching our new store program in 2022, we have opened 44 new stores, 25 of which have been open for at least twelve months.

Over the last twelve months, those 25 stores have averaged approximately $13 million in net sales per store, including e-commerce.

Performance of new stores in year one is highly dependent on which season the new store opens and the brand awareness in the region the new store opens.

Comparable sales decreased 5.9% driven by lower comparable sales across all merchandise divisions as a result of a 6.4% decrease in comparable transactions, partially offset by an increase in average ticket of 0.5% .

The decrease of 2.5% in net sales was driven by decreased sales of 6.7% in the sports and recreation merchandise division, 4.4% in the apparel division and 2.5% in the footwear division, partially offset by an increase of 3.4% in the outdoors merchandise division.

Additionally, we experienced a challenging month in October 2024 with unseasonably warm temperatures across our footprint along with lapping the Rangers World Series run in the prior year, which collectively resulted in a decrease of approximately 1% in both net and comparable sales for the year-to-date 2024 .

E-commerce net sales represented 9.2% of merchandise sales for year-to-date 2024 compared to 9.0% for year-to-date 2023.

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 3.7% driven by lower sales across all merchandise divisions as a result of a 5.2% decrease in comparable transactions, partially offset by an increase in average ticket of 1.5%.

The decrease of 0.9% in net sales was driven by decreased sales of 1.8% in the outdoor merchandise division, 0.6% in the sports and recreation merchandise division and 0.5% in the apparel division, partially offset by an increase of 0.1% in the footwear division.

E-commerce net sales represented 10.0% of merchandise sales for the 2025 first quarter compared to 9.0% for the prior year first quarter.

Gross Margin.

Gross margin decreased $42.0 million, or 2.8%, to $1,471.2 million for the year-to-date 2024 from $1,513.2 million for the year-to-date 2023.

As a percentage of net sales, gross margin decreased 10 basis points from 34.7% for the year-to-date 2023 to 34.6% for the year-to-date 2024.

The decrease of 10 basis points in gross margin was primarily attributable to:

• 40 basis points of unfavorability in merchandise margin as a result of margin deleverage due to increased penetration of our outdoor merchandise division compared to year-to-date 2023;

partially offset by

• 30 basis poin ts of favorability due to product cost management, including lower shipping costs compared to year-to-date 2023 due to increased fulfillment through our BOPIS program.

Gross margin increased $3.1 million, or 0.7%, to $458.9 million in the 2025 first quarter from $455.8 million in the 2024 first quarter.

As a percentage of net sales, gross margin increased 60 basis points from 33.4% in the 2024 first quarter to 34.0% in the 2025 first quarter.

The increase of 60 basis points in gross margin was primarily attributable to 40 basis points of favorability in merchandise margin as a result of managing prices to provide differentiated value and newness to our customers and 10 basis points of favorability as a result of decreased inventory shrink.

Selling, General and Administrative Expenses.

SG&A expenses increased $48.0 million, or 4.6%, to $1,087.3 million for the year-to-date 2024 as compared to $1,039.3 million for the year-to-date 2023, primarily as a result of our increased strategic investments of $51.1 million in new stores and technology as well as deleverage from decreased sales.

SG&A expenses increased $36.2 million, or 10.2%, to $389.6 million in the 2025 first quarter as compared to $353.4 million in the 2024 first quarter, primarily as a result of our increased strategic investments of $33.4 million in new stores, technology, and the Jordan Brand launch.

Write off of Deferred Loan Costs.

Write off of deferred loan costs decreased by $0.4 million in the 2025 first quarter when compared with the 2024 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.

Interest Expense.

Interest expense decreased $5.8 million, or 17.2%, 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.

Interest expense decreased $0.4 million, or 4.7%, in the 2025 first quarter when compared with the 2024 first quarter primarily resulting from lower interest rates and a lower outstanding balance on our Term Loan.

Other (Income), net.

Other (income), net, increased $5.7 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 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.

Other (income), net, decreased $2.4 million in the 2025 first quarter when compared with the 2024 first quarter, primarily driven by decreased money market investments at lower interest rates in the 2025 first quarter when compared with the 2024 first quarter.

Income Tax Expense.

Income tax expense decreased $12.8 million to $88.1 million for the year-to-date 2024 as compared to $100.9 million for the year-to-date 2023, resulting primarily from a decrease in pre-tax income.

The Company's effective income tax rate was 23.6% for the year-to-date 2024 compared to 22.3% 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.

Income tax expense decreased $4.2 million to $16.9 million for the 2025 first quarter as compared to $21.2 million in the 2024 first quarter, resulting primarily from a decrease in pre-tax income.

ASO, Inc.'s effective tax rate was 26.9% in the first quarter of 2025 compared to 21.7% in the first quarter of 2024.

The increase in the effective tax rate compared to the prior year quarter is due to a higher number of employee equity awards vesting and exercised in the 2024 first quarter at a higher share price compared with the 2025 first quarter.

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 Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023

Thirteen Weeks Ended

May 3, 2025 May 4, 2024

Net income $ 46,084 $ 76,465

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Equity compensation (a) 7,542 6,138

6,296 6,245 20,389 26,128

Write off of deferred loan costs — 449

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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 Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023

Thirteen Weeks Ended

May 3, 2025 May 4, 2024

Net income $ 46,084 $ 76,465

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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 and thirty-nine weeks ended November 2, 2024 and October 28, 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 weeks ended May 3, 2025 and May 4, 2024, 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 Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023

Thirteen Weeks Ended

May 3, 2025 May 4, 2024

Net cash provided by operating activities $ 157,472 $ 199,677

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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 repurchase common stock.

We also use cash to pay dividends and to 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 November 2, 2024, our cash and cash equivalents totaled $296.0 million.

On May 3, 2025, our cash and cash equivalents totaled $285.1 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 November 2, 2024, the Company's long-term debt and interest rates consist of (see Note 4 to the accompanying financial statements):

As of May 3, 2025, the Company's long-term debt and interest rates consist of:

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

• Term Loan - 8.88% variable rate term-loan with $89.5 million in principal outstanding maturing November 6, 2027 and quarterly principal payments of $750 thousand;

• Term Loan - 8.18% variable rate term-loan with $88.0 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.

The following table summarizes our current debt obligations by fiscal year (amounts in thousands):

2024 2025 2026 2027 2028 After 2028 Total

2025 2026 2027 2028 2029 Total

Term Loan and related interest (1)

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

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

Thirteen Weeks Ended

May 3, 2025 May 4, 2024

Average funds drawn $ — $ 129

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

November 2, 2024 February 3, 2024 October 28, 2023

May 3, 2025 February 1, 2025 May 4, 2024

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 November 2, 2024.

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

Operating lease obligations include future minimum lease payments under all of our non-cancelable operating leases at May 3, 2025.

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

2025 2026 2027 2028 2029 After 2029 Total

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(1) Minimum lease payments have not been reduced by sublease rentals of $1.7 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 November 2, 2024.

(2) These balances include stores where we have an executed contract but have not taken possession of the location as of May 3, 2025.

Share Repurchases

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

The 2023 Share Repurchase Program did 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 November 2, 2024, the Company had $423.0 million remaining for share repurchases under the 2023 Share Repurchase Program (see Note 2 to the accompanying financial statements).

The following table summarizes our share repurchases for the year-to-date 2024 third quarter (dollar amounts in thousands, except per share amounts):

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

On December 4, 2024, the Company's Board of Directors approved 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.

As of May 3, 2025, the Company had $536.5 million remaining for share repurchases under the Share Repurchase Programs.

See Note 2 to the consolidated financial statements.

The following table summarizes our share repurchases for the 2025 first 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 (February 2, 2025 to May 3, 2025) (2)

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) (2)

2,080,772 47.59 99,031

Total Share Repurchase Activity 4,837,850 $ 56.59 $ 273,766

Total Shares Repurchased 2,080,772 $ 47.59 $ 99,031

(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 third quarter share repurchases.

On December 4 2024, the Board of Directors of the Company approved a new share repurchase program (the "2024 Share Repurcha se Program", which will replace the 2023 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 (see Note 11 to the accompanying financial statements).

The following table summarizes our quarterly dividend payments for the year-to-date 2024 (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 2025 first quarter share repurchases.

The following table summarizes our quarterly dividend payments for the 2025 first quarter (amounts in thousands, except per share amounts):

Dividend per Share Total Dividends Paid Stockholder Date of Record

First Quarter (February 2, 2025 to May 3, 2025) $ 0.13 $ 8,716 March 25, 2025

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) (2) 0.11 7,739 September 19, 2024

Total Dividends Paid $ 8,716

On December 4, 2024, the Company's Board of Directors declared a quarterly cash dividend with respect to the fiscal quarter ended November 2, 2024, of $0.11 per share of the Company's common stock, payable on January 15, 2025, to stockholders of record as of the close of business on December 18, 2024.

On June 5, 2025, the Company's Board of Directors declared a quarterly cash dividend with respect to the fiscal quarter ended May 3, 2025, of $0.13 per share of the Company's common stock, payable on July 17, 2025, to stockholders of record as of the close of business on June 19, 2025.

Capital Expenditures

The following table summarizes our capital expenditures for the thirty-nine weeks ended November 2, 2024 and October 28, 2023 (amounts in thousands):

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

The following table summarizes our capital expenditures for the thirteen weeks ended May 3, 2025 and May 4, 2024 (amounts in thousands):

Thirteen Weeks Ended

May 3, 2025 May 4, 2024

New stores $ 25,970 $ 16,789

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Updates for existing stores and distribution centers 20 %

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 Thirty-Nine Weeks Ended November 2, 2024 and October 28, 2023

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

Cash Flows for the Thirteen Weeks Ended May 3, 2025 and May 4, 2024

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

Thirty-Nine Weeks Ended

November 2, 2024 October 28, 2023

Thirteen Weeks Ended

May 3, 2025 May 4, 2024

Net cash provided by operating activities $ 157,472 $ 199,677

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Net cash used in financing activities (110,309) (137,097)

Net decrease in cash and cash equivalents $ (51,924) $ (62,318)

Net increase (decrease) in cash and cash equivalents $ (3,825) $ 30,225

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 for the year-to-date 2024 increased $86.9 million, compared to the year-to-date 2023.

This increase in cash was attributable to:

• $147.9 million net increase in cash flows provided by operating assets and liabilities;

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

partially offset by

Cash provided by operating activities in the 2025 first quarter decreased $42.2 million, compared to 2024 first quarter.

This decrease is attributable to:

• $30.4 million decrease in net income;

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

• $86.0 million increase in cash flows from accounts payable, due to timing of payments for increased merchandise inventories relative to the prior year period;

• $73.8 million increase in cash flows from prepaid expenses and other current assets, due to timing of payments relative to the prior year period;

• $54.0 million increase in cash flows from accrued expenses and other current liabilities, primarily driven by a $25.5 million increase in accrued personnel costs related to bonuses and timing of payments;

• $52.7 million increase in cash flows from income taxes payables, due to timing of payments relative to the prior year period;

• $21.4 million net decrease in cash flows provided by operating assets and liabilities;

• $9.6 million net increase in non-cash charges.

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

• $88.5 million decrease in cash flows from merchandise inventories, net due to increased inventory receipts relative to the prior year first quarter;

partially offset by

• $122.1 million decrease in cash flows from merchandise inventories, net due to lower sales in the current year period.

• $45.3 million increase in cash flows from accounts payable, due to timing of payments relative to the prior year first quarter;

• $20.7 million increase in cash flows from prepaid expenses and other current assets, largely driven by timing of construction reimbursement payments received in the 2025 first quarter relative to the prior year first quarter.

Investing Activities .

Cash used in investing activities decreased $13.7 million in the year-to-date 2024 compared to the year-to-date 2023.

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

• $16.1 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.

Cash used in investing activities increased $18.6 million in the 2025 first quarter compared to the 2024 first quarter.

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

• $18.6 million increase in capital expenditures, primarily driven by increased spending related to Corporate, E-commerce, and information technology programs in the 2025 first quarter relative to the prior year first quarter.

Financing Activities .

Cash used in financing activities increased $90.2 million in the year-to-date 2024, compared to the year-to-date 2023.

The primary drivers of the increase were:

• $73.7 million increase in cash outflows primarily caused by an increase in repurchases and simultaneous retirement of common stock in the current year;

• $9.6 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;

• $3.3 million increase in dividends paid during the current year.

Cash used in financing activities decreased $26.8 million in the 2025 first quarter, compared to the 2024 first quarter.

The primary driver of the decrease was:

• $23.4 million decrease in cash outflows for repurchases of common stock in the current year period.

Critical Accounting Policies and Estimates

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Recent Accounting Pronouncements

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.

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.

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