Morning and welcome to Academy Sports + Outdoors Second Quarter Fiscal 2025 Results Conference Call. The call is being recorded, and all participants are on a listen-only mode. Following the prepared remarks, there will be a brief question- and- answer session. Questions will be limited to analysts and investors. Please limit yourself to one question and one follow-up. To ask your question during the Q&A session, please press Star, one from your telephone keypad. If you require operator assistance during this call, please press Star, zero. I would now like to turn the call over to Dan Aldridge, Vice President of Investor Relations for Academy Sports + Outdoors. Thank you. You may begin. Good morning, everyone, and thank you for joining the Academy Sports + Outdoors Second Quarter 2025 Financial Results Call. Participating on today's call are Steve Lawrence, Chief Executive Officer, and Carl Ford, Chief Financial Officer. As a reminder, today's earnings release and the comments made by management during this call include forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the earnings release and in our most recent 10-K and 10-Q filings. The company undertakes no obligation to revise any forward-looking statements. Today's remarks also refer to certain non-GAAP financial measures. Reconciliations to the most comparable GAAP measures are included in today's earnings release, which is available at investors.academy.com. This morning, we will review our financial results for the second quarter of fiscal 2025, provide an update on strategic initiatives, discuss outlook for the year, and share updated guidance for the full year fiscal 2025. After we conclude prepared remarks, there will be time for questions. With that, I'll turn the call over to CEO Steve Lawrence. Thanks, Dan, and good morning to everyone on the call. I'd like to start by addressing the historic flooding event that happened in early July in the Texas Hill Country. While none of our team members or stores were immediately impacted, pretty much everyone who works for us personally knows or is connected to someone who was impacted or whose children attend camps in this area. One of the things I'm most proud of working for Academy is how we show up for our team members and customers in times of need. In response to this disaster, the team quickly reacted with donations of water, sleeping bags, cots, and other supplies to help support first responders as well as families that were displaced during the floods. We also made a donation to the Kerr County Flood Relief Fund to help with recovery efforts. We're staying close to this situation in a local community and continue to offer aid and assistance as the long rebuilding process continues. Turning now to our performance in the second quarter. As you saw from our earnings release earlier today, we've seen continued improvement in our business, with sales coming in at $1.6 billion, which is up 3.3% to last year and translated into a 0.2% comp. These results marked a step-change improvement in performance compared to our Q1 results and were the best comps we've posted in many quarters. After a slow start in May, we saw steady improvement with sales running positive the last seven weeks of the quarter. Another bright spot was our dot-com business, which grew approximately 18% during Q2 and increased in penetration by 120 basis points. This was on top of a 10% increase in the first quarter. It was also good to see that we managed to improve the sales trajectory of the business while also holding our gross margin rate essentially flat to last year at 36%. Breaking the business down by category, we had fairly consistent performance across our major families of business, with footwear, apparel, sports and rec, and outdoor all running low single-digit increases. We saw solid results across most of our core categories, such as athletic and outdoor apparel and footwear, sporting goods, hunting, camping, and our backyard businesses. One consistent soft spot was seasonal categories such as swim, pools, and summer seasonal footwear that got off to a slower start during the first half of the quarter. We attributed this to a cooler and wetter start to the summer. Once we got into late June and July, when it got consistently warm across our footprint, all these businesses rebounded. We're also pleased to see that beneath the surface, our merchandise margins improved 40 basis points during the quarter. As we manage our business, we remain focused on driving top-line sales while also growing market share. With a business as diverse as ours, we tend to have to track our relative performance across several different data sources. The first place we focus is on traffic data, which we get through Placer AI. During our Q1 call, we discussed the customer trade-down effect that we first started to see in the back half of last year. Consumers are clearly looking for ways to navigate the current inflationary environment and are seeking out ways to stretch their spending power. We continue to see strong double-digit growth in foot traffic and share gains from customers in the top two income quintiles, which are households making more than $100,000 a year. We were flat in traffic share in the middle-income consumer, whose households make $50,000- $100,000 a year. Finally, we continue to see traffic erosion in the lower-income cohorts that make less than $50,000 a year, but the pace of these declines was less than what we saw in Q1. Another key data source for us is Circana, which provides market share data on roughly 60%- 70% of the categories we carry. We're pleased to see meaningful share gains across almost all of our key businesses, such as apparel, footwear, sporting goods, fishing, and outdoor cooking. Finally, we use government background checks for firearms purchases or NICS checks data as a proxy for firearms market share. Once again, we saw solid growth on this front. To summarize, in looking at all this data, it tells us that customers are gravitating to our diversified assortment and that our value proposition is resonating with them, all of which resulted in a comp sales increase and solid market share gains during the quarter. We would attribute a lot of the momentum we're starting to build in the business to the solid progress we've continued to make against our long-term objectives and goals. I'll now cover a couple of highlights from Q2. First, opening new stores remains our number one growth strategy, and during the quarter, the team successfully opened three new stores with locations in Fort Walton Beach, Florida, Midlothian, Virginia, and Morgantown, West Virginia. With these additions, we ended the quarter with 306 stores in 21 states, with plans to open up a total of 20- 25 locations in 2025. While opening a new store is always fun, what is exciting is watching new markets mature and become key contributors in driving comps. We remain very encouraged by the performance of the 2022 and 2023 vintages, which are all now in our comp base. We saw these vintages move from low single-digit comps in Q1 to mid-single-digits in Q2. Our belief has been that as we see the base business improve, that the new store comps would improve commensurately, and that is exactly what we saw happen this quarter. Our second initiative is to grow our dot-com business at an accelerated pace. The team has taken a back-to-basics approach with a focus on streamlining site navigation and functionality, improving order fulfillment options and speed, and offering a greatly expanded and versatile assortment. The efforts the team put in on this front helped drive approximately 18% growth in our dot-com business during the quarter. Probably the best indicator that this approach is working is the improvement we've seen in both online conversion and average order value this year. As this work continues into the back half of the year, we expect dot-com will continue to drive growth. Our third pillar is improving the productivity of existing stores. We have had several initiatives that we put in place this year to help accomplish this. Our first focus on this front is to continue to refine and expand our assortment by adding the most requested and desirable brands that will inspire existing customers to shop more frequently at Academy, while also attracting new customers to shop with us. We've added new brands to our mix in the first half of the year, such as Jordan, Converse, and HydroJug. We've seen strong results from these launches and have plans to extend each of these brands out into more doors. At the same time, we've also been expanding other brands who are already in our assortment and limited doors out to more doors in the chain. The examples of this would be BURLEBO, Ninja, and Birkenstock, all of which performed well this past quarter. Our second focus was on delivering new technology to stores with the rollout of RFID handheld scanners and new handheld ordering devices. We completed the launch of all these devices during Q2 in advance of the summer selling peak. At this point, we have Nike, Jordan, Brooks, Adidas, Under Armour, Columbia, Levi's, and Puma on a weekly count cycle to have their physical inventories updated. These brands collectively account for roughly 25% of our annual sales, and we continue to see improved in-stock and sales increases as a result of this rollout. Our new handhelds also continue to pay dividends to help stores save the sale on items that for whatever reason may not have been in stock in that specific store on a given day. In most cases, we can now seamlessly fulfill customers' needs with our new handheld devices, either by shipping the item to their home for free, or if needed, we can schedule a BOPIS pickup at another store if that is more convenient for them. Our third focus is on driving traffic through more effective targeted marketing. To that end, we continue to lean into our new Fun Can't Lose campaign launched in the second quarter. This campaign had a focus on helping our customers maximize their spending power and all of their passions, with an emphasis on protecting value and low prices on key summer and back-to-school must-haves. Additionally, we continue to lean into our myAcademy loyalty program with expanded discounts and incentives for our best customers. We're still early in the evolution of this initiative, and are continuously testing and rolling out use cases that help drive customer loyalty. As an example, we launched a campaign in Q2 targeted to myAcademy members called Summer of Savings that included a steady stream of exclusive and early access to deals, targeted offers, and bouncebacks, which aimed to help drive shopping frequency and spend. We saw strong results from this program, which translated into increases in weekly enrollments, higher redemption rates on offers, and a sales uplift. I'm proud of the work the team has done, adding over 12 million customers in the first full year of this program. Our focus here remains on enrolling people in myAcademy so that we can start a dialogue with them and convert them from occasional shoppers to loyal customers who shop with us 2x-3x more in a year than an average customer who spends 4x-5x more on an annual basis. Before handing it over to Carl, I want to give a quick update on tariffs and the work our team has put in to mitigate the impact on our business. The team has worked together to deploy multiple tactics, including partnering with factories and vendors to absorb a portion of the incremental expense, working with our overseas partners to ship country of origin where it made sense, adjusting unit buys where needed, pulling in additional inventory from brands that had available goods in domestic warehouses, and utilizing our pricing optimization tools to create a strategy to drive higher average unit retails. As all of you know, this has remained a fluid situation over the summer. At this point, we believe that we have the strategies in place that should mostly offset the impacts of tariffs to our business throughout the remainder of this year, while still being able to serve customers by delivering a strong value proposition on all of their sports and outdoor needs. Now I'll hand it over to Carl to give you a deeper dive into the financials. Carl? Thanks, Steve. Net sales for the second quarter were approximately $1.6 billion, up 3.3% with a comp increase of 0.2%. As Steve mentioned, we saw sequential comp improvement throughout the quarter, and our e-commerce channel had a positive comp of approximately 18%. Breaking down the comp, transactions were down 1.4%, while ticket was up 1.5%. Compared to Q1, we grew comp sales by almost 400 basis points in a tough sales environment. This contrasts to a challenging 2024 where comp sales decreased by 120 basis points from Q1- Q2, primarily driven by in-stock challenges related to the Georgia Distribution Center WMS implementation, as well as Hurricane Beryl and the derecho that impacted the Houston area. Our Georgia Distribution Center has significantly improved over the last 12 months and helped contribute to a meaningful improvement of in-stock for the total company. Gross margin came in at 36%, down 2 basis points to last year. While we saw a merch margin expansion of 40 basis points, it was offset by shrink and higher e-commerce shipping costs. SG&A came in at 25.3% of sales for the second quarter, an increase of $36 million, or 150 basis points. The increase was driven by initiatives totaling 160 basis points, comprised of 130 basis points of new store growth, 20 basis points of technology investments, and 10 basis points of depreciation. Over the last 12 months, we have added 21 new stores to our fleet, and all of the new stores in our comp base are leveraging expenses as we would expect. If you strip out the costs attributable to our growth initiatives, all other costs would have leveraged by 10 basis points. Operating income was $172 million, and diluted earnings per share was $1.85. Adjusted earnings per share was $1.94. Our inventory per store is elevated, with units per store up 4.6% and dollars per store up 8.2%. We have purposely pulled forward domestic inventory receipts at pre-tariff prices. The majority of this is evergreen products such as bicycles or free weights, which have no seasonal or obsolescence risk. These actions positioned us well to support the summer selling season, and we will continue to evaluate the environment and take further actions as necessary. Since the first quarter, we have seen our inventory units per store decrease by approximately 30% or 190 basis points, and we anticipate inventory levels will continue to normalize as we move through the year. We ended the quarter with $301 million in cash and maintained strong liquidity with an undrawn $1 billion revolver. Our 7% increase in stores since Q2 of last year is 100% funded from cash flows from operations. Q2 free cash flow was $21.7 million. Turning to capital allocation, we remain committed to balanced and disciplined deployment. During the second quarter, we invested approximately $80 million in inventory-related working capital, paid approximately $8.7 million in dividends, and invested approximately $60 million in strategic initiatives, including new store openings and omnichannel infrastructure. We did not repurchase any of our shares during the quarter, instead choosing to allocate capital to manage inventory. This decision led to a strong inventory position that helped drive positive comp sales and mitigated tariff exposure. Going forward, our capital allocation philosophy has not changed. We have over $530 million remaining on our current repurchase authorization. Moving to guidance, sales for the second quarter continue to improve, and the green shoots we saw in Q1 are accelerating. We also have additional information into tariff impacts and have taken appropriate actions to mitigate them. Based on the results of the first half of the year and the expectations for the remainder of fiscal 2025, we are tightening the low end of our comp sales guidance from - 4%-- 3%, with the comp range for the year now being between - 3% and + 1%. To close, our initiatives are starting to bear fruit and are accelerating. We are seeing positive momentum across the business that lends confidence that our strategies are working while also resonating with current customers and attracting new ones. I am incredibly proud of the work our team has done to get us to this point, but we have a long way to go to reach our goals. I'm excited to see the continued progress as we move forward. With that, we are now ready for questions. Thank you. The company will now open the call up for your questions. To ask a question, please press Star, one on your telephone keypad. We will pause for a moment to wait for the queue to fill. At the end of the Q&A session, CEO Steve Lawrence will make closing comments. Our first question comes from Christopher Horvers with JP Morgan Chase. Please proceed with your question. Thanks. Good morning, guys. My first question is about the consumer. You gave us great detail in terms of the different cohorts. Over the past couple of years, you've seen some pretty episodic shopping in between events, you know, strong Memorial Days, strong Labor Days, but the valleys in between tended to be softer. Can you talk about what you've seen sort of post the back-to-school period, you know, in the August timeframe? Do you think those valleys could actually attenuate as you get later into the year? Yeah, that's a great question. I think we do continue to see that episodic shopping you're talking about, Chris. If you go and look at back-to-school for us, which is, you know, kind of we have an earlier back-to-school that bridges that late July, early August time period. We ran a positive comp there, which we're excited about. If you remember, August was one of the only two positive comp months we had last year. The comp-to-comp through that part was feeling pretty good. We did see a slight pullback after we got out of back-to-school. We would attribute that mainly to less clearance activity this year around Labor Day and the shift of the hunting season starting in September versus in August last year. We feel pretty good about the momentum that we have in the business, and we feel pretty good about our opportunity and optimistic about the remainder of the quarter as we laughed some pretty soft comps in late September and October from last year. On the ticket front, can you talk about how much of the ticket benefited from tariff pricing? As you think about your working through this with the brands, and obviously you have a big private brand penetration in your box, will tariff pricing pressures complete in the back half of the year, or would you expect more pricing in the first half of 2026 as the brands catch up with the costs that they've incurred? Thank you. Yeah, thanks. I would say AURs were up, you know, low to mid-single-digits for the quarter. That was certainly a chunk of our average ticket being up about 1.5%. You know, we started seeing some price increases creep in as we got deeper into the summer. I think you'll see more of that activity happen in the back half of the year as the tariffs find their way into the cost of goods. Our goal would be to, you know, complete most of any price adjustments that need to be completed in the back half of the year in anticipation of next year. That being said, it's a fluid environment, Chris. You know, this thing changes every day. We feel pretty good about our ability to mitigate the tariffs so far through all the different levers that we've pulled. It really is now going to be up to the consumer to see how they react to, you know, some of the higher prices that they can experience in the back half of the year. We think we still have a pretty good value proposition out there, and we like where we stand. Thanks so much. Our next question comes from Simeon Gutman with Morgan Stanley. Please proceed with your question. Good morning. This is Pedro on for Simeon. Thank you for taking our questions. My first question is about guidance. Your updated guidance implies good operating leverage in the second half of the year. What are the assumptions around SG&A? Is the leverage coming from gross margin or a reduction in the pace of SG&A investments that you have been making during the first half? As a follow-up, if I could, on tariffs, how is it that you're able to offset most, if not all, of the impact from tariffs while many of your peers are expecting to see pressure on profit margins during the second half? I think I'll probably tag team, it's Pedro. As it relates to guidance for the year, we're sticking with, I've quoted on previous calls, about 100 basis points of SG&A deleverage for the full year. We were down 150 basis points. We delevered 150 basis points in the second quarter, and more than all of it is driven by our initiatives. As it relates to guidance for the back half, we've got a range of outcomes associated with the second half of the year. At the low end, comps would be - 4%. At the high end, it's about a + 3.5%. From a gross margin standpoint, we still feel good about 34.0%- 34.5%. That's up at the low end, 10 basis points from last year where we came in at 33.9%. Some of that 33.9% was impacted by some deleverage that we experienced in one of our distribution centers, primarily in Q2 and Q3. From an expense standpoint, look, we're very consciously investing in these initiatives. They are performing very, very well. Steve talked a little bit about the acceleration that we saw in e-commerce from Q1- Q2. The new stores that are in the comp, you know, mid-single-digits, and Nike and Jordan double-digit up over last year. We're investing in these things, and you're going to see more of it. The base business we will continue to leverage to bring in the annual guidance. From a tariff mitigation perspective, we've been working on this, obviously, from the moment the meeting in the Rose Garden happened. A lot of the actions we detailed on the call, partnering with factories to get them to absorb some portion of the cost, diversifying the sourcing base, adjusting unit buys where needed, pulling in additional domestic inventory. I don't want to downplay that one. That was a big one for us. Obviously, as everybody says, the last kind of resort after you do all those things is looking at how do you adjust prices. We've been working pretty hard on that from a couple of different fronts. First, we use our markdown optimization tool, Revionics, so that on the back end, we're trying to get a little more money out of our clearance, which helps raise AURs. Where we had to make pricing adjustments, what we feel like is, as we've seen the market move on pricing, we still have maintained a pretty good spread on our private brand product, where we that's where we express most of our value. We're seeing that trade-down effect accelerate as we get deeper into the year. That gives us confidence that in the environment we're living in right now, customers are going to choose the value proposition that we offer, which is how we believe we're going to mostly offset or impact the impact of these tariffs. Got it. Thank you, guys. Good luck. Thanks. Our next question comes from Paul Lee with Citi. Please proceed with your question. Hi, guys. This is Kelly on for Paul. Thanks for taking your question. I guess just to get a little bit more granular, given the back half comp assumptions are, you know, so wide, any color you could provide 3Q versus 4Q, how you're thinking about that? Just given, you know, SG&A came in much higher than the street was modeling, and I think 3Q will be a high point for new store openings. If you could just provide maybe some additional color around the quarterly flow of SG&A guide and how that should look. Thanks. Yeah. We don't give quarterly guidance, but I'm happy to give a little bit of color. As it relates to SG&A, I think you'll see a continued moderation of the deleverage. In the first quarter, I think we delivered 290 basis points. We were at 150 basis points in the second quarter. I think you'll continue to see that tapering for the overall year at approximately, at the midpoint, down 100 basis points. From a comp standpoint, if you think about last year, we had two positive comps in the year. They were both in the back half of the year. One was in August. One was in December. What you had was a pretty big trough that happened late September, October, early November. Once we got into December, with the compressed holiday calendar last year, if you remember, we saw the comps inflect positive there. We expect that as we start lapping some pretty tough comps in late September, early October, we'll see the business inflect and we expect that to continue through early November. Obviously, you know, Christmas is going to be what it is. I think even in tough times, people always come out and shop for Christmas. I'm optimistic about that episodic shopping still happening. I believe that we've got some softer comps in the middle part of the quarter, which is going to allow us to have a better, candidly, back half of the year than the first half of the year. That's how we're thinking about it. Just to follow up on those two, I mean, the deleverage rate is dependent on the top line. I guess how much flexibility do you have to sort of achieve that 100 basis points of deleverage in the back half? Like you could spend more every quarter, or what? Even if you could just speak to it on an SG&A dollar growth would be helpful. Thanks. I'm quoting at the midpoint. Between the high and the low cases at 100 basis points, I think we have flexibility associated with many of the variable items. I would tell you that at the low end of our guidance range, incentive comp would be impacted, which we're baking into the overall kind of on the low side. Got it. Thanks, guys. Thank you. Our next question comes from Greg Melich with Evercore ISI. Please proceed with your question. I wanted to follow up on the gross margins in the quarter. You mentioned shrink and the costs of e-commerce being a headwind of 40 or 50 basis points. How do you see that playing out in the back half? My follow-up was just, could you level set us, given all the things you've done to mitigate on tariffs, what percentage of your COGS now are imported from various countries? Thanks. Absolutely. Yeah. As it relates to being down 2 basis points in the quarter, merchandise margin was a tailwind of 40 basis points. Shrink was a headwind of 20. E-commerce shipping was a headwind of 10. There were some miscellaneous things. There was a couple of extra basis points. If you look at shrink, not just in the quarter, but for the full year, we're down 5 basis points to last year. I think that's about in the range of what you would expect it to be for the year. There are puts and takes as we take physical inventory throughout the year. We've taken almost 190 of our stores already. I think we've got a good feel for the trends that are going on there. As it relates to e-commerce, deleverage, look, being up 18% in e-com, we're pleased about that. We think we're starting to see the benefits of what we've been investing in. I'll take 10 basis points of headwinds. I think that's pretty much what you should expect for the year. From a sourcing diversification perspective, it's kind of a moving target, to be honest with you. I think we started off when we got the initial first kind of read on the tariffs, and China looked to be the epicenter for this. We spent a lot of time talking about how we're diversifying our exposure in China, where last year it was in the teens to under 10% with a goal of being in the mid-single-digits by the end of the year. That's still on track. Candidly, as this thing has evolved, what we found is other countries are actually now, in some cases, at higher tariff rates than goods out of China. What we've decided to do moving forward is, with a business as diverse as ours, we need to have a really diversified sourcing base, number one. We're trying not to have too many eggs in any one basket. Second, we're trying to partner with factories and vendors that have multiple countries where they make products so that they can flex and move goods around as the tariffs ebb and flow. I feel really good about the work the team has done on diversifying the sourcing base and not really having too many eggs in any one basket. I think that's going to be the best approach moving forward. It's going to serve us well. As it relates to the goods that we manufacture, we've got about, from a total COG standpoint, about 6%- 7% exposure from total COGs. That's what we manufacture. Think about that as private label. As to what Steve said about the dynamic environment, our national brand partners are changing up, it feels like daily, associated with where their base is. It would be hard to quote a national brand by country, just given the dynamic nature of it. From our private brands, you know, looking at 6%, 7% for the year. Got it. If I could follow up on just that one particular point, I think in inventory, you said AUR was up around 8%. Should we think of that as a proxy of what would happen to ticket AUR in the coming quarters as that flows through? Is that a fair way to think about it? No, we did not say that AUR was up 8%. It was up in the mid-single digit range. We expect that to accelerate in the back half of the year. I think we will see AURs creep up in the high single or double- digits for us and for our industry, candidly, in the back half of the year. Got it. All right. Thanks and good luck. Thank you. Our next question comes from Brian Nagel with Oppenheimer. Please proceed with your question. Hey, guys. Good morning. Morning. Morning. I want to, congrats on the positive comp. I know we've been talking about this for a while, so congrats. Thank you. The question I want to ask is, and this is somewhat repetitive, but as you look at, particularly, the comps have strengthened through this year and even the quarter, is there any, what's the reason why that momentum would not continue through the back half of the year? I mean, recognizing you're probably acting conservative with the guidance, but you're looking at the business. Is there any reason why that momentum should not continue? Not really, Brian. I mean, you know, when you look at it, you hit on it. We see our dot-com business accelerating. It was up, you know, I think 10% in Q1. It was up almost 18% in Q2. You see the new stores' contribution there in the comp accelerate from the low- single digits to the mid-single-digits. You see our investments in technology, whether it's RFID handheld scanners we sent out to save the sale, really start to contribute. We see the new brands working. We haven't had a chance to really talk about, you know, the investment we made with Jordan or Nike, but you know, those two brands in aggregate are driving meaningful double-digit growth for us right now. You see our loyalty program where we have over 12 million people in it right now, and we're adding almost 500,000 or 0.5 million people every quarter, and customers really resonate there. We're picking up market share as a result of all this. We really don't see any reason why that would stop in the back half of the year. I think the wildcard, candidly, is just the consumer health and how they deal with the external macroeconomic environment. We like our strategy, and we feel like it's gaining momentum, and we expect it to carry forward not only through the remainder of this year, but into the next year. That's very helpful. My follow-up question, just on tariffs. I think you mentioned, and this is probably in response to another question, but you know, you're starting to adjust prices here. Are you seeing any impacts upon demand, you know, as these higher prices are starting to roll through? You know, it's funny. We kind of look at it, and as you'd expect, there are like three different buckets. There are some categories, I'd say like front end where we sell soda and chips and things like that that are highly inelastic. The unit demand has not at all been impacted by the AUR increases. You got a second bucket of goods where you're seeing some AUR increases, and the unit demand is roughly in line. Then you had a couple of bigger ticket categories where, as we started nudging some pricing up, you saw some demand erosion there from a unit perspective, greater than the AUR increase. We've made adjustments there. It's very fluid, but definitely kind of three different behaviors depending upon the category and the price point. Got it. I appreciate it. Thank you. Thank you. Our next question comes from Eric Cohen with Gordon Haskett. Please proceed with your question. Hi. Thanks for the question. I was wondering if you can just talk about the promotional environment. You said that consumers are continuing to be value conscious in shopping during events. I'm just curious what you're seeing in the promotional environment. Just on the merchandise margin, is some of that benefiting from the merchandise mix as you have the Jordan and Nike expansion assortment since those are naturally higher margin products? From a promotional environment perspective, Eric, I would say that it's about how we've described it in the past, right? I mean, each year feels like it's a little more promotional than the year before, but not, you know, anywhere near what we were seeing kind of pre-pandemic. I expect that will continue through the remainder of the year. We have seen, on a year-over-year basis, if we run roughly the same promos, we're seeing a higher take rate from the customer where they're aggregating more of the purchases into those promos during the windows that we're running them. That certainly is an acceleration in terms of the take rate on the promos. In terms of margin mix, the goal and belief is that having growth in the apparel category, which tends to be higher margin for us, or footwear, that will mix us up. I would say we really didn't experience that as much in Q2. We had a pretty tight range of performance between all the businesses. They were all within about 120 basis points of each other. We didn't see dramatic mix one way or the other in terms of hard goods and soft goods. Moving forward, that would be the goal and the plan. Great. Just on the cohorts, it sounds like the upper-income consumer, higher-income consumer is continuing to post positive comps. Has that accelerated, and do you expect the higher-income consumer to drive the comp growth in the back half of the year, or do you think that the middle-income consumer can inflect positive in the back half? It has accelerated. If you look at the top two quintiles, $100,000 and up, they were up double- digits in terms of traffic for us within the quarter, which is an acceleration versus Q1. We held share in that middle-income quintile, $50,000- $100,000, and then we lost a little bit of share in the lower-income quintile, although it was less than what we saw in the previous quarters. At the higher end, it's more than offsetting the lower-end income consumers. I do believe that should continue and accelerate as we move through the back half of the year. Got it. Thanks a lot. Thank you. Our next question comes from Kate McShane with Goldman Sachs. Please proceed with your question. Hi. Good morning. Thanks for taking our question. Our question just was going to be focused on Nike and Jordan. Just any more detail that you could give around the performance? I believe you said up double digits, but any more detail there. Can you talk about the exclusivity of both the Nike and Jordan product as you continue to see increased points of distribution by the brand? Yeah. We're very excited about what we're seeing, our early reads in terms of Nike and Jordan. As you remember, we launched Jordan in late Q1, kind of the back half of April, and we've seen that business build, particularly at back-to-school. We had our biggest weeks of the year during back-to-school as we expected. We expect that to continue, particularly on the footwear side as we move into basketball season. We also think it's going to be a big gift-giving category for us this year as well for holiday. Really expect that to continue to be a tailwind for us. On the other side, from a Nike perspective, we've made a big investment there as well. I wouldn't say we have exclusive product per se. I would say we're getting access to better premium products. For example, within footwear, we have the Vomero 18 on the floor as well as the Plus. We have the P6000 out there that's doing very well. We've got 270s out in almost every door at this point, and those aren't cheap shoes. Those are $165, $180 shoes in a lot of cases, doing very well for us. We feel really good about that. On the apparel side, we've got things like the Phoenix Fleece, which in the past we'd have had limited access to. We now have in more doors. It's less about exclusivity for us. It's more about having higher-end product more broadly distributed throughout the chain, and that is working for us. Thank you. Thank you. Our next question comes from Anthony Chukumba with Loop Capital Markets. Please proceed with your question. Morning. Thanks for taking my question. I also wanted to just kind of follow up on Kate's question. I guess, how does your Jordan brand assortment, just in terms of the overall size of the assortment, compare now to, you know, when you first launched it? How much more assortment expansion do you anticipate over the remainder of the year? Thank you. Yeah. I would take a category like footwear where it's dramatically expanded. I think we launched with two shoes. If you remember, we're kind of at the tail end of basketball season. Now you'll see a much more expanded basketball assortment out there. I would say from the SKU count, it's probably more than tripled. We've also taken things like football cleats, which weren't in the assortment initially. Those are out in all doors right now. Categories like backpacks have also expanded out into all doors. Apparel, as we get in the back half of the year, is going to get obviously expanded from more fleece, things like that. The assortment will continue to expand both from a, it has expanded from a door count perspective as well as a SKU count throughout the back half of the year. Obviously, as we go into next year, the goal would be to expand those shops out into more doors. We haven't given guidance on that, but we're working with them right now on what that plan looks like. It will be in more doors for us next spring. That's helpful. Thank you. Thank you. Our next question comes from Jonathan Matuszewski with Jefferies. Please proceed with your question. Great. Good morning, and thanks for taking my questions. The first one was on just spending by customer cohorts. I think you talked about the lower-income consumer a bit, but hoping you could zero in on any disparities in shopping patterns across different ethnicities, including the Hispanic consumer. Is the underperformance there widening, narrowing, or consistent versus prior periods? That's my first question. Thanks. Yeah. All the data that we get or that I'm about to talk about is from Placer. It used to be that Academy over-indexed in consumers making below $50,000. What we've seen since, I don't know, like third quarter of last year is that the growth in quintiles four and five is more than offsetting that degradation in those consumers in quintiles one and two. It's been very steady, and I'm anticipating it to continue. As it relates to ethnicity, again, through Placer, Placer would tell you that the Hispanic consumer in our markets is up year- over- year. We were very concerned associated with the health of that demographic. The other, you know, Black, White, Asian, it gives you all different cuts of it. Overall, I would say there's no real significant outliers. One thing I would comment on, though, is we've got about 30 some-odd stores that over-index towards the Hispanic consumer. Many of those are on the border of Texas and Mexico. We're seeing those stores do a little bit worse than the trend overall as it relates to Texas or as it relates to the balance of the chain. We do think there's some impact associated with people who are coming across the border to shop for the day. I think there's been disruption associated with that. It doesn't show up as pronounced in the data from Placer, but we are seeing it in the individual store performance that over-index on the Hispanic population. That's helpful. A quick follow-up. You mentioned improved in stocks from the RFID initiative and I think just the Georgia DC. Is there a way to dimensionalize maybe the frequency of out-of-stocks you're seeing today versus the magnitude of potential improvement in conversion in the quarters ahead? Thanks. What we've shared publicly is that we see about a 20-point improvement in terms of inventory accuracy in goods that are counted on RFID on a weekly basis versus goods that are not. That's improved our in-stocks by 400 basis points- 500 basis points overall. Having goods in the right sizes certainly helps us from a conversion perspective. That's what we've shared publicly. Our next question comes from John Heinbockel with Guggenheim Securities. Please proceed with your question. Hey, Steve. First question, can you frame the size of those three cohorts that you referenced, right? I don't think it's a third, a third, a third. Do you think structurally going forward, I know you've added best product, is there more to be done on the marketing front, the targeted marketing front to go after the $100,000+, whether it's CRM or social, to try to be leveraged even more to that group? Yeah. I'll start, and I think Steve will finish. As it relates to the size or the penetration percentage, it literally is almost 1/3, 1/3, 1/3. 1/3 quintiles one and two, making below $50,000. Quintile three, $50,000- $100,000, approximately a 1/3. Then above $100,000, quintiles four and five, about a 1/3. I would tell you, even over the last year, there's been a radical shift in that as quintiles one and two frequent us less, and quintiles four and five are significantly growing, trading into Academy. I think at some point, I'll maybe provide a little bit more color related to that. Generally speaking, 30%- 33% for each of those three cohorts. From a marketing perspective, you're spot on correct, right? Obviously, having the new CDP, having done all the data resolution, as we get more of these people shopping with Academy, they're getting added to our customer file. They're high-value customers who are coming in and shopping for the first time. Our goal is certainly to turn them from casual shoppers into Academy loyalists. We have a ton of plays we're working on. One of the things I was just talking to our Chief Customer Officer about last week is we've got some of these people who come in and shop either through one channel or the other, whether they're a dot-com shopper or a brick-and-mortar shopper primarily. What we would expect is when you look at the combination of the two, the customer who shops across both, those are our most valuable customers. We're really doing some targeted marketing to try to convert store-only shoppers to be omnichannel shoppers or online shoppers to be omnichannel shoppers. There's a lot of really good work the team is doing that candidly we could have done several years ago because we didn't have the CDP. We did not have all the information at our fingertips that we do now have. Just a quick follow-up. I know you guys have talked about 100 basis points of supply chain opportunity. What's the cadence of that? Now that you're accelerating stores and using the capacity more, is the opportunity greater than 100 basis points with that, or you don't think so? I think the 100 basis points is still alive. I think we invested some basis points last year, and we'll get them back this year related to twigs. When we talk about our long-range plan, five years, I think 100 basis points is the right cadence. Some of that will be related to the rollout of the WMS to the other two distribution centers, but some of it is we brought in a new Chief Supply Chain Officer last year. Similar to when Steve and I got here, coming from more of the department store space and just looking at how the distribution centers operate from a retail as well as a DTC standpoint, there's just some upside opportunities related to just what normal looks like. I would say Rob Powell is doing a good job at getting after those. I think the 100 basis points is alive and well. I wouldn't take it up at this point in time because I want to prove it out before we talk what maybe some out-year opportunities are. Thank you. Thank you. Our next question comes from Robbie Owens with Bank of America. Please proceed with your question. Hi. This is Maddie Chekhon for Robbie Owens. Thank you for taking our questions. Maybe first, what should we expect in terms of inventory growth in the second half? Then, you called out that all categories were up low- single digits in the second quarter. Could you provide any more color on the performance of each apparel and footwear versus outdoor, and maybe how the ammo business performed versus the first quarter? Thank you. Yeah. If you look at inventory, we're having to look a lot at inventory on a unit basis and on a unit per store basis, A, because of the tariffs and the impact that it's having on costs, B, the fact that we're opening up new stores. If you look at it, we're up about 6.5% in Q1 on a units per store basis. We're up, I think, 4.6% in Q2. We'd expect that number to continue to come down as we progress through the year and sell through the inventory that we pulled forward, kind of normalizing by the end of the year. We feel like we've got a good beat on inventory, particularly on a unit and per store basis, and feel like we're in a really good position there. Repeat the second part of your question. Oh, division of performance. If you look at performance by division, apparel and footwear were the two strongest performing businesses. Both were up almost equal to each other from a comp and an absolute basis. There was only like a 120 basis point spread between outdoor and apparel, which was the best business on an absolute basis. Beneath the surface, you'd asked about ammo. Ammo continues to be tough, although the trend was a little better in Q2 than it was in Q1. I think that's a business that goes through ebbs and flows as there's demand cycles holding more goods out there. Right now, there's a lot of supply. It's become more of a price-sensitive business. We're certainly monitoring and making sure we have the best price on ammo on a daily basis. We're going to continue to monitor the business. We've had some success with bulk packs as a way to drive higher average unit tickets there. We're going to continue to work on that. I would say the ammo business, of all the businesses, is probably one of the more challenged businesses. Yeah. Maddie, you'll get the 10-Q. All you guys will get the 10-Q later today. I'll go ahead and lay out the numbers that you'll see in the footnote. On the soft lines standpoint, footwear and apparel were each up 3.7%, 3.8% in total. Outdoor was up 2.5%. Three of our four divisions had positive comp during the quarter. It wasn't just regionally focused. There was good health across the business. Our fall forecast contemplates a range of outcomes that I think is less centric to the acceleration of our initiatives and is more focused on the health of the overall consumers. I do want to reiterate, with where tariffs are, we envision all retailers taking AURs up. On a weekly standpoint, we scrape active pricing via the Internet on like-to-like products. We also do it on our private brands. Nobody else sells an Academy Sports + Outdoors chair that you put on the soccer field, but lots of other folks have their own private brands. Every week, we're looking at where prices are. If there's any place where we don't represent value as an everyday value retailer, we take adjustments that very next week. Really, really tight performance across the various categories. Initiatives are going to continue to perform. Health of the American consumer is the primary headwind. Very helpful. Thank you. Thank you. Our next question comes from Justin Kleber with Baird. Please proceed with your question. Hey, good morning, guys. Thanks for taking the questions. First one for me, just around future brand access. Specifically, if you started to see the launch of Jordan and the expanded Nike assortment, is that helping break down any historical barriers and allowing you to gain access or at least, you know, have new conversations with brands that previously would not sell to you? I would say it certainly helps, right? I mean, obviously, when you look at the investment we made to bring Jordan to life in our stores and on our site, I think the team did a really good job. I'm really proud of the work they did on this front. I think Nike is very happy with the partnership and what we've managed to do there. I think it definitely has helped us continue to gain access to brands. I mean, we have a couple of new brands. They're not all footwear. We brought in Converse this year, which we didn't have before, but brands like HydroJug coming into the assortment are a big win for us. We've got other higher-end brands. One we've talked a lot about is called BURLEBO. It's kind of a younger men's outdoor brand. Pretty high AUR, candidly, doing really, really well for us. That's out in all doors. A younger golf brand called Waggle that we now have in a meaningful count of doors doing very well for us. We talked about Ninja coolers and grills also doing really well for us. We continue to get access to brands. We continue to have dialogues with brands that we want to have access to. I think that the way we launched Jordan definitely helps our case as we make it to get access to those brands. That's helpful. Thanks, Steve. A question for Carl on the gross margin guide. It seems about 50 basis points of expansion in the back half at the midpoint, which is a bit stronger than the first half. Obviously, tariffs, I think, are going to have a bigger impact as we move deeper into the year. Can you just outline the drivers of expansion you see in the back half, thinking about your view on merch margins versus cycling over some of these elevated freight and supply chain costs that you referenced? Yeah. I mean, at the low end, we're going up 10 basis points from last year and reinvested margin rate in some of the distribution center standpoint. So 34.0 at the low end compared to 33.9 last year. To get to that upper end, we would need merch margin to continue to perform like we're seeing it. I think there are some makeshift things that are in play there associated with Jordan and Nike performing so well. As it relates to shrink, I think it might round to 10 basis points. It's not a huge headwind. As I said, it's running up 5 basis points in the last year. It's a headwind of 5 basis points year- over- year, year- to-d ate. Some of the e-com shipping is some of the price of poker associated with driving such what I consider to be an awesome comp at + 17.7% in the quarter. I'll take that. As it relates to other shipping things, Rob and his team are doing a great job. We pulled forward a lot of inventory, so we've seen a lot of the shipping costs associated with that. Basically, those just play out as we sell the goods. To get to a midpoint, we would continue to see year-over-year improvement. I think we're up 30 basis points year- to- date in gross margin. At the low end, we're up 10 basis points. At the high end, we're up 16 basis points. All right. Thanks for the color, guys. Best of luck. Thanks. Our last question is from John Kernan with TD Cowen. Please proceed with your question. Morning, guys. Thanks for taking the question. Morning. Carl, can you talk to new store productivity, the productivity from the new boxes? It looks like omnichannel sales per foot is still under some pressure here. I'm just curious what your assumptions are as you've ramped store openings in the back half of the year. I got a quick follow-up for Steve. Yeah. I mean, the productivity of the boxes is pretty much coming in exactly like we said it would. So $12 million- $16 million year one, EBITDA positive, but deleveraged to the total company with, I think, averages about $21 million per store. You know, 20% ROIC, four-year kind of cash-on-cash payback. Look, it's different by market. In those new markets where our brand awareness is low and we're having to invest in educating the consumer on what is, you know, Academy Sports + Outdoors, what do they sell, how do I break into that shopping cycle that they're already involved with? It's coming in closer to the $12 million. In the legacy markets where brand awareness is high, they just don't drive routinely like an hour to where an Academy is. It's coming in really close to that $16 million. We're pretty pleased. I think once you get past that first year, we've shown a propensity to be able to kind of estimate what that year one is. They're positive comping. I can't say enough about going from low- single-digit comps. Again, this is once they've reached their 14th month, they're in the comp set. Just going from low-single-digits to mid-single-digits. I think it's 26 stores that are now in the comp set for some portion of the second quarter. That's meaningful to me. I'm really excited about the comp waterfall long-term as we continue to roll out these stores. If there's a level of predictability on where they're going to come in on year one and then they're banging out mid-singles from a growth algorithm standpoint, I like that as it relates to some of the broader goals that we're trying to achieve. That's helpful. Thanks. Steve, you talked about some pretty significant AUR increases in some categories in the back half of the year. I'm just curious how you're planning for that within the comp guidance given the middle to lower-income consumers under a little bit more pressure here. Yeah. I think we expect the behavior we've seen throughout the last several quarters of the lower-end consumer being under pressure to not change, right? I mean, I think those people making under $50,000, they're struggling. I think they're continuing to either opt out or trade down. I think that's going to continue, although we've seen the rate of those at trading slow each quarter. Hopefully, that trend will continue. We're really excited about the middle and higher-income quintiles trading into us. We think that's going to more than offset any erosion we feel on the low end because, you know, once again, it's about relative value. I think Carl mentioned this earlier. You know, as prices go up, one of the things we're very focused on is making sure that we still have the best value on like-to-like items out there in the marketplace. All the work we do on a daily, weekly basis continues to reinforce that. The fact that consumers accelerating at that higher end tells us they're noticing it as well. They're They're trading in and picking Academy for the value that we offer. That's helpful, Steve. Thanks. Thank you. We have reached the end of the question and answer session. I'd now like to turn the call back over to Steve Lawrence for closing comments. Thanks. I want to close by thanking you all for joining our call. I'd also like to express gratitude to our 23,000+ associates who work tirelessly to provide our customers with an outstanding experience when they shop at Academy. You guys are truly the secret sauce that makes Academy a great company. I'd also like to welcome Brandy Treadway as our new Executive Vice President and Chief Legal Officer. Brandy joined us last month and brings nearly 25 years of retail and legal experience. She oversees our legal, compliance, and risk management teams and will play a meaningful role in our continued growth. At this point, we've made it through August and are encouraged by the continued momentum we saw during the back-to-school selling season. It gives us confidence as we head into the back half of the year that we have the right strategies in place and that our assortments are resonating with our core consumers. We remain focused on helping our customers navigate the current economic backdrop by enabling them to maximize their spending power at Academy. We also believe that we'll come out of this year better positioned than ever to serve our customers and ensure long-term growth. Thanks and have a great rest of your day. The call is now concluded. You may now disconnect. Thank you.