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What changed in Academy Sports & Outdoors, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Academy Sports & Outdoors, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+332 added−400 removedSource: 10-K (2023-03-16) vs 10-K (2022-03-29)

Top changes in Academy Sports & Outdoors, Inc.'s 2023 10-K

332 paragraphs added · 400 removed · 252 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

50 edited+12 added−20 removed47 unchanged
Biggest changeAs of January 29, 2022, we generally organized our merchandise in four divisions made up of sixteen categories as follows: Division Category (1) Primary product types (1) Outdoors Camping Coolers and drinkware, camping accessories, camping equipment, sunglasses, backpacks and sports bags Fishing Marine equipment and fishing rods, reels, baits and equipment Shooting sports Firearms, ammunition, archery and archery equipment, camouflage apparel, waders, shooting accessories, optics, airguns and hunting equipment Sports and Recreation Fitness Fitness equipment, fitness accessories and nutrition supplies Team sports Team and specialty sports equipment, including baseball, football, basketball, soccer, golf, racket sports, and volleyball Recreation Patio furniture, outdoor cooking, wheeled goods (bicycles, skateboards and other ride-on toys), trampolines, play sets, watersports and pet equipment Front end Electronics, watches, and front-end (consumables, batteries, etc.) Apparel Outdoor and seasonal apparel Outdoor apparel, seasonal apparel, denim, work apparel, graphic t-shirts and accessories Youth apparel Boys and girls outdoor and athletic apparel Athletic apparel Sporting apparel and apparel for fitness Licensed apparel Professional and collegiate team licensed apparel and accessories Footwear Casual and seasonal footwear Casual shoes, slippers, seasonal footwear and socks Work footwear Work and western boots, shoes and hunting footwear Youth footwear Boys and girls athletic footwear Athletic footwear Running shoes, athletic lifestyle and training shoes Team sports footwear Team and specialty sports footwear and slides (1) Certain products and categories were reclassified amongst categories and divisions, respectively, during 2021 as compared to prior years in order to better align with our current merchandising strategy and view of the business.
Biggest changeApproximately 56% of our customers purchased a private label brand from us in 2022. 7 As of January 28, 2023, we generally organized our merchandise in four divisions made up of sixteen categories as follows: Division Category Primary product types Outdoors Camping Coolers and drinkware, camping accessories, camping equipment, sunglasses, backpacks and sports bags Fishing Marine equipment and fishing rods, reels, baits and equipment Hunting Firearms, ammunition, archery and archery equipment, camouflage apparel, waders, shooting accessories, optics, airguns and hunting equipment Sports and Recreation Fitness Fitness equipment, fitness accessories and nutrition supplies Team sports Team and specialty sports equipment, including baseball, football, basketball, soccer, golf, racket sports, and volleyball Recreation Patio furniture, outdoor cooking, wheeled goods (bicycles, skateboards and other ride-on toys), trampolines, play sets, watersports and pet equipment Front end Electronics, watches, and front-end (consumables, batteries, etc.) Apparel Outdoor and seasonal apparel Outdoor apparel, seasonal apparel, denim, work apparel, graphic t-shirts and accessories Youth apparel Boys and girls outdoor and athletic apparel Athletic apparel Sporting apparel and apparel for fitness Licensed apparel Professional and collegiate team licensed apparel and accessories Footwear Casual and seasonal footwear Casual shoes, slippers, seasonal footwear and socks Work footwear Work and western boots, shoes and hunting footwear Youth footwear Boys and girls athletic footwear Athletic footwear Running shoes, athletic lifestyle and training shoes Team sports footwear Team and specialty sports footwear and slides 8 The following table sets forth the approximate amount of sales (all of which are based in the U.S.) by merchandise divisions for the periods presented (amounts in thousands): Fiscal Year Ended January 28, 2023 January 29, 2022 January 30, 2021 Merchandise sales Outdoors $ 1,940,811 $ 2,174,650 $ 1,968,514 Sports and recreation 1,366,785 1,463,172 1,256,357 Apparel 1,759,005 1,810,345 1,390,519 Footwear 1,291,224 1,290,197 1,044,502 Total merchandise sales (1) 6,357,825 6,738,364 5,659,892 Other sales (2) 37,248 34,764 29,341 Net sales $ 6,395,073 $ 6,773,128 $ 5,689,233 (1) E-commerce sales consist of 10.7%, 9.3% and 10.4% of merchandise sales for 2022, 2021 and 2020, respectively.
Sporting goods merchandise and apparel and outdoor recreation products may represent a small portion of the total merchandise in these stores. • Large format sporting goods stores (examples: Dick’s Sporting Goods and Scheels) generally range in size from 20,000 to over 100,000 square feet and offer a broad selection of sporting goods and outdoor recreation merchandise. • Traditional sporting goods stores (examples: Hibbett Sports and Big 5 Sporting Goods) generally range in size from 5,000 to 20,000 square feet and are frequently located in regional malls and shopping centers and typically carry a varied assortment of primarily sporting goods merchandise. • Specialty outdoor retailers (examples: Bass Pro Shop/Cabela’s and Sportsman’s Warehouse) generally range in size from 7,500 to over 100,000 square feet and typically focus on specific categories such as outdoor recreation. • Specialty footwear retailers (examples: Foot Locker, Boot Barn and The Finish Line) generally range in size from 2,000 to 20,000 square feet and typically focus on specific categories such as athletic footwear. • Catalogue & Internet retailers (examples: Amazon and eBay) do not typically operate brick and mortar stores and primarily rely on delivery of goods.
Sporting goods merchandise and apparel and outdoor recreation products may represent a small portion of the total merchandise in these stores. • Large format sporting goods stores (examples: Dick’s Sporting Goods and Scheels) generally range in size from 20,000 to over 100,000 square feet and offer a broad selection of sporting goods and outdoor recreation merchandise. • Traditional sporting goods stores (examples: Hibbett Sports and Big 5 Sporting Goods) generally range in size from 5,000 to 20,000 square feet and are frequently located in regional malls and shopping centers and typically carry a varied assortment of primarily sporting goods merchandise. • Specialty outdoor retailers (examples: Bass Pro Shop/Cabela’s and Sportsman’s Warehouse) generally range in size from 7,500 to over 100,000 square feet and typically focus on specific categories such as outdoor recreation. • Specialty footwear retailers (examples: Foot Locker, Boot Barn and The Finish Line) generally range in size from 2,000 to 20,000 square feet and typically focus on specific categories such as athletic footwear. • Catalogue & Internet retailers (examples: Amazon, eBay, and Fanatics) do not typically operate brick and mortar stores and primarily rely on delivery of goods.
Mullican holds a Bachelor of Arts in Communication from North Carolina State University and a Juris Doctor degree from the University of Chicago Law School. 13 Steven (Steve) P. Lawrence has served as our Executive Vice President and Chief Merchandising Officer since joining the Academy Sports + Outdoors team in February 2019. Prior to joining Academy Sports + Outdoors, Mr.
Mullican holds a Bachelor of Arts in Communication from North Carolina State University and a Juris Doctor degree from the University of Chicago Law School. Steven (Steve) P. Lawrence has served as our Executive Vice President and Chief Merchandising Officer since joining the Academy Sports + Outdoors team in February 2019. Prior to joining Academy Sports + Outdoors, Mr.
Lawrence also served on the board of directors of francesca’s from October 2016 to January 2019. Mr. Lawrence obtained his Bachelor of Business Administration in Finance from the University of Notre Dame. Samuel (Sam) J. Johnson has served as our Executive Vice President, Retail Operations since joining the Academy Sports + Outdoors team in April 2017.
Lawrence also served on the board of directors of francesca’s from October 2016 to January 2019. Mr. Lawrence obtained his Bachelor of Business Administration in Finance from the University of Notre Dame. 13 Samuel (Sam) J. Johnson has served as our Executive Vice President, Retail Operations since joining the Academy Sports + Outdoors team in April 2017.
The best way to serve our customers is to invest in top talent, be open to innovation, and have the vision to succeed. We are focused on creating a winning team by recruiting and retaining great people, promoting teamwork, and fostering an enjoyable and rewarding work environment.
We believe the best way to serve our customers is to invest in top talent, be open to innovation, and have the vision to succeed. We are focused on creating a winning team by recruiting and retaining great people, promoting teamwork, and fostering an enjoyable and rewarding work environment.
Our employment levels fluctuate over the course of the year mainly due to the seasonality of our business. None of our team members are covered by collective bargaining agreements. The Company believes that it has a good working relationship with its team members. Culture and Core Values.
Our employment levels fluctuate over the course of the year mainly due to the seasonality of our business. None of our team members are covered by collective bargaining agreements. The Company believes that it has a good working relationship with its team members. 11 Culture and Core Values.
Some of the federal, state or local laws and regulations that affect us include but are not limited to: • consumer product safety, product liability or consumer protection laws; • laws related to advertising, marketing, pricing and selling our products, including but not limited to firearms, ammunition, and related accessories; • labor and employment laws, including wage and hour laws; • tax laws or interpretations thereof, including collection of state sales tax on e-commerce sales; • data protection and privacy laws and regulations; • environmental laws and regulations; • hazardous material laws and regulations; • customs or import and export laws and regulations, including collection of tariffs on product imports; • intellectual property laws; • antitrust and competition regulations; • banking and anti-money laundering regulations; • Americans with Disabilities Act, or ADA, and similar state and local laws and regulations; • website design and content regulations; • U.S.
Some of the federal, state or local laws and regulations that affect us include but are not limited to: • consumer product safety, product liability or consumer protection laws; • laws related to advertising, marketing, pricing and selling our products, including but not limited to firearms, ammunition, and related accessories; • labor and employment laws, including wage and hour laws and forced labor prevention laws; • tax laws or interpretations thereof, including collection of state sales tax on e-commerce sales; • data protection and privacy laws and regulations; • environmental laws and regulations; • hazardous material laws and regulations; • customs or import and export laws and regulations, including collection of tariffs on product imports; • intellectual property laws; • antitrust and competition regulations; • banking and anti-money laundering regulations; • Americans with Disabilities Act, or ADA, and similar state and local laws and regulations; • website design and content regulations; • U.S.
These include the following: • Customer focus and service • Excellence in all we do • Responsible leadership • Initiative with urgency • Students of the business • Integrity always • Positive impact on our communities 11 Diversity, Inclusion and Belonging.
These include the following: • Customer focus and service • Excellence in all we do • Responsible leadership • Initiative with urgency • Students of the business • Integrity always • Positive impact on our communities Diversity, Inclusion and Belonging.
Risk Factors" under the sub-caption "Legal and Regulatory Risks". 15 Available Information Our website address is www.academy.com. We use our website as a channel of distribution for company information.
Risk Factors" under the sub-caption "Legal and Regulatory Risks". Available Information Our website address is www.academy.com. We use our website as a channel of distribution for company information.
Financial and other material information regarding the Company is routinely posted on our website and is readily accessible. We do not intend for information contained on our website to be part of this Annual Report on Form 10-K. 16
Financial and other material information regarding the Company is routinely posted on our website and is readily accessible. We do not intend for information contained on our website to be part of this Annual Report on Form 10-K. 15
Our access to national brand and owned brand merchandise creates a comprehensive portfolio of value-based and diversified products, spanning various price-points, that differentiates our assortment from our peers. Our category, brand and price-point mix is unique to Academy and difficult to replicate at other retailers.
Our access to national brand and private label brand merchandise creates a comprehensive portfolio of value-based and diversified products, spanning various price-points, that differentiates our assortment from our peers. Our category, brand and price-point mix is unique to Academy and difficult to replicate at other retailers.
Depending on the team member’s employment and work status, they may be eligible for: medical, dental, and vision insurance; participation in the Company’s 401(k) Plan with a six percent dollar for dollar match up to the IRS deferral limit; participation in the Company’s Employee Stock Purchase Plan which provides a 15 percent discount on the lower of the stock price at the beginning or the end of the each offering period; paid time off and paid vacations; tuition reimbursement programs; professional license/certification reimbursement; medical, family, and bereavement leave; additional voluntary short/long term, life, legal, pet, and accident insurance; paid maternity and parental leave; and a 20 percent team member discount on most all of our merchandise, to name a few.
Depending on the team member’s employment and work status, they may be eligible for: medical, dental, and vision insurance; participation in the Company’s 401(k) Plan with a six percent dollar for dollar match up to the IRS deferral limit; participation in the Company’s Employee Stock Purchase Plan which provides a 15 percent discount on the lower of the stock price at the beginning or the end of each offering period; paid time off and paid vacations; the ability for team members to get a portion of their earnings paid daily; tuition reimbursement programs; professional license/certification reimbursement; medical, family, and bereavement leave; additional voluntary short/long term, life, legal, pet, and accident insurance; paid maternity and parental leave; and a 20 percent team member discount on most all of our merchandise, to name a few.
Specific to our Katy corporate office, we engage our team members through the opportunity to participate in intramural sport teams, 5K fun walk/run events, subsidized membership in the company gym and exercise classes (this is also open to our Katy distribution team members); “food truck Fridays”; onsite car wash; and a company holiday party and other team member appreciation events.
Specific to our Katy corporate office, we engage our team members through the opportunity to participate in intramural sport teams, 5K fun walk/run events, subsidized membership in the company gym and exercise classes (this is also open to our Katy distribution team members); “food truck Thursdays”; onsite dental and car wash service; and a company holiday party and other team member appreciation events.
Item 1. Business The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes included elsewhere in this Annual Report for the fiscal year ended January 29, 2022. This discussion contains forward-looking statements that involve risks and uncertainties.
Item 1. Business The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes included elsewhere in this Annual Report for the fiscal year ended January 28, 2023. This discussion contains forward-looking statements that involve risks and uncertainties.
Sporting goods shoppers consistently rate us as the top retailer for offering sporting and outdoor recreation products for a wide range of customers and being a one-stop shop. We carefully curate our products to provide the right assortment that appeal to beginners, experts, families and casual participants.
Sporting goods shoppers consistently rate us as the top retailer for offering sporting and outdoor recreation products for a wide range of customers and being a one-stop shop. We carefully curate our products to provide the right assortment that appeals to customers from beginners to experts, including families and casual participants.
Our Team Members Our mission is to provide “Fun for All” and a critical component to our success is our people. As of January 29, 2022, we employed approximately 22,000 team members in the U.S. and 11 team members in Hong Kong. Of those team members, approximately 50% were full-time and 50% were part-time.
Our Team Members Our mission is to provide “Fun for All” and a critical component to our success is our people. As of January 28, 2023, we employed approximately 22,000 team members in the U.S. and ten team members in Hong Kong. Of those team members, approximately 50% were full-time and 50% were part-time.
Who We Are Academy Sports + Outdoors is one of the leading full-line sporting goods and outdoor recreation retailers in the United States. Originally founded in 1938 as a family business in Texas, we now operate 259 stores across 16 contiguous states.
Who We Are Academy Sports + Outdoors is a leading full-line sporting goods and outdoor recreation retailers in the United States. Originally founded in 1938 as a family business in Texas, we now operate 268 stores across 18 contiguous states.
Foreign Corrupt Practices Act, or FCPA, the U.K. Bribery Act, or UKBA, and other anti-corruption laws; and • securities and exchange laws and regulations. We sell firearms, ammunition, and related accessories. Firearms represented approximately 6% of our net sales in 2021.
Foreign Corrupt Practices Act, or FCPA, the U.K. Bribery Act, or UKBA, and other anti-corruption laws; and • securities and exchange laws and regulations. We are a federally licensed firearms dealer, and we sell firearms, ammunition, and related accessories. Firearms represented approximately 6% of our net sales in 2022.
Hicks has served as a member of the board of managers of New Academy Holding Company, LLC (our predecessor company) since May 2017 and as a member of the board of directors of Academy Sports and Outdoors, Inc. since June 2020. Mr.
Hicks has served as the Chairman and our President and Chief Executive Officer since May 2018. Mr. Hicks has served as a member of the board of managers of New Academy Holding Company, LLC (our predecessor company) since May 2017 and as a member of the board of directors of Academy Sports and Outdoors, Inc. since June 2020. Mr.
We believe there is significant near-term opportunity for expansion with stores in in-fill markets, where we already have an established presence, and in adjacent markets, markets nearby to current locations which are not fully represented. We expect to open at least eight stores in 2022.
We believe there is significant near-term opportunity for expansion with stores in in-fill markets, where we already have an established presence, and in adjacent markets, markets nearby to current locations which are not fully represented. We expect to open 13 to 15 stores in fiscal 2023.
Our team member handbook outlines safety expectations, but we also empower our team members with knowledge and skills from various safety training courses during the onboarding process and on an ongoing basis through our learning engagement system with topics such as incident reporting, behavior-based safety, evacuation, active shooter response, hazardous materials, ergonomics, heat safety, electrical safety, industrial truck and pallet jack safety, confined space entry and parking lot and garage safety.
Throughout our stores, distribution centers, and corporate headquarters, we employ policies, procedures, and training to promote safe and healthy work environments. 12 Our team member handbook outlines safety expectations, but we also empower our team members with knowledge and skills from various safety training courses during the onboarding process and on an ongoing basis through our learning engagement system with topics such as incident reporting, behavior-based safety, evacuation, active shooter response, hazardous materials, ergonomics, heat safety, electrical safety, industrial truck and pallet jack safety, confined space entry and parking lot and garage safety.
These and some of our other national brands rely on us to broaden their consumer reach, which fosters a mutually beneficial relationship when it comes to pricing and assortment. We play a critical role in delivering customer volume for these brands, especially as mall-based retailers face further headwinds and our industry consolidates.
These and some of our other national brands rely on us to broaden their consumer reach, which fosters a mutually beneficial relationship when it comes to pricing and assortment, and we play a critical role in delivering customer volume for these brands.
Our product assortment focuses on key categories of outdoor, apparel, sports & recreation and footwear (representing 32%, 27%, 22% and 19% of our 2021 net sales, respectively) through both leading national brands and a portfolio of 20 owned brands, which go well beyond traditional sporting goods and apparel offerings.
Our product assortment focuses on key categories of outdoor, apparel, sports & recreation and footwear (representing 31%, 28%, 21%, and 20% of our 2022 net sales, respectively) through both leading national brands and a portfolio of 20 private label brands, which go well beyond traditional sporting goods and apparel offerings.
Third-party trucking companies are used to disburse inventory from the distribution centers to and from our stores. These distribution centers are strategically located throughout our footprint to efficiently serve our retail locations, and have an ability to service up to an average of 110 locations each.
Third-party trucking companies are used to disburse inventory from the distribution centers to and from our stores. These distribution centers are strategically located throughout our footprint to efficiently serve our retail locations and have the capacity to service up to approximately 120 stores per distribution center.
We also provide, in all our distribution centers and our Katy corporate office, subsidized meals for all team members.
We also provide, in all our distribution centers and our Katy corporate office, subsidized meals for all team members at our onsite café and an annual health and benefits fair.
Approximately 80% of our 2021 merchandise sales was comprised of national brand products, with the remainder coming from exclusive products in our portfolio of 20 owned brands. We have minimal product overlap with direct-to-consumer brands and competitors. No single brand we carry accounted for more than 11% of our 2021 sales.
Approximately 80% of our 2022 merchandise sales was comprised of national brand products, with the remainder coming from exclusive products in our portfolio of private label brands. No single brand we carry accounted for more than 11% of our 2022 sales.
Our Industry The retail business is highly competitive based on many variables including price, product assortment, customer service, omnichannel experience and store locations.
Our average customer visits our stores anywhere from two to three times per year. 6 Our Industry The retail business is highly competitive based on many variables including price, product assortment, customer service, omnichannel experience and store locations.
For 2021, 2020 and 2019 no vendor represented more than 11%, 12%, and 14% of our total purchases, respectively. 7 We have premium access to hundreds of well-recognized national brands, such as Nike, Under Armour, adidas, Winchester, Brooks, Crocs, Wilson, Spaulding, Yeti, the North Face, and Columbia Sportswear, which are critical to our market penetration.
We have preferred access to hundreds of well-recognized national brands, such as Nike, Under Armour, adidas, Winchester, Brooks, Crocs, Wilson, Spaulding, Yeti, the North Face, and Columbia Sportswear, which are critical to our market penetration.
Casares holds a Bachelor of Business Administration in Finance from the University of Notre Dame and a Juris Doctor degree from Stanford Law School. 14 Intellectual Property Our trademarks, service marks, copyrights, patents, processes, trade secrets, domain names and other intellectual property, including our Academy Sports + Outdoors brand, our owned brands, such as Academy Sports + Outdoors, Magellan Outdoors, BCG, O’rageous, Game Winner, Outdoor Gourmet and Freely, and our designs, names, slogans, images and trade dress associated with these brands, are valuable assets that are critical to our success.
Intellectual Property Our trademarks, service marks, copyrights, patents, processes, trade secrets, domain names and other intellectual property, including our Academy Sports + Outdoors brand, our private label brands, such as Academy Sports + Outdoors, Magellan Outdoors, BCG, O’rageous, Game Winner, Outdoor Gourmet and Freely, and our designs, names, slogans, images and trade dress associated with these brands, are valuable assets that are critical to our success.
Our owned brand portfolio consists of 20 brands, including Magellan Outdoors, BCG, Academy Sports + Outdoors, Outdoor Gourmet and Freely. Our owned brand strategy focuses on in-filling categories and price points that our national brand products may not satisfy. Our owned brand offerings support and complement our overall merchandising strategy due to limited price-point overlap with national brands.
Our private label brand portfolio consists of 20 brands, including Academy Sports + Outdoors, Magellan Outdoors, BCG, O'rageous, Game Winner, Outdoor Gourmet and Freely. Our private label brand strategy focuses on in-filling categories and price points that our national brand products may not satisfy.
Our long-time customers have grown up with the Academy brand over time and pass their passion for us on to the next generation, enabling us to benefit from strong customer loyalty and shopping frequency in our embedded regional markets. 9 As of January 29, 2022, the number of stores that we operated, exclusively in the U.S., by state was as follows: State Number of Stores Texas 106 Louisiana 18 Georgia 18 Alabama 15 North Carolina 15 Tennessee 13 Oklahoma 13 Florida 12 Missouri 10 South Carolina 9 Arkansas 8 Mississippi 8 Kansas 6 Kentucky 5 Indiana 2 Illinois 1 259 We have significant growth opportunities in both our core markets and outside our footprint.
We are active members of the communities in which we operate, and our long-time customers have grown up with Academy and passed their passion for us on to the next generation, enabling us to benefit from strong customer loyalty and shopping frequency. 9 As of January 28, 2023, the number of stores that we operated, exclusively in the U.S., by state was as follows: State Number of Stores Texas 107 Georgia 20 Louisiana 18 Alabama 15 North Carolina 15 Florida 14 Tennessee 13 Oklahoma 13 Missouri 10 South Carolina 9 Arkansas 8 Mississippi 8 Kansas 6 Kentucky 6 Indiana 3 Illinois 1 Virginia 1 West Virginia 1 268 We have a strong and growing presence in some of the fastest-growing MSAs in the United States, including Austin, Atlanta and Raleigh, which we believe presents significant growth opportunities in both our core markets and outside our footprint.
We also enter into intellectual property agreements whereby the Company receives the right to use third-party owned trademarks typically in exchange for royalties on sales. These agreements typically contain a one to three-year term and contractual payment amounts required to be paid by the Company.
We also enter into intellectual property agreements whereby the Company receives the right to use third-party owned trademarks typically in exchange for royalties on sales.
Lawrence 54 Executive Vice President and Chief Merchandising Officer Samuel J. Johnson 55 Executive Vice President, Retail Operations Sherry Harriman 52 Senior Vice President, Logistics and Supply Chain Jamey Traywick Rutherford 48 Senior Vice President, Omnichannel Manish Maini 48 Senior Vice President, Chief Information Officer William S. Ennis 52 Senior Vice President, Chief Human Resources Officer Rene G.
Johnson 56 Executive Vice President, Retail Operations Sherry Harriman 53 Senior Vice President, Logistics and Supply Chain Jamey Traywick Rutherford 49 Senior Vice President, Omnichannel Manish Maini 49 Senior Vice President, Chief Information Officer William S. Ennis 53 Senior Vice President, Chief Human Resources Officer Rene G. Casares 47 Senior Vice President, General Counsel and Secretary Ken C.
We strive to ensure that a safe and hygienic working environment is provided and that occupational health and safety practices which prevent accidents and injury are promoted. Throughout our stores, distribution centers, and corporate headquarters, we employ policies, procedures, and training to promote safe and healthy work environments.
We strive to ensure that a safe and hygienic working environment is provided and that occupational health and safety practices which prevent accidents and injury are promoted.
Our national brand assortment spans across each brand’s price spectrum beyond those of our competitors and we expand below the national brand price spectrum by complementing the assortment with our owned brands. As such, we receive favorable product exclusivity from leading suppliers.
Our national brand assortment spans across each brand’s price spectrum, which we complement with an assortment of our private label brands priced below the national brand price spectrum. As such, we receive favorable product allocations from leading suppliers.
We seek to lease all of our stores in long-term lease agreements with third-party landlords, which typically range from 15 to 20 years. Other than stores that we may temporarily own, and for which we are in the process of executing sale-leaseback transactions, we do not own our retail locations.
Other than stores that we may temporarily own, and for which we are in the process of executing sale-leaseback transactions, we do not own our retail locations.
We seek to position our stores in areas with certain population densities, demographics and other characteristics to maximize sales. These markets consist of metropolitan, suburban and smaller cities. Additionally, our stores are typically placed in retail centers adjacent to co-tenants who drive significant traffic, with no store tethered to crowded mall spaces.
These markets consist of metropolitan, suburban and smaller cities. Additionally, our stores are typically placed in retail centers adjacent to co-tenants who drive significant traffic, with no store tethered to crowded mall spaces. We seek to lease all of our stores in long-term lease agreements with third-party landlords, which typically range from 15 to 20 years.
Merchandising Our merchandise consists of national brand products that we purchase and license from various vendors, owned brand products that we brand with our internal brands and exclusive license products that we purchase and license from vendors and carry exclusively. We have long-standing relationships with many of our suppliers and have partnered with them to grow our business over time.
Merchandising Our merchandise consists of national brand products that we purchase and license from various vendors, private label brand products that we brand with our internal brands and exclusive license products that we purchase and license from vendors and carry exclusively.
With over 40 million customers in our database, there is ample opportunity to increase our communication directly with our customers via one-on-one marketing. 10 In addition to our CRM tools, our Academy Credit Card program also provides data to track our customers’ purchases across all channels, giving us the ability to better serve and target those customers.
In addition to our CRM tools, our Academy Credit Card program also provides data to track our customers’ purchases across all channels, giving us the ability to better serve and target those loyal customers. 10 We often create events at our stores to drive customer traffic.
Our central “racetrack” aisle and adjacent end-cap merchandising space allows us to adjust our inventory presentations throughout our various selling seasons. Our stores average approximately 70,000 gross square feet, of which approximately 85% is dedicated to selling space. Our store locations are typically positioned adjacent to major highways or thoroughfares, allowing customers to easily locate our stores.
Our stores average approximately 70,000 gross square feet, of which approximately 85% is dedicated to selling space. Our store locations are typically positioned adjacent to major highways or thoroughfares, allowing customers to easily locate our stores. We seek to position our stores in areas with certain population densities, demographics and other characteristics to maximize sales.
We also utilize customer demographic data that we capture to know when our customers buy from us and what items they purchase.
Our current CRM programs focus on welcoming our first-time customers, recognizing our top spenders, reactivating our lapsed customers and cross-selling our category customers. We also utilize customer demographic data that we capture to better localize our marketing, to know when our customers buy from us and what items they purchase.
Governmental Regulations We operate in a complex regulatory and legal environment that exposes us to regulatory, compliance and litigation risks that could materially affect our operations and financial results. Specifically, we are subject to regulation by numerous federal, state and local regulatory agencies and authorities, including the U.S.
These agreements typically contain a one to three-year term and contractual payment amounts required to be paid by the Company. 14 Governmental Regulations We operate in a complex regulatory and legal environment that exposes us to regulatory, compliance and litigation risks that could materially affect our operations and financial results.
Additionally, our stores generally have consistent store layouts providing our customers familiarity across our entire store base. We seek to offer our customers strong merchandise assortment and a localized customer experience, which is facilitated by various types of merchandise fixtures and our large selling floor.
We seek to offer our customers strong merchandise assortment and a localized customer experience, which is facilitated by various types of merchandise fixtures and our large selling floor. Our central “racetrack” aisle and adjacent end-cap merchandising space allows us to adjust our inventory presentations throughout our various selling seasons.
Stores Our stores, all of which are based in the U.S., are designed to provide our customers with an easy-in, easy-out shopping experience. The interior of most of our stores are built around a central “racetrack” aisle that allows customers to efficiently navigate our selling floor.
The interior of most of our stores are built around a central “racetrack” aisle that allows customers to efficiently navigate our selling floor. Additionally, our stores generally have consistent store layouts providing our customers familiarity across our entire store base.
In 2021, we paid over nine million dollars in thank you and retention bonuses to our hourly team members to reward them for their effort and support during a unique and challenging year. Workplace, Health and Safety. The health and safety of our customers, team members, and communities is our top priority.
In 2022, the Company increased the annual merit and adjustment pool over prior years to recognize and reward our team member’s efforts and support in a unique and challenging year. Workplace, Health and Safety. The health and safety of our customers, team members, and communities is our top priority.
Marketing Our marketing strategy is designed to reinforce our broad selection of merchandise and value prices. We rely on various media to communicate with our customers including printed advertisements, television and radio commercials and digital marketing campaigns, among others. Our print advertisements are primarily comprised of newspaper and direct mail circulars.
Marketing Our marketing strategy is designed to reinforce our fun brand, broad selection of merchandise, and our value offering. We regularly analyze consumer trends on media consumption and rely on various media channels to communicate with our customers.
In 2020, we established our Diversity, Inclusion and Belonging Committee, and they led the organization in the creation of the following formal Diversity, Inclusion and Belonging Statement to further demonstrate our commitment: At Academy Sports + Outdoors, we promote a culture of diversity, inclusion and belonging, which should be reflected in the actions and behavior of our team members.
In 2020, we established our Diversity, Inclusion and Belonging Committee, and they led the organization in the creation of our team member led Diversity, Inclusion and Belonging groups throughout the Company.
(2) E-commerce sales consist of 9.3%, 10.4% and 5.1% of merchandise sales for 2021, 2020 and 2019, respectively. (3) Other sales consists primarily of the sales return allowance, gift card breakage income, credit card bounties and royalties, shipping income, net hunting and fishing license income and other items.
(2) Other sales consists primarily of the gift card breakage income, credit card bounties and royalties, shipping income, net hunting and fishing license income, sales return allowance and other items. Stores Our stores, all of which are based in the U.S., are designed to provide our customers with an easy-in, easy-out shopping experience.
We utilize data obtained from our customer relationship management, or CRM, tools, which enable us to create effective customer-targeting strategies. Our current CRM programs focus on welcoming our first-time customers, thanking our big spenders, reactivating our lapsed customers and cross-selling our category customers (including our hunting, sports equipment and recreation categories).
Our advertising features a broad assortment of products and messaging tailored to the current selling season. We utilize certain customer data obtained from our customer relationship management, or CRM, platform, which enable us to create effective customer-targeting strategies.
Information about our Executive Officers Below is a list of our executive officers, their respective ages as of January 29, 2022 and a brief account of the business experience of each of them. Name Age Position Ken C. Hicks 69 Chairman, President and Chief Executive Officer Michael P. Mullican 46 Executive Vice President and Chief Financial Officer Steven P.
We continue to focus on developing and driving our safety-first culture through awareness, training, and actions to reduce the frequency and severity of safety incidents. Information about our Executive Officers Below is a list of our executive officers, their respective ages as of January 28, 2023 and a brief account of the business experience of each of them.
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All statements in this Annual Report concerning our current and planned operations are modified by reference to our discussion of recent developments related to the COVID-19 pandemic, and our ability to carry out our current and planned operations are dependent on further developments associated with the COVID-19 pandemic.
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We have long-standing relationships with many of our suppliers and have partnered with them to grow our business over time. In 2022, we purchased merchandise from approximately 1,400 vendors. For 2022, 2021 and 2020 no vendor represented more than 11%, 11%, and 12% of our total purchases, respectively.
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Our average customer visits our stores anywhere from two to three times per year. 6 Strategic Priorities We made tremendous progress against our 2021 key business priorities. For omnichannel, we implemented improved search capabilities, increased check-out speed, added more payment options and launched a new mobile app.
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Our private label brand offerings support and complement our overall merchandising strategy due to limited price-point overlap with national brands. Additionally, our private label brands generate strong brand equity and drive significant customer loyalty.
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To enhance our customer shopping experience, we focused on better service, better looking stores, and better products. We continued to enhance our merchandise planning and allocation capabilities to increase our inventory efficiency and optimize our markdown strategy to increase sales and expand gross margin. In addition, we have taken measures to protect and strengthen our supply chain.
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We are continually expanding our targeting and personalization capabilities to deliver the right products and messages at the right time and in the media channel they prefer. Our media mix is a blend of digital and traditional, including paid search, email, affiliate, and social media along with linear and streaming broadcast and radio, print, outdoor and direct mail.
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In 2022, we are continuing our efforts to be the best sports and outdoors retailer in the country.
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With over 45 million customers in our database, there is ample opportunity to increase our communication directly with our customers via one-on-one marketing.
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We expect to do this by executing on these key priorities: • Creating a consistent and meaningful omnichannel business that delivers a true omnichannel experience for the customer; • Providing a great customer experience across all of our points of contact that drives loyalty and long-term growth; • Growing our store base to strengthen existing markets and enter new ones successfully; • And we expect to foster our continued growth by: ◦ Strengthening the efficiency and effectiveness of our supply chain; ◦ Developing and retaining an industry leading retail team; and ◦ Maintaining and scaling our IT capabilities.
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These events range from small, private local league shopping nights to large grand opening celebrations to commemorate new store openings that offer various indoor and outdoor activities, athlete and celebrity appearances, fun activities to test our products and meet our suppliers along with food and games.
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In 2021, we purchased merchandise from approximately 1,200 vendors.
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We also leverage sports championship moments when professional or collegiate sports teams in our markets win league titles. At these events we extend our store hours and offer official commemorative merchandise and may also host autograph signings and/or meet-and-greet events with players or coaches from the championship team.
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Additionally, our owned brands generate strong brand equity and drive significant customer loyalty. Approximately 57% of our customers purchased an owned brand from us in 2021.
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We are committed to making a positive impact on the communities we serve and partner with over 700 organizations, including youth sports leagues that reach more than 500,000 participants. We also partner with school districts, Historically Black Colleges and Universities (HBCUs), local parks, hunting and fishing organizations, military bases and local first responders.
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Changes in management's merchandise strategy and viewpoints could result in future reclassifications. 8 The following table sets forth the approximate amount of sales (all of which are based in the U.S.) by merchandise divisions for the periods presented (amounts in thousands): Fiscal Year Ended January 29, 2022 January 30, 2021 February 1, 2020 Merchandise sales (1) Outdoors $ 2,174,650 $ 1,968,514 $ 1,455,080 Sports and recreation 1,463,172 1,256,357 974,125 Apparel 1,810,345 1,390,519 1,358,906 Footwear 1,290,197 1,044,502 1,021,603 Total merchandise sales (2) 6,738,364 5,659,892 4,809,714 Other sales (3) 34,764 29,341 20,183 Net sales $ 6,773,128 $ 5,689,233 $ 4,829,897 (1) Certain products and categories were re-categorized amongst various categories and divisions, respectively, during 2021 as compared to prior years in order to better align with our current merchandising strategy and view of the business.
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These groups provide a forum for team members with common interests and/or backgrounds to connect, network, and provide input on issues related events while helping educate and celebrate our team members' diverse backgrounds and experiences. Talent Management.
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As a result, we have reclassified sales between divisions for 2020 and 2019 for comparability purposes. This reclassification is in divisional presentation only and did not impact the overall net sales balances previously disclosed (see Note 2 to the accompanying consolidated financial statements).
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Name Age Position Ken C. Hicks 70 Chairman, President and Chief Executive Officer Michael P. Mullican 47 Executive Vice President and Chief Financial Officer Steven P. Lawrence 55 Executive Vice President and Chief Merchandising Officer Samuel J.
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We are active members of the communities in which we operate. We have a strong and growing presence in some of the fastest-growing MSAs in the United States, including Austin, Raleigh, Orlando, Houston, San Antonio, Dallas and Charlotte.
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Casares holds a Bachelor of Business Administration in Finance from the University of Notre Dame and a Juris Doctor degree from Stanford Law School.
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These print advertisements consist of a broad assortment of merchandise tailored to the season of the distribution. Our television and radio advertisements are typically themed to represent the current selling season and often feature certain merchandise related to that selling season. Our digital engagement includes communicating with our customers through paid search results, various social media platforms and email.
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Specifically, we are subject to regulation by numerous federal, state and local regulatory agencies and authorities, including the U.S.
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We often create events at our stores to drive customer traffic. These events include large grand opening celebrations to commemorate new store openings that offer various activities, food and games and often feature local celebrities. We also create championship events when professional or collegiate sports teams in our markets win league titles.
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In June 2021, the United States Department of Justice announced a new policy to underscore zero tolerance for willful violations of the law by federally licensed firearms dealers that put public safety at risk.
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At these events we extend our store hours and offer certain commemorative merchandise. We are active members in the communities we serve and sponsor over 3,000 local sports teams and enter into sponsorship agreements with local professional sports teams, associations, events, networks, players and collegiate programs.
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Diversity is inviting all players to join the team. Inclusion and belonging are when everyone gets to play the game. Every player is key, and we are only successful when everyone has an equal opportunity to play and win. Talent Management.
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We continue to focus on developing and driving our safety-first culture through awareness, training, and actions to reduce the frequency and severity of safety incidents. 12 During 2021, we continued our COVID-19 safety precautions based on Centers for Disease Control guidelines, including requiring all team members in stores, distribution centers, and the corporate office to socially distance; wear face coverings if they were not fully vaccinated or at-risk except when alone, eating or drinking; maintain proper hygiene; stay home if they did not feel well or test positive for COVID-19; and promptly notify their leader if they received a positive COVID-19 test result or developed symptoms of COVID-19.
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We also encouraged all team members to obtain a COVID-19 vaccination and booster and facilitated several free onsite vaccination events to offer team members a convenient way to get vaccinated.
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We have taken many additional actions in our stores based on the needs, risks, and regulations present in each community and facility, including cleaning stores professionally on a regular basis, equipping stores with hand sanitizer stations and signage illustrating how to socially distance within the store, limiting the number of customers admitted at one time, monitoring and sanitizing fitting rooms and sampled clothing, installing protective shields at cash registers and other countertops, and providing a cash incentive to our hourly population to get vaccinated.
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We have also provided free masks and hand sanitizer and may take team members’ temperatures when they report to work. We have taken similar actions to mitigate the spread of COVID-19 in our distribution centers and corporate office.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe extent to which the ongoing COVID-19 pandemic impacts our results, financial position and liquidity will depend on future developments, including whether there are additional periods of increases or spikes in the number of COVID-19 cases, further mutations or related strains of the virus (or even the threat or perception that this could occur), within the markets in which we operate and the related impact on consumer confidence and spending, labor supply or product supply, all of which are highly uncertain.
Biggest changeThe extent to which the COVID-19 pandemic continues to impact our results, financial position and liquidity will depend on future developments and the related impact on consumer confidence and spending, labor supply or product supply, all of which are highly uncertain. Intense competition in the sporting goods and outdoor recreation retail industries could limit our growth and reduce our profitability.
If our existing indebtedness were to be accelerated, there can be no assurance that we would have, or be able to obtain, sufficient funds to repay such indebtedness in full.
If our existing indebtedness were to be accelerated, there can be no assurance that we would have, or be able to obtain, sufficient funds to repay such indebtedness in full.
Our quarterly results of operations and comparable sales have historically fluctuated, and may continue to fluctuate, as a result of factors outside our control, including: • general regional and national economic conditions; • consumer confidence in the economy; • unseasonal or extreme weather conditions, natural or man-made disasters or public health emergencies (such as snow storms, hurricanes, tornadoes, floods, pandemics, and civil disturbances); • catastrophic or tragic events (such as tragedies involving firearms); • changes in demand for the products that we offer in our stores; • lack of new product introduction; • lockouts or strikes involving professional sports teams; • retirement of sports superstars used in marketing various products; • sports scandals, including those involving leagues, associations, teams or athletes with ties to us or our markets; • costs related to the closure of existing stores; • litigation; • the success or failure of college and professional sports teams in our markets; • expansion of existing or entry of new competitors into our markets; • consolidation of competitors in our markets; • shift in consumer tastes and fashion trends; • calendar shifts or holiday or seasonal periods; • the timing of income tax refunds to customers; • changes in laws and regulations, politics or consumer advocacy affecting our business, including sentiment relating to the sale of firearms and ammunition; • cancellations of tax-free holidays in certain states; • pricing, promotions or other actions taken by us or our existing or possible new competitors; and • changes in other tenants or landlords or surrounding geographic circumstances in the shopping centers in which we are located.
Our quarterly results of operations and comparable sales have historically fluctuated, and may continue to fluctuate, as a result of factors outside our control, including: • general regional and national economic conditions; • consumer confidence in the economy; • unseasonal or extreme weather conditions, natural or man-made disasters or public health emergencies (such as snow storms, hurricanes, tornadoes, floods, pandemics, and civil disturbances); • catastrophic or tragic events (such as tragedies involving firearms); • changes in demand for the products that we offer in our stores; • lack of new product introduction; • lockouts or strikes involving professional sports teams; • retirement of sports superstars used in marketing various products; • sports scandals, including those involving leagues, associations, teams or athletes with ties to us or our markets; • costs related to the closure of existing stores; • litigation; • the success or failure of college and professional sports teams in our markets; • expansion of existing or entry of new competitors into our markets; • consolidation of competitors in our markets; • shift in consumer tastes and fashion trends; • calendar shifts or holiday or seasonal periods; • the timing of income tax refunds to customers; • changes in laws and regulations, politics or consumer advocacy affecting our business, including sentiment relating to the sale of firearms and ammunition; • cancellations of tax-free holidays in certain states; • pricing, promotions or other actions taken by us or our existing or possible new competitors; and 26 • changes in other tenants or landlords or surrounding geographic circumstances in the shopping centers in which we are located.
The trading price of our common stock may be highly volatile and may be adversely affected due to a number of factors, most of which we cannot control, including those listed elsewhere under this “Risk Factors” section, and the following: • results of operations that vary from the expectations of securities analysts and investors; • results of operations that vary from those of our competitors; • changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • changes in economic conditions for companies in our industry; • changes in market valuations of, or earnings and other announcements by, companies in our industry; • declines in the market prices of stocks generally, particularly those of sporting goods and outdoor recreation retail companies; • additions or departures of key management personnel; • strategic actions by us or our competitors; • announcements by us, our competitors our suppliers of significant contracts, price reductions, new products or technologies, acquisitions, dispositions, joint marketing relationships, joint ventures, other strategic relationships or capital commitments; • changes in preference of our customers and our market share; • changes in general economic or market conditions or trends in our industry or the economy as a whole; • changes in governmental fiscal policy or interest rate regulation; • changes in business or regulatory conditions; • future sales of our common stock or other securities; • investor perceptions of or the investment opportunity associated with our common stock relative to other investment alternatives; • changes in the way we are perceived in the marketplace, including due to negative publicity or campaigns on social media to boycott certain of our products, our business or our industry; • the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; • changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business; • announcements relating to litigation or governmental investigations; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • the development and sustainability of an active trading market for our common stock; 38 • changes in accounting principles; and • other events or factors, including those resulting from informational technology system failures and disruptions, epidemics, pandemics, natural disasters, acts of terrorism, civil unrest, wars (including the invasion of Ukraine by Russia and its regional and global ramifications) or responses to these events.
The trading price of our common stock may be highly volatile and may be adversely affected due to a number of factors, most of which we cannot control, including those listed elsewhere under this “Risk Factors” section, and the following: • results of operations that vary from the expectations of securities analysts and investors; • results of operations that vary from those of our competitors; • changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • changes in economic conditions for companies in our industry; • changes in market valuations of, or earnings and other announcements by, companies in our industry; • declines in the market prices of stocks generally, particularly those of sporting goods and outdoor recreation retail companies; • additions or departures of key management personnel; • strategic actions by us or our competitors; • announcements by us, our competitors, our suppliers of significant contracts, price reductions, new products or technologies, acquisitions, dispositions, joint marketing relationships, joint ventures, other strategic relationships or capital commitments; • changes in preference of our customers and our market share; • changes in general economic or market conditions or trends in our industry or the economy as a whole; • changes in governmental fiscal policy or interest rate regulation; 36 • changes in business or regulatory conditions; • future sales of our common stock or other securities; • investor perceptions of or the investment opportunity associated with our common stock relative to other investment alternatives; • changes in the way we are perceived in the marketplace, including due to negative publicity or campaigns on social media to boycott certain of our products, our business or our industry; • the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; • changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business; • announcements relating to litigation or governmental investigations; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • the development and sustainability of an active trading market for our common stock; • changes in accounting principles; and • other events or factors, including those resulting from informational technology system failures and disruptions, epidemics, pandemics, natural disasters, acts of terrorism, civil unrest, wars (including the invasion of Ukraine by Russia and its regional and global ramifications) or responses to these events.
Our indebtedness reduces the funds that would otherwise be available for operations, future business opportunities and payments of our debt obligations and limits our ability to: • obtain additional financing, if necessary, for working capital and operations, or such financing may not be available on favorable terms; • make needed capital expenditures; • make strategic acquisitions or investments or enter into joint ventures; • react to changes or withstand a future downturn in our business, the industry or the economy in general; • meet store growth, distribution center expansion, e-commerce growth, budget targets and forecasts of future results; • engage in business activities, including future opportunities that may be in our interest; and • react to competitive pressures or compete with competitors with less debt.
Our indebtedness reduces the funds that would otherwise be available for operations, future business opportunities and payments of our debt obligations and limits our ability to: • obtain additional financing, if necessary, for working capital and operations, or such financing may not be available on favorable terms; • make needed capital expenditures; • make strategic acquisitions or investments or enter into joint ventures; • react to changes or withstand a future downturn in our business, the industry or the economy in general; • meet store growth, distribution center expansion, e-commerce growth, budget targets and forecasts of future results; 33 • engage in business activities, including future opportunities that may be in our interest; and • react to competitive pressures or compete with competitors with less debt.
If there is a disruption in supply from a principal supplier (which can occur for various reasons in or out of the control of these suppliers, including as a result of public health emergencies, such as the ongoing COVID-19 pandemic, and measures taken by the Chinese government or other governments in response to such events), we may experience merchandise out-of-stocks, delivery delays or increased delivery costs, or otherwise be unable to obtain the same merchandise from other suppliers in a timely and efficient manner and on acceptable terms, or at all, which could materially affect our results of operations and our customers’ confidence in us.
If there is a disruption in supply from a principal supplier (which can occur for various reasons in or out of the control of these suppliers, including as a result of public health emergencies, such as the COVID-19 pandemic, and measures taken by the Chinese government or other governments in response to such events), we may experience merchandise out-of-stocks, delivery delays or increased delivery costs, or otherwise be unable to obtain the same merchandise from other suppliers in a timely and efficient manner and on acceptable terms, or at all, which could materially affect our results of operations and our customers’ confidence in us.
We may be unable to meet our labor needs and control our costs due to external factors such as the availability of a sufficient number of qualified persons in the work force of the markets in which we operate, competition, unemployment levels, demand for certain labor expertise, prevailing wage rates, wage inflation, changing demographics, health and other insurance costs, adoption of new or revised employment and labor laws and regulations, and the impacts of man-made or natural disasters, such as tornadoes, hurricanes, and public health emergencies, such as the ongoing COVID-19 pandemic.
We may be unable to meet our labor needs and control our costs due to external factors such as the availability of a sufficient number of qualified persons in the work force of the markets in which we operate, competition, unemployment levels, demand for certain labor expertise, prevailing wage rates, wage inflation, changing demographics, health and other insurance costs, adoption of new or revised employment and labor laws and regulations, and the impacts of man-made or natural disasters, such as tornadoes, hurricanes, and public health emergencies, such as the COVID-19 pandemic.
Our e-commerce operations are subject to numerous risks that could have a material adverse impact on our overall results of operations, including: • expansion of our sales across the United States, thereby, subjecting us to the regulatory and other requirements of the 50 states; • website operating issues, including website availability, system reliability, website operation, Internet connectivity, website errors, computer viruses, telecommunication failures, electronic break-ins or similar disruptions; • the need to keep pace with rapid technological change and maintain investments necessary for our e-commerce operation; • legal compliance issues related to the online sale of merchandise; • intellectual property litigation related to the enforcement of patent rights; • privacy and personal data security; • protection against credit card and gift card fraud; • fulfillment, inventory control and shipping issues for e-commerce transactions; • tax issues, including state sales tax collection for e-commerce transactions; • hiring, retention and training of personnel qualified to conduct our e-commerce operation; 25 • ability to procure adequate computer hardware and software and technology services and solutions from third-party providers; and • reduction in visits to, diversion and/or cannibalization of sales from, existing retail stores.
Our e-commerce operations are subject to numerous risks that could have a material adverse impact on our overall results of operations, including: • expansion of our sales across the United States, thereby, subjecting us to the regulatory and other requirements of the 50 states; • website operating issues, including website availability, system reliability, website operation, Internet connectivity, website errors, computer viruses, telecommunication failures, electronic break-ins or similar disruptions; • the need to keep pace with rapid technological change and maintain investments necessary for our e-commerce operation; • legal compliance issues related to the online sale of merchandise; • intellectual property litigation related to the enforcement of patent rights; • privacy and personal data security; • protection against credit card and gift card fraud; • fulfillment, inventory control and shipping issues for e-commerce transactions; • tax issues, including state sales tax collection for e-commerce transactions; • hiring, retention and training of personnel qualified to conduct our e-commerce operation; 24 • ability to procure adequate computer hardware and software and technology services and solutions from third-party providers; and • reduction in visits to, diversion and/or cannibalization of sales from, existing retail stores.
A reduction in overall consumer spending which causes customers to shift their spending to products other than those sold by us or to products sold by us that are less profitable could result in lower net sales, decreases in inventory turnover or a reduction in profitability due to lower margins, which could make it more difficult for us to generate cash flow sufficient to satisfy our 17 obligations under our indebtedness.
A reduction in overall consumer spending which causes customers to shift their spending to products other than those sold by us or to products sold by us that are less profitable could result in lower net sales, decreases in inventory turnover or a reduction in profitability due to lower margins, which could make it more difficult for us to generate cash flow sufficient to satisfy our obligations under our indebtedness.
Our information systems, including our back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, worms, other malicious computer programs, denial-of-service attacks, security breaches (through cyber-attacks from cyber-attackers or sophisticated organizations), catastrophic events such as fires, floods, tornadoes, earthquakes and hurricanes, and usage errors by our associates.
Our information technology systems, including our back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, worms, other malicious computer programs, denial-of-service attacks, security breaches (through cyber-attacks from cyber-attackers or sophisticated organizations), catastrophic events such as fires, floods, tornadoes, earthquakes and hurricanes, and usage errors by our associates.
Any failure to successfully update our information technology systems, and any missteps, delays, cost overruns, vendor disputes, technical challenges or other similar issues that may arise during the updating of our information technology systems, could have a material impact on our business, financial condition, results of operations, internal controls over financial reporting and ability to manage our business effectively.
Any failure to successfully update and maintain our information technology systems, and any missteps, delays, cost overruns, vendor disputes, technical challenges or other similar issues that may arise during the updating of our information technology systems, could have a material impact on our business, financial condition, results of operations, internal controls over financial reporting and ability to manage our business effectively.
The sale of owned brand merchandise subjects us to certain risks, including: • our ability to successfully and profitably conduct sourcing and manufacturing activities internally or with third-party agents, manufacturers and distributors; • our failure or our manufacturers’ failure to comply with federal, state and local regulatory requirements, including product safety, working age and conditions, anti-corruption, import and customs and retail sale restrictions; • potential mandatory or voluntary product recalls; • claims and lawsuits resulting from injuries associated with the use of our owned brand merchandise; • our ability to successfully protect our intellectual property or other proprietary rights (e.g., defending against counterfeit, knock-offs, grey-market, infringing or otherwise unauthorized goods); • our ability to successfully navigate and avoid claims related to the intellectual property or other proprietary rights of third parties; • our ability to successfully administer and comply with the obligations under license agreements that we have with the licensors of brands, including in some instances certain sales minimums that if not met could cause us to lose the licensing rights or pay damages; • sourcing and manufacturing outside the United States, including foreign laws and regulations, political unrest, disruptions or delays in cross-border shipments, changes in economic conditions in foreign countries, exchange rate and import duty fluctuations and conducting activities with third-party manufacturers; and • increases in the price of raw materials used in the manufacturing of our owned brand merchandise and other risks generally encountered by entities that source, manufacture, market and retail owned brand merchandise.
The sale of private label brand merchandise subjects us to certain risks, including: • our ability to successfully and profitably conduct sourcing and manufacturing activities internally or with third-party agents, manufacturers and distributors; • our failure or our manufacturers’ failure to comply with federal, state and local regulatory requirements, including product safety, working age and conditions, anti-corruption, import and customs and retail sale restrictions; • potential mandatory or voluntary product recalls; • claims and lawsuits resulting from injuries associated with the use of our private label brand merchandise; • our ability to successfully protect our intellectual property or other proprietary rights (e.g., defending against counterfeit, knock-offs, grey-market, infringing or otherwise unauthorized goods); • our ability to successfully navigate and avoid claims related to the intellectual property or other proprietary rights of third parties; • our ability to successfully administer and comply with the obligations under license agreements that we have with the licensors of brands, including in some instances certain sales minimums that if not met could cause us to lose the licensing rights or pay damages; • sourcing and manufacturing outside the United States, including foreign laws and regulations, political unrest, disruptions or delays in cross-border shipments, changes in economic conditions in foreign countries, exchange rate and import duty fluctuations and conducting activities with third-party manufacturers; and • increases in the price of raw materials used in the manufacturing of our private label brand merchandise and other risks generally encountered by entities that source, manufacture, market and retail private label brand merchandise.
To the extent that any foreign manufacturers from whom we purchase products directly or indirectly employ labor, environmental, corruption, workplace safety, or other business practices that vary 21 from those commonly accepted in the United States, we could be hurt by any resulting negative publicity or, in some cases, potential claims of liability.
To the extent that any foreign manufacturers from whom we purchase products directly or indirectly employ labor, environmental, corruption, workplace safety, or other business practices that vary from those commonly accepted in the United States, we could be hurt by any resulting negative publicity or, in some cases, potential claims of liability.
In addition, any determination to pay dividends to holders of our common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, results of operations, projections, liquidity, earnings, legal requirements, covenant compliance, restrictions in our existing and any future debt agreements and other factors that our board of directors deems relevant.
Any determination to pay future dividends to holders of our common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, results of operations, projections, liquidity, earnings, legal requirements, covenant compliance, restrictions in our existing and any future debt agreements and other factors that our board of directors deems relevant.
If one or more of these analysts ceases coverage of the Company or fails to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline. 39 Anti-takeover provisions in our organizational documents could delay or prevent a change of control.
If one or more of these analysts ceases coverage of the Company or fails to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline. Anti-takeover provisions in our organizational documents could delay or prevent a change of control.
For example, we are, and may in the future, be subject to claims, demands and lawsuits, and we may suffer losses and adverse effects to our reputation, related to: • injuries or crimes associated with merchandise we sell, that has been associated with an increased risk of injury, including but not limited to firearms, ammunition, firearm accessories, air pistols, crossbows and other archery equipment, knives, deer stands and other hunting equipment, trampolines, wheeled goods such as bicycles and ride-on toys, certain merchandise qualifying as hazardous material and other products; • product liability claims from customers or actions required or penalties assessed by government agencies relating to products we sell, including but not limited to products that are recalled, defective or otherwise alleged to be harmful; • the design, purchase, manufacture, import, distribution and sale of our owned brand products; • the procurement, transportation, storage, distribution and sale of firearms and ammunition, including improper performance of federally mandated procedures for determining customer firearm purchase eligibility (such as age and residency verification, background checks and proper completion of required paperwork); • municipalities or other organizations attempting to recover costs from firearm manufacturers and retailers, relating to the use of firearms and ammunition; • the operations of a fleet of trucks for distribution purposes, including transportation of hazardous materials by such fleet; • the procurement and ownership, leasing or operation of property for retail stores, distribution centers and other corporate needs; • the alleged infringement upon intellectual property rights to merchandise we sell or technology or services we use, including information technology, marketing and advertising services; • global sourcing, including international, customs and trade issues; • real estate issues, including construction, leasing, zoning and environmental issues; • employment issues, including actions by team members, the Equal Employment Opportunity Commission, the Department of Labor, the Occupational Safety and Health Administration and other federal and state employment agencies; • commercial disputes, including contractual and business disputes with vendors, landlords, or competitors; • tort, personal injury and property damage claims related to our stores, e-commerce, distribution centers or corporate headquarters; and • regulatory compliance, including relating to consumer protection, marketing and advertising, product safety, workplace safety, firearms, ammunition and related accessories, knives, import/export customs, taxes, tariffs, duties, and surcharges, data security and privacy, food and other regulated products, accounting, labor and employment, environmental matters, and hazardous materials. 32 We sell firearms, ammunition, and related accessories.
For example, we are, and may in the future, be subject to claims, demands and lawsuits, and we may suffer losses and adverse effects to our reputation, related to: • injuries or crimes associated with merchandise we sell, that has been associated with an increased risk of injury, including but not limited to firearms, ammunition, firearm accessories, air pistols, crossbows and other archery equipment, knives, deer stands and other hunting equipment, trampolines, wheeled goods such as bicycles and ride-on toys, certain merchandise qualifying as hazardous material and other products; • product liability claims from customers or actions required or penalties assessed by government agencies relating to products we sell, including but not limited to products that are recalled, defective or otherwise alleged to be harmful; • the design, purchase, manufacture, import, distribution and sale of our private label brand products; • the procurement, transportation, storage, distribution and sale of firearms and ammunition, including improper performance of federally mandated procedures for determining customer firearm purchase eligibility (such as age and residency verification, background checks and proper completion of required paperwork); • municipalities or other organizations attempting to recover costs from firearm manufacturers and retailers, relating to the use of firearms and ammunition; • the operations of a fleet of trucks for distribution purposes, including transportation of hazardous materials by such fleet; • the procurement and ownership, leasing or operation of property for retail stores, distribution centers and other corporate needs; 31 • the alleged infringement upon intellectual property rights to merchandise we sell or technology or services we use, including information technology, marketing and advertising services; • global sourcing, including international, customs and trade issues; • real estate issues, including construction, leasing, zoning and environmental issues; • employment issues, including actions by team members, the Equal Employment Opportunity Commission, the Department of Labor, the Occupational Safety and Health Administration and other federal and state employment agencies; • commercial disputes, including contractual and business disputes with vendors, landlords, or competitors; • tort, personal injury and property damage claims related to our stores, e-commerce, distribution centers or corporate headquarters; and • regulatory compliance, including relating to consumer protection, marketing and advertising, product safety, workplace safety, firearms, ammunition and related accessories, knives, import/export customs, taxes, tariffs, duties, and surcharges, data security and privacy, food and other regulated products, accounting, labor and employment, environmental matters, and hazardous materials.
In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock. If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock price and trading volume could decline.
In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock. 37 If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock price and trading volume could decline.
In addition, we could incur significantly higher costs and longer lead times associated with 26 distributing our products to our stores and customers during the time it takes for us to reopen or replace these distribution centers.
In addition, we could incur significantly higher costs and longer lead times associated with distributing our products to our stores and customers during the time it takes for us to reopen or replace these distribution centers.
The general conditions that affect U.S. consumer discretionary spending in our markets include: • health of the economy; • consumer confidence in the economy; • financial market volatility; • wages, jobs and unemployment trends; • public health pandemics (including the coronavirus ("COVID-19") pandemic) and their effect on our customers, team members, vendors/suppliers and other stakeholders; • the housing market, including real estate prices and mortgage rates; • consumer credit availability; • consumer debt levels; • gasoline and fuel prices; • interest rates and inflation; • tax rates and tax policy; • immigration policy; • import and customs duties/tariffs and policy; • impact of natural or man-made disasters; • legislation and regulations; • international unrest, trade disputes, labor shortages, and other disruptions to the supply chain; • changes to raw material and commodity prices; and • national and international security and safety concerns.
The general conditions that affect U.S. consumer discretionary spending in our markets include: • health of the economy; • consumer confidence in the economy; • financial market volatility; • wages, jobs and unemployment trends; • public health events (including the COVID-19 pandemic) and their effect on our customers, team members, vendors/suppliers and other stakeholders; • the housing market, including real estate prices and mortgage rates; • consumer credit availability; • consumer debt levels; • gasoline and fuel prices; • interest rates and inflation; • tax rates and tax policy; • immigration policy; • import and customs duties/tariffs and policy; • impact of natural or man-made disasters; • legislation and regulations; • international unrest, trade disputes, labor shortages, and other disruptions to the supply chain; • changes to raw material and commodity prices; and • national and international security and safety concerns.
Additionally, the ability of consumers to compare prices on a real- 20 time basis through the use of smartphones and digital technology puts additional pressure on us to maintain competitive prices vis-à-vis our competitors.
Additionally, the ability of consumers to compare prices on a real-time basis through the use of smartphones and digital technology puts additional pressure on us to maintain competitive prices vis-à-vis our competitors.
For example, we may face losses related to the civil unrest in the United States, such as the civil unrest that occurred in late May 2020 in response to reported incidents of police violence.
For example, we may face losses related to the civil unrest in the United States, such as the that which occurred in late May 2020 in response to reported incidents of police violence.
These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness, and additionally we have further borrowing capacity 35 under the ABL Facility.
These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness, and additionally we have further borrowing capacity under the ABL Facility.
If our existing indebtedness were to be accelerated, there can be no assurance that we would have, or be able 36 to obtain, sufficient funds to repay such indebtedness in full.
If our existing indebtedness were to be accelerated, there can be no assurance that we would have, or be able to obtain, sufficient funds to repay such indebtedness in full.
Our comparable sales, net sales per square foot, customer traffic or average value per transaction may be adversely affected if, for example, our customers reduce their purchases with us due to inflation, job losses, foreclosures, bankruptcies, higher consumer debt and interest rates, higher taxes, reduced access to credit, falling home prices and lower consumer confidence.
Our comparable sales, net sales per square foot, customer traffic or average value per transaction may be adversely affected if, for example, our customers reduce their purchases with us due to continued high inflation, job losses, foreclosures, bankruptcies, higher consumer debt and interest rates, higher taxes, reduced access to credit, falling home prices and lower consumer confidence.
If we increase the price for our products in order to maintain gross margins for our products, such increase may adversely affect demand for, and sales of, our products, which could have a material adverse effect on our financial condition and results of operations. 29 We rely upon various means of transportation, including ships and trucks, to deliver products from vendors to our distribution centers and from our distribution centers to our stores.
If we increase the price for our products in order to maintain gross margins for our products, such increase may adversely affect demand for, and sales of, our products, which could have a material adverse effect on our financial condition and results of operations. 28 We rely upon various means of transportation, including ships and trucks, to deliver products from vendors to our distribution centers and from our distribution centers to our stores.
Moreover, many of our suppliers provide us 23 with merchandise purchasing incentives, such as return privileges, volume purchasing allowances and cooperative advertising, and a decline or discontinuation of these incentives could severely impact our results of operations. Harm to our reputation could adversely impact our ability to attract and retain customers, team members, vendors and/or other partners.
Moreover, many of our suppliers provide us with merchandise purchasing incentives, such as return privileges, volume purchasing allowances and cooperative advertising, and a decline or discontinuation of these incentives could severely impact our results of operations. 22 Harm to our reputation could adversely impact our ability to attract and retain customers, team members, vendors and/or other partners.
Unforeseen events, including public health emergencies, such as pandemics, natural disasters, such as earthquakes, hurricanes, tornadoes, snow or ice storms, floods and heavy rains, and man-made disasters, such as an oil spill closing large areas of hunting or fishing, could disrupt our operations or the operations of our suppliers, as well as the behavior of our consumers.
Unforeseen events, including public health emergencies, such as pandemics, natural disasters, such as earthquakes, hurricanes, tornadoes, freezes, snow or ice storms, floods and heavy rains, heatwaves, and man-made disasters, such as an oil spill closing large areas of hunting or fishing, could disrupt our operations or the operations of our suppliers, as well as the behavior of our consumers.
Consumer spending on sporting goods, sports and casual apparel and footwear, and outdoor recreation products could decrease or be displaced by spending on other activities due to a number of factors, including: • shifts in behavior away from team sports and outdoor activities in favor of media (including social media) and electronics-driven leisure activities; • state, local and federal government budget cuts on facilities and activities, such as school athletic budgets, parks, ball fields, recreational sports leagues, hunting and fishing services, etc.; • weak economic conditions, recession, inflation or other factors, such as global or local pandemics; • legal and regulatory changes in federal and state hunting and fishing seasons, bag limits and firearm and ammunition restrictions; • consumer activism relating to controversial products we may carry, services we may perform, or our corporate philosophy, including those relating to firearms and ammunition, which could cause them to take their retail business elsewhere; • escalating costs of sporting and outdoor activities due to adverse changes in economic conditions, including rising fuel prices, rising participation fees and rising sporting license fees; and • natural or man-made disasters (e.g., an oil spill closing large areas of hunting or fishing), including hurricanes, tornadoes, large storms and floods, and the effects of such events on the ability of large urban areas to continue spending on sporting goods and outdoor recreation products. 18 Total consumer spending may not continue to increase at historical rates due to slowed production growth and shifts in population demographics, and it may not increase in certain product categories given changes in consumer interests and participation rates.
Consumer spending on sporting goods, sports and casual apparel and footwear, and outdoor recreation products could decrease or be displaced by spending on other activities due to a number of factors, including: • shifts in behavior away from team sports and outdoor activities in favor of media (including social media) and electronics-driven leisure activities; • state, local and federal government budget cuts on facilities and activities, such as school athletic budgets, parks, ball fields, recreational sports leagues, hunting and fishing services, etc.; • weak economic conditions, recession, inflation or other factors, such as global or local pandemics; • legal and regulatory changes in federal and state hunting and fishing seasons, bag limits and firearm and ammunition restrictions; • consumer activism relating to controversial products we may carry, services we may perform, or our corporate philosophy, including those relating to firearms and ammunition, which could cause them to take their retail business elsewhere; • escalating costs of sporting and outdoor activities due to adverse changes in economic conditions, including rising fuel prices, rising participation fees and rising sporting license fees; and • severe weather and natural or man-made disasters (e.g., an oil spill closing large areas of hunting or fishing), including heat waves, freezes, hurricanes, tornadoes, large storms and floods, and the effects of such events on the ability of large urban areas to continue spending on sporting goods and outdoor recreation products. 17 Total consumer spending may not continue to increase at historical rates due to slowed production growth and shifts in population demographics, and it may not increase in certain product categories given changes in consumer interests and participation rates.
We depend on approximately 1,200 suppliers to supply us with the merchandise we purchase for resale and our significant dependence on these suppliers exposes us to risks associated with disruption in supply and losses of merchandise purchasing incentives that could have a material adverse effect on our business and results of operations.
We depend on approximately 1,400 suppliers to supply us with the merchandise we purchase for resale and our significant dependence on these suppliers exposes us to risks associated with disruption in supply and losses of merchandise purchasing incentives that could have a material adverse effect on our business and results of operations.
For example, during fiscal 2021 we observed increased competition across the industry for resources throughout the supply chain, which resulted in disruptions to the flow of products from our vendors, labor shortages, reduced shipping container availability, and longer delays at the port.
For example, during fiscal 2022 we observed increased competition across the industry for resources throughout the supply chain, which resulted in disruptions to the flow of products from our vendors, labor shortages, reduced shipping container availability, and longer delays at the port.
Additionally, during fiscal 2021, we observed increased competition across the industry for resources throughout the supply chain, which resulted in disruptions to the flow of products from our vendors, labor shortages, reduced shipping container availability, and longer delays at the port.
Additionally, during fiscal 2022, we observed increased competition across the industry for resources throughout the supply chain, which resulted in disruptions to the flow of products from our vendors, labor shortages, reduced shipping container availability, and longer delays at the port.
From time to time, we may undertake initiatives involving numerous information technology systems, including our merchandise management, warehouse management, point of sale, e-commerce, data security, credit card fraud detection, financial reporting, and labor management systems.
From time to time, we may undertake initiatives involving numerous information technology systems, including our merchandise management, warehouse management, customer relationship management, point of sale, e-commerce, data security, credit card fraud detection, financial reporting, and labor management systems.
Our information technology systems, if not functioning properly, could disrupt our ability to track, record, and analyze sales and inventory and could cause disruptions of operations, including, among other things, our ability to order, process and ship inventory, process financial information including credit card transactions, prevent data breaches and credit card fraud, process payrolls or vendor payments or engage in other similar normal business activities.
Our information technology systems, if not functioning properly or if failing to function altogether, could disrupt our ability to track, record, and analyze sales and inventory and could cause disruptions of operations, including, among other things, our ability to order, process and ship inventory, process financial information including credit card transactions, prevent data breaches and credit card fraud, process payrolls or vendor payments or engage in other similar normal business activities.
If the United States were to withdraw from or materially modify any international trade agreements to which it is a party, or if tariffs were raised on the foreign-sourced goods that we sell, or if border taxes were implemented, then the goods we import may no longer be available at a commercially attractive price or at all, which in turn could have a material adverse effect on our business, financial condition and results of operations.
If the United States were to withdraw from or materially modify any international trade agreements to which it is a party, or if tariffs were raised on the foreign-sourced goods that we sell, or if border taxes were implemented, then the goods we import may become more expensive or may no longer be available at a commercially attractive price or at all, each of which in turn could have a material adverse effect on our business, financial condition and results of operations.
If we fail to locate desirable sites, obtain lease rights to these sites on terms acceptable to us, hire adequate personnel and open and effectively operate these new stores, our financial performance could be adversely affected. 24 We lease our stores under operating leases with terms of 15 to 20 years, and we generally cannot cancel these leases at our option.
If we fail to locate desirable sites, obtain lease rights to these sites on terms acceptable to us, hire adequate personnel and open and effectively operate these new stores, our financial performance could be adversely affected. 23 We lease our stores under operating leases with initial terms of 15 to 20 years, and we generally cannot cancel these leases at our option.
Issues that might pose a reputational risk include failure of our cybersecurity measures to protect against data breaches, product liability and product recalls, our social media activity, failure to comply with applicable laws and regulations or enforce our own policies, our policies related to the sale of firearms, ammunition and accessories, our policies relating to the COVID-19 pandemic, public stances on controversial social or political issues, and any of the other risks enumerated in these risk factors.
Issues that might pose a reputational risk include failure of our cybersecurity measures to protect against data breaches, product liability and product recalls, our social media activity, failure to comply with applicable laws and regulations or enforce our own policies, our policies related to the sale of firearms, ammunition and accessories, our policies relating to public health, public stances on controversial social or political issues, and any of the other risks enumerated in these risk factors.
As a result, we have experienced rising inventory costs on owned brand products we directly source from China, as well as national brand products from China that we source through our vendors. These higher inventory costs have resulted in higher prices and/or lower margins, thus resulting in a negative impact to sales and/or gross margin.
As a result, we have experienced rising inventory costs on private label brand products we directly source from China, as well as national brand products from China that we source through our vendors. These higher inventory costs have resulted in higher prices and/or lower margins, thus resulting in a negative impact to sales and/or gross margin.
Additionally, our operations are conducted through our wholly owned subsidiaries and our ability to generate cash to meet our debt service obligations or to make future dividend payments, if any, is highly dependent on the earnings of, and the receipt of funds from, our subsidiaries via dividends or intercompany loans.
Additionally, our operations are conducted through our wholly owned subsidiaries and our ability to generate cash to meet our debt service obligations or to make future dividend payments or conduct share repurchases, if any, is highly dependent on the earnings of, and the receipt of funds from, our subsidiaries via dividends or intercompany loans.
We have reserved shares for issuance under our New Academy Holding Company, LLC 2011 Unit Incentive Plan, or 2011 Equity Plan, our 2020 Omnibus Incentive Plan, or 2020 Equity Plan, and our new 2020 Employee Stock Purchase Plan, or ESPP.
We have reserved shares for issuance under our New Academy Holding Company, LLC 2011 Unit Incentive Plan (the "2011 Equity Plan"), our 2020 Omnibus Incentive Plan (the "2020 Equity Plan"), and our 2020 Employee Stock Purchase Plan (the "ESPP").
As a result, our third-party manufacturers may not have the materials, capacity, or capability to manufacture our products according to our schedule and specifications. If our third-party manufacturers’ operations remain curtailed, we may need to seek alternate manufacturing sources, which may be more expensive.
As a result, our third-party manufacturers may not have the materials, capacity, or capability to manufacture our products according to our schedule and specifications. If our third-party manufacturers’ operations are again curtailed, we may need to seek alternate manufacturing sources, which may be more expensive.
Our overall level of indebtedness requires that we dedicate a portion of our cash flows to debt service payments. The Term Loan (as defined in Note 4 of the accompanying consolidated financial statements) requires quarterly principal and cash interest payments through September 30, 2027.
Our overall level of indebtedness requires that we dedicate a portion of our cash flows to debt service payments. The Term Loan (as defined in Note 4 of the accompanying financial statements) requires quarterly principal payments through September 30, 2027, and monthly cash interest payments through maturity.
Our stock price may be highly volatile or may decline regardless of our operating performance, and you may not be able to resell shares of our common stock at or above the price you paid or at all, and you could lose all or part of your investment as a result.
Risks Related to the Ownership of Our Common Stock Our stock price may be highly volatile or may decline regardless of our operating performance, and you may not be able to resell shares of our common stock at or above the price you paid or at all, and you could lose all or part of your investment as a result.
We depend on approximately 1,200 suppliers to supply us in a timely and efficient manner with the merchandise we sell. Our significant dependence on these suppliers exposes us to various risks that could have a material adverse effect on our business and results of operations. In 2021, purchases from our largest vendor represented approximately 11% of our total inventory purchases.
We depend on approximately 1,400 suppliers to supply us in a timely and efficient manner with the merchandise we sell. Our significant dependence on these suppliers exposes us to various risks that could have a material adverse effect on our business and results of operations. In 2022, purchases from our largest vendor represented approximately 11% of our total inventory purchases.
A significant portion of the merchandise that we sell, including merchandise we purchase from domestic suppliers and much of our owned brand merchandise, is manufactured in countries such as China, Vietnam, El Salvador and Bangladesh.
A significant portion of the merchandise that we sell, including merchandise we purchase from domestic suppliers and much of our private label brand merchandise, is manufactured in countries such as China, Vietnam, El Salvador and Bangladesh.
Our continued growth also depends in large part, upon our ability to open new stores in a timely manner and to operate them profitably. In 2020 and 2021, in response to the then-current retail environment, we temporarily stopped new store openings, before announcing a planned resumption in 2022.
Our continued growth also depends in large part, upon our ability to open new stores in a timely manner and to operate them profitably. In 2020 and 2021, in response to the then-current retail environment, we temporarily stopped new store openings, before resuming in 2022.
We believe that our trademarks, service marks, copyrights, patents, processes, trade secrets, domain names and other intellectual property, including our Academy Sports + Outdoors brand, our owned brands, such as Academy Sports + Outdoors, Magellan Outdoors, BCG, Freely and Outdoor Gourmet, and our goodwill, designs, names, slogans, images and trade dress associated with these brands, are valuable assets, essential to our success and our competitive position due to their name recognition with customers.
We believe that our trademarks, service marks, copyrights, patents, processes, trade secrets, domain names and other intellectual property, including our Academy Sports + Outdoors brand, our private label brands, such as Academy Sports + Outdoors, Magellan Outdoors, BCG, O'rageous, Game Winner, Outdoor Gourmet and Freely, and our goodwill, designs, names, slogans, images and trade dress associated with these brands, are valuable assets, essential to our success and our competitive position due to their name recognition with customers.
The ongoing COVID-19 pandemic has already impacted the suppliers of products we sell, particularly as a result of mandatory shutdowns in locations where our products are manufactured and in some cases due to extreme demand for certain popular or necessary goods or raw materials.
The COVID-19 pandemic has impacted, and may continue to impact, the suppliers of products we sell, particularly as a result of mandatory shutdowns in locations where our products are manufactured and in some cases due to extreme demand for certain popular or necessary goods or raw materials.
A significant amount of our merchandise is produced in China, and the ongoing COVID-19 pandemic in China has resulted in significant governmental measures being implemented in China to control the spread of the virus, including, among others, restrictions on manufacturing and the movement of team members in many regions of the country.
A significant amount of our merchandise is produced in China, and the ongoing COVID-19 pandemic in China has led to, and may continue to lead to, significant governmental measures being implemented in China to control the spread of the virus, including, among others, restrictions on manufacturing and the movement of team members in many regions of the country.
Each financial institution that is a lender under the ABL Facility is responsible on a several but not joint basis for providing a portion of the loans to be made under the facility.
One of our sources of liquidity is the ABL Facility. Each financial institution that is a lender under the ABL Facility is responsible on a several but not joint basis for providing a portion of the loans to be made under the facility.
As of January 29, 2022, we had no borrowings outstanding under the ABL Facility, and an available borrowing capacity under the ABL Facility of approximately $874.8 million (which is subject to customary borrowing conditions, including a borrowing base). We may be able to increase the commitments under the ABL Facility by $250.0 million, subject to certain conditions.
As of January 28, 2023, we had no borrowings outstanding under the ABL Facility, and an available borrowing capacity under the ABL Facility of approximately $947.8 million (which is subject to customary borrowing conditions, including a borrowing base). We may be able to increase the commitments under the ABL Facility by $250.0 million, subject to certain conditions.
If we were to become involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation, which may adversely affect the market price of our common stock. Our ability to raise capital in the future may be limited.
If we were to become involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation, which may adversely affect the market price of our common stock.
Expansion into new markets could also bring us into direct competition with retailers with whom we have no past experience as direct competitors. To the extent that we become increasingly reliant on entry into new markets to grow, we may face additional risks and our results of operations could suffer.
Expansion into new markets could also bring us into direct competition with retailers with whom we have no past experience as direct competitors. As a result of our anticipated growth, we may become increasingly reliant on entry into new markets to grow, we may face additional risks and our results of operations could suffer.
If some or our entire workforce were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements or work practice, it could have a material adverse effect on our business, financial condition and results of operations. Additionally, on November 5, 2021, the U.S.
If some or our entire workforce were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements or work practice, it could have a material adverse effect on our business, financial condition and results of operations.
The ongoing COVID-19 pandemic and measures taken in response have negatively impacted the global and U.S. economies, disrupted consumer spending and global supply chains, and created significant volatility and disruption of labor and financial markets.
The COVID-19 pandemic, including measures taken in response have negatively impacted the global and U.S. economies, disrupted consumer spending and global supply chains, and created significant volatility and disruption of labor and financial markets, and may continue to do so.
Updating our existing information technology systems subjects us to numerous risks, including: • loss of information; • disruption of normal operations; • changes in accounting or other operating procedures; • changes in internal control over financial reporting or general computer controls; • problems maintaining accuracy of historical data; • allocation and dedication of key business resources to the updating of existing systems; • ability to attract and retain adequate experienced technical resources and third-party contractors for the updating of existing systems; • unknown impact on remaining systems; • adequacy of training and change management to address critical changes in business processes and job functions; and • updated information technology system ultimately does not meet the needs of the business.
From time to time, our computer and information technology systems may require repair, upgrade, enhancement, integration and/or replacement for us to maintain successful current operations and achieve future sales and store growth. 21 Updating our existing information technology systems subjects us to numerous risks, including: • loss of information; • disruption of normal operations; • changes in accounting or other operating procedures; • changes in internal control over financial reporting or general computer controls; • problems maintaining accuracy of historical data; • allocation and dedication of key business resources to the updating of existing systems; • ability to attract and retain adequate experienced technical resources and third-party contractors for the updating of existing systems; • unknown impact on remaining systems; • adequacy of training and change management to address critical changes in business processes and job functions; and • updated information technology system ultimately does not meet the needs of the business.
Additionally, if the U.S. or global economy experiences a crisis or downturn, including any capital markets volatility or government intervention in the financial markets, or if the U.S. or global economy experiences a prolonged period of decelerating or negative growth, then our liquidity, capital resources or results of operations could be materially and adversely impacted.
A prolonged period of depressed consumer spending could have a material adverse effect on our business. 16 Additionally, if the U.S. or global economy experiences a crisis or downturn, including any capital markets volatility or government intervention in the financial markets, or if the U.S. or global economy experiences a prolonged period of decelerating or negative growth, then our liquidity, capital resources or results of operations could be materially and adversely impacted.
We require many of our vendors to carry their own insurance, and we have indemnity agreements with many of our vendors, but we cannot be assured that (1) any specific claim or lawsuit will be subject to a vendor’s insurance or indemnity agreement, (2) our vendors will carry or maintain such insurance coverage or meet their indemnity obligations or (3) we will be able to collect payments from our vendors sufficient to offset liability losses or, in the case of our owned brand products, where almost all of the manufacturing occurs outside the United States, that we will be able to collect anything at all.
We require many of our vendors to carry their own insurance, and we have indemnity agreements with many of our vendors, but we cannot be assured that (1) any specific claim or lawsuit will be subject to a vendor’s insurance or indemnity agreement, (2) our vendors will carry or maintain such insurance coverage or meet their indemnity obligations or (3) we will be able to collect payments from our vendors sufficient to offset liability losses or, in the case of our private label brand products, where almost all of the manufacturing occurs outside the United States, that we will be able to collect anything at all. 32 With all claims and lawsuits, however, there is a risk that liabilities, fines and losses may not be covered by insurance or indemnity or may exceed insurance or indemnity coverage.
Intense competition in the sporting goods and outdoor recreation retail industries could limit our growth and reduce our profitability. The market for sporting and outdoor recreation goods is highly fragmented and intensely competitive. Our current and prospective competitors include many large companies, some of which have substantially greater market presence, name recognition and financial, marketing and other resources than us.
The market for sporting and outdoor recreation goods is highly fragmented and intensely competitive. Our current and prospective competitors include many large companies, some of which have substantially greater market presence, name recognition and financial, marketing and other resources than us.
Our amended and restated certificate of incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders and the federal district courts will be the exclusive forum for Securities Act claims, which could limit our stockholders’ ability to bring a suit in a different judicial forum than they may otherwise choose for disputes with us or our directors, officers, team members or stockholders.
The powers, preferences and rights of these additional series of preferred stock may be senior to or on parity with our common stock, which may reduce its value. 38 Our amended and restated certificate of incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders and the federal district courts will be the exclusive forum for Securities Act claims, which could limit our stockholders’ ability to bring a suit in a different judicial forum than they may otherwise choose for disputes with us or our directors, officers, team members or stockholders.
As of January 29, 2022, we had approximately $297.8 million outstanding under the Term Loan and $400.0 million outstanding under the Notes, all of which is secured.
As of January 28, 2023, we had approximately $194.8 million outstanding under the Term Loan and $400.0 million outstanding under the Notes, all of which is secured.
Adverse financial and economic conditions may adversely affect our ability to draw on our ABL Facility, the ability of banks to honor draws on our ABL Facility or our ability to obtain incremental term loan facilities or access the equity and debt capital markets.
Adverse financial and economic conditions, including as a result of continued increases in interest rates, may adversely affect our ability to draw on our ABL Facility, the ability of banks to honor draws on our ABL Facility or our ability to obtain incremental term loan facilities or access the equity and debt capital markets.
See “Executive Compensation—Equity Compensation Plans.” Any common stock that we issue, including under our 2011 Equity Plan, 2020 Equity Plan, ESPP or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by the investors who purchase common stock in this offering.
Any common stock that we issue, including under our 2011 Equity Plan, 2020 Equity Plan, ESPP or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by the investors who purchase common stock in this offering. In the future, we may also issue our securities in connection with investments or acquisitions.
As of January 29, 2022, we had no borrowings outstanding under the ABL Facility (as defined in Note 4 of the accompanying consolidated financial statements), an available borrowing capacity under the ABL Facility of approximately $874.8 million (which is subject to customary borrowing conditions, including a borrowing base), and outstanding letters of credit of $21.4 million, $17.8 million of which were issued under the ABL Facility.
As of January 28, 2023, we had no borrowings outstanding under the ABL Facility (as defined in Note 4 of the accompanying financial statements), an available borrowing capacity under the ABL Facility of approximately $947.8 million (which is subject to customary borrowing conditions, including a borrowing base), and outstanding letters of credit of $13.9 million, all of which were issued under the ABL Facility.
Unfavorable changes to regulations in these areas could have a material adverse impact on our e-commerce activities. Our owned brand merchandise exposes us to various risks generally encountered by companies that source, manufacture, market and retail exclusive owned brand merchandise. In addition to national brand merchandise, we offer customers owned brand merchandise that is primarily sold exclusively by Academy.
Unfavorable changes to regulations in these areas could have a material adverse impact on our e-commerce activities. Our private label brand merchandise exposes us to various risks generally encountered by companies that source, manufacture, market and retail exclusive private label brand merchandise.
A failure by us to follow these laws or regulations may subject us to claims, lawsuits, 31 fines, penalties, adverse publicity and government action (up to and including the possible revocation of licenses and permits allowing the sale of firearms and ammunition), which could have a material adverse effect on our business and results of operations.
A failure by us to follow these laws or regulations may subject us to claims, lawsuits, fines, penalties, adverse publicity and government action (up to and including the possible revocation of licenses and permits allowing the sale of firearms and ammunition), which could have a material adverse effect on our business and results of operations. 30 Another significant risk relating to our operations is compliance with the FCPA, the UKBA, and other anti-corruption laws applicable to our international operations.
Any such breach, access, misappropriation, loss or other unauthorized or inadvertent disclosure of confidential information, whether by us or our vendors, could attract a substantial amount of media attention, damage our relationships with our customers, team members and vendors and cause a loss of confidence in us, violate applicable privacy laws and obligations and expose us to costly government enforcement actions or private litigation and financial liability (possibly beyond the scope or limits of our insurance coverage), increase the costs we incur to protect against or remediate such breaches and comply with consumer protection and data privacy laws and obligations or disrupt our operations and distract our management and other key personnel from performing their primary operational duties, any of which could adversely affect our reputation, business, results of operations and financial condition.
A future data security breach could also (1) attract substantial media attention, (2) damage our relationships with our customers, team members, and partners, (3) cause a loss of confidence in us or cause us to violate applicable privacy laws and obligations, (4) expose us to costly government enforcement actions or private litigation and financial liability (possibly beyond our insurance coverage), (5) increase the costs we incur to protect against or remediate security breaches and vulnerabilities, (6) result in additional costs and operational activities to comply with consumer protection and data privacy laws and obligations, and/or (7) disrupt our operations and distract our management and other key personnel from performing their primary operational duties, any of which could adversely affect our reputation, business, results of operations, and financial condition.
We have experienced, and expect to continue to experience, a shortage of labor for certain functions, including concerns around the ongoing COVID-19 and other factors, which has increased our labor costs and negatively impacted our profitability.
We have experienced, and expect to continue to experience, a shortage of labor for certain functions, which has increased our labor costs and negatively impacted our profitability.
The extent and duration of the effect of these labor market challenges are subject to numerous factors, including the continuing effect of the ongoing COVID-19 pandemic, vaccine mandates that may be announced in jurisdictions in which our businesses operate, availability of qualified persons in the markets where we and our contracted service providers operate and unemployment levels within these markets, behavioral changes, prevailing wage rates and other benefits, inflation, adoption of new or revised employment and labor laws and regulations (including increased minimum wage requirements) or government programs, safety levels of our operations, and our reputation within the labor market.
The extent and duration of the effect of these labor market challenges are subject to numerous factors, including the continuing effect of the COVID-19 pandemic, availability of qualified persons in the markets where we and our contracted service providers operate and unemployment levels within these markets, behavioral changes, prevailing wage rates and other benefits, inflation, adoption of new or revised employment and labor laws and regulations (including increased minimum wage requirements) or government programs, safety levels of our operations, and our reputation within the labor market. 27 Recent or potential future legislative initiatives may seek to increase the federal minimum wage in the United States, as well as the minimum wage in a number of individual states or markets.
In addition, in the event of a default, the lenders under the ABL Facility could terminate their further commitments to loan money and our secured lenders under the Term Loan and the ABL Facility and/or holders of the Notes could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.
In addition, in the event of a default, the lenders under the ABL Facility could terminate their further commitments to loan money and our secured lenders under the Term Loan and the ABL Facility and/or holders of the Notes could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation. 34 The terms of our outstanding indebtedness may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.
Furthermore, our operating margins may be impacted in periods in which incremental expenses are incurred as a result of upcoming new store openings. 27 The occurrence of severe weather events, catastrophic health events, natural or man-made disasters, social and political conditions or civil unrest could significantly damage or destroy our retail locations, could prohibit consumers from traveling to our retail locations or could prevent us from resupplying or staffing our stores or distribution centers or fulfilling out e-commerce orders, especially during peak shopping seasons.
The occurrence of severe weather events, catastrophic health events, natural or man-made disasters, social and political conditions or civil unrest could significantly damage or destroy our retail locations, could prohibit consumers from traveling to our retail locations or could prevent us from resupplying or staffing our stores or distribution centers or fulfilling out e-commerce orders, especially during peak shopping seasons.
In the future, we may also issue our securities in connection with investments or acquisitions. The amount of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our common stock.
The amount of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to you. 39
We sell firearms, ammunition, and related accessories. Firearms represented approximately 6% of our net sales in 2021.
We are a federally licensed firearms dealer and we sell firearms, ammunition, and related accessories. Firearms represented approximately 6% of our net sales in 2022.
Although we attempt to mitigate the risk of possible business interruptions by employing customary strategies, any material disruption, malfunction or any other similar problem in or with our information technology systems could negatively impact our business operations and materially and adversely affect our financial results. 22 From time to time, our computer and information technology systems may require upgrade, enhancement, integration and/or replacement for us to maintain successful current operations and achieve future sales and store growth.
Although we attempt to mitigate the risk of possible business interruptions by employing customary strategies, any material disruption, malfunction or any other similar problem in or with our information technology systems could negatively impact our business operations and materially and adversely affect our financial results.
A disruption in the operation of our distribution centers would affect our ability to deliver merchandise to either our stores or customers, which could adversely impact our revenues and harm our business and financial results.
Our failure to adequately address some or all of these risks could have a material adverse effect on our business, results of operations and financial condition. 25 A disruption in the operation of our distribution centers would affect our ability to deliver merchandise to either our stores or customers, which could adversely impact our revenues and harm our business and financial results.
We are, and may in the future also be, subjected to claims and lawsuits, including potential class actions, relating to our policies and practices on the sale of firearms, ammunition, or related accessories.
Any improper or illegal use by our customers of firearms, ammunition, or related accessories sold by us could have a negative impact on our reputation and business. We are, and may in the future also be, subjected to claims and lawsuits, including potential class actions, relating to our policies and practices on the sale of firearms, ammunition, or related accessories.
In addition, macro factors, such as the ongoing COVID-19 pandemic, may significantly affect whether or not certain sports leagues are able to host their games in their usual seasons, and if they are, whether or not spectators can attend.
In addition, macro factors, such as severe weather, may significantly affect whether or not certain sports leagues are able to host their games in their usual seasons, and if they are, whether or not spectators can attend. Our licensed apparel is significantly more popular when spectators are able to attend the games of the sports teams featured on such apparel.
If any of these or other factors were to cause a disruption of trade from the countries in which our suppliers are located, our inventory levels may be reduced or the costs of our merchandise may increase.
If any of these or other factors were to cause a disruption of trade from the countries in which our suppliers are located, our inventory levels may be reduced or the costs of our merchandise may increase. 20 The political, health, safety, security, and economic environments of the countries in which we or our vendors obtain merchandise or raw materials have the potential to materially affect our operations.
The Notes (as defined in Note 4 of the accompanying consolidated financial statements) require semi-annual payments of interest (in arrears) and matures on November 15, 2027.
The ABL Facility, under which we had no borrowings as of January 28, 2023, matures on November 6, 2025. The Notes (as defined in Note 4 of the accompanying financial statements) require semi-annual payments of interest (in arrears) and matures on November 15, 2027.
Our licensed apparel is significantly more popular when spectators are able to attend the games of the sports teams featured on such apparel. If we are not successful in managing our inventory balances, our results of operations may be negatively affected. The impact of COVID-19 has, and may continue to, impact our business and financial results.
If we are not successful in managing our inventory balances, our results of operations may be negatively affected. The COVID-19 pandemic has, and may continue to, impact our business and financial results.
If we are unable to continue to develop successful marketing and advertising strategies, especially for online and social media platforms, or if our competitors develop more effective strategies, we could lose customers and sales could decline.
If we are unable to continue to develop successful marketing and advertising strategies, especially for online and social media platforms, or if our competitors develop more effective strategies, we could lose customers and sales could decline. 29 We may pursue strategic acquisitions, which could have an adverse impact on our business, as could assimilation of companies following acquisition.

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Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed2 unchanged
Biggest changeThree year lease extension to original term entered in 2020. (7) Two year lease entered in 2020. Three year lease extension to original term entered in 2022. We lease all of our stores. Our initial store lease terms are typically 15 to 20 years with various renewal options and lease escalation structures.
Biggest changeThree year lease extension to original term entered in 2020. (7) Three year lease entered in 2022. We lease all of our stores. Our initial store lease terms are typically 15 to 20 years with various renewal options and lease escalation structures. We believe that all of our leases are entered into at then-prevailing market lease rates.
The following table sets forth the location, use and size of our corporate and distribution center facilities as of January 29, 2022: Location Use Approximate Square Footage Katy, Texas Corporate Office Building 1 400,000 (1) Katy, Texas Corporate Office Building 2 200,000 (2) Katy, Texas Bulk Warehouse 200,000 (3) Katy, Texas Distribution Center 1,400,000 (4) Twiggs County, Georgia Distribution Center 1,600,000 (5) Cookeville, Tennessee Distribution Center 1,600,000 (6) Kowloon, Hong Kong Global Sourcing Office 5,000 (7) (1) 20 year lease entered in 2007.
The following table sets forth the location, use and size of our corporate and distribution center facilities as of January 28, 2023: Location Use Approximate Square Footage Katy, Texas Corporate Office Building 1 400,000 (1) Katy, Texas Corporate Office Building 2 200,000 (2) Katy, Texas Bulk Warehouse 200,000 (3) Katy, Texas Distribution Center 1,400,000 (4) Twiggs County, Georgia Distribution Center 1,600,000 (5) Cookeville, Tennessee Distribution Center 1,600,000 (6) Kowloon, Hong Kong Global Sourcing Office 5,000 (7) (1) 20 year lease entered in 2007.
We believe that all of our leases are entered into at then-prevailing market lease rates. As of January 29, 2022, our total leased store square footage was approximately 18.3 million square feet.
As of January 28, 2023, our total leased store square footage was approximately 18.8 million square feet.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

3 edited+2 added−1 removed5 unchanged
Biggest changeWe believe, taking into consideration our indemnities, defenses, insurance and reserves, the ultimate resolution of these matters will not have a material impact on our financial position, results of operations or cash flows. 41 Included in the matters discussed above are nine lawsuits filed against us between December 2017 and November 2019 in Texas state judicial courts located in Bexar County, Texas, by 79 plaintiffs on behalf of certain victims of a November 2017 shooting in Sutherland Springs, Texas.
Biggest changeIncluded in the matters discussed above were nine lawsuits filed against us between December 2017 and November 2019 in Texas state judicial courts located in Bexar County, Texas, by 79 plaintiffs on behalf of certain victims of a November 2017 shooting in Sutherland Springs, Texas.
The plaintiffs seek monetary relief ranging from $1 million to over $150 million and, in some cases, injunctive relief to prohibit us from selling certain firearms in Texas to residents of states where such a sale would violate their home state’s applicable firearm laws.
The plaintiffs sought monetary relief ranging from $1 million to over $150 million and, in some cases, injunctive relief to prohibit us from selling certain firearms in Texas to residents of states where such a sale would violate their home state’s applicable firearm laws.
These cases, which present substantially similar issues of law and fact, relate to the April 2016 sale by one of our stores of a firearm and magazine that were alleged to have been used in the Sutherland Springs incident.
These cases, which presented substantially similar issues of law and fact, related to the April 2016 sale by one of our stores of a firearm and magazine that were alleged to have been used in the Sutherland Springs incident.
Removed
Given the Supreme Court of Texas’s opinion and the substantial similarity of all these cases, we expect that any remaining claims and/or cases not included in the Texas Supreme Court Cases should also be dismissed by the trial court. However, the ultimate outcome of those claims and/or cases cannot be determined at this time.
Added
We believe, taking into consideration our indemnities, defenses, insurance and reserves, the ultimate resolution of these matters will not have a material impact on our financial position, results of operations or cash flows.
Added
Given the Supreme Court of Texas’s opinion, all of the plaintiffs filed motions to voluntarily dismiss their lawsuits on April 11, 2022 and the court granted those motions and dismissed all of the plaintiffs' claims with prejudice on April 13, 2022. 40 Item 4. Mine Safety Disclosures Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−1 removed6 unchanged
Biggest changeThe 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. Holders As of March 22, 2022, there were 22 holders of record of ASO, Inc.'s common stock.
Biggest changeAs of January 28, 2023, approximately $299.4 million remained available for share repurchases pursuant the 2022 Share Repurchase Program (see Note 2 to the accompanying financial statements). The 2022 Share Repurchase Program does not obligate the Company to acquire any particular number of common shares, and the program may be suspended, extended, modified or discontinued at any time.
The graph below presents the Company’s cumulative total stockholder returns relative to the performance of the Nasdaq US Benchmark Retail Index and the Russell 3000 Index commencing October 2, 2020 (the Company’s initial day of trading) through January 28, 2022.
The graph below presents the Company’s cumulative total stockholder returns relative to the performance of the Nasdaq US Benchmark Retail Index and the Russell 3000 Index commencing October 2, 2020 (the Company’s initial day of trading) through January 27, 2023.
(b) On September 2, 2021, our Board of Directors authorized a share repurchase program under which the Company may purchase up to $500 million of its outstanding shares during the three-year period ending September 2, 2024 (the "Share Repurchase Program").
(b) On June 2, 2022, the Board of Directors of the Company authorized a share repurchase program (the "2022 Share Repurchase Program") under which the Company may purchase up to $600 million of its outstanding shares during the three-year period ending June 2, 2025.
The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our common stock. 43 Issuer Purchases of Equity Securities The following table summarizes the repurchases and cancellations of our common stock during the fourth quarter of 2021: Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Share Purchased as Part of Publicly Announced Plans or Programs (b) Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (b) October 31, 2021 to November 27, 2021 — $ — — $ — November 28, 2021 to January 1, 2022 906,256 $ 40.73 906,256 $ 217,290,407 January 2, 2022 to January 29, 2022 707,674 $ 40.49 707,674 $ 188,648,157 Total 1,613,930 $ 40.63 1,613,930 $ 188,648,157 (a) The total number of shares purchased excludes shares which were net-settled, and therefore not issued, to cover employee tax withholding related to the vesting of certain restricted stock units.
The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our common stock. 41 Issuer Purchases of Equity Securities The following table summarizes the repurchases and cancellations of our common stock during the fourth quarter of 2022: Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Share Purchased as Part of Publicly Announced Plans or Programs (b) Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (b) October 30, 2022 to November 26, 2022 — $ — — $ 399,411,562 November 27, 2022 to December 31, 2022 1,125,350 $ 52.38 1,125,350 $ 340,489,446 January 1, 2023 to January 28, 2023 778,582 $ 52.78 778,582 $ 299,411,563 Total 1,903,932 $ 52.54 1,903,932 $ 299,411,563 (a) The total number of shares purchased excludes shares which were net-settled, and therefore not issued, to cover employee tax withholding related to the vesting of certain restricted stock awards.
Dividends On March 3, 2022, the Company issued a press release announcing that the Board of Directors (the “Board”) approved the initiation of a quarterly cash dividend and declared a cash dividend with respect to the quarter ended January 29, 2022 of $0.075 per share of common stock, $0.01 par value per share, of the Company (the “Dividend”).
Dividends On March 2, 2023, the Company issued a press release announcing that the Board of Directors (the “Board”) declared a quarterly cash dividend with respect to the quarter ended January 28, 2023 of $0.09 per share of common stock, payable on April 13, 2023, to stockholders of record as of the close of business on March 23, 2023.
Removed
The Dividend is payable on April 14, 2022, to stockholders of record as of the close of business on March 17, 2022.
Added
Holders As of March 9, 2023, there were 18 holders of record of ASO, Inc.'s common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

82 edited+31 added−70 removed63 unchanged
Biggest change(g) Other adjustments include (representing deductions or additions to Adjusted EBITDA and Adjusted EBIT) amounts that management believes are not representative of our operating performance, including investment income, installation costs for energy savings associated with our profitability initiatives, legal fees associated with a distribution to NAHC's (see Note 1 to the accompanying consolidated financial statements) members and our omnibus incentive plan, store exit costs and other costs associated with strategic cost savings and business optimization initiatives. 54 Adjusted Net Income, Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings per Share The following table provides a reconciliation of net income to Adjusted Net Income, Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings per Share for the periods presented (amounts in thousands, except per share data): Fiscal Year Ended January 29, 2022 January 30, 2021 February 1, 2020 Net income $ 671,381 $ 308,764 $ 120,043 Consulting fees (a) — 285 3,601 Private equity sponsor monitoring fee (b) — 14,793 3,636 Equity compensation (c) 39,264 31,617 7,881 (Gain) loss on early retirement of debt, net 2,239 (3,582) (42,265) Severance and executive transition costs (d) — 6,571 1,429 Costs related to the COVID-19 pandemic (e) — 17,632 — Payroll taxes associated with the 2021 Vesting Event (f) 15,418 — — Other (g) 3,118 8,592 7,111 Tax effects of these adjustments (h) (14,884) (136) 33 Adjusted Net Income 716,536 384,536 101,469 Estimated tax effect of change to C-Corporation status (i) — (72,844) (25,542) Pro Forma Adjusted Net Income $ 716,536 $ 311,692 $ 75,927 Pro Forma Adjusted Earnings per Share Basic $ 7.88 $ 4.00 $ 1.05 Diluted $ 7.60 $ 3.83 $ 1.02 Weighted average common shares outstanding Basic 90,956 77,994 72,477 Diluted 94,284 81,431 74,795 (a) Represents outside consulting fees associated with our strategic cost savings and business optimization initiatives.
Biggest change(h) Effective January 28, 2023, we no longer exclude pre-opening expenses from our computation of Adjusted EBITDA and Adjusted EBIT (see "Pre-Opening Expenses" in Note 2 to the accompanying financial statements). 50 Adjusted Net Income, Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings per Share The following table provides a reconciliation of net income to Adjusted Net Income, Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings per Share for the periods presented (amounts in thousands, except per share data): Fiscal Year Ended January 28, 2023 January 29, 2022 January 30, 2021 Net income $ 628,001 $ 671,381 $ 308,764 Consulting fees (a) — — 285 Private equity sponsor monitoring fee (b) — — 14,793 Equity compensation (c) 21,175 39,264 31,617 (Gain) loss on early retirement of debt, net 1,963 2,239 (3,582) Severance and executive transition costs (d) — — 6,571 Costs related to the COVID-19 pandemic (e) — — 17,632 Payroll taxes associated with the 2021 Vesting Event (f) — 15,418 — Other (g) — 3,118 8,592 Tax effects of these adjustments (h) (5,382) (14,884) (136) Adjusted Net Income (i) 645,757 716,536 384,536 Estimated tax effect of change to C-Corporation status (j) — — (72,844) Pro Forma Adjusted Net Income (i) $ 645,757 $ 716,536 $ 311,692 Earnings per common share: Basic $ 7.70 $ 7.38 $ 3.96 Diluted $ 7.49 $ 7.12 $ 3.79 Pro Forma Adjusted Earnings per Share: Basic $ 7.91 $ 7.88 $ 4.00 Diluted $ 7.70 $ 7.60 $ 3.83 Weighted average common shares outstanding: Basic 81,590 90,956 77,994 Diluted 83,895 94,284 81,431 (a) Represents outside consulting fees associated with our strategic cost savings and business optimization initiatives.
Net sales are derived from in-store and e-commerce merchandise sales, net of sales tax and an allowance for merchandise returns.
Net Sales . Net sales are derived from in-store and e-commerce merchandise sales, net of sales tax and an allowance for merchandise returns.
Management uses Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Pro Forma Adjusted Net Income, Pro Forma Adjusted Earnings per Share and Adjusted Free Cash Flow to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures.
Management uses Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Pro Forma Adjusted Net Income, Pro Forma Adjusted Earnings per Share and Adjusted Free Cash Flow to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures.
(e) Represents costs incurred during the first half of 2020 as a result of the COVID-19 pandemic, including temporary wage premiums, additional sick time, costs of additional cleaning supplies and third party cleaning services for the stores, corporate office and distribution centers, accelerated freight costs associated with shifting our inventory purchases earlier in the year to maintain stock, and legal fees associated with consulting in local jurisdictions.
(e) Represents costs incurred during the first half of 2020 as a result of the COVID-19 pandemic, including temporary wage premiums, additional sick time, costs of additional cleaning supplies and third party cleaning services for the stores, corporate office and distribution centers, accelerated freight costs associated with shifting our inventory purchases earlier in the year to maintain stock, and legal fees associated with consulting in local jurisdictions.
These costs were no longer added back beginning in the third quarter of 2020. (f) Represents cash expenses related to taxes on equity-based compensation resulting from the 2021 Vesting Event.
These costs were no longer added back beginning in the third quarter of 2020. (f) Represents cash expenses related to taxes on equity-based compensation resulting from the 2021 Vesting Event.
We test for goodwill at the reporting unit level, which is the operating segment level. We operate in one segment with one reporting unit.
We test for goodwill at the reporting unit level, which is the operating segment level. We operate in one operating segment with one reporting unit.
In November of 2020, we refinanced our debt resulting in an approximate $630 million reduction in our overall debt outstanding. Subsequently, in May of 2021 we entered into an amendment to our Term Loan which reduced the applicable margin on our LIBOR rate by 1.25% and paid down $99 million (see Note 4 to the accompanying consolidated financial statements).
In November of 2020, we refinanced our debt resulting in an approximate $630 million reduction in our overall debt outstanding. Subsequently, in May of 2021 we entered into an amendment to our Term Loan, which reduced the applicable margin on our LIBOR rate by 1.25%, and paid down $99 million (see Note 4 to the accompanying financial statements).
Our tax rate prior to October 1, 2020 was almost entirely the result of state income taxes. In connection with our initial public offering ("IPO"), as a result of the Reorganization Transactions (see Note 1 to the accompanying consolidated financial statements) completed on October 1, 2020, Academy Sports and Outdoors, Inc.
Our tax rate prior to October 1, 2020 was almost entirely the result of state income taxes. In connection with our initial public offering ("IPO"), as a result of the Reorganization Transactions (see Note 1 to the accompanying financial statements) completed on October 1, 2020, Academy Sports and Outdoors, Inc.
Interest Expense. Interest expense includes regular interest payable related to our Term Loan, Notes and ABL Facility (see Note 4 to the accompanying consolidated financial statements) and the amortization of our deferred loan costs and original issuance discounts associated with the acquisition of the debt.
Interest expense includes regular interest payable related to our Term Loan, Notes and ABL Facility (see Note 4 to the accompanying financial statements) and the amortization of our deferred loan costs and original issuance discounts associated with the acquisition of the debt.
We have coupled these tools with the data we have been able to collect from our Academy Credit Card program and targeted customer surveys, so that we can better estimate future inventory requirements.
We have coupled these tools with the data we have been able to collect from our Academy Credit Card program, our customer database and targeted customer surveys, so that we can better estimate future inventory requirements.
The preparation of these financial statements requires the Company to make estimates, judgments, and assumptions that can have a meaningful effect on the reporting of consolidated financial statements. See Note 2 to the consolidated financial statements for additional information.
GAAP). The preparation of these financial statements requires the Company to make estimates, judgments, and assumptions that can have a meaningful effect on the reporting of consolidated financial statements. See Note 2 to the consolidated financial statements for additional information.
Recoverability of long-lived assets is measured by a comparison of the carrying amount of the assets to the estimated undiscounted future cash flows expected to be generated by the use of the assets, which is generally based on historical results.
Recoverability of long-lived assets is measured by a comparison of the carrying amount of the assets to the estimated undiscounted future cash flows expected to be generated by the use of the assets, which is generally projected based on historical results.
Merchandise inventories include the direct cost of merchandise and capitalized costs related to procurement, warehousing and distribution and are reflected net of shrinkage, vendor allowances and other valuation accounts. Judgments and Uncertainties: We record an inventory reserve for the estimated shrinkage between physical inventories on a store-by-store basis.
Merchandise inventories include the direct cost of merchandise and capitalized costs related to procurement, warehousing and distribution and are reflected net of shrinkage, vendor allowances and other valuation accounts. Judgments and Uncertainties: We record an inventory reserve for the estimated shrinkage between physical inventories on a by location basis.
Any reference in this Annual Report to "year" or any year in particular refers to our fiscal year, which represents the fifty-two or fifty-three week period ending on the Saturday closest to January 31. Unless otherwise specified, all comparisons or changes regarding 2021 are made to 2020.
Any reference in this Annual Report to "year" or any year in particular refers to our fiscal year, which represents the fifty-two or fifty-three week period ending on the Saturday closest to January 31. Unless otherwise specified, all comparisons or changes regarding 2022 are made to 2021.
Recent Accounting Pronouncements For discussion of recent accounting pronouncements, see Note 2 to the accompanying consolidated financial statements. Related Party Transactions For discussion of related party transactions, see Note 13 to the accompanying consolidated financial statements.
Recent Accounting Pronouncements For discussion of recent accounting pronouncements, see Note 2 to the accompanying financial statements. Related Party Transactions For discussion of related party transactions, see Note 13 to the accompanying financial statements.
There is significant judgment used in determining these assumptions on intangible asset impairment and variability in the assumptions could cause us to reach a different conclusion on impairment. In 2021, we performed a qualitative impairment assessment and determined a quantitative assessment was not necessary.
There is significant judgment used in determining these assumptions on intangible asset impairment and variability in the assumptions could cause us to reach a different conclusion on impairment. In 2022, we performed a qualitative impairment assessment and determined a quantitative assessment was not necessary.
We anticipate that the increased popularity of isolated recreation, outdoor and leisure activity products brought on by customer demand during the COVID-19 pandemic will continue and will result in a long-term increase to our customer base. Additionally, we have benefited from recent shifting of customer spend towards in-home health and wellness and dedicating more time to memory-making experiences.
We continue to believe that the increased popularity of isolated recreation, outdoor and leisure activity products brought on by customer demand during the COVID-19 pandemic will result in a long-term increase to our customer base. Additionally, we have benefited from shifting of customer spend towards in-home health and wellness and dedicating more time to memory-making experiences.
(g) Other adjustments include (representing deductions or additions to Adjusted Net Income) amounts that management believes are not representative of our operating performance, including investment income, installation costs for energy savings associated with our profitability initiatives, legal fees associated with a distribution to NAHC's members and our omnibus incentive plan, store exit costs and other costs associated with strategic cost savings and business optimization initiatives.
(g) Other adjustments include (representing deductions or additions to Adjusted Net Income) amounts that management believes are not representative of our operating performance, including installation costs for energy savings associated with our profitability initiatives, legal fees associated with a distribution to NAHC's members and our omnibus incentive plan, and other costs associated with strategic cost savings and business optimization initiatives.
For vendor allowances based on contractual provisions, we develop accrual rates for reserves as determined by the agreements, which are typically linked to purchase volumes. Other non-contractual vendor allowances received are applied upon receipt.
For vendor allowances based on contractual provisions, we develop accrual rates for receivables as determined by the agreements, which are typically linked to purchase volumes. Other non-contractual vendor allowances received are applied upon receipt.
Our broad assortment gives us an advantage over mass general merchants who typically do not carry the leading national brands sold at Academy. We have also continued to add owned brand products to our assortment of products, which we generally price lower than the national brand products of comparable quality that we also offer.
Our broad assortment gives us an advantage over mass general merchants who typically do not carry the leading national brands sold at Academy. 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.
As sales increase at a higher rate than our SG&A, this results in sales leverage and a higher sales flow through to net income, which we have experienced in recent years with SG&A expenses as a percentage of sales declining from 25.9% to 23.1% to 21.3% in 2019, 2020 and 2021, respectively.
As sales increase at a higher rate than our SG&A, this results in sales leverage and a higher sales flow through to net income, which we have experienced in recent years with SG&A expenses as a percentage of sales declining from 23.1% to 21.3% in 2020 and 2021, respectively.
Our gross margin depends on a number of factors, such as net sales increases or decreases, our promotional activities, product mix including owned brand merchandise sales, and our ability to control cost of goods sold, such as inventory and logistics cost management.
Our gross margin depends on a number of factors, such as net sales increases or decreases, our promotional activities, product mix including private label brand merchandise sales, and our ability to control cost of goods sold, such as inventory and logistics cost management.
Our stores are supported by approximately 22,000 team members, three distribution centers, and our rapidly growing e-commerce platform, which includes our website at www.academy.com and our mobile app, newly introduced in the 2021 second quarter.
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, introduced in the 2021 second quarter.
A shift in our sales mix in which we sell more units of our owned 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.
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.
Cash flows from operating activities are seasonal in our business. Typically, cash flows from operations are used to build inventory in advance of peak selling seasons, with the fourth quarter pre-holiday inventory increase being the most significant. Cash provided by operating activities in 2021 decreased $338.3 million compared to 2020.
Cash flows from operating activities are seasonal in our business. Typically, cash flows from operations are used to build inventory in advance of peak selling seasons, with the fourth quarter pre-holiday inventory increase being the most significant. Cash provided by operating activities in 2022 decreased $121.3 million compared to 2021.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report for the fiscal year ended January 29, 2022 (this "Annual Report").
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report for the fiscal year ended January 28, 2023 (this "Annual Report").
Any sales made through our website or mobile app are allocated to e-commerce sales for the purpose of measuring comparable sales, regardless of how those sales are fulfilled, whether shipped to home or picked up in-store or curbside through BOPIS.
Any sales made through our website or mobile app are allocated to e-commerce sales for the purpose of measuring comparable sales, regardless of how those sales are fulfilled, whether shipped to home or picked up in-store or curbside through our buy-online-pickup-in-store program ("BOPIS").
We expect that the expansion and enhancement of our omnichannel capabilities has resulted in increased sales in recent years and will be a key driver of growth in our net sales and gross margin.
The expansion and enhancement of our omnichannel capabilities has resulted in increased sales in recent years and we expect that it will continue to be a driver of growth in our net sales and gross margin.
(h) Represents the tax effect of the total adjustments made to arrive at Adjusted Net Income at our historical tax rate.
(h) Represents the tax effect of the total adjustments made to arrive at Adjusted Net Income and Pro Forma Adjusted Net Income at our historical tax rate.
All references in this discussion and analysis to "2021", "2020" and "2019" or like terms relate to our fiscal years as follows: Fiscal Year Ended Weeks 2021 January 29, 2022 52 2020 January 30, 2021 52 2019 February 1, 2020 52 Overview We are one of the leading full-line sporting goods and outdoor recreation retailers in the United States.
All references in this discussion and analysis to "2022", "2021" and "2020" or like terms relate to our fiscal years as follows: Fiscal Year Ended Weeks 2022 January 28, 2023 52 2021 January 29, 2022 52 2020 January 30, 2021 52 Overview We are a leading full-line sporting goods and outdoor recreation retailers in the United States.
Management also uses Adjusted EBIT as a performance target to establish and award discretionary annual incentive compensation. See "Non-GAAP Financial Measures" below. Components of Our Results of Operations. Our profitability is primarily influenced by fluctuations in net sales, gross margin and our ability to leverage selling, general and administrative expenses. 46 Net Sales .
Management also uses Adjusted EBIT as a performance target to establish and award discretionary annual incentive compensation. See "Non-GAAP Financial Measures" below. Components of Our Results of Operations. Our profitability is primarily influenced by fluctuations in net sales, inventory expenses, our ability to leverage selling, general and administrative expenses, and our ability to limit our interest and income tax expense.
Judgments and Uncertainties: The annual Trade Name impairment test provides for the option of first performing a qualitative assessment to evaluate the existence of events and circumstances that would lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
The Trade Name is tested for impairment annually or whenever events or circumstances indicate that the carrying amount of the Trade Name may not be recoverable. 57 Judgments and Uncertainties: The annual Trade Name impairment test provides for the option of first performing a qualitative assessment to evaluate the existence of events and circumstances that would lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
Additionally, our e-commerce platform allows us to reach customers outside of our current store footprint and introduces new customers to the Academy brand. It also allows for us to connect further with our customers for marketing and product education.
Our improved e-commerce platform supports our stores with digital marketing and our BOPIS and ship-to-store programs. Additionally, our e-commerce platform allows us to reach customers outside of our current store footprint and introduces new customers to the Academy brand. It also allows for us to connect further with our customers for marketing and product education.
As of January 29, 2022, we operated 259 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 16 contiguous states located primarily in the southern United States.
As of January 28, 2023, we operated 268 stores that range in size from approximately 40,000 to 130,000 gross square feet, with an average size of approximately 70,000 gross square feet, throughout 18 contiguous states located primarily in the southern United States.
Management compensates for these limitations by primarily relying on our GAAP results in addition to using Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Pro Forma Adjusted Net Income, Pro Forma Adjusted Earnings per Share and Adjusted Free Cash Flow supplementally. 53 Adjusted EBITDA and Adjusted EBIT The following table provides reconciliations of net income (loss) to Adjusted EBITDA and to Adjusted EBIT for the periods presented (amounts in thousands): Fiscal Year Ended January 29, 2022 January 30, 2021 February 1, 2020 Net income $ 671,381 $ 308,764 $ 120,043 Interest expense, net 48,989 86,514 101,307 Income tax expense 188,159 30,356 2,817 Depreciation and amortization 105,274 105,481 117,254 Consulting fees (a) — 285 3,601 Private equity sponsor monitoring fee (b) — 14,793 3,636 Equity compensation (c) 39,264 31,617 7,881 (Gain) loss on early retirement of debt, net 2,239 (3,582) (42,265) Severance and executive transition costs (d) — 6,571 1,429 Costs related to the COVID-19 pandemic (e) — 17,632 — Payroll taxes associated with the 2021 Vesting Event (f) 15,418 — — Other (g) 3,118 8,592 7,111 Adjusted EBITDA $ 1,073,842 $ 607,023 $ 322,814 Less: Depreciation and amortization (105,274) (105,481) (117,254) Adjusted EBIT $ 968,568 $ 501,542 $ 205,560 (a) Represents outside consulting fees associated with our strategic cost savings and business optimization initiatives.
Management compensates for these limitations by primarily relying on our GAAP results in addition to using Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Pro Forma Adjusted Net Income, Pro Forma Adjusted Earnings per Share and Adjusted Free Cash Flow supplementally. 49 Adjusted EBITDA and Adjusted EBIT The following table provides reconciliations of net income (loss) to Adjusted EBITDA and to Adjusted EBIT for the periods presented (amounts in thousands): Fiscal Year Ended January 28, 2023 January 29, 2022 January 30, 2021 Net income $ 628,001 $ 671,381 $ 308,764 Interest expense, net 46,441 48,989 86,514 Income tax expense 190,319 188,159 30,356 Depreciation and amortization 106,762 105,274 105,481 Consulting fees (a) — — 285 Private equity sponsor monitoring fee (b) — — 14,793 Equity compensation (c) 21,175 39,264 31,617 (Gain) loss on early retirement of debt, net 1,963 2,239 (3,582) Severance and executive transition costs (d) — — 6,571 Costs related to the COVID-19 pandemic (e) — — 17,632 Payroll taxes associated with the 2021 Vesting Event (f) — 15,418 — Other (g) — 3,118 8,592 Adjusted EBITDA (h) $ 994,661 $ 1,073,842 $ 607,023 Less: Depreciation and amortization (106,762) (105,274) (105,481) Adjusted EBIT (h) $ 887,899 $ 968,568 $ 501,542 (a) Represents outside consulting fees associated with our strategic cost savings and business optimization initiatives.
Additionally, we are deepening our customer relationships, further integrating our e-commerce platform with our stores and driving operating efficiencies by developing our omnichannel capabilities, such as our curbside pickup and ship-to-store programs, which we launched in 2020. 45 The following table summarizes store activity for the periods indicated: Fiscal Year Ended January 29, 2022 January 30, 2021 February 1, 2020 Beginning stores 259 259 253 Q1 new stores — — 1 Q2 new stores — — 2 Q3 new stores — — 5 Q4 new stores — — — Closed — — (2) Ending stores 259 259 259 Relocated stores 1 — — How We Assess the Performance of Our Business and Recent Trends 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.
Additionally, we are deepening our customer relationships, further integrating our e-commerce platform with our stores and driving operating efficiencies by developing our omnichannel capabilities, such as our mobile app, optimizing the website experience and upgrading our fulfillment capabilities. 43 The following table summarizes store activity for the periods indicated: Fiscal Year Ended January 28, 2023 January 29, 2022 January 30, 2021 Beginning stores 259 259 259 Q1 new stores 1 — — Q2 new stores 1 — — Q3 new stores 4 — — Q4 new stores 3 — — Closed — — — Ending stores 268 259 259 Relocated stores — 1 — How We Assess the Performance of Our Business and Recent Trends 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.
On September 2, 2021, the Board of Directors of the Company authorized a share repurchase program (the "Share Repurchase Program") under which the Company may purchase up to $500 million of its outstanding shares during the three-year period ending September 2, 2024.
Share Repurchases On June 2, 2022, the Board of Directors of the Company authorized a share repurchase program (the "2022 Share Repurchase Program") under which the Company may purchase up to $600 million of its outstanding shares during the three-year period ending June 2, 2025.
Our product assortment focuses on key categories of outdoor, apparel, sports & recreation and footwear (representing 32%, 27%, 22% and 19% of our 2021 net sales, respectively) through both leading national brands and a portfolio of 20 owned brands, which go well beyond traditional sporting goods and apparel offerings. Our business is subject to seasonal fluctuations.
Our product assortment focuses on key categories of outdoors, apparel, sports & recreation and footwear (representing 31%, 28%, 21% and 20% of our 2022 net sales, respectively) through both leading national brands and a portfolio of 20 private label brands, which go well beyond traditional sporting goods and apparel offerings. Our business is subject to seasonal fluctuations.
There is significant judgment used in determining these assumptions used in the assessment of goodwill impairment and variability in the assumptions could cause us to reach a different conclusion on impairment.
There is significant judgment used in determining these assumptions used in the assessment of goodwill impairment and variability in the assumptions could cause us to reach a different conclusion on impairment. In 2022, we performed a qualitative impairment assessment and determined a quantitative assessment was not necessary.
Our presentation of Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Pro Forma Adjusted Net Income, Pro Forma Adjusted Earnings per Share and Adjusted Free Cash Flow should not be construed to imply that our future results will be unaffected by any such adjustments. 52 Our Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Pro Forma Adjusted Net Income, Pro Forma Adjusted Earnings per Share and Adjusted Free Cash Flow measures have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP.
Our Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Pro Forma Adjusted Net Income, Pro Forma Adjusted Earnings per Share and Adjusted Free Cash Flow measures have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP.
We have deployed several new tools over recent years to improve inventory handling and vendor management, including third-party programs to analyze our inventory stock and execute a disciplined markdown strategy throughout the year at every location.
We have deployed several new tools over recent years to improve inventory handling and vendor management, including third-party programs to analyze our inventory stock and execute a disciplined markdown strategy throughout the year at every location. This implementation, along with other factors, has allowed us to improve our inventory management in stores over the past few years.
We believe Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings per Share assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.
We describe this adjustment by reconciling net cash provided by operating activities to Adjusted Free Cash Flow in the applicable table below. 48 We believe Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Pro Forma Adjusted Net Income and Pro Forma Adjusted Earnings per Share assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.
We have seen a significant comparable store sales increase in recent years from (0.7%) in 2019 to 16.1% and 18.9% in 2020 and 2021, respectively. See the discussion on Net Sales below for some contributing factors to these increases.
We have seen a significant comparable sales increase in recent years from (0.7%) in 2019 to 16.1% and 18.9% in 2020 and 2021, respectively. However, we experienced a decrease in comparable sales of 6.4% in 2022. See the discussion on Net Sales below for some contributing factors to the recent changes. Transactions and average ticket.
In 2021, we performed a qualitative impairment assessment and determined a quantitative assessment was not necessary. 61 Intangible Assets Description: Intangible assets primarily consists of the trade name "Academy Sports + Outdoors" (the "Trade Name"). The Trade Name is expected to generate cash flows indefinitely and, therefore, is accounted for as an indefinite-lived asset not subject to amortization.
Intangible Assets Description: Intangible assets primarily consists of the trade name "Academy Sports + Outdoors" (the "Trade Name"). The Trade Name is expected to generate cash flows indefinitely and, therefore, is accounted for as an indefinite-lived asset not subject to amortization.
We track and measure operating expenses as a percentage of net sales in order to evaluate our performance against profitability targets. Management of SG&A expenses depends on our ability to balance a control of operating costs, such as store, distribution center, and corporate headcount, information technology infrastructure and marketing and advertising expenses, with efficiently and effectively servicing our customers.
Management of SG&A expenses depends on our ability to balance a control of operating costs, such as store, distribution center, and corporate headcount, information technology infrastructure and marketing and advertising expenses, with efficiently and effectively servicing our customers. Interest Expense.
We believe our long history of operations has given us sufficient data to enable us to accurately predict these reserves. 60 Impairment of long-lived assets Description: We review the carrying value of long-lived assets, including property and equipment at our stores, for indicators of impairment regularly and whenever events and circumstances indicate that the carrying value of an asset may not be recoverable.
Impairment of long-lived assets Description: We review the carrying value of long-lived assets, including property and equipment at our stores, for indicators of impairment regularly and whenever events and circumstances indicate that the carrying value of an asset may not be recoverable.
(b) Represents our contractual payments under the Monitoring Agreement. (c) Represents non-cash charges related to equity based compensation, which vary from period to period depending on certain factors such as the 2021 Vesting Event (see Note 1 to the accompanying consolidated financial statements), timing and valuation of awards, achievement of performance targets and equity award forfeitures.
(c) Represents non-cash charges related to equity based compensation, which vary from period to period depending on certain factors such as the 2021 Vesting Event (see Note 1 to the accompanying financial statements), timing and valuation of awards, achievement of performance targets and equity award forfeitures. (d) Represents severance costs associated with executive leadership changes and enterprise-wide organizational changes.
The 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 January 28, 2023, the Company had $299.4 million remaining for share repurchases under the 2022 Share Repurchase Program. The 2022 Share Repurchase Program does not obligate the Company to acquire any particular number of common shares, and the program may be suspended, extended, modified or discontinued at any time.
E-commerce sales increased $36.7 million, or 6.2%, in 2021 when compared to the prior year and represented 9.3% and 10.4% of merchandise sales for 2021 and 2020, respectively.
E-commerce sales increased $56.8 million, or 9.1%, in 2022 when compared to the prior year and represented 10.7% and 9.3% of merchandise sales for 2022 and 2021, respectively. Gross Margin. Gross margin for 2022 decreased $138.6 million, or 5.9%, when compared to 2021.
(i) Represents the retrospective tax effect of Adjusted Net Income at our estimated effective tax rate of approximately 25% for periods prior to October 1, 2020, the effective date of our conversion to a C-Corporation, upon which we became subject to federal income taxes. 55 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): Fiscal Year Ended January 29, 2022 January 30, 2021 February 1, 2020 Net cash provided by operating activities $ 673,265 $ 1,011,597 $ 263,669 Net cash used in investing activities (76,017) (33,144) (66,783) Adjusted Free Cash Flow $ 597,248 $ 978,453 $ 196,886 Liquidity and Capital Resources Sources and Uses of Liquidity Historically, our principal sources of cash have included: • cash generated from operating activities; • issuances of debt securities, including the Notes; and • borrowings under our Term Loan and ABL Facility.
(j) Represents the retrospective tax effect of Adjusted Net Income at our estimated effective tax rate of approximately 25% for periods prior to October 1, 2020, the effective date of our conversion to a C-Corporation, upon which we became subject to federal income taxes. 51 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): Fiscal Year Ended January 28, 2023 January 29, 2022 January 30, 2021 Net cash provided by operating activities $ 552,005 $ 673,265 $ 1,011,597 Net cash used in investing activities (108,806) (76,017) (33,144) Adjusted Free Cash Flow $ 443,199 $ 597,248 $ 978,453 Liquidity and Capital Resources Sources and Uses of Liquidity Our principal liquidity requirements are for working capital, capital expenditures and cash used to pay our debt obligations and related interest expense.
We track and measure gross margin as a percentage of net sales in order to evaluate our performance against profitability targets. 47 For the past several quarters, we have seen increased competition across the industry for resources throughout the supply chain, which has resulted in disruptions to the flow of products from our vendors, labor shortages, reduced shipping container availability, and longer delays at the port.
Over the past couple of years, we have seen increased competition across the industry for resources throughout a constrained supply chain, which has resulted in disruptions to the flow of products from our vendors, labor shortages, reduced shipping container availability, and longer delays at the port.
These costs 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 payroll and benefits, distribution center occupancy costs and freight and are generally variable in nature relative to our sales volume.
As a result of the Reorganization Transactions, which occurred on October 1, 2020, ASO, Inc. became subject to U.S. federal income taxes and is being taxed at the prevailing corporate rates. 51 Non-GAAP Measures Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Pro Forma Adjusted Net Income, Pro Forma Adjusted Earnings per Share and Adjusted Free Cash Flow, as shown below, have been presented in this Annual Report as supplemental measures of financial performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States of America ("GAAP").
Non-GAAP Measures Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Pro Forma Adjusted Net Income, Pro Forma Adjusted Earnings per Share and Adjusted Free Cash Flow, as shown below, have been presented in this Annual Report as supplemental measures of financial performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States of America ("GAAP").
The following table summarizes our current debt obligations by fiscal year (in thousands): 2022 2023 2024 2025 2026 After 2026 Total Term Loan and related interest (1) $ 17,309 $ 19,538 $ 19,684 $ 19,445 $ 19,241 $ 296,186 $ 391,403 Notes and related interest (2) 24,000 24,000 24,000 24,000 24,000 424,000 544,000 ABL Facility and related interest (3) 2,500 2,500 2,500 2,500 1,909 — 11,909 (1) Interest payments are future cash payments which do not include amortization of discount and debt issuance costs and are approximated based on projected interest rates and assumes no unscheduled principal payments until maturity.
The following table summarizes our current debt obligations by fiscal year (amounts in thousands): 2023 2024 2025 2026 2027 Total Term Loan and related interest (1) $ 19,590 $ 17,263 $ 15,660 $ 15,284 $ 192,860 $ 260,657 Notes and related interest (2) 24,000 24,000 24,000 24,000 424,000 520,000 ABL Facility and related interest (3) 2,500 2,500 1,909 — — 6,909 (1) Interest payments do not include amortization of discount and debt issuance costs and are approximated based on projected interest rates and assume no unscheduled principal payments.
Critical Accounting Policies and Estimates This discussion and analysis of financial condition and results of operations is based upon the Company's consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP).
As of January 28, 2023, we had $947.8 million of available capacity under our ABL Facility and $337.1 million of cash and cash equivalents. 55 Critical Accounting Policies and Estimates This discussion and analysis of financial condition and results of operations is based upon the Company's consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (U.S.
This decrease is attributable to: • $772.1 million net decrease in cash flows provided by operating assets and liabilities; partially offset by • $362.6 million increase in net income; and • $71.1 million net increase in non-cash charges.
This decrease is attributable to: • $51.5 million net decrease in non-cash charges; • $43.4 million decrease in net income; and • $26.4 million net decrease in cash flows provided by operating assets and liabilities.
During 2021, 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 support of our mobile app, optimizing the web site experience and upgrading our fulfillment capabilities, which will continue to require significant investments by us.
We expect to continue to invest in expanding and enhancing our omnichannel capabilities, including support of our mobile app, optimizing the web site experience and upgrading our fulfillment capabilities, which will continue to require significant investments by us. 45 We expect that new stores will be a key driver of growth in our net sales and gross margin in the future.
Actual long-term income results could vary significantly from our projections due to a variety of reasons such as changes in the local retail environment or macroeconomic factors not used in our assumptions. In addition to variables considered in developing projected long-term store income, assumptions are made to develop the assumed discount rate based on company specific factors.
Additionally, the long-term store income projections also contain a projection of future store specific costs such as store wages and advertising. Actual long-term income results could vary significantly from our projections due to a variety of reasons such as changes in the local retail environment or macroeconomic factors not used in our assumptions.
(Gain) loss on early retirement of debt, net. (Gain) loss on early retirement of debt, net decreased $5.8 million to a loss of $2.2 million from a gain of $3.6 million in 2020. During the 2021 second quarter, we refinanced our Term Loan, which resulted in a loss on early retirement of debt of $2.2 million.
During the 2021 second quarter, we refinanced our Term Loan, including a prepayment of $99.0 million, which resulted in a loss on early retirement of debt of $2.2 million. Interest Expense.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” to our Annual Report on Form 10-K for the fiscal year ended January 30, 2021. 49 2021 (52 weeks) Compared to 2020 (52 weeks) The following table sets forth amounts and information derived from our consolidated statements of income for the periods indicated as follows (dollar amounts in thousands): Fiscal Year Ended Change January 29, 2022 January 30, 2021 Dollars Percent Net sales $ 6,773,128 100.0 % $ 5,689,233 100.0 % $ 1,083,895 19.1 % Cost of goods sold 4,422,033 65.3 % 3,955,188 69.5 % 466,845 11.8 % Gross margin 2,351,095 34.7 % 1,734,045 30.5 % 617,050 35.6 % Selling, general and administrative expenses 1,443,148 21.3 % 1,313,647 23.1 % 129,501 9.9 % Operating income 907,947 13.4 % 420,398 7.4 % 487,549 116.0 % Interest expense, net 48,989 0.7 % 86,514 1.5 % (37,525) (43.4) % (Gain) loss on early retirement of debt, net 2,239 0.0 % (3,582) (0.1) % 5,821 NM Other (income), net (2,821) (0.0) % (1,654) 0.0 % (1,167) 70.6 % Income before income taxes 859,540 12.7 % 339,120 6.0 % 520,420 153.5 % Income tax expense 188,159 2.8 % 30,356 0.5 % 157,803 519.8 % Net income $ 671,381 9.9 % $ 308,764 5.4 % $ 362,617 117.4 % * Percentages in table may not sum properly due to rounding. **NM - Not meaningful Net Sales .
Management’s Discussion and Analysis of Financial Condition and Results of Operations” to our Annual Report on Form 10-K for the fiscal year ended January 29, 2022. 46 2022 (52 weeks) Compared to 2021 (52 weeks) The following table sets forth amounts and information derived from our consolidated statements of income for the periods indicated as follows (dollar amounts in thousands): Fiscal Year Ended Change January 28, 2023 January 29, 2022 Dollars Percent Net sales $ 6,395,073 100.0 % $ 6,773,128 100.0 % $ (378,055) (5.6) % Cost of goods sold 4,182,571 65.4 % 4,422,033 65.3 % (239,462) (5.4) % Gross margin 2,212,502 34.6 % 2,351,095 34.7 % (138,593) (5.9) % Selling, general and administrative expenses 1,365,953 21.4 % 1,443,148 21.3 % (77,195) (5.3) % Operating income 846,549 13.2 % 907,947 13.4 % (61,398) (6.8) % Interest expense, net 46,441 0.7 % 48,989 0.7 % (2,548) (5.2) % Loss on early retirement of debt 1,963 0.0 % 2,239 0.0 % (276) (12.3) % Other (income), net (20,175) (0.3) % (2,821) (0.0) % (17,354) 615.2 % Income before income taxes 818,320 12.8 % 859,540 12.7 % (41,220) (4.8) % Income tax expense 190,319 3.0 % 188,159 2.8 % 2,160 1.1 % Net income $ 628,001 9.8 % $ 671,381 9.9 % $ (43,380) (6.5) % * Percentages in table may not sum properly due to rounding.
We believe our real estate strategy has positioned us well for further 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.
We expect most of our stores to achieve profitability within the first twelve months of opening. We believe our real estate strategy has positioned us well for further expansion. Gross Margin. Gross margin is our net sales less cost of goods sold.
Cash used in financing activities decreased $261.4 million in the 2021, compared to 2020.
Cash used in financing activities increased $103.2 million in the 2022, compared to 2021.
See the section of this Annual Report entitled "Risk Factors—Risks Related to Our Business—The impact of COVID-19 may adversely affect our business and financial results." Results of Operations A discussion regarding Results of Operations and Analysis of Financial Condition for the fiscal year ended January 30, 2021, as compared to the fiscal year ended February 1, 2020, is included in “Part II – Item 7.
Results of Operations A discussion regarding Results of Operations and Analysis of Financial Condition for the fiscal year ended January 29, 2022, as compared to the fiscal year ended January 30, 2021, is included in “Part II – Item 7.
Critical accounting estimates are defined as those reflective of significant judgments, estimates and uncertainties, which may result in materially different results under different assumptions and conditions. As conditions resulting from the COVID-19 pandemic continue to evolve, the Company expects these judgments and estimates may be subject to change, which could materially impact future periods.
Critical accounting estimates are defined as those reflective of significant judgments, estimates and uncertainties, which may result in materially different results under different assumptions and conditions.
We believe it is important that we continue to grow our omnichannel capabilities, especially in light of changing consumer preferences as a result of the COVID-19 pandemic, which, together with recent enhancements made to our website and omnichannel capabilities, contributed to the substantial increase in e-commerce sales during 2020.
We believe it is important that we continue to grow our omnichannel capabilities, which, together with recent enhancements made to our website and omnichannel capabilities, contributed to the increase in e-commerce sales during 2020, 2021 and 2022. During 2022, stores facilitated approximately 95% of our total sales, including ship-from-store, BOPIS and in-store retail sales.
If such assets are considered to be impaired, the impairment loss recognized is the amount by which the carrying amount of the assets exceeds its estimated fair value, which is calculated using discounted expected future cash flows.
If such assets are considered to be impaired, the impairment loss recognized is the amount by which the carrying amount of the assets exceeds its estimated fair value, which is calculated using discounted expected future cash flows. 56 Impact of Assumptions: The assumptions used to project store impairment loss is based on projected future store income and considers variables such as historical and current trends, macroeconomic conditions, store location and local economy and supply chain factors.
The following table summarizes our operating lease obligations by fiscal year: 2022 2023 2024 2025 2026 After 2026 Total Operating lease payments (1) $ 198,725 $ 192,775 $ 184,030 $ 177,496 $ 169,563 $ 902,083 $ 1,824,672 (1) Minimum lease payments have not been reduced by sublease rentals of $1.1 million due in the future under non-cancelable subleases.
The following table summarizes our operating lease obligations by fiscal year: 2023 2024 2025 2026 2027 After 2027 Total Operating lease payments (1) (2) $ 211,906 $ 207,038 $ 200,278 $ 192,346 $ 178,547 $ 908,455 $ 1,898,570 (1) Minimum lease payments have not been reduced by sublease rentals of $0.5 million due in the future under non-cancelable subleases.
Our gross margin is also impacted by variables including commodity costs, freight costs, shrinkage and inventory processing costs and e-commerce shipping costs.
Our gross margin is also impacted by variables including commodity costs, freight costs, shrinkage and 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.
Gross Margin. Gross margin for 2021 increased $617.1 million, or 35.6%, when compared to 2020. Our gross margin, as a percentage of net sales, was 34.7% in 2021 compared to 30.5% in 2020, an increase of 420 basis points.
Our gross margin, as a percentage of net sales, was 34.6% in 2022 compared to 34.7% in 2021, a decrease of 10 basis points.
Liquidity information related to the ABL Facility is as follows for the periods shown (dollar amounts in thousands): Fiscal Year Ended January 29, 2022 January 30, 2021 February 1, 2020 Average funds drawn $ — $ 126,648 $ 29,593 Number of days with outstanding balance — 99 182 Maximum daily amount outstanding $ — $ 500,000 $ 147,100 Minimum available borrowing capacity $ 780,945 $ 161,089 $ 771,750 Liquidity information related to the ABL Facility (amounts in thousands) as of: January 29, 2022 January 30, 2021 Outstanding borrowings $ — $ — Outstanding letters of credit $ 17,828 $ 20,112 Available borrowing capacity $ 874,831 $ 718,763 58 Capital Expenditures.
(3) Assumes a minimum revolving credit commitment of $1.0 billion and no balances drawn on our ABL Facility. 52 Liquidity information related to the ABL Facility is as follows for the periods shown (dollar amounts in thousands): Fiscal Year Ended January 28, 2023 January 29, 2022 January 30, 2021 Average funds drawn $ — $ — $ 126,648 Number of days with outstanding balance — — 99 Maximum daily amount outstanding $ — $ — $ 500,000 Minimum available borrowing capacity $ 935,550 $ 780,945 $ 161,089 Liquidity information related to the ABL Facility (amounts in thousands) as of: January 28, 2023 January 29, 2022 Outstanding borrowings $ — $ — Outstanding letters of credit $ 13,878 $ 17,828 Available borrowing capacity $ 947,764 $ 874,831 Leases We lease store locations, distribution centers, office space and certain equipment under operating leases expiring between fiscal years 2023 and 2043.
We expect that new stores will be a key driver of growth in our net sales and gross margin in the future. Our results of operations have been and will continue to be materially affected by the timing and number of new store openings.
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 we expect to open 13 to 15 new stores in fiscal 2023.
We lease store locations, distribution centers, office space and certain equipment under operating leases expiring between fiscal years 2022 and 2043. Operating lease obligations include future minimum lease payments under all of our non-cancelable operating leases at January 29, 2022.
Operating lease obligations include future minimum lease payments under all of our non-cancelable operating leases at January 28, 2023.
Cash Flows: Our consolidated statements of cash flows are summarized as follows (in thousands): Fiscal Year Ended January 29, 2022 January 30, 2021 February 1, 2020 Net cash provided by operating activities $ 673,265 $ 1,011,597 $ 263,669 Net cash used in investing activities (76,017) (33,144) (66,783) Net cash used in financing activities (488,854) (750,234) (123,192) Net increase in cash and cash equivalents $ 108,394 $ 228,219 $ 73,694 Operating Activities.
The following table summarizes our forecasted allocation of capital expenditures for fiscal year 2023: 2023 Corporate, e-commerce and information technology programs 25 % New stores 55 % 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. 54 Cash Flows: Our consolidated statements of cash flows are summarized as follows (in thousands): Fiscal Year Ended January 28, 2023 January 29, 2022 January 30, 2021 Net cash provided by operating activities $ 552,005 $ 673,265 $ 1,011,597 Net cash used in investing activities (108,806) (76,017) (33,144) Net cash used in financing activities (592,052) (488,854) (750,234) Net increase (decrease) in cash and cash equivalents $ (148,853) $ 108,394 $ 228,219 Operating Activities.
We continue to invest in initiatives that will increase traffic to our e-commerce platform, which includes our website and mobile app, and drive increased online sales conversion. Our improved e-commerce platform supports our stores with digital marketing and our BOPIS and ship-to-store programs.
We continue to invest in initiatives that will increase traffic to our e-commerce platform, which includes our website and mobile app, and drive increased online sales conversion. During 2022, we improved our omnichannel capabilities by implementing several innovative features to enhance the customer shopping experience, including outfitting, express check-out and enabling biometric security measures.
Interest expense decreased $37.5 million, or 43.4%, to $49.0 million in 2021 from $86.5 million in 2020 resulting primarily from a lower outstanding balance on our long-term debt as a result of the Refinancing Transactions and principal repurchases during the current year. Other (Income), net.
Interest expense decreased $2.5 million, or 5.2%, to $46.4 million in 2022 from $49.0 million in 2021 resulting primarily from a lower outstanding balance on our long-term debt as a result of the Refinancing Transactions (see Note 4 to the accompanying financial statements) and the voluntary Term Loan prepayments of $99.0 million and $100.0 million, which occurred in the second quarter of 2021 and the fourth quarter of 2022, respectively, partially offset by an increase in interest rates in recent months on our Term Loan.
Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Pro Forma Adjusted Net Income, Pro Forma Adjusted Earnings per Share and Adjusted Free Cash Flow.
Our presentation of Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Pro Forma Adjusted Net Income, Pro Forma Adjusted Earnings per Share and Adjusted Free Cash Flow should not be construed to imply that our future results will be unaffected by any such adjustments.
As a result, we have begun to experience a period of decreased supply and high inflationary costs. These factors have negatively impacted transportation and inventory costs, as we continue to pay higher rates to maintain our inventory levels.
As a result, we have experienced a period of decreased or delayed supply and high inflation. These factors have negatively impacted transportation and inventory costs. Under the last in, first out method ("LIFO"), our cost of sales reflects the costs of the most recently purchased inventories.
On November 6, 2020, the Company (1) issued $400.0 million of 6.00% senior secured notes (the "Notes"), which are due November 15, 2027, (2) entered into a $400.0 million first lien term loan (the "2020 Term Loan" and, together with the 2015 Term Loan (as defined in the notes to the accompanying consolidated financial statements), the "Term Loan"), which is due November 6, 2027 and (3) extended the maturity of Academy, Ltd.’s asset-based revolving credit facility thereunder to November 6, 2025 (as extended, the "2020 ABL Facility" and, together with the 2015 ABL Facility (as defined in the notes to the accompanying consolidated financial statements), the "ABL Facility").
Long-Term Debt As of January 28, 2023, the Company's long-term debt and interest rates consists of (see Note 4 to the accompanying financial statements): • Notes - 6.00% fixed rate senior secured notes with $400 million in principal outstanding and full principal maturing November 15, 2027; • Term Loan - 8.12% variable rate term-loan with $194.8 million in principal outstanding maturing November 6, 2027 and quarterly principal payments of $750 thousand; and • ABL Facility - $1.0 billion commitment on a variable rate secured asset-based revolving credit facility with no principal outstanding maturing November 6, 2025.
This increase is primarily due to: • 357 basis points of favorability in merchandise margins due to a shift in higher margin goods driving the increased sales, higher average unit retails, and less promotional activity from the prior year; • 92 basis points of favorability in inventory overhead expenditures as a result of lower expense absorption rates from higher inventory flow through on increased sales; partially offset by • 89 basis points of unfavorability in import freight as a result of increased costs of ocean freight. 50 Selling, General and Administrative Expenses.
This decrease is primarily due to: • 17 basis points of unfavorability in e-commerce shipping costs due to increased e-commerce sales during 2022; • 13 basis points of unfavorability on inventory valuation adjustments; partially offset by • 19 basis points of favorability on domestic inbound freight due to lower freight costs per unit. Selling, General and Administrative Expenses.
Net sales increased $1,083.9 million, or 19.1%, in 2021 over the prior year as a result of increased comparable sales of 18.9% and strong sales performances across all of our merchandise divisions. The increase in sales, which included no new stores, was driven by an increase in both transactions and average ticket.
The decrease of 6.4% in comparable sales was driven by lower sales across all merchandise divisions as a result of fewer transactions of 8.2%, partially offset by an increase in average ticket of 2.0%. The higher comparable sales in the prior year were partially due to stimulus payments and child tax credits issued by the U.S. government during 2021.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe detrimental effect of a hypothetical 100 basis point increase in interest rates on current borrowings under the ABL Facility and Term Loan would increase our interest expense by approximately $3.0 million for 2021. 62 Interim Results and Seasonality Our business is subject to seasonal fluctuations.
Biggest change“Derivative Financial Instruments” and Note 6 “Fair Value Measurements” to our accompanying financial statements included in Part IV. Item 15 of this Annual Report. The detrimental effect of a hypothetical 100 basis point increase in interest rates on current borrowings under the Term Loan and ABL Facility would increase our interest expense by approximately $2.0 million.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Our exposure to changes in interest rates primarily results from our ABL Facility and Term Loan, as these borrowings have variable interest rates. When appropriate, we have historically used derivative financial instruments to mitigate the risk from such exposure.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Our exposure to changes in interest rates primarily results from our Term Loan and ABL Facility, as these borrowings have variable interest rates.
A significant portion of our net sales and profits is driven by summer holidays, such as Memorial Day, Father’s Day and Independence Day, during the second quarter. Our net sales and profits are also impacted by the November/December holiday selling season, and in part by the sales of cold weather sporting goods and apparel during the fourth quarter.
Our net sales and profits are also impacted by the November/December holiday selling season, and in part by the sales of cold weather sporting goods and apparel during the fourth quarter. 58
Removed
A discussion of our accounting policies for derivative financial instruments is included in Note 5. “Derivative Financial Instruments” and Note 6 “Fair Value Measurements” to our consolidated financial statements included in Part II. Item 8 of this Annual Report.
Added
When appropriate, we also enter into fixed interest rate debt, such as the Notes, to limit the floating interest rate exposure on our long term debt or historically we have used derivative financial instruments to mitigate the risk from such exposure. A discussion of our accounting policies for derivative financial instruments is included in Note 5.
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Interim Results and Seasonality Our business is subject to seasonal fluctuations. A significant portion of our net sales and profits is driven by summer holidays, such as Memorial Day, Father’s Day and Independence Day, during the second quarter.

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