Michael Mullican: With respect to the long-term growth algorithm, no changes there. I mean we’re still planning low single-digit comp growth overall throughout the long-range plan. Total sales growth of high single digits, EBITDA growth at high single digits and net income growth in the high teens. We will do that for the addition of 80 to 100 new stores investing in our dot-com business, which is out on a real growth run here, continuing to grow at double digits quarter-over-quarter and improving our existing operations.
Operator: Our last question comes from the line of John Zodolis with Quo Vadis.
John Zolidis: I have two questions, but I’ll just stick with 1 here since it’s the last one. You mentioned that you had…
Kenneth Hicks: You can ask two.
John Zolidis: Okay, thank you. All right. So here’s my two questions then. First question is on average unit sales. So for the full year, we’re looking at just under, I believe, $25 million per average store, and that’s down about from — a little over $26 million in the previous year. And so the first question is for the new units that are coming on, what do you expect those to annualize in their first year?
Michael Mullican: John, I’m sorry, I missed the last piece of your question.
John Zolidis: So the newer stores that you’re opening up, we’ve got 9 open year-to-date, as you’ve mentioned, they haven’t been open a full year yet. But as we think about the sales contribution from the new stores, what should they be annualizing at in their first year?
Michael Mullican: We underwrite them on average of around $16 million at year 1 sales end of year 1 sales. We do expect them to be EBITDA accretive after year 1 Again, some of these just opened, but the first 4 collectively as a whole were more accretive to earnings even just a few months into the year opening.
Steven Lawrence: Then obviously, they ramp up on the day rate basis.
Kenneth Hicks: Yes, significantly higher than a typical store.
John Zolidis: Okay. We will monitor that. And then the second question relates to something you talked about with pandemic winter categories. And you mentioned that a number of these, even though they might be down a little bit, are still dramatically higher than pre-COVID levels and in particular, for example, ammunition still up triple digits. So I think a more cautious view might suggest, hey, these are still performing okay, but what we really just haven’t seen the reversion or in the demand for these categories yet. And as we go into next year and potentially less favorable consumer environment, that’s where you’re going to see this kind of continued downward pressure. And so obviously, we can’t predict what’s going to happen. But my question is, how are you positioned — how are you able to manage inventory if that were to occur?
Steven Lawrence: Well, I think we’ve demonstrated that over the past several years, to be honest with you. We certainly build contingency plans into our buying process. We have trigger dates that we activate depending upon where we see demand happening. We have great partnerships with our vendor partners. And I think on both sides of it as inventory was scarce and we had to chase it. I think we definitely outperformed a lot of our competitors in terms of getting supply of goods, which I think was reflected in sales trend that we drove in ’20 and ’21. And I think this year, as the supply chain has gotten a lot better, and actually, a lot of them just caught up, some people have been caught the other way with inventory ballooning for them.
And I don’t think we’ve seen that happen. So I think we’ve got a very nimble team, who’s got good partnerships and relationships, a strong planning and allocation basis, strong open-to-buy management. And that’s really allowed us to manage on both sides of it. So I don’t see that changing if we see a slowdown next year. But what I would say is 1 of the things that gives us confidence, and I think Michael hit on this, is these search categories, we track them. And you mentioned several of them, we talked about animal being 1 or fitness being another or cooking or things like that. they’re all stabilizing at these higher levels. In a lot of cases, higher than the 30% trend that the company performed at. And we’re seeing the volumes stabilize at those levels.
So that’s another thing we’re looking at, not just the trend versus last year, but the average weekly volume, the average monthly volume. And so that’s giving us confidence that this is kind of the new baseline that we’re building off of because they’ve been maintaining at those consistent levels for multiple quarters in a row.
Michael Mullican: Two other things that I think are very important about this category and the inventory. First, as Steve mentioned, I think we have absolutely demonstrated we can manage inventory as well, if not better than most anybody in the space. But the categories where if you take a bearish view and you predict a demand drop off, the inventory doesn’t go bad. It’s not seasonal in nature. It doesn’t become toxic like seasonal apparel what inventory does. Secondly, in these categories, while if you believe they’re going to be demand challenged, they shouldn’t be share challenged because a lot of folks in this space have walked away for it and they don’t support it like they used to. And so we should continue to take share even if the category becomes demand challenge. And again, the inventory will remain healthy because it doesn’t — it’s not subject to fashion or seasonality or those types of things.
