A €“Ken Hicks: Yes. , the rumors of my demise has greatly exaggerated. I’m having fun, enjoying it. I like Academy. Our Board has taken a very thoughtful approach to succession planning. And as with any Board, it’s a thorough process. And I would envision that I will be associated with Academy for some time to come. I’m €“ I would like to €“ I love Academy, and I’d like to be a part of it for the future. What that is exactly, we’ll see. But for right now, I’m enjoying and having fun.
Operator: Our next question comes from the line of Simeon Gutman from Morgan Stanley.
Unidentified Analyst: This is Jackie on for Simeon. Just honing in on the kind of big-ticket durables categories in the business, which are the economically sensitive. On a unit basis, kind of how are those categories trending versus 2019? Is there stability in deterioration? Or are they kind of holding at this higher water level? And I guess the broader question with that is do you think that they’re holding, is this indicative of kind of a higher level of growth in sporting goods generally as a category and what would be driving that?
Steve Lawrence: Yes. I mean we definitely are seeing the declines versus last year in some of those categories. I mentioned fitness equipment being one, being one. Those are still tough baseline much higher than the company average. So we’re up 32% versus ’19, and those categories in aggregate are well ahead of that. as we move into 2023, we see some of these search categories starting to level off, and we think we can start moving back to growth. Fishing is a great category where big surge last year is a little choppy, but we expect this year as competitors pull back in that category for the growth. Some of the bigger ticket ones with longer replacement cycles like fitness or Kayak, we anticipate those will continue to be challenged for a little bit longer, but we’ve modeled that into our plans and it’s in the guidance that we’ve given you guys.
Ken Hicks: That said, there are some — it’s not this amorphous group. We’ve got some big ticket things like outdoor cooking that are very good and some of the other big ticket categories within other parts of the business. With that said, as I think the important thing is that our base is much higher than it was 3 years ago. And so we’re working from a higher base and look forward to grow from there.
Unidentified Analyst: Got it. And just one quick follow-up. On the 34% to 34.4% gross margin guide for ’23, this is above the prior long-term range that you guys have given. Is this the kind of right run rate that we should think about post ’23 going forward? And I guess, what are the key levers we should think about in terms of maintaining that higher gross margin rate over time?
Michael Mullican: Yes. I think certainly, our expectations are — have — are higher than they were a few years ago when we rolled out that initial guide. And we certainly look forward to providing more color around our expectations going forward at our Investor Day in a few weeks. But we previously said 32% to 32.5% and we expect that to be higher.
Operator: Our next question comes from the line of Greg Melich from Evercore ISI.
Greg Melich: Two questions. The first one is to help frame sort of the share and traffic gains over the last few years. So if the 3-year comp is running up high 20s or 30%. Is it fair to assume now that transactions are still positive versus 2019, but almost all of that comes from ticket size?
Steve Lawrence: Transactions are well up versus ’19. We also have seen an increase in ticket size as the hard goods business has become a bigger percent of the total.
Greg Melich: Okay. So they’re both still up meaningfully. It’s not like flat on 1 and up 30.
Steve Lawrence: Yes, yes.
Greg Melich: Okay. Got it. And then the second was, Michael, maybe help us understand the SG&A. I guess, how did you manage to leverage it in the fourth quarter with the sales coming in a bit light? And as you described, that 100 bp investment in ’23. Could you tell us when you’d see the biggest pressure on SG&A through the year.
Michael Mullican: Greg, certainly, sales were a little softer than we thought in the quarter, but good team . And I’m proud of the team and what we’ve done to navigate the sales miss and grow adjusted net income by 12%, largely through expense management. I’ll tell you the logistics and supply chain teams did a great job managing expenses, really getting out there and being aggressive, managing container costs, managing the distribution centers, merchants did their role in pursuing some vendor allowances and those kinds of things. So we were able to bring the quarter in, I think, in a way that we’re very proud of. And despite the challenges, we lead the sector in free cash flow margin. I’m pretty proud of that. This business generates a lot of cash, our ability to return over $600 million to shareholders in a year where we ran down and invested the most capital back into the business that we’ve invested since 2017 sets us up well for the future.
And I think it shows we’ve got a very durable business model with a very capable team. With respect to next year, I would say 20 basis points of deleverage is tech investments related to our initiatives, omnichannel, supply chain, our customer data initiatives. Those are big, big levers for us, and they require some tech investments. About 30 basis points of the deleverage relates to new store growth and a combination of the construction of the new stores themselves and some additional marketing that we’ll have to deploy to make sure they get off to a good start. I’d say, 10 basis points is the 53rd week. You got a little bit of stock comp deleverage and the rest is just kind of small stuff. So I hope that’s helpful.
Greg Melich: That’s very helpful. And I guess the last one, I just want to make sure the first quarter, how is it trending? Are we in the range? Or could we presumably be below it just given the comps recycling?
Ken Hicks: They don’t — let me answer this question because every time I do, I confuse people. So I’ll let Michael.
