Michael Mullican: Look, I’ll go back to what Steve said. We expect that the year will improve as we move along. And we I can’t say a whole lot more about that. We don’t provide the inter-quarter guidance, but we expect the year to improve as we go. I think we’re off to a start that we expected.
Steve Lawrence: And I’d say, beneath the surface, we’ve had on this, and we’ve got some really healthy business out there. I just want to reiterate that. I mean our apparel business for business, our team sports business. We think there’s a lot of opportunity in categories like hunting and fishing as they start to cycle some of these trends. Inventory is in the best position it’s been in, in a long time. our value position in the space. We have a lot of reasons to be positive.
Greg Melich: That’s great. We’ll see it in a couple of weeks. Good luck, guys.
Operator: Our next question comes from the line of Kate Fitzsimons from Wells Fargo.
Kate Fitzsimons : I guess I wanted to switch gears and speak to some of the store openings. You guys are targeting this year, 13 to 15, can you just expand whether this is a mix of new and existing markets and how we should think about that? And you noted some interesting learnings from the 9 new stores you guys had done last year. So if you could just provide some more color there. And then I have a question on the balance sheet.
Michael Mullican: Sure. I’ll give you a little bit of color on the program overall. As a reminder, this was a test and learn year and a year about capability building as we entered a new phase for the company, which is really one of accelerated multiyear unit growth. We tested a lot. We learned a lot, tested new markets. We tested different store layouts. We looked at different marketing approaches. We developed the capability to retrofit existing spaces, which is not 1 frankly this company ever had. I think in the past decade, we might have only retrofitted 1 or 2 spaces. So I would say, overall, we’re pleased with the progress of the new store program. As a whole, the current vintage will clear the 20% ROIC hurdle that we’ve established.
We feel comfortable with that. I will say when you adopt a test-and-learn mindset, if everything you try works exactly where you want it to, you probably didn’t test enough. And so we had some stores that did phenomenally well. We had others that came a little bit short of our expectations, and we have learnings in both instances, and we’re applying them. I want to reemphasize a critical point. Only a handful of our mature stores, and I mean a handful had four-wall EBIT rates in the single digits. So of the 268 stores we have, 258 stores are doing double-digit 4-wall EBIT margin. So our bottom quartile stores outperform the competition on a productivity standpoint on a profit dollar standpoint. And so even though we haven’t put our best to forward, this is a powerful part of our toolkit that we look forward to speaking more about going forward.
We’ve never shut a store because of profitability issues in this company, and we’re not tinkering with the fundamental business model. We have a business model that works. We just need to scale it. So we look forward to accelerating it. We’re confident in that. I can’t tell you all the learnings because we don’t want to give away our game plan, but look forward to talking more about it in a few weeks at Investor Day.
Kate Fitzsimons : Okay. That’s helpful. And then just secondly, switching gears to some of the free cash flow priorities for 2023. You guys have been pretty aggressive on the buyback, certainly appreciate the raise in the dividend. I am curious if you could speak to how you’re evaluating the debt on the balance sheet. You bought back $100 million in Q4. I believe $400 million of that 2027 note is callable later this year. So I am just curious how you’re evaluating the debt portion of the balance sheet and cash returns this year.
Michael Mullican: Sure. Over the past 3 years, we’ve generated over $2 billion in free cash flow. For a company of our market cap for a company of our size, that’s pretty extraordinary. And when you generate $2 billion in free cash flow while investing in the business, you can do a lot of things. And we’re going to continue to take the approach we’ve had. I think we’re beyond the point where we’ve reached the stability of our journey. We want to invest back in the business, which is why you see the capital increasing next year. After that, I think we’ve got a lot of runway to do a number of different things, and we’ll continue to take that portfolio approach with buybacks, which over the past few years, buying back over $900 million of ASO stock at average price around $40.
It’s been a pretty good return. We’ll continue to take a door approach and look at the debt I think from a debt level standpoint, we’re in a pretty good spot. I don’t like the rate, and we’ll keep looking at the rates. And if those get away from us, we’ll take out the variable rate debt before we look at the 6% callable debt to your question. So that’s how we think about it. One more thing on the stores that I want to highlight. We get questions all the time about the format. We think the big stores that have broad and exciting assortments do well. We think big stores that are highly profitable, can put smaller stores that are less profitable out of business. And so we’re not going to tinker with our model a heck of a lot. As we go forward, we’re going to focus on the stores that are in that and above range.
