Nathan Friedman : This is Nathan Friedman on for Seth. Just wanted to follow up on the gross margin sustainability. Maybe you can share more color behind the higher expectations versus the prior 32 to 32.5. Is it just merchandise margin improvement is being — is more sticky and sustainable in light of higher promotions? Or is there a larger runway for a supply chain that could drive gains to offset this or something else?
Steve Lawrence: I’ll start on the merch margin, I’ll let Michael talk about the other components. I mean, we’re certainly at a much higher level than where we were 3 years ago from a merger margin perspective. It’s up over 500 basis points during that time period. We do see some promotions creeping back in and expect that going forward. But to be clear, I don’t think we’re ever going to go back to where we were in 2019 and prior from a promotional intensity perspective. I also think that during that time period, we’ve made a lot of improvements in just the fundamentals of how we manage the business. The inventory management process, the allocation system being much more thoughtful about where and how we’re putting good, the clearance strategy that we’re running, all these things that we’ve done from an MP&A perspective have long-term benefits that we think are going to be sticky.
So there may be a little bit of erosion next year in merch margin relative to this year with some more promotions. But we think the vast majority of what we picked up over the last couple of years is going to stick to our roads.
Nathan Friedman : Got it. And maybe just a housekeeping question. Just curious where you’re expecting your inventory growth for the upcoming year knowing that you’re well positioned for the spring, but any more color there would be great.
Steve Lawrence: I think as we progress through the year, you’re going to see the inventory start to normalize closer to where it was last year. We started getting back in stock halfway about halfway through last year. So I think you’ll see the inventory start to normalize on a Y-o-Y basis as we get deeper into the year.
Operator: Our next question comes from the line of John Heinbockel from Guggenheim.
Unidentified Analyst: This is Julian for John. A quick question on contract and what do you expect from bigger ticket items? And anything you can call out from maybe the more casual consumers and versus your most engaged. You guys mentioned improvements in targeting and data analytics. So anything you can call out there would be great. Then I have a quick follow-up.
Steve Lawrence: Yes. I would say that kind of the story over the past year has been that our best engaged customers are shopping with us more and are spending more with us, that’s certainly embedded in our numbers. We certainly picked up a lot of onetime customers during the pandemic particularly the early days, when we’re the only kind of store open and other people weren’t. The good news is we’ve gotten a lot of data on them. We know how to contact them. It’s one of the things that we’ve really been working on beneath the surface is being much better in terms of our targeted marketing outreach. We’ve taken our traditional media spend way down, and it’s now over 50% targeted and it’s going to keep increasing from there. We’ll talk a little bit about that at the Investor Day.
We’ve got a new customer data platform coming on board that’s going to really help us be even more sharp in our targeting. We’re seeing really high reactivation rates on lapsed customers, which is also something we’re really excited about, both happening currently and in the future.
Unidentified Analyst: Great. Appreciate that color. And based on our stores is inventory, especially apparel and fuller look about as clean as it’s ever been. Our comp store units close to upper link to low single digits area. And can you chase — and can you chase if the demand backdrop is somewhat better than what exciting like now?
Steve Lawrence: Yes. I would say comp store units versus last year are up a little bit versus 2019 are still down 7%. Once again, that’s with 9 more stores. So we’re operating a lot leaner today than we were 3 or 4 years ago when there was top stock throughout the store. That being said, what was really interesting is we learned in pandemic, we could turn faster. We learned how nimble the teams could be in terms of chasing goods. And so we haven’t lost that. That’s in our muscle memory now. And so if business starts to accelerate — we feel like we’ve got the inventory to do the business and going to chase additional goods. Conversely, if we see it slow down, we feel like we’ve been very nimble in management on both sides.
Ken Hicks: Yes. Part of it is also some of the things that Steve and his team have put in place allow us to flow the merchandise bed. So we don’t have to carry as much inventory to do the volume and it moves through the system. So better planning and flow, and that’s — our supply chain has been able to handle it, but we think the improvements that we’re putting in place for the future will make it even more able to handle the slow and we can improve our inventory productivity.
Operator: Ladies and gentlemen, we have time for one more question. And the question is from Patrick Holanda from Goldman Sachs.
Unidentified Analyst: You guys opened 9 net new stores in 2022. You mentioned you took share during the year across categories. We were just wondering if there’s any data you can share around the ramp-up in spend from new customers? Has there been kind of different shopping patterns from new customers in new categories that you’re taking share from or new customers at new stores that you’ve opened in infill markets or new markets?
Steve Lawrence: So we see new stores, candidly, as a really great way to expand our brand and attracting customers. I mean you think about some of the new markets we’re in, like short pump, obviously, all those customers are new to Academy and new shoppers for us. as we’ve gone into new markets, we’ve done, I think, a better job of localizing the assortment. One of the things we’ve done in the past and prior vintages in ’19 and prior was we kind of took a Texas-based assortment approach and tried to apply it broadly and that didn’t work. So we’ve actually seen some pretty positive reaction to some of the localization efforts we put in place this here. But that being said, as Michael said, there’s always learnings we’re going to have — and we’re taking those learnings from ’22, and we’re going to play into ’23 and to take a lot smarter about how we market, how we assort and how we manage those stores.
Ken Hicks : All right. I appreciate everybody’s time and attention. And hopefully, we helped you better understand why we’re so bullish on our future and what we’ve got ahead of us. It was a challenging quarter and challenging times. But that said, we’re well positioned for that, and we’ve got the right team to accomplish what we need to accomplish and achieve our goals. We look forward to seeing all of you at the Analyst Meeting, the first part of April, and we think you’ll be excited in our new plan and our outlook for the future. With that, I hope everybody has a great day and a lot of fun out there. Thank you.
Operator: Thank you. The conference of Academy Sports and Outdoor has now concluded. Thank you for your participation. You may now disconnect your lines.
