Carl Ford

Thanks, Steve. Good morning, everyone. While our top line in Q4 and full year was impacted by our customer being financially pressured, we diligently controlled inventory and operating costs, which enabled us to generate healthy cash flows and profits as well as invest in future growth drivers.
I will now walk you through the details of our fourth quarter and full year results. Our fourth-quarter net sales came in at $1.8 billion with a comp of negative 3.6%. This was at the upper end of our expectations, led by December sales that were higher than last year. So we were pleased with the trajectory change from prior quarters.
While customers were financially stressed, they responded to our strong value message across a broad assortment of products. For the quarter, ticket size increased by 1%, while transactions declined by 5%. E-commerce sales were 14.7% of total merchandise sales compared to 13.5% in the fourth quarter of 2022.
Our fourth quarter 2023 had an extra week of sales. So when discussing divisional sales to last year, we are providing comparable sales by division instead of total sales for a more accurate comparison. The best-performing division was outdoor whose sales increased 6.3% compared to Q4 of last year driven by strength in hunting and camping.
Within camping, the standouts for Stanley and YETI. Both brands did an outstanding job of driving newness through color and product extensions such as the bar wear collection that YETI rolled out prior to holiday. Apparel was our second best division with a 6% sales decrease.
We saw growth in work apparel and fleece, driven by car heart and Nike, offset by declines in outdoor and athletic apparel. Footwear sales declined 8.8%. We continue to see outperformance in key brands such as Brooks, hey, dude and Nike.
One area that struggled was our cleated business. Fleece was one of our last businesses to fully get back in stock. And we faced strong sales from Q4 of last year that were still being driven by some scarcity in the marketplace and the World Cup.
Last, sports and recreation sales decreased 8.9%. Growth in outdoor Cooking and Games was offset by continued weakness in fitness and bikes. For the full year, net sales were $6.2 billion with comparable sales of negative 6.5%. E-commerce sales were 10.7% of total merchandise sales, which was the same as last year.
Looking at gross margins, the gross margin rate in the fourth quarter was 33.3%, a 50 basis point increase compared to Q4 of last year. Merchandise margins declined by 40 basis points and shrink was 37 basis points worse than Q4 of last year. These declines were offset by inventory and freight savings.
For the full year, our gross margin rate was 34.3%. Freight savings were offset by merchandise margin and shrink declines, leading to a 30 basis point decline compared to last year. This is the third consecutive year that our gross margin rate has exceeded 34%
This demonstrates that the merchandising and operational changes made over the last few years, such as the investments made in price optimization and planning and allocation as well as better clearance and promotions management and disciplined inventory management are now reflected in the long-term margin structure of Academy.
We continue to find opportunities in these areas to drive margin improvement through technology enhancements in stronger processes during the fourth quarter, our SG&A delevered by 80 basis points. We are focused on managing our cost structure while investing in the pillars of our long-term growth strategy.
More than 75% of the dollars spent above last year were for investments in our growth initiatives, new stores, omnichannel customer data and supply chain for the full year over 90% of the SG&A dollar growth was spent on our growth initiatives.
Overall, we controlled inventory promotions and expense to deliver net income during the fourth quarter of $168.2 million, a 6.7% increase over last year. GAAP diluted earnings per share was $2.21 for the fourth quarter and $6.70 for fiscal 2023.
Adjusted diluted earnings per share was also $2.21 for Q4 and $6.96 for fiscal 2023. Looking at the balance sheet, our inventory at year end was $1.2 billion, a decrease of 7% compared to fiscal 2022. Total inventory units were down 7.2%, and this includes having an additional 14 stores compared to fiscal 2022.
On a per store basis, inventory units were down 11.8%. We have had a balanced approach to capital allocation since going public in October of 2020. The three pillars of our strategy are maintaining adequate liquidity for financial stability, self-funding our growth initiatives and increasing shareholder return.
Our cumulative shareholder return over this time period is more than 500%, driven by operational execution and more than $1 billion of share repurchases. We have also reduced our debt by almost $1 billion and paid more than $50 million in dividends.
As a result of these actions, Academy is one of the highest returning stocks from the class of 2020 IPOs. During Q4 and fiscal 2023, Academy continue to generate positive net cash from operations. In Q4, we generated approximately $235 million and $536 million. For the full year, we utilized the cash to pay down $100 million of the Company's term loan reducing the outstanding balance to $91.8 million.
After the paydown, we have $348 million in cash, $484.6 million of total debt and no outstanding borrowings on our $1 billion credit facility, which was recently amended and extended through March of 2029.
During Q4, we repurchased approximately $3 million worth of shares. For all of fiscal 2023, we decreased our net share count by $3.7 million through $204 million in share repurchases. As of the end of the fiscal year, Academy has $697 million remaining on its share repurchase authorization.
In addition, the Board recently approved a 22% dividend increase to $0.11 per share payable on April 18, 2024, as stockholders of record as of March 26, 2024. Heading into 2024 we have the cash to fund our growth initiatives and to continue to execute our capital allocation plan.
Turning to 2024 guidance and slide 8 of the deck, we expect to operate in a challenging economic environment. As the current macro dynamics are still impacting our customers, we are going to run the business as efficiently as possible while also making investments to support our long term strategic opportunities as outlined on slide 6 opening new stores, growing our omnichannel business, leveraging our customer data platform and modernizing and scaling our supply chain.
Based on this Academy is providing the following initial guidance for fiscal 2024. Net sales ranging from $6.07 billion to $6.35 billion. At the midpoint, this is 2% growth compared to fiscal 2023 when excluding the $73 million in sales related to the 53rd week.
Comparable sales of negative 4% to positive 1%, gross margin rate between 34.3% and 34.7%. GAAP net income between $455 million and $530 million dollars, resulting in GAAP diluted earnings ranging from $5.90 per share, $6.90 per share.
The earnings per share estimates are calculated on a share count of approximately 77 million diluted weighted average shares outstanding for the full year and do not include any potential repurchase activity. In 2024, we will no longer be guiding to adjusted net income or adjusted earnings per share. Any adjustments such as stock compensation will be provided in the quarterly results.
SG&A expenses, which includes stock-based compensation expense of $30 million or approximately $0.3 of earnings per share are expected to be approximately 100 basis points higher than in 2023. Interest expense is expected to be $38 million, down from $46 million in fiscal '23 due to our reduced debt levels. We expect to generate $290 million to $375 million of free cash flow, including $225 million to $275 million of capital expenditures.
As we begin a new year we are focused on addressing our opportunities to return to growth and delivering long-term value to our customers and stakeholders.
I will now turn the call back over to Steve.

Steve Lawrence

Thanks, Carl. As we turn our focus to 2024 and beyond, we remain committed to our long-range targets. We've taken the lessons we've learned over the past year and have leveraged them help improve our go-forward strategies.
We believe that this refined approach to new store openings, coupled with an increased focus on improving customer experience and driving more productivity of our supply chain with the keys to driving growth and unlocking value for our shareholders. We've put in place a strong, talented team to help guide the company through our next phase of growth. We're energized and optimistic about the future for Academy.
With that, we'll now open it up for questions.

Question and Answer Session

Operator

Thank you. (Operator Instructions)
Simeon Gutman, Morgan Stanley.

Simeon Gutman

Hey, guys, thanks for the question. My first question is on thinking about the normalized comp rate for the business in three years sort of post COVID. The business did really well.
It's but it is still comping negative. And I don't know if it's taking longer in your mind to turn the corner or not, but because it is, does that affect the normalized comp rate going forward, especially since you're adding more stores?

Steve Lawrence

Yes. Thanks for the question. So how we would characterize it is we have a challenged customer, not necessarily a challenge strategy. We really believe and obviously the long-range goals that we put forward out there.
If you go back, as you pointed out, we obviously had a pretty strong growth in 2020 and 2021. We saw a pullback in '22 we think that was a start-up of rebaselining coming out of COVID that continued into '23. I think as we got through '23, that's why we put some commentary in there around.
We're starting to see the kind of the builds on a weekly monthly basis return to pre-COVID time periods. We feel like we're past a lot of that rebaseline. What we're dealing with right now is primarily challenge customer and I think that's pretty well documented them.
Obviously, inflation continues to be pretty high. Consumer debt is pretty high. And what that's really translating into is a customer who's behaving in a specific way. They're shopping for newness. They're shopping for value and they're coming out and shopping at key time periods during the year when they need to shop, whether it's a replacement cycle as a kid starts a new sport season or gift-giving time. And so that's really how we've modeled our business and built it moving forward.

Simeon Gutman

And then the one follow-up related is, I think, just to clarify what you said, the stores that you're opening in existing markets, those are performing better relative to either new space productivity or a comp waterfall second, third year, then you thought it's the stores that are in markets in which you don't have a presence that have been ramping slowly more slowly. Is that a fair characterization?

Steve Lawrence

Yeah, that's correct. I mean and that's why I went into some pretty good detail on that. I mean, it stands to reason where we've got high brand awareness from, we're seeing those stores start out very, very strong in some of these smaller markets where we're going in with one or two stores at a time, it's taking a little longer to build brand awareness week.
\Changing kind of how we think about modeling these new stores going forward and billing performance, which we detailed in the call as well as on the supplemental material that we provided. But over time, I mean, we the expectation is that these stores are going to have a five year ramp with outsized growth in the first five years and over the next 5 to 10 years, beyond that, we would accept them to continue to grow maybe slightly faster than the chain and settling around the average of what an average store volume does for us.
But new stores, new markets, low brand awareness are definitely a little more slow to start out than stores in existing markets, high brand awareness.

Simeon Gutman

Makes sense. Okay, thanks. Good luck.

Steve Lawrence

Thanks.

Operator

Kate McShane, Goldman Sachs.

Kate McShane

Hi, good morning. Thanks for taking our question. You mentioned in the prepared comments that you're going to focus on value and price. And I know that pretty much always where you've been focused on but do you think that you've got a little bit away from where you've been historically and that could be part of the reason why you've seen some pressure on the comps and how should we think about just a renewed emphasis on value going forward in '24?

Steve Lawrence

I think you said it best in your question, Kate. It's not a renewed focus it's always a focus for us, and we see ourselves and our customers see us as the value provider in our space and we deliver value on a multitude of fronts. A lot of that's driven by our private label, which is about 22% of our total business.
We have strong value in those items, and they're priced every day at really low prices compared to like items in the marketplace. At the same time, we also deliver value on a lot of well-known national brands where we provide a price split ticket price on there where we're selling that at a at a slightly lower price than competitors are selling at an MSRP.
And then thirdly, we develop or deliver value is promotions, right? And so we generally aren't a promotional retailer, but we certainly do promote during key time periods during the year. Certainly holiday being one of the biggest one of those. And I think we leaned into those three different ways to deliver value for holiday. And we think that's what we saw an inflection point.
During Q4, we saw negative 3%, 6% comp versus a negative 7%, 6% that were running through the first few quarters here. So we think that that really kind of broke through during that time period. So I would say is as much renewed focus, it's just a continued focus and then looking for ways to expand it.
I mean, that's what the customer's telling us you're voting on. So you're going to look at ways that we're going to add some more color on key value items. So really no sharp items on well-known categories like bikes and grills, really sharp prices. We're expanding some of the offerings there.
And I think you're going to see us continue to lean into promotions during those key moments on the calendar when the customers really shop.

Kate McShane

If I could just ask a quick follow up on the promotions. I know there's been a lot of vendor support for promotions over the last year or so. Are you expecting the same level of vendor support in '24, what you saw in '23?

Steve Lawrence

Yes. I mean, obviously, we had really strong partnerships with our vendors. I don't see any reason why they wouldn't support. So the degree that they've supported us in '23 and beyond. I think that, candidly, some we're seeing more vendor support on a multitude of fronts, not just obviously margin and price support on marketing and other initiatives because they look at us as a growth partner.
And that means we're getting access to more products and newer products and more innovative products means better support on the marketing front. So we actually see our vendor support growing in the future, not declining or maintaining.

Kate McShane

Thank you.

Steve Lawrence

Thank you.

Operator

Greg Melich, Evercore ISI.

Greg Melich

Thanks. Maybe just to help us on the what's driving the growth or that inflection you talked about, Steve, the in the fourth quarter, ticket was still positive in transactions running down five.
If you look at the guide this year, I would you expect that all the improvement to be on transactions and transaction growth if we get back to a 0% comp actually being positive this year?

Carl Ford

Yes, I'll take it, Greg. This is Carl. In embedded within the '24 guidance if you just kind of look at the midpoint, how we see it is ticket slightly up and traffic slightly down. And while we're very aware that the consumer is challenged, we're going to monitor it throughout the year, but at the midpoint, that's how we would model it.

Greg Melich

And in terms of a progression, just given how it sounds like, it's the first quarter would be the weakest and then we'll get slowly better over time or do the comparisons get harder by the end of the year, given how December was strong.

Steve Lawrence

I think you stated it correctly. First of all, you said it the way we see the quarter progressing or the year progressing is obviously customer is still under pressure that didn't change as we turn the page to 2024. So we think that's going to continue into the first part of 2024. So we do expect Q1 to be the softest quarter. And that's how we model that.
We expect Q2 to build upon that. We expect the back half of the year to be better than the first half of the year.

Greg Melich

And just to clarify that the SG&A that now including the stock comp and thanks for that, it's nice to make it clean. Is that that 100 bps increase that you flagged, is that a new run rate that we should think of in terms of stock-based comp or was there something about this year that sort of steps it up versus last year?

Carl Ford

No, that I think the $30 million is fair to say it's fair to use going forward. But I do want to kind of speak to what's embedded within FY24 holistic SG&A. It's about at the midpoint. It's about 100 basis points of deleverage in expense.
And I want to take you back to our long-range plan where we said, we anticipate 200 basis points of expense deleverage offset by about 150 basis points of supply chain. And overall, like gross margin benefits, which is inclusive of private brands and whatnot.
So the deleverage that that we're seeing is from a dollar perspective, what we anticipated, what is causing the deleverage from a rate perspective is running at a negative 6.5% comp. But to Steve's earlier point, and I think it's been very well discussed in the retail industry this year.
The consumer is under pressure, so that is what we are experiencing. That does not make us second gas, the strategies that we're building this long-range plan on, we're going to continue to open stores. We're going to continue to invest in omnichannel.
We're going to continue to invest in customer data and supply chain, but specific to stock compensation and $30 million in the next year is a fine run rate to think about, but we'll obviously update you year by year.

Greg Melich

That's great. Thanks and good luck.

Steve Lawrence

And thanks. Appreciate it.

Operator

Chris Horvers, JPMorgan.

Chris Horvers

Thanks, and good morning, guys. So a couple of follow-ups there. So first, on the comp, do you expect the first quarter to be within the range of the year and sort of are you are you essentially expecting 1Q look like and the quarter to date trend on?
And then as you think about it, can you can you talk about like the gross margin puts and takes you? You mentioned rolling out WIMS. over the next 18 months. You talked about some efficiencies that the new head of supply chain has seen. How are you thinking about the gross margin good guys in 2024? And what are the offsets?

Steve Lawrence

Yes. So I will probably tag team this one in terms of the comp progression, I think it plays out exactly, as I said before, where we see the first quarter being the weakest. You know, I certainly we're coming out of Q4 last year with the down 3%, 6% trend.
If you look at our low end of our guidance, it's negative four, which is basically in line with that and as we progress forward through the year, we expect the Q2 to be better and then obviously, the fall will be better and that's you can kind of model it based off of that feedback in terms of margin puts and takes there several right.
And Carl's got a long list here. A couple I just hit on is private brand continues to be a tailwind for us. They're mixing into a higher margin mix. And private brand is a big tailwind for us. Promotional on intensity is kind of settling into a more normalized state moving forward. So I don't expect that we're going to see a tremendous uptick in promotions. Carl, I know you've got a couple of you want to add on as well.

Carl Ford

Yeah, from a gross margin going forward standpoint, we're seeing what's going on with international shipping. We don't put quite as much through the Red Sea as perhaps others do. But there is a delay coming around Africa and kind of the equipment that's being used.
And so there might be modest deleverage there. But we've got it's we've talked about like outbound transportation and how we run our trucks between our distribution centers and our stores. We've got opportunity there associated with WMS, just keeping up with trucks and doing multi-stop shuttles, which we don't really do in any large way now the second would be just in that broader supply chain space.
If you think about kind of the labor management aspect associated with what we're doing within the distribution centers, yes, we get a new tool Entavio mask that is there a lot more sophisticated than almost 30-year Accipiter system that we're using now just from an overall labor management standpoint.
I would say that merchants are really leaning into this as well as we think about cross-dock penetration or how much stuff does it need to be put away in separately Republic, and that's a big opportunity at the company and not in the play, the Chief Merchant And Rob, the new Rob, how the new Chief Supply Chain Officer are in lock step on this. We've seen that there's betterment there and we started executing on that.
Yes, I won't reiterate kind of the merchandising stuff, but I am excited about our private brands offering freely and we are doing are doing well and we're seeing customers resonate with that value opportunity.
The last thing I would say as it relates to is specific to FY24. I want to be clear, we did not make our sales plan for FY23, although we ended with an inventory that was down 7% and we feel was well managed and the merchants really did a Herculean effort at bringing that in where they wanted to.
There was some promotional activity associated with pockets of inventory where when you're planning on something a little bit higher and it comes in after we reguided in Q1, they took some actions and we're ending clean. Now we like our inventory position. And so we don't think that we'll have to kind of execute in that manner for FY24.

Chris Horvers

Got it. And then my follow-up, just on the new store maturity ramp. You lowered the year one given the new market mix. But as you think about like where can you remind us what you said about where did they get in year five because it sounds like you said there's this very steep ramp to year five in that over the next five years that will get to the average on the average of the chain 10 years out.
So can you maybe just provide some more color because typically we think of, you know, double digit comps in year one and then by year five, you're floating with the overall business?

Steve Lawrence

Yeah. So we you know, in our long-range plan, we initially modeled this. We said $80 million in year one and then their brand five years from there. We didn't put an endpoint associated with where we think they matured over time. We said it would come in close to where the average store volume is we don't think that that necessarily changes is starting from a lower base.
Right. So obviously, you know, the $12 million to $16 million is meant to encompass a couple of different types of stores, right? Smaller stores and smaller markets where we have less brand awareness probably would be towards the low end of that $12 million versus new stores in the existing geography where you have high brand awareness, probably to the high end of that range.
We would expect them to grow at a faster rate, you know, at least two times faster than the Company growth during the first five years of that wouldn't get them all the way to the average for the new store. That's why when you look at it over a 10 to 15-year time horizon, we expect them to get there.
And we've really seen this play out over time. If you go back 10, 15 years, Northern Florida was a new market for us. And when we looked at those stores initially, they started off with lower volumes because it was a new market. And as we look at them today, we've been in that market now over 10 years.
Those stores are doing on average store volumes. So that's how we're looking at it over time. But it's up a five-year faster ramp and then 5 to 10 year after that, but it's settling it at the Company average.

Chris Horvers

Thank you very much.

Operator

Robbie Ohmes, Bank of America.

Robbie Ohmes

Hey, good morning, guys. Can you talk a little more about you've mentioned how well the private label is doing. How are you thinking about getting the athletic apparel, the outdoor apparel, some of the branded athletic footwear, are there things you can do to get those businesses to be a little stronger or any initiatives underway? How are things like LBL being doing? I'd love to get some color on that.

Steve Lawrence

Yes. So I would say, in general, the theme we've seen happen over the past couple of years as new ideas have done very well. So a lot of the new brands you've heard us mention like L.L. Bean or bought bags continue to do very well, and we're expanding a lot of these categories. You think last year we had broken stocks in a small number of doors for us and a small number of doors.
We're expanding those very rapidly. We've got new brands we're introducing this year like crush city base that's already off to a fast start. So new brands are working for us, and we're scaling them out very rapidly in terms of some of these larger legacy brands where they're a little more challenged. We're partnering with them around making sure we've got a strong pipeline of innovation flowing out to our stores.
And we're optimistic as we partner with our large brands that we're going to start seeing that turn the tide as we move through 2024. We've got great partnerships. I think Carl called out on the call, Nike, that's been one of our stronger businesses that certainly our largest business having that work has been a really good thing for us and where we've got some brands are a little softer. I think we've got good plans in place with those teams to turn them around and get it moving in the right direction.

Robbie Ohmes

Thanks. And then my follow-up is I actually want to follow-up on Kate's question. When you look at the vendor community, are you seeing prices coming down?

Steve Lawrence

I wouldn't say we've seen prices coming down. Certainly, there are places where we've negotiated better deals on things, but we haven't seen as freight settled in that necessarily translate through a ton of cost reduction so far, but we continue to work and negotiate with vendors on that front.

Robbie Ohmes

Got it. Thanks.

Steve Lawrence

Thank you.

Operator

Michael Lasser, UBS.

Michael Lasser

Good morning. Thanks a lot for taking my question. Steve, when we compare Academy's results to especially in the footwear and apparel categories to several other retailers, especially those retailers that also index for lower income segments.
The footwear and apparel categories in particular seem to be it's doing worse that Academy than many other players out there suggesting it's seeding market share. A, why do you think that is the case and B outside of some of the factors that you pointed to, what do you think is the principal and strategy that's going to allow Academy to stabilize its market share because is it simply a function of its core customer base getting healthier that might prove to be elusive for us?

Steve Lawrence

Yes, I'd start with I'm not sure I agree with the premise of the question. We can tell you, we look at market share on a monthly quarterly annual basis we use Cercon is primary source for that. And if you look at some kind of data, they will tell you that we picked up market share broadly across business and in 2023, we'd also say that we picked up market share over a four year stack pretty aggressively considering the fact we're still up about 25% versus where we were in 2019.
And I would also say when we look at our comparison in footwear and apparel to other retailers in general, the results I've seen as others have called out and gone through the earnings cycle for the most part are at or maybe a little better than broad-based retail. I mean, we do have a competitor who is outperforming us right now. I think we have a different customer than they have.
I think we've got a more middle-income consumer versus a high end consumer. We've certainly seen the high end consumer continue to spend a little bit more, then the middle or lower income consumers a little more pressured.
So one of the ways we combat that is continuing to build out the better best end of our assortment and get access to a more premium product from our existing vendor base like Nike, like a new balance. And we've had some really good success on those fronts. We continue to bring in new brands so that we're ahead of the curve there and have them in some cases, first to market.
And it's going to be a journey for us as we move forward. But we are not losing market share. The data doesn't really support that. And we actually feel like we're picking up market share from every data point we see.

Michael Lasser

My follow-up question is on the gross margin in the last 50 years seem to any investment you might be making either promotions or price would you would you see how much would you see and improvement in sales if you are willing to sacrifice some of the gross margin gains that you've achieved is a quick housekeeping note and how much will SG&A grew? How much will SG&A dollars grow this year and due to investments that you might be making in wages or labor within the store? Thank you very much.

Steve Lawrence

Carla are going to tag team this one. I'll start on the margin front. It's a it's a question that I think every retailer ask themselves on a regular basis. If I promoted more what I would I see a higher sales trend and you certainly understand the My math is Michael, that if you sell at a discount of 25% off, you got to sell 33% more units to offset that.
So what we've seen, candidly, throughout the course of 2023 and part of '22 is when we've leaned into promotions during kind of non-peak time periods when the customer is not willing to shop, we've seen a trade down in AUR and we haven't seen an offset in terms of unit growth to offset the sales decline. So we've been very thoughtful about where we plan our promotions.
As we talked about, we plan them around the big market share moments on the calendar like a Mother's Day, like a Father's Day, like an Easter like a back-to-school like a holiday. And that strategy has worked for us. I mean, if you look at our margin or merch margin for Q4, it was down about 50 basis points.
We had offsets in other lines to help pull the total gross profit up. But um, we did certainly lean into promotion a little bit during Q4. And I think that that definitely helped us. I think you'll see us continue to run those plays as we move forward. But broadly promoting all the time we don't think is the pathway to success.

Carl Ford

And I'll take it from an SG&A standpoint. Michael, I said 90% of what we invested in this year from a SG&A rate standpoint was the investments. I also said expect at the midpoint 100% growth in SG&A of rate next year. It's really all investments like 100% of it.
I'm actually pretty proud of the team when anything incremental that was over and above launching new stores, investing in omnichannel, making investments on the customer data platform that we implemented last year were all really offset dollar for dollar with incremental savings. So if you think about how that it's going to manifest itself on a more detailed P&L.
We now have 15 to 17 stores versus 14 this year. We'd like to start a little bit earlier in the year. So there's a little bit of capital investment made in '24 that all that will get us out of the gate good in FY25. And that represents the wages that we pay to our associates and managers in those facilities, the rents, property taxes, the seeding of the market.
Steve talked about where there's low brand awareness and now we've got a new tool with the customer database platform and some other tactics investing in advertising associated with those new markets. And the and the other thing would be just the technology and comp costs associated with you know the WMS is a SaaS-based system.
There's going to be tech expense associated with that. The Treasure Data customer data platform has a cost to it. And obviously, omnichannel from the user experience investments that we're making there. So in short, the 100 basis points of expense deleverage that you should expect for next year, and that was embedded within our long-range plan. It's all of the investment. That's the totality of the investment costs.

Michael Lasser

Thanks very much.

Steve Lawrence

Thanks

Operator

Anthony Chukumba, Loop Capital Markets.

Anthony Chukumba

Good morning and thanks for taking my questions. So I just want to kind of tie a couple of things together. In terms of my question, you talked about some of the outperformance in certain footwear brands, you specifically brought up, Brooks, you also talked about the fact that you're definitely counting on some new products to drive growth in 2024 to help in 2024.
So kind of tying those two together, any insights in terms of some of the sort of hot running brands, US specifically Hogan on any insights in terms of whether what your expectations in terms of whether you can get one or either or both of those brands, particularly given the fact you've had success with Brooks, which is a relatively, you know, what sort of high ticket footwear brand? Thank you.

Steve Lawrence

Yes. No, I think you asked us this question last time, too, because we don't have any updates on that front? I mean, as you know that you're right, those are two of the hottest brands that are out there. We would love to have access to those. And as I've said before, I don't think it's a matter of if it's when we continue to have dialogue and we'll continue to put our assets out there right now.
We don't have access those. And so our mission and our plan is to win with the brands we have access to. And I think you're seeing that play out and some of the successes call called out with Nike, particularly some of the higher end running shoes that we've gotten from them.
Brooks, a great call out there. Brooks has since then absolutely on fire for us. You know, we're seeing great success in brands like New Balance and other running brands. So we're going to win with the brands we currently have.
We're going to continue to drive to get the brands. We don't have access to that. The customers telling us they want, and we're going to continue to seek out more brands and incubate new brands earlier in the cycle so that we're not trying to catch them when they're hot, we're going to have them at the moment they start to turn. So you'll see that and that's not just for conversation.
I think that's broadly across the store. We've got it. We've got to get better at getting newness in the stores. And I think the teams really rallied around that. And you see that in a lot of the new brand initiatives we called out and we're going to we're going to scale them very quickly and make them big and important so that we don't have to have a conversation about why we don't have access will all come in on going forward.

Carl Ford

Yes, at the risk of double dip. And I will so we've got 282 stores in 18 states and we talk with our vendors about what's on the horizon. And we talk to a lot 160 to 180 stores over the next five years. But longer term, we see runway to be an 800 plus our store location.
That's nationwide and partnering with us and what has been unitary growth on potential of an academy. So we definitely talk to them about the here and now and how we're happy about 25% sales growth from pre pandemic and all the things that we talk about here, but we talk with the more about the future, what's over the mid-term and a longer term horizon. And I think it really resonates the growth potential associated with the company.

Anthony Chukumba

Got it. And apologies for asking the same question, I mean, nothing if not consistent. I'm just you all everyone quick follow-up. You talked about the stock-based compensation that's like $0.3. So when they look at this initial guide and so on and kind of apples to apples like adjusted basis, that would say the guidance was really more like kind of $6.20 to $7.20 on an adjusted basis, is it is there also the potential for there to be other add backs over the course.
I mean, I know it's obviously hard to hard to say that you want to stick with the with the gap. And I'm just I'm just trying to make sure I'm thinking about this apples to apples. I mean, could there be other potential add-backs to gap as the year progresses? Thanks.

Carl Ford

So I'm going to say that as we think about add-backs, we actually pride ourselves on the simplicity of our P&L. And since stock-based comp is the one. And for the last three years, there's been a small add-back for, you know, early extinguishment of debt, which we think is the right thing to do for our business and we're not going to we disclose to you in the in the 10-K what preopening store costs are, but the SEC frowned upon a lot of add-backs.
And so we're really vanilla because our business makes sense without the add-backs. If you think about the guidance for next year from an adjusted EBIT standpoint, at the midpoint, it's about a negative 70 basis point decline. At the pretax income standpoint, it's about negative 60 basis points to FY23.
And net income is about 50 basis points of degradation at the at the midpoint. And literally all of it is related to our strategic initiatives that we have confidence and that are getting better with each vintage. And so yes, we're not there's probably I mean who knows what comes, but we're not thinking about any new adjusting items.

Steve Lawrence

Anthony, I just want to say you don't have to apologize for asking the question. It's a fair question. We always look forward to challenging questions you posed to us.

Anthony Chukumba

Thanks for the kind words. Good luck with us fiscal 2024.

Steve Lawrence

Thank you.

Operator

John Heinbockel, Guggenheim Securities.

John Heinbockel

Steve, can you just walk through our CRM initiatives this year right now that you've stood that up, whether it's reactivating customers, wallet share and how you're going to lean into that? And then the thought of about personalized promotions, right you talked about this pricing on bikes and fitness and stuff like that.
Do you see an opportunity to do personalized promotions where you're not blasting that out to the marketplace, but being very surgical in how you attack that?

Steve Lawrence

Yes, it's a good question. So I would say a couple of things. First, we installed the new CDP. last summer. We spent the back half of last year testing a lot of different use cases in terms of customer acquisition, customer acquisition.
And I think as you move forward, you're going to see us lean into a couple of focuses. First, traffic is a challenge. I mean, you know, the traffic for transactions for Q4 were down mid-single digits. Our goal is to drive more customers coming into our store and drive traffic.
So I think you're going to see us use the CDP and working with our various agencies and partners to generate more look-alike audiences and to really start filling the top of the funnel. That's going to be a big focus for us.
I think you're going to also see us then look at our high-value customers and look at ways to get them to shop with us more frequently and move people up the identity ladder and have them become have some customers who are more occasional shoppers become more loyal shoppers and move them off.
So I think you're going to see a multi-prong focus there. But new customer acquisition and driving traffic is number one. And then moving customers up that identity letter to shop with us more be the second focus in terms of more personalized promotions?
I think you're dead on. I mean that is the future. And that's where I think we're ultimately headed. We're probably a little behind on this one. That being said, it's an opportunity for us, and I think you're going to see us as we learn more of our customers have more one-to-one marketing and to have more targeted promotions.
I think that will allow us to pull back on some of the more global promotions that we do run, and that will be a journey as we move forward. But there's definitely an opportunity for that, and it's something we're looking at very closely.

John Heinbockel

And then just quickly last thing. When do you think when do you launch the new loyalty program? Is that still pretty holiday here?

Steve Lawrence

Our goal is to have it in place sometime this year. So preholiday, definitely for sure if we can get it in place before back-to-school, we'd like to. But I want to make sure whatever we rollout is fully vetted and we're very comfortable with that being said.
And what I want to make sure you understand is we see this loyalty program as being a long-term build over time. This is not something we don't want to come out with a bunch of benefits. The customer may or may not want.
We want to make sure whatever we include in the initial rollout is something the customers told us, it's a value. And so you'll probably see us take some things that have resonated well with our credit card customer, which is kind of the basis of our loyalty program and extend that more broadly to a broader range of customers and then test into new capabilities on as we progress forward.
So it will be a slow burn and an add over time, but we definitely want to get something out in the marketplace before holiday.

John Heinbockel

Thank you.

Steve Lawrence

Thank you.

Operator

Will Gaertner, Wells Fargo.

Will Gaertner

Hey, guys, thanks for squeezing me in here. So if we just talk about the new stores on, can you just talk a little bit about lowering the guide for the new stores, new, where where's the drag coming from? And then secondly, are all the all the new stores that you're opening?
Are they all EBITDA positive, is it vary by News new store or new markets versus new versus existing? And then what gives you confidence in increasing your store footprint, particularly as comps remain negative?

Steve Lawrence

Yes. So I go back to the to answered probably last question first. I mean, we're investing in opening new stores because it's critical to our future and so on. We are going to keep pushing forward on this pace. Now that being said, we're moderating it a little bit, right?
So this year, candidly, we guided 15 to 17 new stores. We probably could have opened a few more stores this year, probably push some out of Q4 into Q1 of next year so that we can get more density who will go into a new market. And so we're trying to be very deliberate and thoughtful about how we pace out.
These new stores is kind of going slow so you can go fast in the future in terms of the volume expectation, I think it's really driven by what we described in the call.
You know, obviously the stores that are newer markets, it's taking a little longer to build brand awareness. So those would be at the lower end of that $12 million range versus stores in existing markets being in or in larger markets being in the higher end of that volume range of $16 million.
I think the key is in terms of the number of stores, I'm looking at more midsized markets. I would say initially we were focused primarily on going into large metro markets. And I think as we've had some stores and more mid-sized markets be very successful, we've got now store and Christian Virginia, that's done very well for us or Harlingen, Texas.
And so I think we look at those stores and say, okay, there's an appetite for a sporting goods store such as ours, sports and outdoor stores such as ours to go into those markets and really take care of an underserved customer CCs kind of opening the window a little bit in terms of our consideration set.
And that's what's really driving more stores that will be more stores, maybe a slightly lower volume, but because they're in smaller markets, the operating cost to run those stores are very favorable and more than offset the slightly lower volume targets.

Carl Ford

And well, I'll hit the last kind of two parts of your question. As you think about, I think you said, like slowing new store growth and the headwinds of negative comps on a negative 6%, 5% comp this year, we generated $536 million in cash flow from operations.
We invested that $208 million into capital, $203 million into share repurchases, $103 million into debt service and $27 million into dividends and ended with $10 million more in cash than we did the year before, and that's on a negative 6%, 5% comp. So I give all the credit to the merchants for their inventory management.
But negative comps are not going to come cause us to come off of this strategy. We have so much whitespace. We want to open great stores and we're going to methodically do that over our long-range plan.
So as it relates to EBITDA, as you know, by vintage, they're all positive. I would tell you at $12 million. You know, we're EBITDA positive depending upon the location that you know, if it's in the city or something like that, below that, it gets tough to be EBITDA positive and that's why we're just being really discerning specifically with these new markets that we're going into.

Robbie Ohmes

Okay. So with that, I'll (multiple speakers)

Will Gaertner

No, Thank you. Appreciate it.

Steve Lawrence

Okay. I appreciate it. I appreciate everybody joining us on the call today. Just in closing our goal over the next years to move back to top line growth while continuing to make investments will drive returns in future years, allow us to achieve our long-term objectives.
We believe that we have a unique concept that resonates with a wide range of consumers and a scalable and transportable. While our long-range plan encompasses targets we plan to achieve over the next five years, our ultimate long-term goal is to be the best sports and outdoor retailer in the country store stretching across the continent. And that is what we remain focused.
On closing, I want to thank all 22,000 of our Academy associates for all the hard work and effort they put in over the past year. We continue to believe that our employees are the key ingredient to our secret sauce, and I know that every one of our team members is going to give it their best effort out there and help more people have fun out there in 2024.
Thanks for joining us today and have a great rest of your day.

Operator

Ladies and gentlemen, the call is now concluded. Thank you for your participation. You may now disconnect your lines.