Well, thank you, everybody, for joining us for Academy Sports + Outdoors. It's my pleasure to welcome Steve Lawrence, Chief Executive Officer, and Carl Ford, Chief Financial Officer. As with the other Firesides, I'll ask questions, and then we'll save time at the end for audience questions, so please join in. So to set the table, I thought it's helpful to talk about your range of outcomes for same-store sales for the year and how you think about the drivers of being at the lower end of the range versus the top end of the range.
Sure. So we actually put forward guidance of down 4 up 1, which is a little wider range than we normally would provide. A couple of things that we thought about as we went through that. First, it's 2024 is going to be a little tricky year for us in terms of forecasting for a couple of reasons. First, we're up against the 53rd week. Second, customers under pressure coming out of last year. Not sure when and how that's going to turn around. Third, it's an election year, so that creates some variability in our business. And then fourth, there's a compressed holiday calendar this year. So when we looked at it, we assumed that the down 4 , which is roughly the run rate we came out of Q4 with, would continue all the way through.
Then the things that would move us from the down 4 to the up one tend to be a lot of things that are within our control, right? So some of the things that we've been working on, we've launched a new customer data platform, and we're on a journey to move from being very traditional marketers, heavy print, heavy broadcast, to more digital and using more CRM. So we installed a new database last year. We put in place a lot of tests and learn. In the back half of the year, we're going to be scaling out a lot of those tests as we get through this year. So that should start paying some dividends for us and start providing a bit of a tailwind. At the same time, we've hired a new Chief Customer Officer who came to us from Dollar General.
His name is Chad Fox. He basically put the same kind of program and infrastructure in place at Walmart. He left there, took it to Dollar General. He's a Texas native. We managed to lure him back down to Texas, so he's helping us with that. And so it's like almost I describe it as we had a great race car before. Now we got a good driver for the car. And I think the deeper he gets into working with us, the more leverage we're going to get out of the customer data platform. That'd be one, I would say, that's going to help move that -4 to more positive territory. Second, we've seen the customer behave certain ways over the past couple of years. When they're under pressure, they are gravitating towards value. They're kind of aggregating their purchases during key appointments on the calendar.
So we've really looked at where our big weeks are, and that's kind of over the summer months. We tend to have a big spike in our business from about Memorial Day through back to school. And so we really leveraged a lot of our promotions and marketing dollars during that time period. So I think that's going to help us inflect. Third, obviously, the election kicking in. That's going to have some impact on certain sectors of our business. And then lastly is newness. Customers also, while they're looking for value, is also gravitating towards newness. And so we've been working really hard as a company to have a steady diet of newness in terms of new brands or new product from existing brands.
As we get deeper into the year, a lot of the tests that we've been doing in the back half of last year or in the H1 of this year start scaling out on a more broad-based basis. I would say it's those four headwinds or four tailwinds that kind of start overcoming some of the headwinds, and the negative four could be closer to up one. That's how we thought about it.
Great. A question that we've been asking everybody in the webcast is about the consumer broadly, and you mentioned the consumer. We're hearing varying degrees of confidence or lack of confidence around the consumer based on who you're talking to. It seems like the low end's weaker and not necessarily improving. On the other hand, you're starting to hear some green shoots in some of the early COVID-winning categories, maybe not the long replacement cycle stuff. But I guess you touch on all of that. You were an acute COVID winner, and you have a breadth of a consumer base. So can you talk about what you're seeing from the consumer, and have we seen any change over the past six months?
Yeah. So from a consumer perspective, we describe our core customer as active young families. That's really who our core customer is. And I'd say we over-index with kind of the middle three quintile. So our average customer household income is somewhere between $30,000-$150,000 annually. But they're a family, and they're trying to stretch their dollars. So what we've seen happen, certainly over the last year, is that middle-income consumer to lower-income consumer is under pressure. A lot of people generated a lot of savings during the pandemic at the lower to middle part of the consumer end. It was probably through stimulus or forbearance against payments on certain loans. At the higher end, it's probably through not spending, right? And so what we've seen happen coming out of the pandemic is that they've exhausted at the lower and middle end. They've exhausted their savings.
They're living more on credit card, paying for credit card balances are up back to where they were pre-pandemic. So the customer is being very thoughtful and choosy about how they spend, which is some of the behaviors I just articulated. At the high end, we think they're still spending. So we've been building out the better best end of our assortments. We have a little more exposure to the high-end consumer. Then obviously, some of the tactics I talked about and how we're structuring our marketing and our promotions to really go after that middle to lower-income consumer. In terms of some of the COVID-winning categories, they're kind of in different buckets. So kind of poster children we had were, I'd say, grills spiked or bikes or fitness equipment. So they're all kind of at different stages of recovery.
So I'll start with grills, which is probably the healthiest for us. That business won during COVID, and it never really slowed down. And I think the reason it hasn't slowed down for us is because, first, the industry's had a lot of innovation in newness. So you think about a brand like Blackstone, that wasn't a big deal a couple of years ago, and this whole flat griddle trend. A lot of people want to augment that and have that as part of their outdoor kitchen. And so that trend is driving it. And then at the same time, we've really expanded our business where we used to be solely focused on just the cooking surface. We expanded, obviously, out to accessories. So if you're going to buy a Blackstone, you got to have all the different griddle things for that.
At the same time, there's a whole rise in things like sauces and rubs that you need to barbecue and cook outdoors. We've really built a very localized business with that, partnering with local influencers on a store-by-store level. So that business has actually been pretty good for us. I'd say the second category I'd touch on would be bikes, where it's been a little longer to recover. If you bought an adult bike two years ago, probably don't need to buy a new adult bike right now. At the flip side, though, the kids' business is a replacement cycle business, right? As kids outgrow their bikes, you're starting to see that spike back a little bit.
Certainly in those big months, the summer months, when you buy a new kid a bike for Christmas, we think that business is going to help offset any softness in the adults. So we're seeing that business start to stabilize. The one we haven't seen come back yet is fitness or cardio equipment. It stands to reason. If you bought an elliptical or a treadmill 2 or 3 years ago, you don't need another one. And there's not been a lot of newness or innovation in that marketplace. So I would say that that business has been on the downtrend. We've been planning it down appropriately based off where the run rate is. We've been taking marketing dollars or average inventory and moving it to other categories to offset it. Some of the categories around it, like fitness nutrition, that's had a little bit of a moment.
And so we've certainly been putting more money behind fitness nutrition or strength training where we can offset it. But it's just planning it appropriately and managing it. That one hasn't recovered yet.
Yep. And so on the hunt and ammo side of the business, there's been moments of we're starting to see seasonality set in. It's stabilizing. It's easier to plan. But there's been some sort of spikiness around it. It seems like there were some fits and starts around it. So can you talk about what you're seeing on the hunt and ammo side?
Yeah. I mean, that was probably the most extreme winner during the pandemic, and it was driven by several things. Obviously, it's a business that reacts to unrest or uncertainty. There was a lot of that during the pandemic. It reacts to outside external events. So sometimes when the Ukraine war happened or when the Middle East conflict started bubbling up, you see that business spike. We saw, obviously, meteoric growth in that for several years. Then we ran about seven quarters of negative comps in 2022 through the first part of 2023. We started seeing that business stabilize towards the tail end of Q3 of 2023, and we actually flipped a positive there as we got into Q4. That's the hunting category for us, but it's more broad-based than that for us in outdoor.
I mean, our outdoor business also comprises fishing, which is another COVID-winning category. We've seen that business start to stabilize as well as our camping business. So I think we're kind of past the baseline coming out of the pandemic, and hopefully, the business will start stabilizing and growing from where we're at today. So we see that as actually being a tailwind for us moving forward.
The lodge, hunt, fish, camp category.
Yes.
Tailwind going forward. Okay. And then can you just remind us, just to put a finer point and move on, can you remind us the sort of mixed exposure to these individual categories, or however you disclose it?
Yeah. So firearms and ammo, what we've shared is it's roughly 10% of our business. So during some of the heavy surge time periods, it might have grown to 11%-12%. It's never been much beyond that. But it's certainly we look at it as the ammo, for sure, is a traffic driver. It's kind of like our milk and eggs. If we look at we had a question earlier today from somebody, and they said, "What's the cross-shop with ammo?" And if you look at our basket, it's probably the most common cross-shopped item across the store. So if you're looking for commonality, ammo has the most commonality in our baskets. So it certainly is a traffic driver for us. Hopefully, that answered your question.
Yep. And then just the other exercise equipment, like.
Those are relatively small there. I mean, those of you guys know, our ex-CEO, Ken Hicks, who's now chairman of the board, used to say he said, "The good thing about our business is nothing's important and everything's important." So we don't have any business that's more than 10%-11% of our business. So it's a lot of little businesses that add up to big businesses. So we can survive having a soft trend in fitness equipment or bikes as long as we have other categories to offset it. So they're not meaningful enough to move the needle in and of themselves.
I would love to see the Ken Hicksisms.
We've got a lot of them. We've got a lot of them. We'll break them out. Don't worry.
Great. As you think about, there was a lot of volatility last year in the spring around tax refunds. There's been volatility this year around tax refunds. When you reported the Q4 , we talked a little bit about this of it can have an impression but not sure if it was causation. So can you talk about how you think about how that affects your business?
Yeah. We're monitoring the stats on total number of returns processed, total aggregate amount refunded. It's down year-over-year. I think I saw that the average return, although, is up. We used to talk about Taxmas . For a lower-income customer getting $1,000 back or whatever it is, that's a real opportunity to go out. We would see over-penetration in work boots, over-penetration in some of the fun family categories. Treat that like a bonus. Look, I think that I see the stats about overall returns and dollars down year-over-year. We don't look at it as a huge driver of our business. It could cause some delay associated with when customers come in with that. But I don't think that's what's moving the business right now. I think it might move some stuff from March to April or April to May, but not a huge driver.
Yep. Since you joined, the assortments changed a lot. And so a particularly large brand is talking about really emphasizing wholesale partners. You have other innovation from other brands in the market looking to expand their footprint. So my broader question is, how do the brands look at you from a customer acquisition perspective? Whom are they trying to reach, and how is that evolving?
Sure. So we have a pretty unique position with the brands, particularly the athletic brands. But it also plays in a lot of the outdoor guys as well. We talked about our core customer being active young families. So in our marketplace, we're kind of the entry point for sport or some of these activities, right? So I always use this example. I've lived in Texas now 34 years. I've got 3 kids. And so when my son or daughter started out sports and they started out tee ball, Academy is the place you go because you can get in, and you can buy the bat, the ball, the glove, the cleat for under $100, right? And as a matter of fact, we just ran a promotion on that a month or so ago. Baseball season kicked off, right?
And then the next month, when they decide they're going to play volleyball or soccer, you put that stuff in the closet, and you come in and buy the shin guard and the ball and whatever you need. And you won't break the bank. And so we've always been really good at that piece of that. And the brands really value that, right? Because the belief is that if you can get them in the first pair of cleats and they're wearing a pair of Adidas or Nike, they're going to stick with that through their journey through sports. And that same thing, I think, plays out through fishing and hunting as well, right? And so the brands have always valued us. And so one of the things we've heard is Nike went on a bit of a tangent where they're really emphasizing D2C, right?
And they talked about that very broadly. That never really impacted us or our assortment or access to product. I would tell you that our business with Nike continues to grow year-over-year. It's been one of the healthiest businesses we have. It's the single largest vendor we have in the store. It's about 11% of our total business. And we've continued to get better access to better product, both in the team sports piece of it, cleats and sporting goods, as well as apparel and footwear, performance running, etc. So them saying they're going to go back and lean more towards wholesale, I think, is probably a positive for all of us. I don't know how much it's going to really change our relationship because it's already been on a pretty good footing. But certainly, we like hearing that, that they are in favor of wholesale again, so.
I think last year at the Analyst Day at the store tour, Ken was giving some stats around I think it was opening price, the good better best spectrum and how that's changed. You gave some examples before on some running price points that were actually like, "Wow, that sounds pretty high for Academy." So can you talk about the evolution as a dovetail to the last question, the evolution of how you've shifted opening price point versus better and better?
Yeah. It's a great question. So if you go back around 2018, 2019, which is when Carl and I both joined the company, we were really good at the good, right? So we were the place where you went, and you bought that first bat or glove for your kid. The problem was that if he decided to stick or she decided to stick with the sport and they wanted to move to a rec league or even start playing high school ball or with a traveling team, we didn't have the gear, right? So one of the things that we found over the past several years is the customer gives us permission to have a better, best layer of our assortment.
So we've layered in Marucci bats and things like that that sell for $300-$400 on the baseball side. We've layered in premium balls and cleats and soccer. And that's broadly across the store. We've done the same thing in firearms and in fishing, etc., in running footwear. We used to not have a shoe over $100. And we now have a really big franchise with Brooks that starts out around $130. We sell Nike running shoes up to $180-$190. And so we've built out that better, best end of our assortment. I would tell you that the growth we've had over the past couple of years has primarily come from those two buckets. We haven't lost our focus on the good. And I don't want anybody to think that because at our heart, we're a value-based retailer.
But we've layered on that better, best, and we've gotten access to that. And the customer's gone with us on that journey. The preponderance of the business is still, it's kind of that traditional retail pyramid where the base of the pyramid, the biggest part of the business, is in the good. But the better, best has become a more meaningful part.
Will you continue to try to move up the continuum?
Yeah. I mean, as much as we can and the customer gives us permission to. I mean, we're constantly testing things. We used to grilling is a great example where we're primarily a gas pellet kind of place, and we wouldn't go north of $500. We sell grills now over $1,000. And it's because the customer's gone with us on that one. Other places, we start breaking some natural price barriers. We've seen less acceptance of that. So it really, I think, is going to vary by the category where the customer gives us permission to do that. But I would even say where we've layered in and this is a point that I want to make where we've layered on some better, best, it still doesn't mean that it doesn't represent value. So one of our growth initiatives is to grow our private label.
So if you go back to 2019, we were about 20% private label. Today, we sit at around 22%. Our plan, our long-range plan, which is about a 5-year plan, calls for us to get to 25%. We built a very it's not a hope and a prayer. It's like we built a very thoughtful roadmap on how to get there. And one of the things that is driving that growth is kind of the better piece of our private brand. So if you take a category like women's leggings, we have a fighter brand that we've always carried called BCG and a pair of women's leggings there is about $19.99. On the flip side, the next choice up would be an Adidas or a Nike or an Under Armour legging that would sell for maybe $39-$49.99, maybe even $59.99.
There's a price gap in there. We created a brand called Freely, which I think you think about a low-impact kind of yoga-esque brand like a CALIA at Dick's or like an Alo or maybe a Lululemon in some cases in terms of elevated fabric, silhouette, etc., but at a value price, at a $29-$34.99 price. We're looking at filling in those price gaps with elevated product, but it's still a very strong relative value to what you'd find in the marketplace.
Yeah. Makes sense. Can you talk a little bit about there's always a question when you have more discretionary merchandise, the promotions in the market, the level of inventory that you're exposed to it, so in more at-risk categories? What have you seen in terms of how rational or irrational the promotional environment is? And as you sit here, how do you feel about where your inventory health is?
Why don't we tag team this one? I'll let Carl go first. Yeah. We ended the year with our inventory position on a per-store basis down 11.8%. So we feel super clean from an inventory perspective. That gives us the room to kind of grow and build and chase. Most of the overall reduction, while I'm quoting it on a per-store basis, is inventory out of our distribution center. We carry a little more inventory in our distribution center than Steve and I have experienced in a broader retail context. As it relates to promotionality in the space, I would kind of quote holiday, if you will, Q4 of 2023. We were more promotional in 2023 than we were in 2022. For the full year, our merchandise margins were down 60 basis points. And I think some of that is the promotionality that we're talking about.
Our gross margin overall is up about 500 basis points to pre-pandemic. I don't think we're going back to the level we're not as it relates to the level of promotionality because of the inventory management disciplines that we put in. So I think it's more we saw more overall promotionality in the fourth quarter year- over- year, not back to where it was. The gross margin gains that we've received over time is more around the structural aspects of managing inventory and allocating inventory to stores and Open-to-Buy disciplines and some things that we've done from a pricing perspective using some tools. But that's what I would kind of open it up with. Yeah.
I'd say, broadly speaking, certainly, there were all the shortages that were created during the pandemic. Then there was, obviously, a well-documented inventory overhang for a lot of people that happened in 2022 as we kind of overshot the mark. Honestly, we don't feel like we ever really got too ahead of ourselves from an inventory perspective. Our inventory has been fairly consistent over time. But clearly, in the marketplace, it was heavy. 2023 feels better than where it was in 2022. It feels like it's more under control. As Carl said, I think we saw less promotions out there than maybe pre-pandemic, more than they were the year before. The place where we probably saw greatest promotions were in some of the brands on their D2C sites or their outlet stores. So that felt like maybe they were still going through some cleanup of inventory there.
But at Carl's point, not back to where it was pre-pandemic at all.
It's an interesting point relative to some of the competition. Your lower exposure, concentration of brands is a relative risk minimizer in terms of having to compete with your vendor.
To a certain degree. I think the other thing we talk about at our core being a value-based retailer. So we drive value a couple of different ways, right? So one is the private brand that we sell. So we are very thoughtful about where we price our private brand. A lot of cases, we haven't raised prices there. So we sell a chair. I think we talked about this at the Analyst Day last year. We sell over 2 million of this portable, floatable chair that you take to the sidelines for a soccer match or whatever. It sells for $5.99, spent that same price for about 10 years. Even though the cost has gone up, we've tried to protect price there. So we look at making sure we have a great everyday value there.
In the brands, what we tend to do with kind of the big fighter categories like T-shirts and shorts within Nike and Adidas and Under Armour, they put an MSRP on their garments. Historically, we've put a ticket. It's about $5 below where their MSRP has been on that brand. So we count that as a regular price sale. So when they're ticketed at $30 and we're at $24.99, that looks like a regular price sale to us. To the customer, it looks like a discount of about $5. So about 75% of our business is done on a regular price basis on an annualized time frame, so.
Yep. Maybe to explore a point that Carl brought up, retailers overall have been fighting this structural margin rerate, so to speak, since pre-COVID. Some stocks in my coverage, and it hasn't been Academy yet, have received the benefit of, "Okay, this is the new level of margin." I think to your deck, the differential NP is essentially that. You haven't flipped the positive comps yet. Can you talk about because I'm sure you get the question a lot, what's so structural about the improvement? Why isn't the gross margin going back to pre-COVID or even going back?
Yeah. So Steve and I joined in early 2019. What I would tell you is the company was not well-run historically associated with inventory management. So when we got there, we did our first open-to-buy meeting. It's a standard tool in every retailer's toolkits to make sure they're aligned with the merchants on what they were doing. It was unlike anything that we had ever seen before. I think Ken was just waiting for us, honestly, to come to our first one and had reset transparency and accountability related to what the buyers are expected to deliver and how that flows up to the DMMs and the GMMs. So some of the things that we did quickly is we exited some categories that aren't very intuitive to sports and outdoors.
We got out of toys, and we got out of luggage, and we got out of some electronics that I don't think were expected from us. The second is we put in an Open-to-Buy discipline that was very rigorous associated with, "What is your receipt budget? What is your promotions budget? Where do you need to land from an inventory perspective as you exit a category?" Historically, on that note, a buyer could take markdowns sort of when they saw fit. And because some of their compensation was driven by their margin achievement, they may not have wanted to take markdowns, or they may not wanted to clear goods. And what that looked like was clearing goods way out of season at an AUR or a margin rate that was bad. And so we went in, and lots of our products are not year-round products.
If you think about water shoes or baseball bats or some of the things that are more seasonally intensive, we assigned season codes to them and let a pricing engine that we have sort of algorithmically manage, "Okay, to maximize the margin as you exit the season leading up to its life cycle, how do you maximize that?" There's not a lot of discretion associated with it. We use that same pricing tool to look at our reg price optimization, RPO program. Steve said about 75% of what we sell is regular priced goods. So as it relates to our private brand, should we price that at $14.99 or $15.99? What is it individually? That tool helped us sort of more science versus art maximize the AUR associated with the product. We allocated goods in a way that was very manual.
We implemented a new allocation tool to what store should carry what product. We did not have a replenishment tool. So as you think about mins and maxes at a SKU level, we were getting out of stock on things, and we weren't replenishing the stores in a thoughtful way. All of that led to lower clearance, better margins on promotions and clearance product, not overbuying certain categories and doing what you did last year. The sum total of all of that is about 500 basis points in gross margin back if you hearken back to 2019. Not a ton of that is related to promotions specifically. It's more those kind of foundational elements of how you manage inventory.
That's very helpful. As a segue, is gross margin going forward, maybe 2024, but longer term? I remember we did this on Zoom in 2020. And some good Ken Hicksisms came through over the Zoom. But we were talking about the supply chain opportunity. It was really early stages. In cross-dock, you got one truck per store, per trip, just so many things that seem extremely 1992. And he sort of floated out a triple-digit supply chain margin opportunity. So I'd love to think about 2024, but then even beyond 2024, is that right? And how quickly do we see those benefits?
Yeah. When I was interviewing for the job in late 2018, they walked me through our distribution center outside of Houston, Texas. I had never seen a retail distribution center like it. It looked like a warehouse more than a distribution center. We had a lot of inventory at rest sitting on shelves, almost like an e-commerce DTC operation. But it was our retail distribution center. So a month or two after we get into the job, I see some opportunities over here related to supply chain and some other things related to e-commerce and marketing. Ken was just very methodical of, "We're not going to boil the ocean. We're going to take things one step at a time.
And we're really going to place an emphasis on what I just walked through, which is being good merchants, maximizing the inventory that you carry, and not doing silly things." I really think that's where our margin growth thus far has come from. Now we've entered this period as we launched a new long-range plan to get to $10 billion over the next five years where supply chain capabilities, e-commerce, and customer data are really the foundational elements around the strategy. So what we've guided towards for next year is approximately 40 basis points of margin expansion. We ended last year at a 34.3% gross margin rate. We've guided that on the low. On the high, it's 34.7%. So about 40 basis points of upside potential. So where I see that coming from is not from shrink. We're at an elevated level.
Shrink was up 40 basis points. I don't think that's all going to come down in 2024 based on some of the things that we've been doing about it. I don't think it's going to come from freight. I think we'll see import pressure. And I think it'll be offset by some domestic lane opportunities that we have. Where I do think the 40 basis points would come from is, call it half, in distribution center operations where we have a lot of opportunity. Two things that kind of make me think that is we have a 30-year-old WMS product. It's called Exeter. We kind of own the software. And we're implementing Manhattan's Active program . Our first distribution center in Twiggs County, Georgia, which is our lowest productive facility, is the first out of the gate. We'll do that in the next, I'll say, two months.
But it's upon us now. So you pair that with Steve hired a new chief supply chain officer, Rob Howell. He came with a 20-year background most recently at Sysco. He's really good at DC operations and logistics. And his eyes were as wide as mine when I came in in early 2019. And I think you pair those two things together. And I think you're going to see our units per hour go up and the merchants leaning into more cross-docking and pack-by-store from the vendor. And I think those are all very healthy things. The other 20 basis points would probably be in merchandise margin. Our merch margin was down 60 basis points in 2023. And some of that is because in 2023, we did not achieve our sales plan. We did not plan to have a negative 6.5 comp.
The team, after Q1, quickly realized what the customer was telling us and what their health was. We were able to proactively stop and cancel some inventory in advance. We had some inventory on hand that we needed to deal with. We took that in addition to the promotional space that Steve kind of talked about. I think we got 20 basis points of upside in merch margin in 2024 related to private brands penetration growth. We're doing really good. The customer is resonating towards it. We're launching some awesome new things. That has an elevated margin rate to kind of soft goods, hard goods penetrations. We used to be 50/50. Hard goods have been outperforming a little bit. I think footwear and apparel carrying a little more load, it has an elevated margin as it relates to the hard goods.
The third thing is what I talked about, needing to mark down and clear some inventory. I think that pairs up to 20 basis points. Longer term, I think we have 150 basis points in gross margin upside. 100 of it is from supply chain. We have significant opportunities in distribution center efficiencies. Our leading competitor has 20% less distribution center square footage than us and does twice the sales volume. That tells me we have opportunities with efficiencies. Some of those will be garnered by the new stores that we put in. Let's say a little more than half of the 100 basis points of gross margin expansion over the next five years is from DC operations. The other is what you talked about from a logistics standpoint, something specifically related to how we run product from our distribution center to our stores.
It's one DC dock door, one truck, one store, and back. That's not the loop that I'm used to doing in a city and dropping off with a little more frequency. I think there's opportunities associated with outbound logistics. The last 50 basis points that makes up that 150 basis points of gross margin opportunity is really in the merch margin space. I would point you towards the same two things that I talked about for 2024. Private brands penetration, we see getting to 25% versus our 22%, not as a target, but because we see opportunity there. And two, that hard goods, soft goods normalization.
Great. With that, I'd love to open up for questions. If we want to ask questions, just grab the microphone so people can hear.
Can you talk about the productivity of the new stores inside of Texas and outside of Texas and how they differentiate?
Yeah. So we came out on earnings call. So if you go back in our analyst day a year ago, we gave a pretty precise volume target for year one of new stores. It was $18 million, right? I think, in hindsight, made a couple of mistakes in that. First, obviously, stores open up to a range, right? They're not all going to hit $18 million. Second, when we're looking at that volume, we were looking at probably the most recent vintages stores we'd open up, which was 2019. And the challenge with that is when you look at 2020, 2021, etc., there was some pandemic impact on that, some surge activity that probably inflated some of the volumes there. So as we've opened up these stores over the past two years, we've opened up 23 stores. There was 9 in 2022, 14, and 2023.
We've seen them coming closer to $12-$16 million is the range that we're now talking about. And so what we've actually done is gone back and looked at some of our older classes of stores we opened up in 2012, 2013, 2014 to kind of get a sense of what their model and run rate was. And they're actually performing a lot like the new stores are. And so that's why we've changed to $12-$16 because it's more realistic. In terms of Texas versus non-Texas, I would frame it up a little differently. It's probably more heritage existing markets where you have high brand awareness tend to open up towards the high end of that. And new stores and markets where we have low brand awareness, it's a little bit lower than that, which stands to reason, right?
So that's why we're tweaking some of our strategies there to make sure we have a better balance between new and existing markets. At the same time, we're looking at some of the learnings to invest a little bit more money in some of these newer markets to build brand awareness at a faster rate. We're looking at trying to come into new markets with greater density when we go into them, all common sense kind of things, but tweaks that we've made since we did our Analyst Day a year ago.
What is that actual differential between stores and existing markets?
I think it's $12-$16 would be that right range.
Oh, so $12.
$12 on the low end, $16 on the high end. Now, once again, that's a range. I will tell you, we've opened up some stores in heritage markets that have been well over $16, have been north of $18, right? But in terms of how we're modeling this going forward and looking at it, I think that's a good range to work off of.
One thing I would add is Charlotte, North Carolina, Atlanta, Georgia, Jacksonville, Florida, Nashville, Tennessee. Those all were new markets for us at one point. We're a company that was birthed out of Texas. And with our cash flow position, so we threw off about $535 million in cash flow from operations last year. And the way that we invested that is $200 million into ourselves, $200 million into share buybacks, $100 million into debt service, and $27 million into dividends, ending the year with $10 million more in cash than we began. And so as we think about planting these seeds in could be new markets, could be infill markets, we know that those seeds come to fruition. We've seen that in the past associated with some of the expansion beyond Texas, Oklahoma, Louisiana to be now an 18-state footprint.
We feel good about generating the cash to be able to invest into the future growth of the company. We're very happy with the ROIC that we're seeing, even if it's not the year one volume that we contemplated a year ago.
Just one follow-up on that. If you look at the new versus existing stores in market and new market, what's the difference in the ROIC?
I'll just be candid with you. We use 20% as a floor on some of the new markets. If we're going in there with mass, like with two or three locations in an urban center, I need those to average at least above 20%. If you look at those that have a higher brand awareness, we're into the mid-20s. We kind of use that ROIC threshold as a governor for how do we feel about investing in that. Actually, it's helped us to say no to a lot of opportunities where the landlord then says, "Hey, maybe we can do something different here. Maybe we can make this footprint a little bit different. Or maybe we can structure that rent a little bit differently." It's been a really good guardrail.
Actually, working with a lower year one volume has, I think, been a very good exercise for us because, to Carl's point, it's more requiring, right, in terms of the rent we pay, the bill that we put in the store. These don't all average to 20. We're not trying to get them to 20. That's where we set the volume. A lot of these we're approving them could be in the mid-20s. When we look at the class of 2023, which has an anniversary itself yet, but when we extrapolate out what we've seen through the first six months or whatever these stores have been open and look at it, because they're coming in at a lower build and the volume's closer to the average, it's actually coming in at a higher ROIC than we initially thought in some cases.
It's too early to tell because it's only one. We're not even a full year into that.
Carrying a little less inventory, staffing it a little bit differently from an overhead perspective. Good question.
Good question over here.
Yeah. Thanks, guys. Question is on how you're planning the categories. You sort of touched on it in the first two questions. But you mentioned, for example, we've got an election coming up, firearms and ammo, 10%. At peak, it's been 12%. I mean, if firearms and ammo, 10% of your business, grows 20%, it's two points comp, maybe low single digits, I guess. What would be is that the plan to see a similar sort of seasonal spike? And if so, how do the other categories trend within your comp guidance?
Yeah. So we expect apparel and footwear, obviously, which are two of the more margin-rich categories, to perform better than they did in the back half of last year. And a lot of that's driven by the flow of newness that we've talked about where we've targeted the promotions, the value we built in there, etc. So we certainly have planned to see some growth within the firearms and ammo piece of the category. But we also have growth in the apparel/footwear side of it that offsets that. So we don't see it as being a margin headwind. We see it being neutral to a margin tailwind.
Just to clarify on that, when you said you expect Hunt to be a tailwind, you expect Hunt to come positive this year?
We don't get down to guidance down to that level. But the fact that we ran positive in Q4 in outdoor and obviously.
Outdoor.
Hunting would be part of that. The hope would be that we'd see that trend continue. Yes, ma'am.
Thank you for the time. I wanted to maybe clarify the densification comment against also what you said on the earnings call that you're more willing to consider one-store or two-store markets. Just wanted to understand how you're thinking about approaching new markets, which ones? Then, densification, is it a population thing, demographics? What's the, I guess, thinking behind when do you do one-store or two-store versus?
Yeah. So I would say that the first round of stores we opened up, I would describe them as opportunistic. We were starting our new store engine up from a dead stop. We hadn't opened up stores in a couple of years. We had disbanded the real estate team. So we had to rebuild the real estate team. We had to start building the pipeline back. And we've had a lot of experience prior to the pandemic and even some of the stores we've opened in the last couple of years where we're dropping in one store in a market that probably needs three or four stores ultimately serviced and left it alone. That's not a winning formula, right? And so what we're trying to do is we go into a new market.
I think Indianapolis was a great example of this where we opened up basically 3-4 stores in that surrounding geography over about a 12-month time period so that we could get some leverage and scale from a marketing perspective. When we're looking at going into new markets, I think you're going to see us have more of that approach where we're not going to just drop in one store in a large metro market that may ultimately need 3 or 4. We're assessing upfront, saying, "The size of this market needs 3 stores." We want to have them roughly positioned in these 3 different retail nodes to kind of service broadly the customer base. We want to be in the number one retail nodes in each of those places, not the third or fourth option, right?
So sometimes there may not be availability of all those at the same time. And so what we start doing is working on deals, the ones we have, and we hold off until we get the third location and try to open those up at the same time. So as we're building out that pipeline and trying to get that densification, we also want to make sure we're opening up new stores. And we found that some of these midsize markets that maybe only need one or potentially two stores that are underserved are very, very productive for us. And so we said, "You know what? We initially were only focused on large metros. We probably need to consider some of these midsize markets as well, which should probably be the one-store markets.
I would describe, I would give an example of Panama City, Florida. We need one store there. We don't need to go in with a densified position and multi-store. We went into Panama City, and we went right in town where the population lives and not the tourists live. We are really happy with the year one productivity, the operating margins of that. So I think that's the juxtaposition that you're looking at is if you're going to go into a big city, come strong. If you're going to come into a middle market, choose your location really, really well. Make sure there's the brand awareness that you want on the forefront of it and afterwards, and then enjoy the fruits of launching a good store.
Two questions, follow-ups. The first one is just market share and guns and ammo. What do you think that is today versus when you were at your peak previously? And then the ROI on new stores, surprising but encouraging also that you could have 20% lower volume than you planned but have higher ROIC. Can you just maybe walk through how that's possible?
I'll take the first part, Carl. Thanks, second part. So there's no true market share in guns and ammo. It's not Circana doesn't track it. We look at NICS data from a firearms perspective. Even that's a little cloudy because if you apply for a personal carry permit, sometimes you have to do a background check. And that's what the NICS check is. But we look at that as kind of the proxy. There's no market share for ammo. What I will tell you is we have picked up share in both from every data point we look at. And that's talking to vendors and having them tell us. And in some cases, that's because there's been a pullback, right? So there's been an exit. Certainly, Walmart's pulled back on the category quite a bit. Dick's has pulled out of the category completely.
So we've picked up a lot of market share in both of those. The interesting thing is, from an ammo perspective, I believe we're in the position with most ammo retailers or manufacturers where we're their number one customer. So in the past, Walmart was kind of the anchor on pricing on ammo. I think in a lot of markets now, we're kind of the anchor from a pricing perspective. That's been helpful in terms of holding the volume there and not chasing to the bottom on price.
From an ROI standpoint, yeah, we've lowered the capital investment associated with the stores. In some cases, it's because the team was exploring ground leases in those first two vintages, 2022 and 2023. That may be really applicable in one market. What I've told them, what we've told them is, "Hey, then you get your one market per year. But the rest is going to be a traditional build-to-suit or reverse build-to-suit," which we have a lot of. That brought the capital investment down. In some cases, if they're doing less sales volume, the net working capital investment is smaller. That addresses two points on the denominator. On the numerator, rents in these middle markets, obviously, is lower than in a city. So we're seeing that. We're seeing landlords be more accommodating as it relates to rents.
And then second, the store payroll, if it's doing a large volume, do we need four salaried positions versus three salaried positions? There's other things under the covers. But those two numerator and those two denominators make me feel good about the ROIC profile of what we're investing in.
I think there are one other one in there, which is when we're looking at the build-out of these stores. I mean, we're using a prototype we developed prior to the pandemic in 2019. And that's the first year we opened this prototype up. We opened up 4 of them, I think. So when we started building out these new stores, we started with that as the prototype. A lot of inflation during the pandemic because of shortage of supply. So some of that's died down a little bit. So that's gotten a little better as we've had more scale. And now we've opened up 23 of these. We're getting better sourcing costs in a lot of the build-out on some of these things. And then three, we're being very thoughtful about how much and where we build out.
In some cases, we're getting some pretty good secondary boxes that don't require as much build-out in some cases. And so that would be another piece we've looked at value engineering a little bit better.
I think last year at your Investor Day, you had a slide in there that showed, I think, the bottom quartile Academy store was as good or if not better than the average sporting goods store in terms of profitability or well economics. Is that still the case? I guess, what is the simple reasoning behind that? Is that just a matter of the size of the box or productivity? Or what exactly goes into that?
So I'm going to tell some factual data points. Then I'm going to answer your question. So if you look at the profitability of Academy Sports + Outdoors, we are top decile in retail. If you look at the cash flow generation, cash flow from operations as a rate to sales, we are top quartile in retail. Feel really good about managing expenses, managing promotions, managing inventory. We got a multi-year track record of doing this. So essentially, you're asking, why are your unit economics different from the unit economics? I would encourage you. There's a really good slide on this if you go to our investor relations website that shows us against some of the higher growth unit economics in retail and juxtaposes that against our valuation. I think it's very telling. If you look at a sales per sq ft standpoint, we're up there.
We have a goal to be at $365 in sales per sq ft over the next five years. I think we're at $306. We're in that range. The specifics are in the investor deck. If you look at a sales per store standpoint, $22 million per store is pretty strong. EBITDA on average is $3 million per store. So what drives that? Staying clean on inventory. So from a store labor standpoint, you're not marking stuff down and moving it around a lot. In some cases, look, we're not in New York City. We're not in Chicago. We're not in L.A. where these rents are really high. We're in markets. And we're entering markets where we feel really good about the rent profile. And in some cases, doing it with multiple stores to help spread out some of the operating costs around that.
I do think there's a secret sauce associated with the sales profile of a store, this whole diversity of product. This being true to sports and outdoors, it meets a lot of people's lifestyle needs. And they come in there and like to buy a lot of stuff. Is there anything?
No, I think you did a good answer on that.
Yeah. It's a good question. Thank you.
Well, great with that. Our time is actually up. So thanks, everybody, for joining us. And thanks, the Academy Sports + Outdoors management team.
Thank you.
Thank you.
Thank you guys for coming. We appreciate it.