Prepared remarks
Good morning, and welcome to the Academy Sports and Outdoors First Quarter 26 Earnings conference call. This call is being recorded and all participants are on a listen-only mode. Following the prepared remarks, there will be a brief question and answer session. Questions will be limited to analysts and investors. Please limit yourself to 1 question and 1 follow-up. To ask your question during the call, please press 1. If you require operator assistance during the call, please press 0. I will now turn the call over to your host, Dan A. Aldridge, Vice President, Investor Relations, Academy Sports and Outdoors.
Good morning, everyone, and thank you for joining the Academy Sports and Outdoors First Quarter Fiscal 26 Financial Results Call. Participating on today's call are Steven Paul Lawrence, Chief Executive Officer, and Earl Carlton Ford, Chief Financial Officer. As a reminder, today's earnings release and the comments made by management during this call include forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in today's earnings release and in our most recent Form 10-K and Form 10-Q filings. The company undertakes no obligation to revise any forward-looking statements. Today's remarks also refer to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are included in today's earnings release, which is available on our website at investors.academy.com. This morning, we will review our financial results for the first quarter of fiscal 26 and provide an update on our strategic initiatives, discuss our outlook for the year. After we conclude our prepared remarks, there will be time for questions. With that, I will turn the call over to Steven.
Good morning, everyone, and welcome to our first quarter 2026 earnings call. Our plan this morning is to discuss our Q1 results, while also updating you on the progress we are making against our long-term growth initiatives. Turning to our first quarter results. We were pleased to move back to comp store growth in Q1, with sales coming in at $1.44 billion which was up 6.7% in total sales and translated into a 2.9% comp increase. Both the comp and total sales were on the high side of the range we communicated in our press release issued on 04/07/2026 in advance of our Analyst Day, where we gave an update to our long-range plan and goals. These results were driven by a combination of a low single-digit positive traffic coupled with a high single-digit AUR increase. Units per transaction were down slightly, which we would attribute to the increased AUR. Positive results were broad based with our .com business comping up 17% and all four of our divisions running increases for the quarter. Outdoor was our best performing category and up 12% driven by strength in fishing and shooting sports categories. At the surface, our ammo business, which was a headwind for us most of last year, turned positive in February and accelerated after the conflict in the Middle East began. Our firearms business also continues to be a bright spot. And utilizing mixed checks data as a proxy, we have grown market share in this category for eight consecutive quarters. To help build on the momentum in the shooting sports business, we launched the suppressors category into a limited door count during the first quarter with a goal to roll it out to over 100 stores by the end of the year. This is a rapidly growing category in the industry, with a strong attachment rate to firearms and high AURs. Since suppressors are totally new to our assortment, this business should be 100% accretive and provide an additional tailwind to the shooting sports category throughout the remainder of this year and next. Sports and recreation was our second best business at plus 6% with the increase driven by solid gains in baseball, which fueled our team sports business during the first quarter. We also saw double-digit growth in our front-end business. Normally, we do not call out front end, but we are seeing rapid growth in this area driven by the collectible trading card business, which has benefited from our increased investment in this category. In addition, we continue to see solid improvements in our outdoor speakers business driven by the leadership position we have taken in Turtlebox. Apparel sales were also positive, plus 5%, with particular strength in our outdoor and work businesses, supported by expanded assortments from Carhartt, Berlevo, Levi's, and our own Magellan Outdoors brand. We will continue to lean into the work-western lifestyle trend with the addition of roughly 100 Ariat shops in the back half of the year. On the athletic side of the business, gains were driven by continued momentum in the Nike and Jordan brands coupled with double-digit increases in our better private brands of Freely and Roll. In the second quarter, we plan to add 55 Jordan Brand shops on our apparel pads; this will take our Jordan Brand shop count to 200 stores and continue to fuel the growth in this business. Footwear sales were up 3% for the quarter. Key drivers of growth in Q1 were our cleated business, driven by baseball, along with our summer seasonal businesses driven by Crocs and Birkenstock. We also remain encouraged by the momentum we are seeing in the performance running category fueled by key platforms such as the Nike Vomero, the Adidas EVO SL, the New Balance Ellipse, and the Brooks Glycerin. Our plan is to continue to build out our assortment and space devoted to this category as we progress throughout the remainder of the year. Based on the solid start to the year, we saw growth in market share across all of our businesses, both for the quarter and on a rolling 12-month basis. We have also driven a positive comp over that same 12-month period. We would attribute the momentum we are building in the business and the market share gains to the continued progress we are making against our three core growth strategies. I will now give you a brief update on them. New store expansion remains our number one growth lever. We are starting to build critical mass behind this strategy. We began the year with 39 stores from our 24 vintages in our comp base. This tranche of stores continues to perform well, with sales comping in the high single digits. We anticipate this tailwind should accelerate as the 24 stores from our 25 vintages start to flow into the comp base as we progress through the year. During the first quarter, we opened two new stores in Canton, Ohio and Muskogee, Oklahoma, both of which support our strategy of growing in mid-sized markets. These are underserved communities and tend to over-index with our core customer, the Academy family. During the second quarter, we will open three more stores with locations in Altoona, Pennsylvania, North Knoxville, Tennessee and Morristown, Tennessee. The remaining 15 to 20 stores are expected to open in the back half of the year with a heavy focus in legacy and existing markets. As we head into 2027 and beyond, we would expect to have a more balanced mix of openings between the first half and the second half of each year. Our second growth strategy is to improve the productivity of our existing businesses. There are multiple initiatives focused on driving comps in our legacy stores and improving the core business during the second quarter. Initiatives that will have the biggest impact on our comp sales through the remainder of the year are the relaunch of our My Academy Rewards program which is being integrated into our loyalty ecosystem. The newly integrated program features a three-tiered structure. The base tier is myAcademy Rewards and does not require a credit card to access savings. The key elements of the value proposition at this level include both a $15 welcome offer and birthday reward, a $25 off reward at a $500 spend threshold, and free shipping on all dot-com orders over $25. The mid-tier of My Academy Rewards requires an Academy private label credit card which gives you access to 5% off your purchases at Academy. It is important to note that the customer gets these savings instantaneously at point of sale versus having to wait for a reward certificate that they can redeem against future purchases, as is the case with most of the competitive offers in the marketplace. This tier also qualifies for free shipping on all dot-com purchases with no minimum purchase requirement. The top tier is unlocked by our new co-branded myAcademy Rewards Mastercard, which we call the Official Card of Fun. Customers in this tier get all the benefits from the other tiers, while also getting a higher credit limit coupled with a best-in-market 2% back on all spend outside of Academy in the form of rewards that can only be redeemed at Academy. We are in the process of reissuing new cards to all of our current cardholders and plan to be complete by the end of June. We are already seeing an uplift in sales from this initiative, driven by increased enrollment and card utilization. We believe customers are leveraging our best-in-market value proposition as a way to offset the rising costs they are dealing with in their everyday lives. Enrollment in myAcademy Rewards is up double digits year over year, with our goal being to add an additional 2 million new members this year which will grow our total loyalty program to over 15 million members. As we have shared before, summer is one of our prime selling seasons, and we are well positioned this year to help fuel the fun for our customers. Our in-stocks continue to run up over 200 basis points versus last year, driven by our expanded utilization of RFID. In addition, we have several non-comp tailwinds this year, including the World Cup being played in venues across our footprint coupled with America's 250th birthday. We are well stocked at World Cup gear, summer essentials, and all things red, white, and blue so we can maximize the opportunities ahead of us in the second quarter. Shifting gears to our omnichannel business, we continue to make solid progress, which is evidenced by the 17% growth in sales and the 100 basis point expansion in penetration we experienced in Q1. We have two key focuses during the second quarter. First, we are expanding our same-day delivery platforms to include Uber Eats and Instacart as a complement to our existing partnership with DoorDash. Our research shows there is minimal overlap between the customer bases for each of these services. Expanding our online presence to include these additional same-day delivery platforms should be mostly accretive and expose our branded product categories to a broader audience. In addition, we plan to migrate the search platform on our site to be powered by Google's AI commerce search and Gemini Enterprise customer experience as we turn the corner into back-to-school. We believe customers are increasingly utilizing AI agents to aid them as they shop online, so moving our search to be powered by AI is a natural evolution and will be intuitive for them. As we continuously evolve our online capabilities, we expect the sales momentum we have built over the past year in this business will continue to provide a strong comp tailwind for overall sales. In summary, our belief is high gas prices and other inflationary pressures will persist and continue to negatively impact discretionary spending for the American consumer throughout the remainder of the year. In the face of this pressure, we are committed to remaining a steward of value for our customers while we methodically execute against our long-range plans and objectives. As our strategies mature and we build critical mass across each of them, we believe this will provide a strong tailwind which will allow us to sustain the positive momentum we have built in the first quarter. Based on the solid start to the year, we are raising our annual sales guidance to be +3% to +5% which would translate into a flat to +2% comp sales increase for fiscal 26. Now I will turn it over to Earl who will give you a deeper dive into the Q1 financial results, along with additional information on our updated 2026 guidance. Earl?
Thanks, Steven. Net sales for the first quarter were $1.44 billion, an increase of 6.7% with comparable sales up 2.9%. E-commerce remained a strength in the quarter, with over 17% growth which accelerated versus fiscal 25 levels. We expect e-commerce to remain a tailwind throughout the year as we continue to expand our endless aisle, enhance search functionality, and expand same-day delivery. As expected, gross margin for the quarter was 33.2%, down 71 basis points year over year. The decline was driven by tariffs and was partially offset by favorability in freight and shrink. We expect the first quarter to be the largest tariff impact for the year and for the pressure to subside as we move through 2026. SG&A was 28.1% of sales, an improvement of 77 basis points primarily driven by the 2.9% comp. Additionally, we are lapping $7.5 million related to the Nike expansion and Jordan brand rollout from the prior year. The improvement was partially offset by a $3.6 million increase in stock compensation expense year over year. Operating income for the quarter was $74.7 million. Diluted earnings per share was $0.80, an increase of 17.6%, and adjusted earnings per share, which excludes stock compensation, was $0.93, an increase of 22.4%. From a balance sheet and cash flow standpoint, we remain in a position of strength. Our inventory has continued to improve versus last year, with total inventory dollars per store down 0.8% and units per store down 6.8%. We ended the quarter with strong liquidity and generated healthy free cash flow of $121.6 million representing a 14.2% increase year over year. This allows us to continue investing in the business while returning capital to shareholders. Our cash balance was $338 million at the end of the quarter, and we have an untapped $1 billion revolver. Our capital allocation philosophy has not changed. Approximately 50% of cash flow from operations is reinvested back into the business and we expect to return the remainder to shareholders through dividends and share repurchases. During the first quarter, we repurchased approximately 1.7 million of our shares representing about 2.5% of our shares outstanding, paid $9.6 million in dividends, and continued to fund strategic investments including new stores, omnichannel capabilities, and technology initiatives. At the end of the first quarter, we had $338 million remaining on our share repurchase authorization. In May, we refinanced our outstanding long-term debt at a 5.875% rate and amended and extended our ABL, which will generate approximately $2.5 million in annual interest savings for the next five years. The maturity date on each is 2031, and additional details were provided in our May 14 press release which can be found on our Investor Relations site. Before getting into guidance, I wanted to share a few thoughts on the consumer and how ongoing trends played into how we think about the shape of the year. The consumer environment remains pressured as high gas prices largely offset the benefit of tax refunds in the first quarter, particularly for lower-income households which continues to weigh on discretionary spending. At the same time, we continue to see higher-income consumers, which are our largest and fastest growing cohort, trade into Academy in search of value. During the first quarter, trips from consumers who make over $100 thousand grew by mid single digits. Consumer confidence remains bifurcated, with materially higher confidence levels among upper-income households versus lower-income cohorts, where there is less optimism about their future financial prospects. This dynamic continues the derisking of our consumer base that began at the end of 2024 and reinforces confidence in Academy's value-driven positioning. Turning to guidance. We are updating select elements of our full-year outlook to reflect the first quarter sales performance, while also planning for higher gas and freight prices, tariff dynamics, and the timing of new store openings. We now expect sales to be in the range of $6.23 billion to $6.35 billion, or growth of 3% to 5%, and comp sales of flat to up 2%. We are maintaining our gross margin rate guidance of 34.5% to 35% for the year. We are raising the midpoint of our net income guidance and now expect a range of $390 million to $415 million. We expect earnings per share of $5.95 to $6.35 and adjusted earnings per share to be in the range of $6.40 to $6.80. At the midpoint, we expect comp sales to be approximately 1%, gross margin to be roughly flat, and modest SG&A leverage for the full year, resulting in EPS growth of over 10% when compared to fiscal year 25. This EPS guidance does not include any impact from future share repurchases. Looking at the shape of the year, we expect our strategic initiatives to drive positive sales. As a reminder, we had no IEPA tariff impact to gross margin in the first quarter of 25, and costs attributable to tariffs increased throughout the year as we use the weighted average method of inventory accounting with their full impact hitting average unit cost in the fourth quarter of 25. We continue to expect modest gross margin pressure in the first half of 26 followed by modest expansion in the back half, resulting in approximately flat gross margin at the midpoint of our full-year guidance. On SG&A, we continue to expect leverage in the first half with potential deleverage in the back half as new store openings accelerate, ultimately arriving at modest leverage for the full year at the midpoint of our outlook. To close, we continue to operate in a bifurcated consumer environment. Higher-income consumers are increasingly trading into Academy in search of value, while lower-income consumers remain under pressure. Against this backdrop, we are executing a rock-solid plan with clear growth tactics, supported by our strong balance sheet, disciplined expense management, and relentless focus on value. Together, these position us well to navigate the current environment and drive long-term value for our shareholders. With that, we are ready for Q&A. Operator, thank you.
Questions and answers
At this time, we will be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. As a reminder, we ask that you please limit to 1 question and 1 follow-up. One moment, please, while we poll for questions. Our first question comes from Jeff Licht with Stephens. Your line is now live.
Good morning. Thanks for taking my question. Congrats on a nice quarter. I guess I would throw this out to anyone. I am just curious, since the Analyst Day, maybe you could just comment on what has surprised you in either direction, what has been incremental? And how are you seeing the gas prices manifest themselves in consumption patterns? And my follow-up would be: given the World Cup and America 250 is in Q2, I think you have mentioned previously that you were expecting Q2 to be the weakest quarter in terms of comp. Is that still going to be the case?
Yes, I will start. Thanks for the question. So yes, gas prices definitely are a headwind for the American consumer. I saw an article, I think, a week or so ago that said on a monthly basis it is pulling out about $17.5 billion of consumer discretionary spending each month. So that definitely is impacting the consumer. I would say as we have gotten into Q2, we have seen a little bit of a slowdown from the consumer, which we would attribute to gas prices. That being said, we kind of look at the quarter as three legs of a race. The first leg is getting through Memorial Day, which is our first big event. Total sales through Memorial Day are tracking up low single digits, roughly flat comp. And while we would like to be playing with the lead, what we are excited about is we still have a lot of the initiatives that we are counting on to drive business out of this. We have the World Cup, as you just said. It kicks off on Thursday. We have our credit card relaunch, which is taking place right now. We are issuing new plastic to consumers, and that should be in people's hands. That has a reactivation award associated with it, so we think that will help drive business for the next leg of the race with Father's Day. And then, of course, we have America's 250th ahead of us. So definitely seeing an impact, a little bit of a slowdown from what we saw in Q1 with the consumer. Tracking flat through Memorial Day, but optimistic about the opportunities still ahead of us with a lot of initiatives still to play out. Probably, you asked about what surprised us from our April 7 Analyst Day. I would say this quarter generally came in as expected. We were at the high side of the guidance that we gave from a top-line perspective. We had indicated that we knew that there would be gross margin pressure associated with anniversarying last year's Q1 that did not have that IEPA tariff burden in it. And from an expense management standpoint, we knew that we were not re-anniversarying the Jordan launch cost and Nike expansion costs, that $7.5 million. So I would generally say that the quarter played out like we thought it would, but it was towards the high side of the guidance that we put out there.
Thanks, Jeff. Our next question comes from Kate McShane with Goldman Sachs. Your line is now live.
Hi, good morning. Thanks for taking our question. We wanted to focus on gross margins. With the strength in ammo, which is a lower margin category, did that contribute at all to some of the pressure or the gross margin short that we saw in the quarter? And just how should we think about the cadence of some of the tariff pressures that we saw in the first quarter for the rest of the year?
Yeah. I am going to answer this very directly. If you look at the 71 basis points of gross margin degradation versus Q1 of last year, 110 basis points was driven by tariffs — essentially having the full burden of that IEPA impact in Q1 of this year versus really nothing last year. That 110 basis points of tariff headwind was offset by 20 basis points of good news in shrink and 10 basis points as it relates to shipping. So think of transportation, e-commerce shipping, things of that nature — that is how you arrive at the big components of it. From an ammo perspective, the overall outdoor field was up 12% during the quarter and the field carries a lower margin profile. Ammo was certainly a headwind from a mix perspective, but I would say it was offset by other puts and takes in the mix.
Thanks, Kate.
Our next question comes from Christopher Horvers with JPMorgan. Your line is now live.
Thanks. Good morning, guys. My first question is on Deckers' latest earnings call where they talked about planning to continue to selectively ban wholesale distribution, with a few thoughtfully chosen tests with new partners this fall. Just curious if you can comment if you are a part of that planned test?
Yeah. I will give you the same answer I give every time I get asked this question. If and when we are ready to announce something, you guys are not going to have to ask us. We will tell you. Nothing new to announce at this moment in time.
Got it. Thank you. And then stepping back as you think about the balance of the year, what has changed versus what you initially thought? Is ammo expected to be a continued tailwind for the balance of the year more than you originally thought? What is your read on Memorial Day weekend and what that says about Father's Day and July 4 and the 250th anniversary as well as the World Cup? Could you take us through the puts and takes of how you are more optimistic versus more balanced, given you basically kept the balance of the year on the comp side?
Yes. I would say what we saw happen as we progressed through the quarters — it is pretty widely documented that increased tax refunds were out there fueling consumer spending, and I think that helped mute the impact of gas prices as we got through Q1. I think we are kind of past that now. As we've seen the exit rate coming out of the quarter move from an up-3-ish comp to more of a flat, that's what we've seen happen with the health of the consumer. What gives us confidence about the remainder of the year is a lot of the initiatives that we have. We have talked about our credit card relaunch and integrating that with our loyalty program. We think that is a big deal for us and probably going to have the most impact on our business moving forward. We think it is well timed, particularly in an environment where consumers are looking for value. The fact that we are going to give them 5% off every day with the Academy credit card — which we have had before, but now 2% back on outside spend — I think is a big deal. We have other things we created as self-help tailwinds like leaning into the work-western category, rolling out Ariat shops, and leaning into newness with brands like Hoka and Brunton coming into the assortment. The .com growth we are seeing also provides a tailwind. I think all those things help overcome some of the headwinds. But I think consumers are going to be cautious. They are being very deliberate about when they shop and choosing to buy more on promotion or in clearance. That is something we will need to think about. Ammo specifically, I think, was a tailwind for us before the conflict in the Middle East, and it accelerated in Q1. I think it will remain a tailwind throughout the remainder of the year, though we are lapping a pretty tough ammo business last year. We believe the initiatives we put in place, the self-help initiatives, are the things that will help us continue to drive the business throughout the remainder of the year. Thanks, and best of luck with peak season.
Our next question comes from Jonathan Richard Matuszewski with Jefferies. Your line is now live.
Greg. Good morning. Thanks for the time. My first question was on Nike and Jordan. Last year there were a couple of quarters where that combined business was growing somewhere between high single and low double digits. I think we may have lapped the initial rollout of Jordan. Could you give an update on the trends you are seeing in that combined business and what type of growth is embedded for the remainder of the year and the updated guide?
Yeah. So if we are still in a place, we launched Jordan last year in April. That being said, we did have product on the floor in March. If you look at the combined Nike-Jordan business for us, that was up mid single digits. We lapped the launch and ran an increase that week, which we are excited about. So it is still healthy for us. We expect the trend we are seeing through the first quarter to continue throughout the remainder of the year. We think Nike is a growth engine for us. We are really excited about some of the expansion we are going to have and some of the performance running categories like the Vomero. We will have roughly 150 doors going into back-to-school, which is about double the door count we had last year. It feels like they are just starting to get their innovation pipeline moving. Greg.
That is helpful. And then just a follow-up on regional trends: the NBA championships, Spurs — maybe comment on related fanwear implications for demand and any dispersion you are seeing in Texas versus other markets?
Yeah. I would say the licensed team business for us has been a tailwind and will probably be a tailwind throughout the summer. That is where a lot of the World Cup product lives, and we expect that obviously to continue into July as the World Cup plays out. The Spurs are certainly a tailwind for us. You have to remember, though, that last year the Thunder winning the championship was in our geography, and while we have fewer stores in Oklahoma City, it's similar in terms of local enthusiasm. So it is pretty comparable to what we are seeing with the Spurs. We certainly hope the Spurs win. We do not have any stores in the New York area, so a New York win would be less impactful for us. Overall, we are pretty happy with the licensed business and expect it to be a tailwind primarily driven by the World Cup throughout the remainder of the quarter. Thanks and best of luck.
Our next question comes from Joseph Savella with Truist Securities. Your line is now live.
Hey, guys. Thanks so much for taking my question. Wanted to see if you could provide any color on early June post-Memorial Day and if anything in recent trends like you mentioned with the gas prices has impacted your view on what the World Cup might deliver?
Yeah. So the World Cup is still early. We just set that at the front of our stores in the markets where the World Cup matches are being played; it is roughly 40 doors. We have seen an acceleration in product once we set it. We set it right after Memorial Day weekend. So I think it is still early, but initial signs are pretty good. In terms of trends, I will stick with what I told you: we are looking at Q2 as a three-legged race. First leg is Memorial Day, where we came out running flat comps, up low single digits. Next is Father's Day, which is a week later on the calendar, so we are still in the middle of that. Then we move into Fourth of July with back-to-school at the tail end of the quarter. So far, so good. Lots still ahead of us.
From a fuel-specific standpoint, we think that fuel prices are at an elevated level and are going to be persistent throughout the majority of this year. We talked a little bit about the sensitivity that we did on our last call, and I would now say that we have encapsulated that within our gross margin guidance. As it relates to weighing on the consumer, with $4-plus gas, we think being a steward of value is a really good thing in times like these, and we continue to see customers from the upper income levels — quintiles four and five — transacting more with us year over year. That trend has been consistent since the back part of 2024, although we saw a lessening of that somewhat in Q1, which we think could be a turning point. On tariffs, we have disclosed that we sold our rights to a refund for a portion of the IEPA tariffs from last year. We disclosed it in the 10-K last year as well as in the third quarter. We monetized about $10.5 million. Included in our guidance for this year is recognition of that $10.5 million. For the portion that we did not sell the rights to, we have included that in our tariff guidance and that is what is included. So the portion that you did not sell is also embedded. For clarity, we did not receive any tariff refunds in the first quarter. There is nothing associated with refunds in the first quarter. We have started to see those flow in the second quarter, so what is embedded in our guidance is what we monetized as well as what we expect to receive.
Thanks.
Our next question comes from Paul Lejuez with Citi. Your line is now live.
Hey, thanks. Just to clarify on the last point, did you guys record a receivable that is flowing through the P&L? And does this represent a change versus what you had baked into guidance as of last quarter?
No. In order to book a receivable from an accounting standpoint, we would have had to recognize that last year, and we did not. We put it on our balance sheet essentially as a contingent asset pending clarification associated with how refunds would play out. I think we are seeing some clarity in that. So the $10.5 million that was in our cash flow and our balance sheet and spoken to at year end, within our 10-K, we are anticipating that being recognized this year versus recognizing it last year with the receivable, if that makes sense. We do not give quarterly guidance, but I will tell you there was no recognition in the first quarter. It is in our annual guidance, that $10.5 million.
And then just relative to the updated comp guidance range that you gave today, can you just talk about where you expect each quarter to fall relative to that range? Specifically, interested in how you are thinking about Q2.
Yes. We do not give quarterly guidance. As was noted earlier, Q2 was our best quarter last year; we are up against a modest comp gain last year (about 0.2%). As mentioned earlier, we are tracking flat through Memorial Day and still have a lot ahead of us. We are optimistic that for the remainder of the year we will be somewhere between flat and up 2% comp, and that would be inclusive of what we think is going to happen in Q2.
And is World Cup-related product incremental, or is that a substitute for something else in the store?
I think it is mainly incremental. Having the world's largest soccer tournament on U.S. soil and people cheering for their team once every four years brings incremental demand. I see that as a trade from, for example, a college or pro football fan, but overall it is incremental.
Our next question comes from Ike Boruchow with Wells Fargo. Your line is now live.
Hey, good morning. Two from us. First, the gross margin inflecting in the back half — can you comment on the drivers? Is that effectively the tariff headwinds rolling off or is there something else shifting as you move through the year? Second, on the store ramp through the year, I think it is three in Q2. Can you just give us Q3 versus Q4 for the plan for the 15 to 20? And lastly, on the flat comp to Memorial Day comment, can you comment on the last two weeks? I assume they have slowed a bit more given the consumer comment. Could you give us the last two weeks or quarter-to-date?
That is absolutely the main thing you should be thinking about. We bore the full burden of the weighted average cost impact of the IEPA tariffs toward the back part of last year; Q1 of this year was up against something where there was none of that. You will see that tariff burden moderate throughout the year. I hope the shrink improvement we saw in the first quarter will continue. Fuel will be a headwind for the year, but the main driver of that inflection will be the diminishment of the Q1 tariff headwind that we experienced in Q1 of 2026.
We have not broken down the remaining store openings between Q3 and Q4. We are more back-half weighted this year than we wanted to be. When we were looking at the class of 2026 stores, that coincided with the tariff situation changing and uncertainty around steel and construction costs. Our goal is to get all new stores opened prior to Thanksgiving, but the openings will be fairly balanced across both quarters and more back-half weighted than initially planned. Regarding the last two weeks, we are in a period where Father's Day is a week later on the calendar, so the picture is a bit murky. We are happy with the trends we are seeing and remain optimistic about being somewhere between flat to up 2% for the year.
Got it. Thanks, guys.
Our next question comes from Simeon Gutman with Morgan Stanley. Your line is now live.
Hi, good morning. This is Pedro on for Simeon. Thanks for taking our question. Wanted to ask about the comp guidance shape for the year: should we expect Q2 to be the strongest quarter given the World Cup, the 250th anniversary, and the loyalty rollout, or is it more of an even cadence for the remaining three quarters?
Pedro, sitting where I am today, I think the 2.9% comp we experienced in Q1 is outside the range of our 0% to 2% guidance. I think Q1 will be the strongest quarter. We are excited about the credit card relaunch, the World Cup, the 250th, and new brand launches, but the rest of the quarters will be within the navigational beacons of our guidance.
And as a follow-up, can you give an update on the supply chain efficiencies you are driving and how to think about transportation costs for the rest of the year?
We brought in a new Chief Supply Chain Officer, Rob Howell, about two years ago. He has been doing great work balancing capacity and making room in distribution centers as store count grows. We are continuing to see unit-per-hour productivity and cost-per-unit productivity improvements in distribution center operations. I do not expect that to change. As it relates to transportation, net transportation was a 10 basis point tailwind improvement year over year from Q1 of this year versus Q1 of last year. That reflects both inbound freight as well as e-commerce shipping. Fuel will be a bigger headwind in Q2 and perhaps Q3 and beyond, but the team is executing well and increasing productivity year over year.
Our next question comes from John Heinbockel with Guggenheim Partners. Your line is now live.
Hey, Steven. Given current gas prices and macro trends, do you think this amplifies peaks and valleys around holidays with deeper valleys? If so, have you made tactical adjustments around how you spend promotional dollars and communicate with the customer for the rest of the year?
Yeah. I think your instincts are spot on. We have definitely seen that play out as we progress through Q2 and we expect it to continue. Customers are looking for value and are amplifying purchases during promotional windows. We have pulled back a little in certain areas and have adjusted our forecasts and plans to account for that. We are being thoughtful about promotional cadence and communications given the heightened sensitivity to gas and other costs.
Secondly, on membership, you said you want to add two million members to reach over 15 million by year-end. How does that break down between rewards members, proprietary credit card holders, and the Mastercard co-branded card? Do you think most growth will come from the new Mastercard offering?
We have not broken it down precisely by channel. What I will tell you is we are seeing a meaningful acceleration in applications for the new credit card. Customers have been eligible to apply since mid-March and applications are up double digits since we launched. We expect that to continue. The 2 million-member goal is achievable and I am fairly confident we will beat that number this year given the current trends.
Our next question comes from Anna Gluskin with B. Riley Securities. Your line is now live.
Hi, good morning. Thanks for taking my questions. I would like to follow up on the Jordan and Nike performance. Nice to see you are expanding into more stores. Could you comment if there is any structural reason you would not expand through the whole fleet, and the follow-up: when you said you expected mid-single-digit growth through the year following Q1 performance, was that on a comp-store sales basis given the expansion?
We currently have elements of Jordan in all stores: slides, backpacks, and sports equipment are in every store. The Jordan shop concept is being expanded to an additional 55 stores, taking us to 200 shops, which is about two-thirds of the store base. That is a meaningful chunk of volume and we will expand methodically over time. I do not see any structural reason why ultimately we would not have all elements of Jordan in all stores, but it will be a phased rollout. The mid-single-digit growth we referenced for the combined Nike-Jordan business is a comp number and we expect that trend to continue.
Anna, just to add: in Q1 of last year we expanded Nike and rolled that shop concept out to 135 doors. This year we are adding 55 doors, but the timing is Q2. There are some costs associated with that rollout, but we saw enough benefits in the shop concept versus having Jordan elements dispersed that we wanted to roll out those additional 55 doors this year.
Thanks. That is super helpful. And then a follow-up on the introduction of suppressors: why historically have you not had the category, and what signals gave you the confidence to expand now as many competitors are exiting or diminishing the category?
Suppressors have become more accessible given changes in regulation starting earlier this year. The purchasing process is still more involved than many categories, but the industry has seen expansion in suppressors as laws have evolved. We currently have it in roughly 30 to 35 stores and plan to roll it out to over 100 stores this year. The category is primarily for hearing protection for shooting sports enthusiasts and has a high attachment rate with accessories and different types of ammunition, which provides cross-category tailwinds. We think it will be accretive and fuel the shooting sports category throughout the remainder of this year and next as we expand it.
Thank you. Our next question comes from Brian Nagel with Oppenheimer. Your line is now live.
Hi, this is Andrew on for Brian. Thanks for taking our questions. Q1 comp was driven by both ticket and traffic, a reversal from Q4's transaction decline. Given the $50k-and-under cohort remains under pressure, how dependent is full-year comp guidance on the lower-income cohort improving versus continued outperformance by higher-income cohorts?
Going back to Q3 of 2024, we saw quintiles four and five, households above $100k, inflect positively, while the under-$50k cohort was a drag. That trend continued in 2025. In Q1 of 2026, households above $100k were up mid single digits while below $50k were only down low single digits, so it was less bad. Some of that may have been due to tax refunds. What we'll be watching is whether that lower-income cohort stays at low-single-digit declines, moves to flat, or returns to a more meaningful pull-down. Our higher-income customers are our largest and fastest-growing cohort and that is embedded within our guidance. The differentiation between the low and high end of our guidance range is how that lower-income cohort performs going forward.
Appreciate that. One follow-up: how are you thinking about halo effects around the World Cup — will stores outside match markets see traffic uplift?
We have World Cup products in all stores. In markets where matches are being played, we have placed World Cup sets at the front of the stores, and that accounted for roughly 40 doors. But even outside those markets, we have a meaningful World Cup presentation in licensed team pads and general apparel. We expect growth not just in in-market stores but broadly across the chain. Historically, these events also drive youth participation in sports like soccer, which can provide a halo into the next seasons and potentially into spring of 2027.
Our next question comes from Michael Lasser with UBS. Your line is now live.
Good morning. Thanks for taking my question. What do you think happened in Q1 that may not necessarily repeat over the course of the year? If Q1 was a 2.9% comp and the midpoint of guide implies a much lower run rate, should we assume the difference is due to tax refunds and macro getting a bit more difficult, such that if the macro does not get worse you could do better than what is embedded in the guidance?
Simplistically, what we saw in Q1 was tax refunds blunting the impact of higher gas prices. As we've moved away from that period, the business moved toward a flattish comp up low single digits. What gets us from that flattish run rate to the +1% midpoint implied in our guidance are the initiatives and how well they are received — notably the credit card relaunch integrated with our loyalty program, new stores entering comps, and e-commerce growth. Those initiatives are what we expect to take us toward the midpoint.
Michael, I will add specifics. Last year's Q1 comp was -3.7%, which was an easier compare. Q2 of last year was up 0.2%, Q3 was down 0.9%, and Q4 was down 1.6%. I would encourage you to look at two-year stacks when modeling. The prior-year compares factor into how we guided for the current year. Regarding why we raised the low end of profit dollars: Q1 came in toward the high side versus the low side of guidance, so we are taking that low-side risk off the table while keeping the Q2, Q3, and Q4 ranges as we contemplated them when we guided the full year.
We have reached the end of the question and answer session. I would now like to turn the call back over to Steven Paul Lawrence for closing comments.
Thanks. We started to see momentum shift in the business last year, which continued to build into the first quarter and resulted in a positive comp. While inflationary pressures persist, we are confident in our ability to execute through a range of environments. We have a thoughtful, straightforward strategy. Our goal is to continue to build momentum in the business by methodically executing against this strategy, while also providing our customers with compelling assortments at a strong value. We know that if we do this, our key stakeholders will be pleased with the results. I would like to close with a heartfelt thanks to our 22,000-plus Academy team members who delivered a solid start to the year. I am confident our team will keep the momentum rolling as we head into the remainder of 2026. Thanks for joining our call today, and have a good rest of your day.
This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.