Sportsman’s Warehouse Holdings reported adjusted earnings in the second quarter ended August 4 rose 18.2 percent, thanks to 6.2 percent top-line growth and reduced debt and tax expenses. Earnings were a penny above expectations, while sales were at the top-end of guidance.

Jon Barker, chief executive officer, stated, “We are pleased with our second quarter performance, as our top line results were in line with expectations, including a comparable sales increase of 0.2 percent, and bottom line results were a penny above our outlook driven by our better than expected gross margins. We made good progress on the priorities we set at the start of the year, including our omni-channel strategy of store growth and e-commerce investment, customer acquisition and engagement and merchandising assortment. These strategic growth initiatives, combined with our convenient shopping experience, breadth of assortment and category expertise are fueling continued market share gains as we focus on enhancing our competitive positioning.”

For the Thirteen Weeks Ended August 4, 2018

Net sales increased by 6.2 percent to $203.3 million from $191.5 million in the second quarter of fiscal year 2017. Same store sales increased by 0.2 percent from the comparable prior year period.

Income from operations was $13.2 million compared to $14.2 million in the second quarter of fiscal year 2017.

The company opened two new stores in the second quarter of fiscal 2018 and ended the quarter with 91 stores in 23 states, or square footage growth of 6.5 percent from the end of the second quarter of fiscal year 2017.

Interest expense increased to $4.3 million from $3.4 million in the second quarter of fiscal year 2017. Excluding a $1.6 million write off in debt discount and deferred financing fees associated with the company’s old term loan, interest expense was $2.7 million in the second quarter of fiscal 2018.

Net income of $6.6 million was flat with the second quarter of fiscal year 2017. Adjusted net income, which excludes the write-off of deferred financing fees and debt discount associated with the company’s old term loan, was $7.8 million compared to adjusted net income of $6.6 million for the second quarter of fiscal year 2017.

Net income was also helped by a reduction in tax expense to $925,000 from $1.8 million.

Diluted earnings per share of 15 cents was flat with the second quarter of fiscal year 2017. Adjusted diluted earnings per share was 18 cents compared to adjusted diluted earnings per share of 15 cents in the second quarter of fiscal year 2017.

Adjusted EBITDA was $19.0 million compared to $20.4 million in the second quarter of fiscal year 2017.

The retailer had projected sales to be in the range of $199.0 million to $206.0 million based on a same store sales increase in the range of negative 2.0 percent to positive 2.0 percent compared to the corresponding period of fiscal year 2017. Adjusted net income were expected to be in the range of $5.9 million to $7.1 million with adjusted diluted earnings per share of 14 cents to 17 cents.

For the 26 Weeks Ended August 4, 2018

Net sales increased by 10.0 percent to $383.3 million from $348.4 million in the first half of fiscal year 2017. Same store sales increased by 1.7 percent from the comparable prior year period.

Gross margins eroded slightly to 35.6 percent from 35.8 percent while selling, general and administrative expenses rose slightly to 30.9 percent from 30.6 percent.

Income from operations was $9.5 million compared to $10.5 million in the first half of fiscal year 2017. Adjusted income from operations, which excludes charges incurred in conjunction with the retirement of the company’s former CEO, was $12.2 million compared to adjusted income from operations, which excludes professional and other fees incurred in connection with evaluation of a strategic acquisition, of $12.2 million for the first half of fiscal year 2017.

Interest expense increased to $7.9 million from $6.6 million in the first half of fiscal year 2017. Excluding a $1.6 million write-off in debt discount and deferred financing fees associated with the company’s old term loan, interest expense was $6.3 million in the first half of fiscal 2018.

Net income was $0.7 million compared to net income of $2.0 million in the first half of fiscal year 2017. Adjusted net income, which excludes charges incurred in conjunction with the retirement of the company’s former CEO and the write-off of deferred financing fees and debt discount associated with the company’s old term loan, was $4.2 million compared to adjusted net income, which excludes professional and other fees incurred in connection with evaluation of a strategic acquisition of $3.1 million for the first half of fiscal year 2017.

Diluted earnings per share was $0.02 compared to $0.05 in the first half of fiscal year 2017. Adjusted diluted earnings per share was $0.10 compared to $0.07 in the first half of fiscal year 2017.

Adjusted EBITDA was $23.8 million compared to $24.6 million in the first half of fiscal year 2017.

Balance Sheet Highlights as of August 4, 2018

Total debt: $213.4 million consisting of $173.8 million outstanding under the company’s revolving credit facility and $39.6 million outstanding under the term loan, net of unamortized debt issuance costs.

Total liquidity (cash plus $33.9 million of availability on revolving credit facility): $36.6 million

Third Quarter and Fiscal Year 2018 Outlook

For the third quarter of fiscal year 2018, net sales are expected to be in the range of $220.0 million to $228.0 million based on a same store sales increase in the range of (3.0) percent to 0.0 percent compared to the corresponding period of fiscal year 2017. Adjusted net income is expected to be in the range of $10.2 million to $11.5 million with adjusted diluted earnings per share of $0.24 to $0.27 on a weighted average of approximately 43.0 million estimated common shares outstanding.

For fiscal year 2018, net sales are expected to be in the range of $841.0 million to $857.0 million based on same store sales in the range of negative 1.0 percent to positive 2.0 percent compared to fiscal year 2017. Adjusted net income is expected to be in the range of $24.4 million to $27.0 million with adjusted earnings per diluted share of 57 cents to 63 cents on a weighted average of approximately 43.0 million estimated common shares outstanding when adjusted for the one-time expense incurred in connection with the announcement of the retirement of the company’s former Chief Executive Officer John Schaefer in the first quarter of fiscal 2018 and the write-off of the debt discount and deferred financing fees relating to the company’s old term loan incurred in the second quarter of fiscal 2018.

Previously, Sportsman’s Warehouse expected sales for the year in the range of $837.0 million to $860.0 million based on same store sales in the range of negative 1.0 percent to positive 2.0 percent. Adjusted net income was expected to be in the range of $23.8 million to $27.6 million with adjusted earnings per diluted share of 55 cents to 64 cents.

Photo courtesy Sportsman’s Warehouse