Sportsman’s Warehouse Lifts Sales Guidance On Strong Q3

Sportsman’s Warehouse Holdings Inc. on Wednesday lifted its sales guidance after reporting revenue for the third quarter ended November 2 increased 8.7 percent to $242.5 million primarily due to a same-store sales increase of 4.8 percent from the prior year period. That beat expectations by $7.1 million.

The company now expects to generate $891 million to $901 million in revenue for the year versus a prior view of $866 million to $884 million.

Jon Barker, CEO, stated, “We are very pleased with our third quarter results, which were at the high end of our guidance on the top and bottom line excluding the eight recently acquired stores that were not included in our original outlook. These strong results are reflective of our differentiated positioning within a consolidating industry and the team’s disciplined execution of our growth strategies around merchandising, customer acquisition and engagement, and our omni-channel platform.”

Barker continued, “As we look to the final quarter of the year, we feel very good about our competitive positioning and the underlying strength of our business. That said, multiple competitors are making assortment changes that are creating some short term sales headwinds which we have incorporated in our fourth quarter outlook. We believe these competitive changes bode well for Sportsman’s Warehouse longer term, and, combined with the investments we have made across our business, we are well positioned to capitalize on the increased market share opportunities moving forward.”

For the thirteen weeks ended November 2, 2019:

• Net sales increased by 8.7 percent to $242.5 million from $223.1 million in the third quarter of fiscal year 2018 primarily due to a same-store sales increase of 4.8 percent compared to the prior year period.
• Income from operations was $15.9 million compared to $17.5 million in the third quarter of fiscal year 2018. Adjusted income from operations was $16.3 million in the third quarter of fiscal 2019, which excludes certain expenses related to the acquisition of eight stores during the period. There were no non-GAAP adjustments to income from operations in the third quarter of fiscal 2018 (see “GAAP and Non-GAAP Measures”).
• The company opened one new store and acquired eight stores in the third quarter of fiscal year 2019 and ended the quarter with 103 stores in 27 states, or square footage growth of 13.6 percent from the end of the third quarter of fiscal 2018.
• Interest expense decreased to $2.1 million from $2.6 million in the third quarter of fiscal year 2018.
• Net income was $10.5 million compared to net income of $12.4 million in the third quarter of fiscal year 2018. Adjusted net income in the third quarter of fiscal year 2019 was $10.8 million, which excludes certain expenses incurred related to the acquisition of eight stores. Adjusted net income in the third quarter of fiscal year 2018 was $11.1 million, which excludes a non-recurring tax benefit (see “GAAP and Non-GAAP Measures”).
• Diluted earnings per share was $0.24 compared to diluted earnings per share of $0.29 for the third quarter of fiscal year 2018. Adjusted diluted earnings per share was $0.25 in the third quarter of fiscal year 2019 compared to adjusted diluted earnings per share of $0.26 in the third quarter of fiscal year 2018 (see “GAAP and Non-GAAP Measures”).
• Adjusted EBITDA was $23.2 million compared to $22.6 million in the third quarter of fiscal year 2018 (see “GAAP and Non-GAAP Measures”).

For the thirty-nine weeks ended November 2, 2019:

• Net sales increased by 3.6 percent to $628.2 million from $606.4 million in the first three quarters of fiscal year 2019 primarily due to new store openings and the acquisition of eight new store locations. Same store sales increased by 0.6 percent from the comparable prior year period.
• Income from operations was $20.3 million compared to $27.1 million in the first three quarters of fiscal year 2018. Adjusted income from operations was $21.3 million in the first three quarters of fiscal 2019, which excludes expenses related to the transition of the company’s CFO, recruitment and hiring of various key members of the senior management team, and certain expenses related to the acquisition of eight stores. Adjusted income from operations was $29.7 million in the first three quarters of fiscal 2018, which excludes charges incurred in connection with the retirement of the company’s former CEO (see “GAAP and Non-GAAP Measures”).
• Interest expense decreased to $6.6 million from $10.5 million in the first three quarters of fiscal year 2018. Interest expense for the first three quarters of fiscal year 2018 included a $1.6 million write-off of debt discount and deferred financing fees associated with the company’s prior term loan.
• Net income was $10.5 million compared to net income of $13.1 million in the first three quarters of fiscal year 2018. Adjusted net income in the first three quarters of fiscal 2019 was $11.3 million, which excludes expenses incurred related to the transition of the company’s CFO, the recruitment and hiring of various key members of the senior management team, and certain expenses related to the acquisition of eight stores. Adjusted net income in the first three quarters of fiscal year 2018 was $15.3 million, which excludes charges incurred in connection with the retirement of the company’s former CEO, the write-off of deferred financing fees and debt discount associated with the company’s old term loan, and a non-recurring tax benefit (see “GAAP and Non-GAAP Measures”).
• Diluted earnings per share was $0.24 compared to diluted earnings per share of $0.31 for the first three quarters of fiscal year 2018. Adjusted diluted earnings per share was $0.26 in the first three quarters of fiscal 2019 compared to adjusted diluted earnings per share of $0.36 in the first three quarters of fiscal 2018 (see “GAAP and Non-GAAP Measures”).
• Adjusted EBITDA was $39.4 million compared to $46.5 million in the first three quarters of fiscal year 2018 (see “GAAP and Non-GAAP Measures”).

Balance sheet highlights as of November 2, 2019:

• Total debt: $160.5 million consisting of $130.8 million outstanding under the company’s revolving credit facility and $29.7 million outstanding under the term loan, net of unamortized debt issuance costs.
• Total liquidity (cash plus $78.7 million of availability on revolving credit facility): $80.4 million

Fourth Quarter and Fiscal Year 2019 Outlook:

For the fourth quarter of fiscal year 2019, net sales are expected to be in the range of $263.0 million to $273.0 million based on a change in same store sales in the range of down 1.5 percent to up 1.5 percent compared to the corresponding period of fiscal year 2018. Adjusted net income is expected to be in the range of $12.6 million to $15.3 million with adjusted diluted earnings per share of $0.29 to $0.35 on a weighted average of approximately 43.5 million estimated common shares outstanding.

For fiscal year 2019, net sales are expected to be in the range of $891.0 million to $901.0 million based on a change in same store sales in the range of flat to up 1.0 percent compared to fiscal year 2018. Adjusted net income is expected to be in the range of $24.0 million to $26.6 million with adjusted earnings per diluted share of $0.55 to $0.61 on a weighted average of approximately 43.5 million estimated common shares outstanding, when adjusted for the executive transition costs and acquisition costs incurred (see “GAAP and Non-GAAP Measures”).