Sportsman’s Warehouse, Inc. (SPWH) shares increased steadily throughout the day on Thursday, September 4 in anticipation of another solid quarterly report for the three-month period ended August 2, but that excitement soon turned to concern as the outdoor sports retailer delivered a less than stellar sequel to a strong first quarter. Consequently, those same SPWH shares shed value overnight, falling in mid-single digits in post- and pre-market trading. Still, as the dust settled on Friday, Sportsman’s was riding high once again as shares rallied again, closing up 12.3 percent for the day.

On a Thursday afternoon conference call with analysts, company President and CEO Paul Stone highlighted continued progress on the company’s transformation strategy, noting the company delivered its second consecutive quarter of same-store sales growth. Same-store (comp store) sales were up 2.1 percent year-over-year, with positive comps posted each month of the quarter. The comp sales growth exceeded a strong Q1 period that saw comps up 2.0 percent – the first quarterly comp sales increase in nearly four years – and handily beating analysts’ estimates.

The second quarter comp sales increase cycled against a 9.8 percent comp sales decline in the 2024 second quarter, and came despite the retailer’s moves in Q1 to pull orders forward from the second quarter, impacting inventory levels.

The solid top-line performance for Q2 also prompted the company to raise its top-line guidance for the full year.

So why the long face in the early hours, Wall Street?

One reason may be that management said it expects continued margin headwinds in the back half of the year due to a higher mix of firearms and ammunition sales — both lower-margin categories — and the risk of additional tariffs, though ongoing negotiations with vendors and MAP (Minimum Advertised Price) policies may help offset some impacts, according to analysis from StockStory.

RW Baird analysts on Thursday wrote that while sales were ~1 percent above consensus, results lagged internal expectations, and weaker gross margin drove a ~28 percent Adjusted EBITDA shortfall.

“Sales exceeded consensus by ~1 percent; however, weaker gross margin (-140 bps vs. Street’s -20 bps; higher shrink and seasonal markdowns within camping/apparel) drove a ~28 percent adj-EBITDA shortfall ($7.4M vs. Street’s $10.3M),” the Baird team noted.

Baird also said that while SPWH is making progress on initiatives to reset the business via SKU rationalization that are paying dividends within Fishing and improving operations, the team noted that “turnarounds are rarely linear.” As an example, Baird said SPWH management acknowledged having cut inventory too deep – particularly in core items – so the SPWH team is investing an incremental $20 million during the third quarter – largely focused on the Hunting & Shooting Sports business. But Baird may have missed the part about heavier investments in non-lethal Personal Protection product that is performing well and carries higher margins.

There was also concern that the retailer’s core customer remains under pressure, as SPWH experienced a decline in store traffic which led to lower demand across most categories, except in the Fishing business. Hunting & Shooting Sports comps declined ~13 percent despite incremental promotional activity, but declines moderated as the quarter progressed.

Second Quarter Sales Summary
Net sales for the fiscal 2025 second quarter were $293.9 million, a 1.8 percent increase year-over-year (y/y) compared to net sales of $288.7 million in the prior-year Q2 period.

Comparable store sales were up 2.1 percent, a small acceleration from the 2025 first quarter comp store increase.

“I’m encouraged by the strong progress our team continues to make as we advance our transformation strategy in the second quarter,” offered CEO Paul Stone. “Despite ongoing consumer macroeconomic headwinds, we delivered our second consecutive quarter of comp store sales growth. Same-store sales were up 2.1 percent compared to last year, with positive comps achieved each month of the quarter.”

Stone called out the fact that the growth came even as June faced a difficult comparison due to last year’s pull-forward of sales in California ahead of the new firearm and ammunition taxes that took effect on July 1, 2024.

“Our efforts to localize merchandise assortments and geo-target our marketing is delivering strong early results,” Stone highlighted. “For example, in Alaska, sales in the second quarter grew by high-single digits, reflecting how well these initiatives are resonating with customers. Aligning our merchandising and marketing to local outdoor pursuits and solution selling is proving to be a critical unlock, not only for driving growth, but also for improving inventory productivity and efficiency.”

Stone said the SPWH Firearms business once again outperformed the industry as NSSF-adjusted NICS checks declined 4.9 percent in the quarter, while SPWH unit sales increased more than 4 percent versus last year. He said this was further evidence that the retailer is capturing market share. However, as NSSF points out, the NICS checks are simply the background checks and do not directly reflect purchases of firearms.

“Consistent with broader consumer trends, we did see some trade down behavior reflected in a 4 percent decline in average unit retail for firearms again this quarter,” Stone cautioned.

However, the CEO said attachment remains strong as average order value continues to be at all-time highs.

“In Ammunition, our strategic shift to an everyday low price (EDLP) model on core ammo calibers and improved in-stock continues to resonate strongly with our customers,” Stone shared. “Ammunition sales grew 10 percent in the quarter with average unit retail (AUR) up in low-single digits. We are also sharpening and investing in our firearm-related merchandise assortment to drive higher basket attachment and greater overall customer value.”

The comp store sales increase for the quarter was led by the Hunting & Shooting Sports and Fishing departments.

Hunting/Shooting comps increased 4 percent in Q2, said to be driven by Firearms, Ammunition and products related to Personal Protection.

Fishing department sales were reportedly up nearly 11 percent y/y and was said to be up 20 percent on a two-year stack.

“This is a category with expanding market participation and clear opportunities for us to capture additional share,” Stone emphasized. He said the retailer is well positioned with “late season fishing inventory to sell down and end the season strong with clean inventory.”

In Camping, the CEO said they were disappointed with the department’s performance in Q2 with sales down 10 percent year-over-year. “As part of our ongoing transformation, we made a deliberate decision late last year to eliminate certain slow-moving categories that were tying up working capital, but we have not yet seen the level of offsetting growth we anticipated in other areas of the department,” Stone suggested.

“To address this, we recently implemented an EDLP strategy on core consumables, similar to what has been effective in Ammunition, and we are confident this will strengthen the business over time,” he noted. “Additionally, we invested in compelling new assortments, most notably with Yeti,” noted that early results indicate that the additions are resonating with customers.

E-Commerce
Stone reported that the retailer’s e-commerce business grew 3 percent y/y and continues to be a strength of the retailer’s omni-channel retail strategy.

“Importantly, over 70 percent of online transactions were fulfilled through our buy online, pick up in store (BOPUS) program, underscoring how e-comm drives significant traffic and sales into our brick-and-mortar location[s],” he detailed. “At the same time, our ship-to-home business remains strong, reflecting our ability to capture consumer demand well beyond our physical store footprint. With these dual strengths, we are uniquely positioned to gain market share as e-commerce continues to outpace traditional retail channels.”

Four-Point Strategic Focus
The CEO emphasized that the improvements SPWN is seeing across the business is directly tied to its strategic focus, which remains centered on our four key priorities, with the first priority focused on Inventory Precision.

“Inventory readiness for the critical fall hunting season was foundational in Q2,” Stone said. “In prior years, we were often late to the season. This year, we are ahead. Our inventory is healthier, our in-stock levels are stronger, and we have depth in our core products.”

Stone shared that the second quarter represented the retailer’s peak inventory build, and suggested the business is now well positioned to sell through moving into the key fall hunting and holiday season.

Two, Local Relevance. Stone said SPWH continues to strengthen its role as a trusted local destination.

“This quarter, we launched our partnership with the United States Concealed Carry Association, or USCCA, to provide in-store training and education. Their robust market-specific programs are a natural complement to our localization strategy,” he noted. “In addition, we are expanding in-store events that leverage the expertise of our outfitters further strengthening our role as a trusted resource and deepening our connection to the communities we serve.”

Three, he noted the focus on Personal Protection, a category that continues to outpace total company performance.

“We’ve expanded the number of stores that carry the Byrna [non-lethal self-defense] product line where we offer the customer a chance to try before you buy, leveraging our archery lanes and enclosed shooting pods, Stone revealed. “We also launched Taser, well-known less lethal brand earlier this week in our top-performing personal protection stores. We will continue to lean in this category as we establish Sportsman’s Warehouse as the authority in personal protection.”

Fourth, Stone called out the focus on Brand Awareness.

“As a differentiated omni-channel retailer, we are strengthening brand recognition and trust,” he said. “Our new ‘Adventure Like a Local’ campaign underscores the expertise and authenticity that set Sportsman’s apart, while our refined digital strategy is accelerating customer acquisition and positioning us for sustained long-term growth.”

In wrapping up his prepared remarks, Stone said that despite ongoing consumer macroeconomic challenges, he personally remains confident in both the retailer’s strategic plan and the SPWH team’s ability to deliver against that plan.

“Our competitive advantage is clear,” he suggested. “We ‘out local’ the big box retailers and ‘out assort’ the smaller specialty shops, providing customers with a differentiated combination of value, quality, breadth of selection and personalized service rooted in the communities we serve.”

Stone assured the call participants that SPWH remains disciplined in managing the levers within its control, with areas such as “variable cost, inventory productivity and merchandise margins” mentioned.

“As we advance our strategic initiatives, we are confident these efforts will drive sustainable sales growth, operating margin improvement and debt reduction in the back half of 2025,” the CEO concluded.

Stone did introduce new company CFO Jennifer Fall Jung on her first SPWH conference call, with Stone stating, “she’s a proven financial leader, and I look forward to partnering with her to further accelerate the transformation of our business.”

Profitability and Expenses Summary
Gross margin was 32.0 percent of net sales in the second quarter, compared to 31.2 percent of net sales in the prior-year Q2 period. The 80 basis-point improvement was said to be largely driven by improved overall product margins from healthier inventory and increased sales from the retailer’s Fishing department, which carries a relatively higher gross margin.

Fall Jung said that upside was offset in part by by a mix shift to Firearms & Ammo, which has a lower gross margin; a lower penetration in camping, which carries a higher margin rate; and increased freight tied to the strategic pull forward of inventory to be store ready for the key hunting season.

“The freight expense due to the inventory pull forward resulted in an estimated 40 basis point drag on margin in the quarter,” she noted.

Selling, general, and administrative (SG&A) expenses were $97.2 million, or 33.1 percent of net sales, in Q2, compared to $94.3 million, or 32.7 percent of net sales, in the prior-year Q2 period. This increase reportedly reflects reinvestment in the retailer’s customer facing areas, including store labor and digital marketing to drive sales and omni-channel traffic.

Fall Jung said they will continue to closely manage the company’s variable operating expenses to align with sales trends.

The net loss for the second quarter was $7.1 million, compared to a net loss of $5.9 million in the prior-year Q2 period. Adjusted net loss was $4.7 million compared to Adjusted net loss of $5.3 million in the prior-year Q2 period.

Adjusted EBITDA improved to $8.3 million in Q2, compared to $7.4 million in the corresponding prior-year Q2 period.

Diluted loss per share was 18 cents per diluted share in Q2, compared to diluted loss per share of 16 cents in the corresponding prior-year Q2 period. Adjusted diluted loss per share was 12 cents, compared to Adjusted diluted loss per share of 14 cents in the prior-year Q2 period.

Balance Sheet and Capital Allocation Summary
SPWH ended the second quarter with net debt of $195.1 million, comprised of $151.2 million of borrowings outstanding under the company’s revolving credit facility, $43.9 million of net borrowings outstanding under the company’s term loan facility, and $1.8 million of cash and cash equivalents.

Inventory at quarter-end was $443.5 million, an increase of $80.1 million when compared with the end of Q2 2024. Inventory was said to be intentionally pulled forward in the second quarter to be on-time and ready for the key late summer and fall hunting seasons, and represents peak inventory for the year.

“Our second quarter results reflect the deliberate and disciplined approach we are taking to simplify assortments, improve working capital efficiency, and drive margin improvement,” said Fall Jung in a earnings release. “We made a strategic decision to build inventory ahead of the critical late summer and fall hunting seasons, with a focus on depth in core products, and regionally relevant items that turn faster and are supported by predictable demand. Importantly, we expect to exit 2025 with total inventory below last year’s level, demonstrating our progress in improving inventory productivity. We remain confident that the second quarter represents our peak debt and inventory levels for the year and that both will decline as we sell through seasonal product, generate improved EBITDA, and pay down debt in the back half of 2025.”

Looking ahead, the CFO said the SPWH team is continuing to simplify the product assortment to drive efficiency in working capital and support margin improvement over time.

“With new systems, processes and enhanced buying discipline, our goal is to be in season earlier, exit earlier and achieve clean sell-throughs across categories, which will drive down the working capital investment needed for inventory,” she noted.

Total liquidity was $109.5 million as of the end of the prior-year Q2 period, comprised of $107.7 million of availability on the revolving credit facility and $1.8 million of cash and cash equivalents. The company exercised its $20 million deferred draw feature on the term loan, further strengthening the balance sheet.

“Inventory efficiency and tight control of variable expenses will remain top priorities,” Fall Jung committed.

“We have confidence in our second half strategy to drive profitable sales despite the macroeconomic headwinds and potential margin pressure from higher tariffs,” Fall Jung said, shifting gears to the 2025 back half outlook.

Fiscal Year 2025 Outlook
SPWH raised its sales guidance for fiscal year 2025 and now expects net sales to be in the range of flat to up 3.5 percent, compared to prior guidance issued in June for net sales to be in the range of down 1.0 percent to positive 3.5 percent for the year.

SPWH also reaffirmed Adjusted EBITDA to be in the range of $33 million to $45 million for the year, to be reportedly driven by modest gross margin improvement and disciplined expense management..

The company continues to expect capital expenditures for 2025 to be in the range of $20 million to $25 million, said to be primarily consisting of technology investments relating to merchandising, store productivity and general store maintenance.

“We remain focused on growing sales, generating positive free cash flow for the year, paying down debt and returning value to all of our stakeholders,” the CFO said to conclude her prepared remarks.

Stores
The company anticipates opening one new store in November 2025 in Surprise, Arizona.

The company said it has not reconciled expected adjusted EBITDA for fiscal year 2025 to GAAP net income because the company does not provide guidance for net (loss) income and is not able to provide a reconciliation to net (loss) income without unreasonable effort. The company said it is not able to estimate net (loss) income on a forward-looking basis without unreasonable efforts due to the variability and complexity with respect to the charges excluded from Adjusted EBITDA.

SGB Data Analyst Note:
Lots of excitement and itchy trigger fingers at play here with Sportsman’s Warehouse shares overnight, and the market and the retailer are probably breathing a sigh of relief as investors and analysts digest the data and the management feedback to arrive at a positive trend for the stock. From this Outdoor Active Lifestyle analyst’s position, we are seeing a number of right moves being made, with inventory being a major concern last year when rumors of vendors holding back deliveries hurt the business – and the stock.

It is important to note that SPWH was up against fairly easy comparatives in the first half of the year, with Q1 cycling against a 13.5 percent decline in Q1 last year and Q2 cycling against a 9.8 percent decline in its year-ago comparative period. One might assume that the retailer comped better in Q2 because of the easier comparatives, but the trend here remains positive and that is clearly a positive trigger.

As should be expected, SPWH will face tougher comparisons, along with other headwinds like tariffs in the 2025 second half as the retailer looks to keep comps positive as it cycles against a 5.7 percent comp sales decline in Q3 last year and essentially flat comps (-0.5 percent) in the fiscal 2024 fourth quarter.

That will be the next test.

Image courtesy Sportsman’s Warehouse Holdings, Inc.