Sportsman’s Warehouse Holdings Inc. reported third-quarter earnings that came in at the low end of guidance while its sales fell just short. The company also lowered its guidance for the full year due to a promotional climate expected to continue in the fourth quarter.

For the thirteen weeks ended October 28, 2017:

  • Net sales increased by 0.4 percent to $218.1 million from $217.2 million in the third quarter of fiscal year 2016. Same store sales decreased by 7 percent over the same period.
  • Income from operations was $19.5 million compared to $20.5 million in the third quarter of fiscal year 2016.
  • The company opened three new stores in the third quarter of fiscal 2017 and ended the quarter with 86 stores in 22 states, or square footage growth of 10.8 percent from the end of the third quarter of fiscal year 2016.
  • Interest expense increased to $3.5 million from $3.4 million in the third quarter of fiscal year 2016.
  • Net income was $9.8 million compared to $10.5 million in the third quarter of fiscal year 2016.
  • Diluted earnings per share were 23 cents compared to 25 cents in the third quarter of fiscal year 2016.
  • Adjusted EBITDA was $25.1 million compared to $26.1 million in the third quarter of fiscal year 2016

Previously, the company had expected sales in the quarter to be in the range of $220 million to $225 million based on a same-store sales decline in the range of 6 percent to 8 percent. Net income was expected to be in the range of $10 million to $11.2 million with diluted earnings per share of 23 cents to 26 cents on a weighted average of approximately 42.8 million estimated common shares outstanding.

John Schaefer, chief executive officer, stated, “Our third quarter results were largely in line with our expectations and reflected continued softness in firearms and ammunition as well as a shift in the timing of a planned third quarter new store opening into the fourth quarter. We again navigated a difficult operating environment but were pleased to deliver gross margin expansion of 110 basis points, pay down debt for a quarter-ending leverage ratio of 2.78x, reduce inventory by 8.7 percent on a per store basis and make continued progress against our key strategic priorities as we focus on driving further market share gains.”

Schaefer added, “As we look to the remainder of the year, we are modifying our fourth quarter outlook. While the difficult firearm comparisons that we anniversaried through the first three quarters of fiscal year 2017 will be behind us, we expect a heightened promotional environment which we are reflecting in our sales and margin outlook. Our differentiating attributes of everyday low pricing, unparalleled breadth of product offering and knowledgeable customer service position us well as we continue to navigate these headwinds and remain focused on delivering sustainable long-term growth.”

For The 39 Weeks Ended October 28, 2017:

  • Net sales increased by 1.4 percent to $566.5 million from $558.6 million in the first three quarters of fiscal year 2016. Same store sales decreased by 7.6 percent over the same period.Income from operations was $30 million compared to $39.6 million in the first three quarters of fiscal year 2016. Adjusted income from operations, which excludes professional and other fees incurred in connection with the evaluation of a strategic acquisition, was $31.7 million, compared to adjusted income from operations of $39.7 million for the first three quarters of fiscal year 2016, which excludes secondary offering expenses.
  • The company opened eleven new stores in the first three quarters of fiscal year 2017.
  • Interest expense was flat at $10.1 million in the first three quarters of fiscal year 2017 and 2016.
  • Net income was $11.9 million compared to $19.1 million in the first three quarters of fiscal year 2016. Adjusted net income, which excludes professional and other fees incurred in connection with the evaluation of a strategic acquisition, was $12.9 million compared to an adjusted net income, which excludes secondary offering expenses and prior-year tax credits, of $18.7 million for the first three quarters of fiscal year 2016.
  • Diluted earnings per share were 28 cents compared to 45 cents in the first three quarters of fiscal year 2016. Adjusted diluted earnings per share were $0.30 cents compared to 44 cents in the first three quarters of fiscal year 2016.Adjusted EBITDA was $49.8 million compared to $55.9 million in the first three quarters of fiscal year 2016.

Balance Sheet Highlights As Of October 28, 2017:

  • Total debt: $214 million consisting of $78.5 million outstanding under the company’s revolving credit facility and $135.5 million outstanding under the term loan, net of unamortized discount and debt issuance costs.
  • Total liquidity (cash plus $46.5 million of availability on revolving credit facility): $48.7 million.

Fourth Quarter And Fiscal Year 2017 Outlook:

For the fourth quarter of fiscal year 2017, net sales are expected to be in the range of $240 million to $245 million based on a same-store sales decline in the range of 4 percent to 6 percent compared to the corresponding period of fiscal year 2016. Net income is expected to be in the range of $11 million to $12.4 million with diluted earnings per share of 26 cents to 29 cents on a weighted average of approximately 42.6 million estimated common shares outstanding.

For fiscal year 2017, net sales are expected to be in the range of $807 million to $812 million based on a same-store sales decline in the range of 6 percent to 7 percent compared to fiscal year 2016. Adjusted net income is expected to be in the range of $23.9 million to $25.3 million with adjusted earnings per diluted share of 56 cents to 59 cents on a weighted average of approximately 42.6 million estimated common shares outstanding, when adjusted for the professional fees and other fees incurred in connection with the evaluation of a strategic acquisition in the first quarter of fiscal year 2017.

Under its prior guidance, sales were expected to be in the range of $825 million to $835 million based on a same-store sales decline in the range of 5 percent to 6 percent compared to fiscal year 2016. Adjusted net income was expected to be in the range of $25.7 million to $28.4 million with adjusted EPS of 60 cents to 66 cents.

The company’s fiscal year 2017 will include 53 weeks, while fiscal year 2016 included 52 weeks. The estimated fiscal year 2017 impact of the additional week is roughly $9 million to $11 million in revenue and approximately 1 cent on earnings per share. There is no impact on expected same-store sales as those are presented on a 52-week comparative basis.

Photo courtesy Sportsman’s Warehouse