Sportsman’s Warehouse Holdings, Inc. reported a 3.5 percent increase in revenue for first quarter ended April 29.
For the first quarter ended April 29, 2017:
- Net sales increased by 3.5 percent to $156.9 million from $151.6 million in the first quarter of fiscal year 2016. Same store sales decreased by 6.9 percent over the same period.
- Income loss from operations was $3.8 million compared to $2.4 million in the first quarter of fiscal year 2016. Adjusted income loss from operations, which excludes professional and other fees, incurred in connection with the evaluation of a strategic acquisition was $2 million, compared to adjusted income from operations of $2.5 million in the first quarter of fiscal year 2016, which excludes secondary offering expenses.
- The company opened four new stores in the first quarter of fiscal year 2017 and ended the quarter with 79 stores in 22 states, or square footage growth of 10.7 percent from the end of the first quarter of fiscal year 2016.
- Interest expense decreased to $3.2 million from $3.6 million in the first quarter of fiscal year 2016.
- Net income loss was $4.5 million compared to $300,000 in the first quarter of fiscal year 2016. Adjusted net loss, which excludes professional and other fees incurred in connection with the evaluation of a strategic acquisition, was $3.4 million, compared to an adjusted loss which excludes secondary offering expenses as well as prior-year tax credits of $100,000 for the first quarter of fiscal year 2016.
- Diluted earnings loss per share were 11 cents compared to 1 cent in the first quarter of fiscal year 2016. Adjusted earnings loss per share were 8 cents compared to 0 cents in the first quarter of fiscal year 2016.
- Adjusted EBITDA decreased to $4.2 million from $7.4 million in the first quarter of fiscal year 2016.
John Schaefer, CEO, stated, “As expected, we saw continued softness in firearm demand during the first quarter as we anniversaried difficult compares post the San Bernardino shooting and executive orders that were issued at the beginning of 2016. The industry remained highly promotional and we increased our promotional activity in order to maintain our share position, resulting in slightly better than planned sales, and in-line adjusted earnings performance for the first quarter. We are pleased with the progress we continued to make on our key strategic initiatives of maximizing the potential of our loyalty program, growing our private label segment, enhancing our e-commerce platform and investing in our store teams.”
Schaefer continued, “We are maintaining a conservative approach for the second quarter until we anniversary the unfortunate events that took place in Orlando in June 2016 that caused increased demand in our firearm and ammunition categories. We continue to expect year over year trends in the second half of 2017 to show improvement relative to year on year performance trends in the first half of the year, and are reiterating our full year guidance. Despite the recent slowdown in firearm demand across the industry, we believe we are the best positioned retailer in our niche to capture market share given our extensive offering of brand name products, everyday low pricing strategy and knowledgeable customer service, combined with our convenience as a neighborhood store in larger markets or big box appeal in smaller markets, and our growth plans of opening 12 stores in fiscal year 2017.”
Schaefer concluded, “We are pleased to announce today that we have entered into an amendment to our term loan agreement with our lender which provides us with increased covenant flexibility. In addition, as we look ahead to fiscal year 2018, we are moderating our planned store growth and currently expect to open 5 to 9 stores. While we remain confident in the 300 store potential that we believe exists for Sportsman’s Warehouse, given current industry conditions and continued market consolidation, we believe this moderation is prudent. It will also allow us to allocate more free cash flow to debt paydown next year.”
Balance sheet highlights as of April 29, 2017:
- Total debt: $212.5 million consisting of $78.1 million outstanding under the company’s revolving credit facility and $134.4 million outstanding under the term loan, net of unamortized discount and debt issuance costs.
- Total liquidity (cash plus $33 million of availability on revolving credit facility): $35.2 million
Subsequent to April 29, 2017
On May 18, 2017, the company agreed with its lender to amend certain financial covenants of its term loan, providing additional flexibility for the company. With this amendment, the company increased the maximum leverage ratio in each of the remaining quarters by amounts ranging from 0.2x-1.3x with an average quarterly increase of 0.75x. The largest increase of the covenant level is in fiscal year 2018 which includes increases of 1.1x to 1.3x. As a result of the amendment, the interest rate on the company’s revolver will increase 25 basis points to LIBOR plus 6.25 percent with a 1.25 percent LIBOR floor, up from LIBOR plus 6 percent with a 1.25 percent LIBOR floor previously.
Second Quarter and Fiscal Year 2017 Outlook:
For the second quarter of fiscal year 2017, net sales are expected to be in the range of $189-194 million based on a same store sales decline in the range of 8-10 percent compared to the corresponding period of fiscal year 2016. Net income is expected to be in the range of $5.1 million to $6 million with diluted earnings per share of 12 cents to 14 cents on a weighted average of approximately 42.8 million estimated common shares outstanding.
For fiscal year 2017, the company is reiterating its previously provided annual guidance. Net sales are expected to be in the range of $825-845 million based on a same store sales decline in the range of 4-6 percent compared to fiscal year 2016. Adjusted net income is expected to be in the range of $25.5-29 million with adjusted earnings per diluted share of 60-68 cents on a weighted average of approximately 42.8 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.