Sportsman’s Warehouse Holdings, Inc. reported earnings declined 22.5 percent on an adjusted basis in the second quarter as sales retreated 9.4 percent. Results exceeded the high end of guidance.

“We delivered another strong quarter of operating results despite the challenging economic environment, exceeding the high end of guidance,” said Jon Barker, Sportsman’s Warehouse president and CEO. “Our core business fundamentals remain solid, with the team consistently responding with discipline and rigor, using data-driven metrics to drive decisions that best support changing consumer behaviors. We are confident in our competitive position within the outdoor sporting goods space, and believe we have the right team, strategies, and capabilities to successfully navigate through these challenging macroeconomic conditions.”

For the thirteen weeks ended July 30, 2022:

  • Net sales were $351 million, a decrease of 3.0 percent, compared to $361.8 million in the second quarter of fiscal year 2021. The net sales decrease was primarily due to lower demand across most product categories as we began to see the impact of consumer inflationary pressures and recessionary concerns. This decrease, however, was partially offset by the opening of 12 new stores since July 31, 2021. Compared to the second quarter of fiscal year 2019 net sales increased 65.7 percent from $211.8 million.
  • Same-store sales decreased 9.4 percent during the second quarter of 2022, compared to the second quarter of 2021. Compared to the same period of 2019, same-store sales increased 31.7 percent.
  • Gross profit was $117.5 million or 33.5 percent of net sales, compared to $120.1 million or 33.2 percent of net sales in the comparable prior year period. The 30 basis point improvement, as a percentage of net sales, can be attributed to favorable shipping, freight, and logistical expenses, as we slowed inventory receipts in response to consumer demand.
  • SG&A expenses were $97 million, an increase of 1.2 percent, compared to $95.9 million in the second quarter of fiscal year 2021. This increase was primarily due to resuming its pre-pandemic marketing-related activities during the quarter and new store openings. These expenses were partially offset by increased store operating efficiencies.
  • Net income was $14.6 million, compared to a net income of $17.7 million in the second quarter of 2021. Adjusted net income was $15.1 million, compared to an adjusted net income of $19.5 million in the second quarter of 2021.
  • Adjusted EBITDA was $30.6 million, compared to $35.2 million in the comparable prior year period.
  • Diluted earnings per share were $0.35 compared to diluted earnings per share of $0.40 in the comparable prior year period. Adjusted diluted earnings per share were $0.36 compared to adjusted diluted earnings per share of $0.44 for the comparable prior year period.

Sales of $351 million topped company guidance in the range of $330 million to $350 million. The same-store sales decline of 9.4 percent compares with guidance calling for a decline in the range of 16 percent to 10 percent. Adjusted EPS of 36 cents exceeded company guidance in the range of 22 cents to 30 cents.

For the twenty-six weeks ended July 30, 2022:

  • Net sales were $660.5 million, a decrease of 4.1 percent, compared to the first six months of fiscal year 2021. This net sales decrease was primarily driven by lower demand across most product categories as we anniversaried the increased demand driven by the impact of the COVID-19 economic stimulus dollars, current consumer inflationary pressures and recessionary concerns, which were partially offset by the opening of 12 new stores since July 31, 2021.
  • Same-store sales decreased 10.4 percent compared to the first six months of fiscal 2021. This decrease was primarily due to lower sales demand across most product categories due to inflationary pressures and difficult year-over-year comparisons. Compared to fiscal year 2019, same-store sales for the first six months of 2022 increased 34.6 percent.
  • Gross profit was $216.6 million or 32.8 percent of net sales, compared to $224.1 million or 32.5 percent of net sales for the first six months of fiscal 2021. This year-over-year improvement was due to increased overall product margins and decreased shipping, freight, and logistical expenses as we slowed inventory receipts in response to changes in consumer demand.
  • SG&A expenses increased to $193.1 million or 29.2 percent of net sales, compared with $186.3 million or 27.0 percent of net sales for the first six months of fiscal 2021. This increase was primarily due to resuming its normal pre-pandemic marketing and travel-related activities during the period, management recruiting expenses and new store expenses. These expenses were partially offset by increased store operating efficiencies.
  • Net income was $16.6 million, compared to a net income of $28.2 million in the prior year period. Adjusted net income was $17.3 million, compared to an adjusted net income of $32.0 million in the first six months of fiscal 2021.
  • Adjusted EBITDA was $43.6 million compared to $58.7 million in the prior year period.
  • Diluted earnings per share were $0.38, compared to diluted earnings per share of $0.63 in the first six months of last year. Adjusted diluted earnings per share were $0.40, compared to adjusted diluted earnings per share of $0.72 in the prior year period.

Balance sheet and capital allocation highlights as of July 30, 2022:

  • The company ended the quarter with net debt of $84.8 million, comprised of $6.0 million of cash on hand and $90.8 million of borrowings outstanding under the company’s revolving credit facility.
  • Total liquidity was $209.2 million as of the end of the second quarter of fiscal 2022, comprised of $203.2 million of availability on the revolving credit facility and $6.0 million of cash on hand.
  • During the second quarter, the company repurchased 5.3 million shares of its common stock in the open market, returning $52.1 million to shareholders. As of the end of the second quarter, the company had $22.9 million of remaining capacity under its authorized repurchase program.

Third Quarter 2022 Outlook
For the third quarter of fiscal year 2022, net sales are expected to be in the range of $345 million to $365 million, anticipating that same-store sales will be down 17 percent to 12 percent year-over-year. Adjusted diluted earnings per share for the quarter are expected to be in the range of $0.24 to $0.32.

Jeff White, CFO, Sportsman’s Warehouse said, “Despite the macroeconomic headwinds, we remain in a solid financial position, with healthy overall inventory levels and a strong balance sheet. We will stay disciplined in our approach to capital and expense allocation, and are pleased with the open-market success of the share repurchase program.”

Photo courtesy Sportsman’s Warehouse