Sportsman’s Warehouse’s Q3 Sales Drop 10 Percent

Profits at Sportsman’s Warehouse Holdings, Inc. fell 42.3 percent in the third quarter ended October 29 as sales declined 10.3 percent.

Sales of $359.7 million were in line with guidance in the range of $345 million to $365 million. The same-store sales decline of 15.0 percent was in line with guidance in the range of negative 17 percent to 12 percent. Adjusted diluted earnings per share were $0.34 exceeded guidance in the range of $0.24 to $0.32.

“We executed our strategic initiatives and reported strong sales and earnings results in the third quarter, despite the challenging macroeconomic environment,” said Jon Barker, Sportsman’s Warehouse president and chief executive officer. “The investments made over the last few years to enhance our omnichannel capabilities have strengthened the overall foundation of the business. Moving forward, we will continue to closely manage the business with discipline and rigor, and maintain focus on leveraging our investments while accelerating the growth of our store footprint to reach more customers nationwide.”

For The Thirteen Weeks Ended October 29, 2022
Net sales were $359.7 million, a decrease of 10.3 percent, compared to $401.0 million in the third quarter of fiscal year 2021. The net sales decrease was primarily due to lower demand across most product categories it the retailer continued to experience the impact of consumer inflationary pressures and recessionary concerns. This decrease, however, was partially offset by the opening of 11 new stores since October 30, 2021. Compared to the third quarter of fiscal year 2019 net sales increased 48.3 percent from $242.5 million.

Same-store sales decreased 15.0 percent during the third quarter of 2022, compared to the third quarter of 2021. Compared to the same period in 2019, same-store sales increased 19.5 percent.

Gross profit was $120.8 million or 33.6 percent of net sales, compared to $129.6 million or 32.3 percent of net sales in the comparable prior year period. The 130 basis point improvement, as a percentage of net sales, could be attributed to an increased product margin, favorable shipping, freight, and logistical expenses, and a favorable product mix.

SG&A expenses were $102.3 million, an increase of 2.3 percent, compared to $100.0 million in the third quarter of fiscal year 2021. This increase was primarily due to resuming our pre-pandemic marketing and travel-related activities during the quarter, and higher depreciation, rent and management recruiting expenses due to new store openings. These expenses were partially offset by a decrease in acquisition costs due to the terminated merger and increased store operating efficiencies.

Net income was $12.9 million, compared to net income of $21.9 million in the third quarter of 2021. Adjusted net income was $13.1 million, compared to adjusted net income of $22.7 million in the third quarter of 2021.

Adjusted EBITDA was $29.1 million, compared to $39.3 million in the comparable prior year period.

Diluted earnings per share were $0.33 compared to diluted earnings per share of $0.49 in the comparable prior year period. Adjusted diluted earnings per share were $0.34 compared to adjusted diluted earnings per share of $0.51 for the comparable prior year period.

For The Thirty-Nine Weeks Ended October 29, 2022
Net sales were $1.02 billion, a decrease of 6.4 percent, compared to $1.09 billion in the first nine 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 and current consumer inflationary pressures and recessionary concerns, which were partially offset by the opening of 11 new stores since October 30, 2021.

Same-store sales decreased 12.1 percent compared to the first nine 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 nine months of 2022 increased 28.8 percent.

Gross profit was $337.5 million or 33.1 percent of net sales, compared to $353.7 million or 32.5 percent of net sales for the first nine months of fiscal 2021. This year-over-year improvement was due to increased overall product margins and decreased shipping, freight, and logistical expenses.

SG&A expenses increased to $295.4 million or 29.0 percent of net sales, compared with $286.3 million or 26.3 percent of net sales for the first nine months of fiscal 2021. This increase was primarily due to resuming our normal pre-pandemic marketing and travel-related activities during the period, as well as higher depreciation, rent and management recruiting expenses due to new store openings. These expenses were partially offset by a decrease in acquisition costs due to the terminated merger and increased store operating efficiencies.

Net income was $29.5 million, compared to net income of $50.0 million in the prior year period. Adjusted net income was $30.4 million, compared to adjusted net income of $54.8 million in the first nine months of fiscal 2021.

Adjusted EBITDA was $72.7 million compared to $98.0 million in the prior year period.

Diluted earnings per share were $0.71, compared to diluted earnings per share of $1.13 in the first nine months of last year. Adjusted diluted earnings per share were $0.73, compared to adjusted diluted earnings per share of $1.23 in the prior year period.

Balance Sheet and Capital Allocation Highlights
(as of October 29, 2022)

The company ended the quarter with net debt of $102.5 million, comprised of $2.6 million of cash on hand and $105.1 million of borrowings outstanding under the company’s revolving credit facility.

Total liquidity was $195.5 million as of the end of the third quarter of fiscal 2022, comprised of $192.9 million of availability on the revolving credit facility and $2.6 million of cash on hand.

During the third quarter, the company repurchased 1.2 million shares of its common stock in the open market, returning $10.4 million to shareholders. As of the end of the third quarter, the company had $12.6 million of remaining capacity under its authorized repurchase program.

Fourth Quarter and Full-Year 2022 Outlook
For the fourth quarter of fiscal year 2022, net sales are expected to be in the range of $370 million to $385 million, anticipating that same-store sales will be down 13 percent to 9 percent year-over-year. Adjusted diluted earnings per share for the quarter are expected to be in the range of $0.25 to $0.35. This implies our full-year 2022 net sales will be in the range of $1.39 billion to $1.405 billion, with adjusted diluted earnings per share for the full year in the range of $0.98 and $1.08.

As the company looks to fiscal year 2023, it expects to accelerate the growth of its stores, opening between 13-and-18 new doors during the year; this would be the highest number of new store openings in one year.

Jeff White, CFO, said, “Our guidance for the fourth quarter considers ongoing consumer inflationary pressures and a challenging macroeconomic environment, which we are carefully navigating. We will maintain our discipline with expense management and capital allocation as we continue to execute on our short and long-term strategic initiatives.”

Photo courtesy Sportsman’s Warehouse