Sportsman’s Warehouse Holdings Inc. reported earnings on an adjusted basis rose 26.2 percent in the fourth quarter as same-store sales gained 3.1 percent. Earnings came in at the higher end of guidance while comps topped guidance.

Jon Barker, chief executive officer, stated, “We are pleased with our solid end to the year as our fourth quarter results were in-line with expectations on the top and bottom line. Our fourth quarter same-store sales increase of 3.1 percent compared to the fourth quarter of fiscal 2017 exceeded our expectations and was driven by strong performance from our existing stores and e-commerce platform. We believe these results are a testament that the investments we’ve made throughout the year are gaining traction, including the enhancements to our omni-channel capabilities, increasing customer acquisition and engagement and offering a differentiated merchandising assortment in fiscal 2018.”

Barker continued, “As we look to fiscal 2019, we will continue to invest in key areas across the business to further differentiate Sportsman’s Warehouse and better enable us to both strengthen our relationship with our existing customers as well as capitalize on market share opportunities to draw new customers into the fold. Similar to 2018, we will continue to take a disciplined approach as we focus on further strengthening our market position in 2019 and beyond.”

Fiscal Year

Fiscal year 2018 contained 52 weeks of operations and ended on February 2, 2019. Fiscal year 2017 contained 53 weeks of operations ended on February 3, 2018. We refer to the extra week of operations as the “53rd week.” Due to the 53rd week in fiscal year 2017, all references to same-store sales for the fourth quarter and fiscal year 2018 are compared to the shifted period for the comparable period for fiscal year 2017.

For the thirteen weeks ended February 2, 2019:

  • Net sales decreased by 0.2 percent to $242.7 million from $243.2 million in the fourth quarter of fiscal year 2017 due to the 53rd week of operations in the fourth quarter of fiscal 2017. Excluding the $10.6 million in sales from the 53rd week in the fourth quarter of fiscal year 2017, sales in the fourth quarter of fiscal 2018 increased by 4.4 percent or $10.2 million driven by a same-store sales increase of 3.1 percent from the comparable prior year period. The company had projected sales in the range of $238.0 million to $246.0 million with same-store sales growth in the range of negative 1.0 percent to positive 2.0 percent.
  • Income from operations was $17.0 million compared to $16.6 million in the fourth quarter of fiscal year 2017. Adjusted income from operations was $17.1 million in the fourth quarter of fiscal 2017, which excludes the write-off of an IT-related asset that did not impact the fourth quarter of fiscal 2018.
  • Interest expense decreased to $2.7 million from $3.7 million in the fourth quarter of fiscal year 2017.
  • Net income was $10.6 million compared to net income of $5.9 million in the fourth quarter of fiscal year 2017. Adjusted net income in the fourth quarter of fiscal 2017 was $8.4 million, which excludes the write-off of an IT related asset and the impact of the Tax Cuts and Jobs Act (“US Tax Reform”) that did not impact the fourth quarter of fiscal 2018.
  • Diluted earnings per share was $0.25 compared to diluted earnings per share of $0.14 for the fourth quarter of fiscal year 2017. Adjusted diluted earnings per share was 20 cents in the fourth quarter of fiscal 2017.
  • On an adjusted basis, earnings climbed 26.2 percent to $10.6 million, or 25 cents a share, from $8.4 million, or 20 cents, a year ago. Adjusted net income was expected to be in the range of $10.0 million to $11.3 million with EPS between 23 cents to 26 cents.
  • Adjusted EBITDA was $22.0 million compared to $23.0 million in the fourth quarter of fiscal year 2017.

For the fifty-two weeks ended February 2, 2019

  • Net sales increased by 4.9 percent to $849.1 million from $809.7 million in fiscal year 2017. Excluding the $10.6 million in sales from the 53rd week of operations in fiscal year 2017, net sales increased by 6.3 percent or $28.8 million. Same-store sales increased by 1.5 percent from the comparable prior year period.
  • Income from operations was $44.0 million compared to $46.6 million in fiscal year 2017. Adjusted income from operations, which excludes charges incurred in conjunction with the retirement of the company’s former CEO, was $46.7 million, compared to adjusted income from operations of $48.8 million, which excludes professional and other fees incurred in connection with the evaluation of a strategic acquisition and the write-off of an IT related asset, in fiscal year 2017.
  • Interest expense decreased to $13.2 million, including a $1.6 million write off of debt discount and deferred financing fees associated with the company’s old term loan, from $13.7 million in fiscal year 2017.
  • Net income was $23.8 million compared to net income of $17.7 million in fiscal year 2017. Adjusted net income, which excludes charges incurred in conjunction with the retirement of the company’s former CEO, the write-off of deferred financing fees and debt discount associated with the company’s old term loan, and a non-recurring tax benefit, was $25.9 million compared to adjusted net income, which excludes professional and other fees incurred in connection with the evaluation of a strategic acquisition, the write-off of an IT related asset, and the impacts of US Tax Reform, of $21.3 million in fiscal year 2017.
  • Diluted earnings per share was $0.55 compared to $0.42 in fiscal year 2017. Adjusted diluted earnings per share was $0.60 compared to $0.50 in fiscal year 2017.
  • Adjusted EBITDA was $68.5 million compared to $72.8 million in fiscal year 2017.

Balance sheet highlights as of February 2, 2019:

  • Total debt: $179.9 million consisting of $144.3 million outstanding under the company’s revolving credit facility and $35.6 million outstanding under the term loan, net of unamortized debt issuance costs.
  • Total liquidity (cash plus $19.3 million of availability on revolving credit facility): $20.8 million

First Quarter and Fiscal Year 2019 Outlook:

For the first quarter of fiscal year 2019, net sales are expected to be in the range of $174.0 million to $180.0 million based on a change in same-store sales in the range of (2.0 percent) to (5.0 percent) compared to the corresponding period of fiscal year 2018. Net loss is expected to be in the range of ($3.5) million to ($4.8) million with diluted loss per share of ($0.08) to ($0.11) on a weighted average of approximately 43.0 million estimated common shares outstanding.

For fiscal year 2019, net sales are expected to be in the range of $860.0 million to $890.0 million based on a change in same-store sales in the range of (1.0 percent) to 2.0 percent compared to fiscal year 2018. Net income is expected to be in the range of $22.5 million to $27.5 million with earnings per diluted share of $0.52 to $0.64 on a weighted average of approximately 43.2 million estimated common shares outstanding.

CFO Transition:

The company also today announced that Kevan Talbot, the company’s Chief Financial Officer, will be leaving the company in the coming months to spend more time with his family before pursuing other interests. The company has launched a search to identify and recruit a new CFO, and Mr. Talbot is expected to continue to serve as Chief Financial Officer to assist in the search for a replacement and to ensure a smooth transition of his duties.

“On behalf of the Sportsman’s Warehouse Board of Directors and management team, I want to express my gratitude for Kevan’s significant contributions during his 17-year tenure with the company,” said Jon Barker, Chief Executive Officer. “In his ten years as CFO, not only did he help take the company public, but he has been instrumental in our relationships with the investment community, has driven improvements in our capital structure and has built a strong and capable finance team. We wish him well in his future endeavors.”

Image courtesy Sportsman’s Warehouse