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SW

SPORTSMAN'S WAREHOUSE HOLDINGS, INC. (SPWH)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 FY2024 net sales were $244.2M, down 8.7% year over year, with same-store sales -13.5%; gross margin improved 30bps to 30.2% as fishing mix helped, while SG&A dollars fell $4.6M but rose to 38.6% of sales on lower volumes .
  • Diluted EPS was -$0.48; adjusted EPS was -$0.47; adjusted EBITDA was -$8.7M, reflecting weak hunting/shooting demand and heavier rent/depreciation from 11 new stores opened since April 2023 .
  • Management reaffirmed FY2024 guidance: net sales $1.15B–$1.23B, adjusted EBITDA $45M–$65M, CapEx $20M–$25M, and no new store openings; excess free cash flow is expected to reduce line-of-credit borrowings in 2H24 .
  • Balance sheet: inventory $391.6M, net debt $161.8M, liquidity $80.8M; inventory is meaningfully cleaner vs last year, enabling better seasonal execution .
  • Potential catalyst: back-half gross margin recovery as clearance pressure anniversaries, incremental $5M–$7M annualized cost savings (freight and contracts), and improved category mix (camp/fish) could shift narrative if traffic improves and promotions normalize .

What Went Well and What Went Wrong

What Went Well

  • Fishing turned to positive comps in Q1; gross margin improved to 30.2% from 29.9% on better mix and rate in fishing; “our stores are beginning to come to life visually” with early and deeper seasonal sets .
  • Expense discipline: SG&A dollars down $4.6M YoY; per-store SG&A down 12.3% YoY; identified an incremental $5M–$7M annualized savings (majority in freight), layered on top of ~$25M annualized reductions achieved in 2H23 .
  • Inventory reset and SKU/vendor rationalization: inventory down ~$77.9M YoY; ~20% SKU/vendor reduction enterprise-wide supports depth in core items and higher-margin categories .

What Went Wrong

  • Macro-driven discretionary softness and firearm/ammo demand pressure: hunting department sales down ~7%; apparel -26% and footwear -28%; traffic remained challenging .
  • Promotions likely to weigh on near-term margin (Q2), with management focused on driving traffic; back-half margin recovery more likely as clearance-heavy comps anniversary .
  • SG&A as % of sales rose to 38.6% (from 37.0%) on deleveraging, and rent/depreciation increased ~$3.7M from new stores, widening operating loss and EPS .

Financial Results

MetricQ1 FY2023 (Apr 29, 2023)Q4 FY2023 (Feb 3, 2024)Q1 FY2024 (May 4, 2024)
Net Sales ($USD Millions)$267.5 $370.4 $244.2
Gross Margin %29.9% 26.8% 30.2%
SG&A % of Net Sales37.0% 29.0% 38.6%
Operating Income (Loss) ($USD Millions)-$19.0 -$7.9 -$20.6
EBIT Margin %-7.1% -2.2% -8.4%
Net Income (Loss) ($USD Millions)-$15.6 -$8.7 -$18.1
Net Income Margin %-5.9% -2.4% -7.4%
Diluted EPS ($USD)-$0.42 -$0.23 -$0.48

Segment/category trends (management commentary):

DepartmentQ3 FY2023Q4 FY2023Q1 FY2024
HuntingComps -10.6%; firearms -5.2%, ammo -10.6%; October lift from event-driven demand Best performing category; down 3.9% on 14-week basis Down ~7% vs prior year
FishingComps -5.8%; total fishing sales +2.7% YoY Early-season strength into spring noted; set earlier than usual Positive comps; early and deeper sets drove mix benefits
Camping—Positive early trends into spring Down ~6% YoY but improving with cleaner inventory
ApparelDown slightly (-2.1%) YoY (clearance-heavy) Clearance significantly pressured gross margin Down ~26% YoY; leaner inventory and fewer vendors
FootwearUp +1.8% YoY (clearance-heavy) Clearance significantly pressured gross margin Down ~28% YoY; leaner inventory and fewer vendors

Key KPIs:

KPIQ4 FY2023Q1 FY2024
Same-Store Sales-12.8% (13-week comparable) -13.5%
Ending Inventory ($USD Millions)$354.7 $391.6
Net Debt ($USD Millions)$122.9 $161.8
Liquidity ($USD Millions)$91.4 $80.8
Adjusted EBITDA ($USD Millions)$5.3 (Q4) -$8.7
Adjusted Diluted EPS ($USD)-$0.20 (Q4) -$0.47

Estimates comparison (Q1 FY2024):

MetricActualConsensusBeat/Miss
Revenue$244.2M Consensus unavailable (S&P Global data unavailable today)N/A
Diluted EPS-$0.48 Consensus unavailable (S&P Global data unavailable today)N/A

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY2024$1.15B–$1.23B $1.15B–$1.23B Maintained
Adjusted EBITDAFY2024$45M–$65M $45M–$65M Maintained
CapExFY2024$20M–$25M $20M–$25M Maintained
New Store OpeningsFY2024None anticipated None anticipated Maintained
Debt Reduction (FCF usage)FY2024 (H2 timing)Prioritized FCF to pay down line of credit Expect FCF to reduce line of credit in 2H24 Maintained (timing reiterated)

Earnings Call Themes & Trends

TopicQ3 FY2023Q4 FY2023Q1 FY2024Trend
Inventory & SKU rationalizationAggressive clearance in apparel/footwear; target inventory < $375M YE Inventory ended $354.7M; clearing distressed inventory drove ~300–800bps GM pressure; prepared earlier for spring sets Inventory YoY down ~$77.9M; cleaner mix; rationalized ~20% SKUs/vendors Improving mix, cleaner inventory; depth in core items
Promotions & Gross MarginElevated promotions; event-driven lift short-lived Heavy clearance drove GM to 26.8%; EPS impact quantified More aggressive promotions in Q2 to drive traffic; margin improvement back-half weighted Near-term margin pressure; recovery expected H2
Category Mix (Fish/Camp vs Firearms/Ammo)Fishing total sales +2.7% YoY; comps -5.8% Early strength in fish/camp; mix benefits Fishing comps positive; mix aided GM Favoring higher-margin categories
Technology & OperationsOmnichannel improvements; cost cuts underway Blue Yonder merchandising/planning; workforce management tool Store resets (layouts, sightlines); loyalty/digital marketing focus Execution tools and store experience improving
Private Label—Strategic, quality-first approach; back-half introduction Early success; expanding thoughtfully Gradual build to support value

Management Commentary

  • “Our stores are beginning to come to life visually, with improved store layouts, sightlines and feature space, making for an improved customer experience.” — Paul Stone, CEO .
  • “Gross margin…30.2%…primarily driven by improved mix and rate from our fishing department.” — Jeff White, CFO .
  • “We identified an additional $5 million to $7 million of annualized cost savings…majority…in the freight line…immediate in nature.” — Jeff White, CFO .
  • “We are positioning ourselves for a relaunch of our stores in early fall, setting us up for a successful back half of the year.” — Paul Stone, CEO .

Q&A Highlights

  • Confidence in full-year guidance despite “slightly weaker Q1” and more promotional Q2; management expects back-half profitability improvement as clearance-heavy comps anniversary and merchandising is more relevant .
  • Gun demand: regulatory/political chatter did not materially change trends; hunting/shooting remains pressured; need to maintain competitiveness in service and pricing given ample supply .
  • Gross margin trajectory: near-term promotions temper sequential uplift; opportunity in back half as full-priced goods and clean inventory support margin .
  • Cost savings: incremental $5M–$7M largely from freight renegotiations with immediate impact; additional contract/process improvements to SG&A .
  • Store resets: fleet-wide visual and allocation changes targeted to be completed by August ahead of fall; seasonal sets performing better with newness and depth .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 FY2024 revenue and EPS was unavailable today due to data access limits; as a result, we cannot assess beat/miss versus estimates at this time. When S&P Global data becomes available, comparisons should anchor to that source [Estimates unavailable from S&P Global today].

Key Takeaways for Investors

  • Near term: expect heavier promotions in Q2 to drive traffic; margin uplift likely back-half weighted as the company cycles last year’s clearance and normalizes mix toward fishing/camp .
  • Expense and freight savings are tangible ($5M–$7M annualized) and additive to prior ~$25M reductions, partially offsetting deleverage from lower sales .
  • Inventory is cleaner and more relevant; category depth and earlier seasonal sets (especially fishing) are improving conversion and margin mix .
  • Balance sheet focus persists: management plans to use excess FCF to reduce line-of-credit borrowings in 2H24; liquidity $80.8M and net debt $161.8M at Q1-end .
  • Risks: firearm/ammo margin pressure amid competitive pricing and abundant supply; persistent consumer softness may require elevated promotions, delaying margin recovery .
  • No new stores in 2024; technology and store experiences (Blue Yonder, workforce management, merchandising resets) are priority investments to improve productivity and service .
  • Watch for back-half catalysts: store “relaunch” by early fall, normalized promotions, and mix shift to higher-margin categories; confirm with next quarter trends and any update to annual guidance .