Sign in

You're signed outSign in or to get full access.

SW

SPORTSMAN'S WAREHOUSE HOLDINGS, INC. (SPWH)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 revenue and profitability declined amid ongoing consumer pressure and heavier promotions: Net sales fell to $288.7M (–6.7% YoY), gross margin compressed to 31.2% (–140 bps YoY), and diluted EPS was –$0.16; adjusted EBITDA was $7.4M .
  • Same-store sales decreased 9.8% with broad category softness (fishing the lone positive), while e-commerce rose ~3% and reached 19% of sales, aided by targeted firearm/ammo promotions and omnichannel efforts .
  • Management cut FY24 guidance: net sales to $1.13–$1.17B (from $1.15–$1.23B) and adjusted EBITDA to $20–$35M (from $45–$65M); capex held at $20–$25M, with no new stores in 2024; positive FCF still expected and prioritized for debt paydown .
  • Liquidity bolstered via a $45M term loan; quarter-end net debt was $152.5M, inventory down ~$94M YoY to $363.4M, and total liquidity ~$100M (rose to ~$127M after August) .
  • Key near-term stock catalysts: guidance cut and margin headwinds (shrink, promo) vs. improving mix/assortment resets, targeted inventory investment (~$20M in core hunting), and marketing transformation under new leadership .

What Went Well and What Went Wrong

What Went Well

  • E-commerce execution improved: e-com sales grew ~3% and comprised 19% of total sales, led by hunting and fishing, supported by new omnichannel marketing leadership and a unified go-to-market plan .
  • Fishing outperformed: same-store sales up ~6% with consistent regional growth, highlighting better early-season positioning and depth where assortment was right .
  • Cost discipline gaining traction: SG&A dollars fell ~$8M YoY despite six new stores; per-store payroll down ~17% with improved efficiencies, contributing to lower SG&A as a % of sales vs. Q2’23 .

What Went Wrong

  • Revenue and margin shortfalls: Net sales of $288.7M missed internal expectations; gross margin fell to 31.2% due to increased shrink and seasonal markdowns (apparel, camping) .
  • Shrink emerged as a new headwind: methodology changes to improve inventory accuracy increased recognized shrink, with further headwind expected in 2H 2024 .
  • Discretionary demand weakness and heavier promotions: core customer under macro pressure; heavier promotional activity (especially firearms/ammo mid-June) supported traffic but pressured category margins, and same-store sales declined 9.8% .

Financial Results

Headline metrics vs. prior year and prior quarter

MetricQ2 2023Q1 2024Q2 2024
Net Sales ($M)$309.5 $244.2 $288.7
Gross Margin %32.6% 30.2% 31.2%
SG&A % of Sales33.1% 38.6% 32.7%
Net Loss ($M)$(3.3) $(18.1) $(5.9)
Diluted EPS ($)$(0.09) $(0.48) $(0.16)
Adjusted Diluted EPS ($)$(0.04) $(0.47) $(0.14)
Adjusted EBITDA ($M)$13.1 $(8.7) $7.4

KPIs and balance sheet

KPIQ2 2023Q1 2024Q2 2024
Same-Store Sales %(16.1%) (13.5%) (9.8%)
E-commerce Mix % of Sales——19%
Inventory ($M)$457.2 $391.6 $363.4
Net Debt ($M)$200.2 $161.8 $152.5
Total Liquidity ($M)$98.6 $80.8 $99.9; ~$127M after Aug

Department trends (same-store sales where disclosed)

Department / KPIQ2 2024
Hunting(13%) comp; improved through July; pricing/marketing refocus
Fishing+~6% comp; consistent regional growth
Apparel / CampingSeasonal markdowns to end season clean; pressured categories
E-commerce~3% growth; 19% of sales mix

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($B)FY 2024$1.15–$1.23B $1.13–$1.17B Lowered
Adjusted EBITDA ($M)FY 2024$45–$65M $20–$35M Lowered
Capex ($M)FY 2024$20–$25M $20–$25M Maintained
New Store OpeningsFY 2024None anticipated No new stores for remainder of FY24 Maintained
Free Cash FlowFY 2024Expected H2 FCF to reduce revolver balance Expect positive FCF for full year; prioritize debt paydown Maintained/clarified
Ending Inventory ($M)FY 2024—Target $335–$350M (company target) New disclosure

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2024)Current Period (Q2 2024)Trend
Promotions/MarkdownsValue-driven assortment; disciplined expenses Aggressive promotions and seasonal markdowns (apparel/camping); heavier ammo/firearm promotions mid-June More aggressive promos to drive traffic
ShrinkNot highlightedRecognized as a headwind due to methodology changes; expected to continue in 2H New headwind emerged
Inventory StrategyInventory $391.6M; focus on balance sheet, H2 FCF Inventory down to $363.4M; plan ~$20M strategic core hunting investment; end clean From rightsizing to targeted reinvestment
Omnichannel/E-comNo quant providedE-com 19% of sales, +~3%; new omnichannel marketing leader unifying teams Strengthening digital/marketing execution
Store Growth/Real EstateNo new stores anticipated in 2024 No new store openings for remainder of FY24 Pause continues
Liquidity/Capital StructureRevolver mgmt; focus on paydown New $45M term loan; liquidity ~ $100M, ~ $127M after Aug Liquidity enhanced
Technology InvestmentsCapex $20–$25M for merchandising/store productivity Capex reiterated for tech to improve service/productivity Ongoing

Management Commentary

  • “We continued to make substantial progress on our initiatives to reset the business... however, we were disappointed that sales and margins came in below our expectations.” — Paul Stone, CEO .
  • “Gross margin... was largely driven by increased costs associated with shrink... and seasonal markdowns within our camping and apparel departments in an effort to end the season with clean inventory.” — Jeff White, CFO .
  • “E-com-driven sales were up about 3%... comprised 19% of our total sales.” — Paul Stone .
  • “We are making an incremental $20 million investment into new and core inventory focused on products for our hunting department.” — Paul Stone .
  • “We... secured a $45 million term loan... strengthening our balance sheet, allowing us to focus... on a continued reset of the business.” — Jeff White (release) ; see loan announcement .

Q&A Highlights

  • Promotions focus: Heavier promos centered on firearms/ammo (mid-June) to drive price-sensitive traffic; seasonal markdowns to end summer clean; apparel/footwear were key promotional areas .
  • Shrink impact: Headwind tied to methodology/operational changes to improve inventory accuracy; expected to persist in 2H as cycle counts increase on high-velocity SKUs .
  • Category cadence: Hunting comps improved through July; California’s 11% excise tax caused some pull-forward with smaller-than-typical post-tax drop-off due to targeted engagement .
  • Loyalty/credit attachment: Attachment rates improved to all-time highs with supplier support and outfitter incentives; conversion metrics trending positively under the “outfitter” model .
  • Free cash flow and expense levers: Positive FY24 FCF reiterated (inventory target central); expense cuts now granular (contracts/landlords) vs. large early-2023 reductions .

Estimates Context

  • We attempted to retrieve Wall Street consensus (S&P Global) for Q2 2024 revenue and EPS but the request failed due to provider rate limits; as a result, we cannot present a definitive beat/miss vs. consensus for Q2 2024 at this time [GetEstimates error].
  • Implication: Without consensus comparisons, investors should anchor on the company’s updated FY24 guidance and intra-quarter qualitative trends (mix, promo intensity, shrink) to recalibrate models .

Key Takeaways for Investors

  • Guidance reset: FY24 sales and adjusted EBITDA ranges were lowered; margin headwinds (shrink, markdowns) likely persist through 2H, with heavier holiday promotions implied—model lower margins near term .
  • Liquidity improved but discipline still key: $45M term loan and ~$100–$127M liquidity cushion support the reset; management prioritizes FCF and debt paydown—balance sheet risk moderated but not eliminated .
  • Assortment depth is a core lever: Underinvestment in core items pressured Q1/Q2; a ~$20M targeted reinvestment (hunting) and clean seasonal exits should aid sell-through and comp stabilization into holiday .
  • Digital and marketing execution inflecting: E-com mix at 19% and leadership unifying omnichannel strategy—watch for traffic and conversion lift as programs scale through fall/holiday .
  • Category dynamics: Fishing strength contrasts with hunting/apparel/camping pressure; firearms/ammo promos improve traffic but weigh on commodity margins—monitor category mix and promo elasticity .
  • Shrink methodology change: Expect continued headwind as counts rise; better inventory accuracy should support long-term working-capital efficiency—short-term GM drag for improved control .
  • Near-term trading setup: Results likely constrained by macro and promotions; catalysts include holiday execution vs. guided promo cadence, progress on inventory targets ($335–$350M), and any improvement in shrink trajectory .

Financial Appendix (Q2 2024 detail from press release)

  • Q2 2024: Net sales $288.7M; gross profit $90.0M (31.2%); SG&A $94.3M (32.7%); net loss $(5.9)M; adjusted net loss $(5.3)M; adjusted EBITDA $7.4M .
  • 1H 2024: Net sales $533.0M; gross profit $163.8M (30.7%); SG&A $188.8M (35.4%); net loss $(24.0)M; adjusted net loss $(23.1)M; adjusted EBITDA $(1.3)M; inventory $363.4M; net debt $152.5M; liquidity $99.9M .