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SW

SPORTSMAN'S WAREHOUSE HOLDINGS, INC. (SPWH)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 results modestly improved sequentially but remained pressured: Net sales $324.3M (-4.8% YoY), same-store sales -5.7%, gross margin +150 bps YoY to 31.8% on mix and rate improvements; diluted EPS $(0.01); adjusted EPS $0.04; adjusted EBITDA $16.4M .
  • Management leaned into promotions (gifting/value) and inventory investments to support hunting/holiday, which aided traffic but weighed on margins versus internal expectations; firearms/ammo mix also pressured rate while fishing (+13% YoY), camping and “gift bar” (optics/electronics/cutlery) comped positive .
  • FY24 guidance raised on sales and tightened on EBITDA: net sales to $1.18–$1.20B (from $1.13–$1.17B), adjusted EBITDA to $23–$29M (from $20–$35M), capex cut to $17–$20M; inventory targeted below $350M; no new stores in FY24 and one planned in FY25 .
  • Balance sheet: net debt $151.3M; liquidity $150.8M; management expects positive FY24 free cash flow with excess cash to pay down debt, a key near‑term catalyst alongside holiday execution and inventory reduction .

What Went Well and What Went Wrong

  • What Went Well

    • Category outperformance and demand capture: Fishing comps +13% YoY; camping and gift bar also positive; firearms units outpaced NICS as SPWH leaned into its leadership in the category .
    • Gross margin expanded 150 bps YoY to 31.8% on improved apparel/footwear margins (despite mix/freight/shrink headwinds) and more disciplined end‑of‑season clearance approach versus last year .
    • Strategic marketing shift drove digital engagement and e‑comm: “highest ever e‑comm transaction count” during Black Friday/Cyber Week; pivot from print to targeted digital improved measurability (ROAS) and bottom‑funnel conversion .
    • Quote: “We implemented new and targeted promotions and ad campaigns… to drive customer traffic and increase transactions.” — CEO Paul Stone .

  • What Went Wrong

    • Top line softness persisted: Net sales -4.8% YoY; comps -5.7%; pressured discretionary consumer and promotion-driven environment required heavier value messaging and discounts .
    • Margin below internal expectations: Higher firearms/ammo mix, softer apparel/footwear penetration, promotional stance, and freight on inventory build weighed on gross margins versus plan (despite YoY expansion) .
    • SG&A steadied but included legal settlement costs; adjusted SG&A implies a “steady-state” base into Q4 with some seasonal lift, limiting near-term operating leverage .

Financial Results

MetricQ3 2023Q2 2024Q3 2024
Net Sales ($M)$340.6 $288.7 $324.3
Gross Margin %30.3% 31.2% 31.8%
SG&A % of Sales29.4% 32.7% 30.8%
Operating Income ($M)$3.07 $(4.32) $3.12
Net Income ($M)$(1.33) $(5.91) $(0.36)
Diluted EPS ($)$(0.04) $(0.16) $(0.01)
Adjusted Diluted EPS ($)$(0.01) $(0.14) $0.04
Adjusted EBITDA ($M)$16.23 $7.41 $16.38

KPIs and Balance Sheet

KPIQ2 2024Q3 2024
Same-Store Sales (YoY)-9.8% -5.7%
Inventory ($M)$363.4 $438.1
Net Debt ($M)$152.5 $151.3
Total Liquidity ($M)$99.9 $150.8
Revolver Outstanding ($M)$131.1 $130.0
Term Loan ($M)$24.0 $24.0

Category/Segment Commentary (qualitative)

CategoryQ3 2024 Commentary
Fishing+13% comp YoY; strategic merchandising/newness supported gains
CampingPositive comp YoY
“Gift bar” (optics/electronics/cutlery)Positive comp YoY
FirearmsUnits outperformed NICS; pricing trade-down evident
AmmunitionHeadwind YoY, lapping Israel-Hamas spike last year
Apparel/FootwearBelow plan; under-penetrated vs expectations; higher-margin categories

Note: Company does not report operating segments with revenue contribution in earnings materials .

Guidance Changes

MetricPeriodPrevious Guidance (9/3/24)Current Guidance (12/10/24)Change
Net SalesFY2024$1.13–$1.17B $1.18–$1.20B Raised
Adjusted EBITDAFY2024$20–$35M $23–$29M Narrowed lower at midpoint (27.5→26)
Inventory (Ending)FY2024—< $350M New target
Capital ExpendituresFY2024$20–$25M $17–$20M Lowered
Free Cash FlowFY2024Positive implied at low end Positive implied at low end Maintained
Store OpeningsFY2024/FY2025No new stores FY24 No FY24; one store in FY25 Maintained FY24; added FY25 plan

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2024)Current Period (Q3 2024)Trend
Consumer & PromotionsQ1: Value-driven assortment, macro pressure; reaffirmed higher FY guide at that time . Q2: Aggressive promos; margin pressure; cut FY guide; positive FCF reiterated .More aggressive promos (gifting/value) to drive traffic; sequential comp improvement; still pressured consumer .Ongoing promotion intensity; sequential comp improvement.
Gross Margin DriversQ2: Shrink and seasonal markdowns pressured rate .+150 bps YoY; but below plan due to firearms/ammo mix, under-penetrated apparel/footwear, and freight on inventory build .Mix headwind persists; apparel/footwear uplift needed.
Inventory StrategyQ1: Seasonal buys; focus on balance sheet and FCF . Q2: End summer clean; inventory -$93.8M YoY; added $45M term loan capacity .Built inventory for hunt/holiday to ensure in-stocks/newness; target < $350M by year-end .Build then reduce; disciplined year-end target.
Firearms Demand/NICS—Units outpaced NICS; price trade-down; leverage attachment to offset promo pressure .Units strong; margin managed via attachment.
Marketing/Digital—Shift from print to digital; bottom-funnel focus; record e‑comm transactions during BF/Cyber .Improved measurability and conversion.
Tariffs/Macro—Direct tariff exposure <3% (private brands); monitoring branded supply chains; higher US-made penetration vs peers .Limited direct exposure; watch 2025.
Legal/Regulatory—California legal settlement impacted SG&A .One-time item in Q3.
IT/Operations—Continued investments in merchandising/store productivity systems to improve in-stocks/margins .Foundational to reset thesis.

Management Commentary

  • “We implemented new and targeted promotions and ad campaigns aligned with normal seasonal demand to drive customer traffic and increase transactions.” — Paul Stone, CEO .
  • “Gross margins… came in below where we expected due to… higher‑than‑expected penetration of firearms and ammo in October… [and] underperformed… apparel and footwear… two of our highest margin categories.” — Jeff White, CFO .
  • “We introduced a new omni‑channel marketing campaign… and… experienced our highest ever e‑comm transaction count” during Black Friday/Cyber Week .
  • “We will remain disciplined in managing our expenses, and will reduce total inventory levels to generate positive free cash flow. Our mid and long-term objectives will be centered on improving our topline with a focus on margins and profitability.” — Jeff White, CFO .
  • “We will prioritize the paydown of our debt as the primary use of excess cash flow. Maintaining a strong balance sheet is a top priority.” — Jeff White, CFO .

Q&A Highlights

  • Comps cadence improved sequentially through Q3; promotions offset tough laps (apparel/footwear liquidation and Israel-Hamas demand spike last year). Q4 comps interpretation complicated by 53rd week shift; management still expects sequential improvement .
  • Gross margin outlook: No repeat of last year’s extreme liquidation pressure in Q4; margin recapture expected vs last year’s clearance impact (no specific rate provided) .
  • SG&A: Adjusted SG&A around ~$98M base in Q3; expect steady-state into Q4 with some seasonal lift; savings in back office to be reinvested in store labor and service .
  • Firearms/attachments: Units outpaced NICS; attachment selling and solution-oriented approach help offset lower firearm margins amid promotions and price trade-down .
  • Tariffs: Direct private-brand exposure <3%; monitoring branded supply chains; relatively higher US-made penetration .
  • Holiday/inventory: Confident in meeting year-end sales and inventory targets; not expecting heavy clearance/liquidation into January as last year .
  • New stores: One opening planned in FY25 (AZ), late Q2/early Q3 timing; standard 30k sq. ft format with updated VM/layout learnings .

Estimates Context

  • We attempted to retrieve S&P Global (SPGI) Wall Street consensus estimates for revenue, EPS, and EBITDA for the current quarter and near-term forward periods; data was unavailable at this time due to an SPGI daily request limit. As a result, we cannot provide a vs-consensus comparison for Q3 2024 or updated FY24 guidance in this report. We will update when SPGI access is restored.

Key Takeaways for Investors

  • Sequential progress: Comps improved and adjusted EBITDA rebounded to $16.4M, aided by promotions and category bright spots; but rate pressure from firearms/ammo mix and softer apparel/footwear persists .
  • Guidance reset is constructive: Sales guidance raised; EBITDA range narrowed with a slightly lower midpoint; capex cut; explicit inventory target supports free cash flow and deleveraging narrative .
  • Holiday execution is pivotal: Managing promotions to drive traffic while protecting margins and ending inventory < $350M will likely drive near-term stock reaction .
  • Margin mix watch: Reacceleration in apparel/footwear penetration and moderation in ammo/firearms mix are key levers for gross margin recovery in 2025, alongside shrink and freight normalization .
  • Digital/omni traction: Bottom‑funnel, measurable digital marketing and record e‑comm transactions suggest improved traffic conversion; sustainment into Q4 could underpin top-line stabilization .
  • Balance sheet discipline: Expectation for positive FY24 FCF and debt paydown reduces risk; liquidity improved to $150.8M .
  • 2025 setup: One new store (AZ), IT/merchandising systems investments, and category leadership in firearms position SPWH to leverage any macro stabilization, but execution on mix and inventory discipline remains critical .