Sportsman’s Warehouse Earnings Call: Mixed Sentiments and Strategic Focus

Sportsman’s Warehouse ((SPWH)) has held its Q1 earnings call. Read on for the main highlights of the call.

In the recent earnings call, Sportsman’s Warehouse presented a balanced sentiment, highlighting both achievements and challenges. The company celebrated its first positive year-over-year sales comp in four years and gained market share in firearms. E-commerce also showed robust growth. However, the company faced a significant net loss and pressure on gross margin due to strategic inventory adjustments, reflecting a mix of positive and negative aspects.

Positive Year-Over-Year Sales Comp

Sportsman’s Warehouse achieved its first positive year-over-year sales comp in nearly four years, with first quarter sales up 2% compared to last year. This marks a significant milestone for the company, indicating a positive shift in sales performance.

Firearms Market Share Gain

The company reported a notable increase in firearm unit sales, which rose nearly 7% over last year. This growth significantly outpaced the adjusted NICS data, which declined 5.4%, suggesting that Sportsman’s Warehouse successfully captured market share in this category.

E-commerce Growth

E-commerce sales posted a positive comp, increasing by 8% over the previous year. This growth was fueled by a new digital-first marketing strategy and an improved omnichannel customer experience, highlighting the company’s successful adaptation to digital trends.

Fishing Category Success

Fishing sales experienced an 11% increase, with a two-year comp stack growth of 12.3%. This success validates the company’s new merchandising strategy, showcasing effective category management.

SG&A Leverage Improvement

There was an improvement in SG&A expenses as a percentage of net sales, dropping from 38.6% to 38.2%. This reflects the company’s continued focus on expense discipline and operational efficiency.

Net Loss in Q1

Despite these positive developments, the company reported a net loss of $21.3 million for the first quarter, compared with a net loss of $18.1 million in the first quarter of the prior year, indicating ongoing financial challenges.

Pressure on Gross Margin

The gross margin saw a modest increase of 20 basis points, hindered by increased freight expenses tied to strategic inventory pull-forward in anticipation of higher tariffs, showcasing the challenges in maintaining profitability.

Camping Sales Decline

Camping sales were down, attributed to a later spring and the timing of Easter, which impacted the overall performance of this category.

Increased Inventory Levels

Inventory levels at the end of Q1 were $412.3 million, up from $391.6 million. This increase was due to a strategic pull-forward of approximately $20 million of inventory ahead of rising tariffs, reflecting proactive inventory management.

Adjusted EBITDA Decline

The adjusted EBITDA for the first quarter was negative $9 million, compared with negative $8.7 million in the first quarter of 2024, indicating a slight decline in earnings before interest, taxes, depreciation, and amortization.

Forward-Looking Guidance

Looking ahead, Sportsman’s Warehouse anticipates fiscal 2025 net sales to range between down 1% to up 3.5% compared to 2024, with adjusted EBITDA expected to be between $33 million and $45 million. The company remains focused on inventory efficiency, aiming to end the year with lower inventory levels and generate positive free cash flow to reduce debt. These strategic initiatives highlight the company’s commitment to improving financial health and operational efficiency.

In summary, the Sportsman’s Warehouse earnings call reflected a balanced sentiment with both achievements and challenges. The company celebrated significant milestones in sales and market share growth, particularly in firearms and e-commerce. However, financial challenges persist, as evidenced by the net loss and pressure on gross margins. Looking forward, the company remains focused on strategic initiatives to improve financial performance and operational efficiency.