Sportsman's Warehouse Holdings, Inc. Announces Third Quarter 2022 Financial Results


WEST JORDAN, Utah, Dec. 07, 2022 (GLOBE NEWSWIRE) -- Sportsman's Warehouse Holdings, Inc. (“Sportsman's Warehouse” or the “Company”) (Nasdaq: SPWH) today announced third quarter financial results for the thirteen and thirty-nine weeks ended October 29, 2022.

“We executed our strategic initiatives and reported strong sales and earnings results in the third quarter, despite the challenging macroeconomic environment,” said Jon Barker, Sportsman’s Warehouse President and Chief Executive Officer. “The investments made over the last few years to enhance our omnichannel capabilities have strengthened the overall foundation of the business. Moving forward, we will continue to closely manage the business with discipline and rigor, and maintain focus on leveraging our investments while accelerating the growth of our store footprint to reach more customers nationwide.”

For the thirteen weeks ended October 29, 2022:

  • Net sales were $359.7 million, a decrease of 10.3%, compared to $401.0 million in the third quarter of fiscal year 2021. The net sales decrease was primarily due to lower demand across most product categories as we continued to experience the impact of consumer inflationary pressures and recessionary concerns. This decrease, however, was partially offset by the opening of 11 new stores since October 30, 2021. Compared to the third quarter of fiscal year 2019 net sales increased 48.3% from $242.5 million.

  • Same store sales decreased 15.0% during the third quarter of 2022, compared to the third quarter of 2021. Compared to the same period of 2019, same store sales increased 19.5%.

  • Gross profit was $120.8 million or 33.6% of net sales, compared to $129.6 million or 32.3% of net sales in the comparable prior year period. The 130 basis point improvement, as a percentage of net sales, can be attributed to increased product margins, favorable shipping, freight, and logistical expenses, and favorable product mix.

  • Selling, general and administrative (SG&A) expenses were $102.3 million, an increase of 2.3%, compared to $100.0 million in the third quarter of fiscal year 2021. This increase was primarily due to resuming our pre-pandemic marketing and travel related activities during the quarter, as well as higher depreciation, rent and management recruiting expenses due to new store openings. These expenses were partially offset by a decrease in acquisition costs due to the terminated merger and increased store operating efficiencies.

  • Net income was $12.9 million, compared to net income of $21.9 million in the third quarter of 2021. Adjusted net income was $13.1 million, compared to adjusted net income of $22.7 million in the third quarter of 2021 (see “GAAP and Non-GAAP Measures”).

  • Adjusted EBITDA was $29.1 million, compared to $39.3 million in the comparable prior year period (see "GAAP and Non-GAAP Measures").

  • Diluted earnings per share were $0.33 compared to diluted earnings per share of $0.49 in the comparable prior year period. Adjusted diluted earnings per share were $0.34 compared to adjusted diluted earnings per share of $0.51 for the comparable prior year period (see "GAAP and Non-GAAP Measures").

For the thirty-nine weeks ended October 29, 2022:

  • Net sales were $1.02 billion, a decrease of 6.4%, compared to $1.09 billion in the first nine months of fiscal year 2021. This net sales decrease was primarily driven by lower demand across most product categories as we anniversaried the increased demand driven by the impact of the COVID-19 economic stimulus dollars and current consumer inflationary pressures and recessionary concerns, which were partially offset by the opening of 11 new stores since October 30, 2021.

  • Same store sales decreased 12.1% compared to the first nine months of fiscal 2021. This decrease was primarily due to lower sales demand across most product categories due to inflationary pressures and difficult year-over-year comparisons. Compared to fiscal year 2019, same store sales for the first nine months of 2022 increased 28.8%.

  • Gross profit was $337.5 million or 33.1% of net sales, compared to $353.7 million or 32.5% of net sales for the first nine months of fiscal 2021. This year-over-year improvement was due to increased overall product margins, and decreased shipping, freight, and logistical expenses.

  • SG&A expenses increased to $295.4 million or 29.0% of net sales, compared with $286.3 million or 26.3% of net sales for the first nine months of fiscal 2021. This increase was primarily due to resuming our normal pre-pandemic marketing and travel related activities during the period, as well as higher depreciation, rent and management recruiting expenses due to new store openings. These expenses were partially offset by a decrease in acquisition costs due to the terminated merger and increased store operating efficiencies.

  • Net income was $29.5 million, compared to net income of $50.0 million in the prior year period. Adjusted net income was $30.4 million, compared to adjusted net income of $54.8 million in the first nine months of fiscal 2021 (see “GAAP and Non-GAAP Measures”).

  • Adjusted EBITDA was $72.7 million compared to $98.0 million in the prior year period (see "GAAP and Non-GAAP Measures").

  • Diluted earnings per share were $0.71, compared to diluted earnings per share of $1.13 in the first nine months of last year. Adjusted diluted earnings per share were $0.73, compared to adjusted diluted earnings per share of $1.23 in the prior year period (see "GAAP and Non-GAAP Measures").

Balance sheet and capital allocation highlights as of October 29, 2022:

  • The Company ended the quarter with net debt of $102.5 million, comprised of $2.6 million of cash on hand and $105.1 million of borrowings outstanding under the Company’s revolving credit facility.

  • Total liquidity was $195.5 million as of the end of the third quarter of fiscal 2022, comprised of $192.9 million of availability on the revolving credit facility and $2.6 million of cash on hand.

  • During the third quarter, the Company repurchased 1.2 million shares of its common stock in the open market, returning $10.4 million to shareholders. As of the end of the third quarter, the Company had $12.6 million of remaining capacity under its authorized repurchase program.

Fourth Quarter and Full-Year 2022 Outlook:

For the fourth quarter of fiscal year 2022, net sales are expected to be in the range of $370 million to $385 million, anticipating that same store sales will be down 13% to 9% year-over-year. Adjusted diluted earnings per share for the quarter are expected to be in the range of $0.25 to $0.35. This implies our full-year 2022 net sales will be in the range of $1.39 billion to $1.405 billion, with adjusted diluted earnings per share for the full-year in the range of $0.98 and $1.08.

As we look to fiscal year 2023, we expect to accelerate the growth of our fleet and currently anticipate opening between 13 and 18 new stores during the year. This would be the highest number of new stores opened in a single year.

Jeff White, Chief Financial Officer of Sportsman’s Warehouse said, “Our guidance for the fourth quarter considers ongoing consumer inflationary pressures and a challenging macroeconomic environment, which we are carefully navigating. We will maintain our discipline with expense management and capital allocation as we continue to execute on our short and long-term strategic initiatives.”

Conference Call Information:

A conference call to discuss third quarter 2022 financial results is scheduled for December 7, 2022, at 5:00PM Eastern Time. The conference call will be webcast and may be accessed via the Investor Relations section of the Company’s website at www.sportsmans.com.

Non-GAAP Information

This press release includes the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission (the “SEC”): adjusted net income, adjusted diluted earnings per share and Adjusted EBITDA. We define adjusted net income as net income plus expenses incurred relating to costs incurred for the recruitment and hiring of key members of management, expenses incurred relating to the terminated merger with the Great Outdoors Group, LLC and recognized tax benefits, as applicable. We define adjusted diluted earnings per share as adjusted net income divided by diluted weighted average shares outstanding. We define Adjusted EBITDA as net income plus interest expense, income tax (benefit) expense, depreciation and amortization, stock-based compensation expense, expenses incurred relating to the terminated merger with the Great Outdoors Group, LLC, pre-opening expenses and costs incurred for the recruitment and hiring of key members of management.  The Company has reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures under “GAAP and Non-GAAP Measures” in this release. The Company believes that these non-GAAP financial measures not only provide its management with comparable financial data for internal financial analysis but also provide meaningful supplemental information to investors. Specifically, these non-GAAP financial measures allow investors to better understand the performance of the Company’s business and facilitate a more meaningful comparison of its diluted earnings per share and actual results on a period-over-period basis. The Company has provided this information as a means to evaluate the results of its ongoing operations. Other companies in the Company’s industry may calculate these items differently than the Company does. Each of these measures is not a measure of performance under GAAP and should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements in this release include, but are not limited to, statements regarding our ability to have sufficient inventory of products in demand by our customers and our guidance for the fourth quarter and full fiscal year 2022. Investors can identify these statements by the fact that they use words such as "continue", "expect", "may", “opportunity”, "plan", "future", “ahead” and similar terms and phrases. The Company cannot assure investors that future developments affecting the Company will be those that it has anticipated. Actual results may differ materially from these expectations due to many factors including, but not limited to: current and future government regulations relating to the sale of firearms and ammunition, which may impact the supply and demand for the Company’s products and ability to conduct its business; the Company’s retail-based business model; general economic, market and other conditions and changes in consumer spending; macroeconomic factors, such as political trends, social unrest, inflationary pressures, and recessionary trends; the Company’s concentration of stores in the Western United States; competition in the outdoor activities and specialty retail market; changes in consumer demands; the Company’s expansion into new markets and planned growth; the impact of COVID-19 on the Company’s operations; and other factors that are set forth in the Company's filings with the SEC, including under the caption “Risk Factors” in the Company’s Form 10-K for the fiscal year ended January 29, 2022 which was filed with the SEC on March 30, 2022, and the Company’s other public filings made with the SEC and available at www.sec.gov. If one or more of these risks or uncertainties materialize, or if any of the Company’s assumptions prove incorrect, the Company’s actual results may vary in material respects from those projected in these forward-looking statements. Any forward-looking statement made by the Company in this release speaks only as of the date on which the Company makes it. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

About Sportsman's Warehouse Holdings, Inc.

Sportsman’s Warehouse Holdings, Inc. is an outdoor specialty retailer focused on meeting the needs of the seasoned outdoor veteran, the first-time participant, and everyone in between. We provide outstanding gear and exceptional service to inspire outdoor memories.

For press releases and certain additional information about the Company, visit the Investor Relations section of the Company's website at www.sportsmans.com.

Investor Contact:

Riley Timmer
Vice President, Investor Relations & Corp. Development
Sportsman’s Warehouse
(801) 566-6681
investors@sportsmans.com

 
SPORTSMAN’S WAREHOUSE HOLDINGS, INC.
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
   
 For the Thirteen Weeks Ended 
             
 October 29,
2022
  % of net
sales
 October 30,
2021
  % of net
sales
 YOY
Variance
 
Net sales$359,720  100.0% $401,014  100.0% $(41,294)
Cost of goods sold 238,898  66.4%  271,392  67.7%  (32,494)
Gross profit 120,822  33.6%  129,622  32.3%  (8,800)
             
Operating expenses:            
Selling, general and administrative expenses 102,322  28.4%  99,974  24.9%  2,348 
Income from operations 18,500  5.2%  29,648  7.4%  (11,148)
Interest expense 1,187  0.3%  413  0.1%  774 
Income before income tax expense 17,313  4.9%  29,235  7.3%  (11,922)
Income tax expense 4,436  1.2%  7,372  1.8%  (2,936)
Net income$12,877  3.7% $21,863  5.5% $(8,986)
             
Earnings per share            
Basic$0.34    $0.50    $(0.16)
Diluted$0.33    $0.49    $(0.16)
             
Weighted average shares outstanding            
Basic 38,414     43,878     (5,464)
Diluted 38,681     44,582     (5,901)
                


SPORTSMAN’S WAREHOUSE HOLDINGS, INC.
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
 
 For the Thirty-Nine Weeks Ended 
             
 October 29,
2022
  % of net
sales
 October 30,
2021
  % of net
sales
 YOY
Variance
 
Net sales$1,020,246  100.0% $1,089,784  100.0% $(69,538)
Cost of goods sold 682,794  66.9%  736,061  67.5%  (53,267)
Gross profit 337,452  33.1%  353,723  32.5%  (16,271)
             
Operating expenses:            
Selling, general and administrative expenses 295,430  29.0%  286,263  26.3%  9,167 
Income from operations 42,022  4.1%  67,460  6.2%  (25,438)
Interest expense 2,521  0.2%  905  0.1%  1,616 
Income before income tax expense 39,501  3.9%  66,555  6.1%  (27,054)
Income tax expense 10,012  1.0%  16,519  1.5%  (6,507)
Net income$29,489  2.9% $50,036  4.6% $(20,547)
             
Earnings per share            
Basic$0.71    $1.14    $(0.43)
Diluted$0.71    $1.13    $(0.42)
             
Weighted average shares outstanding            
Basic 41,438     43,809     (2,371)
Diluted 41,672     44,471     (2,799)
                


SPORTSMAN’S WAREHOUSE HOLDINGS, INC.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
       
  October 29,  January 29, 
  2022  2022 
Assets      
Current assets:      
Cash and cash equivalents $2,560  $57,018 
Accounts receivable, net  1,685   1,937 
Merchandise inventories  485,156   386,560 
Prepaid expenses and other  19,182   21,955 
  Total current assets  508,583   467,470 
Operating lease right of use asset  267,842   243,047 
Property and equipment, net  147,031   128,304 
Goodwill  1,496   1,496 
Definite lived intangibles, net  404   264 
  Total assets $925,356  $840,581 
       
Liabilities and Stockholders' Equity      
Current liabilities:      
Accounts payable $130,119  $58,916 
Accrued expenses  93,054   109,012 
Income taxes payable  4,984   9,500 
Operating lease liability, current  43,440   40,924 
Revolving line of credit  105,064   66,054 
  Total current liabilities  376,661   284,406 
Long-term liabilities:      
Deferred income taxes  4,294   5,779 
Operating lease liability, noncurrent  261,095   236,227 
  Total long-term liabilities  265,389   242,006 
  Total liabilities  642,050   526,412 
       
Commitments and contingencies      
Stockholders' equity:      
Preferred stock, $.01 par value; 20,000 shares authorized; 0 shares issued and outstanding      
Common stock, $.01 par value; 100,000 shares authorized; 37,697 and 43,880 shares issued and outstanding, respectively  377   439 
Additional paid-in capital  79,169   90,851 
Accumulated earnings  203,760   222,879 
  Total stockholders' equity  283,306   314,169 
  Total liabilities and stockholders' equity $925,356  $840,581 
         


SPORTSMAN’S WAREHOUSE HOLDINGS, INC.
Condensed Consolidated Statements Cash Flows (Unaudited)
(in thousands)
  Thirty-Nine Weeks Ended 
  October 29,  October 30, 
  2022  2021 
Cash flows from operating activities:      
Net income $29,489  $50,036 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:      
Depreciation of property and equipment  22,961   18,778 
Amortization of deferred financing fees  146   188 
Amortization of definite lived intangible  51   23 
Noncash lease expense  21,169   21,204 
Deferred income taxes  (1,486)  (558)
Stock-based compensation  3,526   2,236 
Change in operating assets and liabilities, net of amounts acquired:      
 Accounts receivable, net  252   (103)
 Operating lease liabilities  (18,580)  (20,915)
 Merchandise inventories  (98,596)  (185,063)
 Prepaid expenses and other  3,135   (781)
 Accounts payable  68,327   41,723 
 Accrued expenses  (11,369)  (2,694)
 Income taxes payable and receivable  (4,516)  (2,417)
   Net cash provided by (used in) operating activities  14,509   (78,343)
Cash flows from investing activities:      
Purchase of property and equipment, net of amounts acquired  (38,477)  (38,463)
    Net cash used in investing activities  (38,477)  (38,463)
Cash flows from financing activities:      
Net borrowings on line of credit  39,010   57,551 
Decrease in book overdraft  (5,113)  (1,382)
Proceeds from issuance of common stock per employee stock purchase plan  525    
Payments to acquire treasury stock  (62,411)   
Payment of withholdings on restricted stock units  (1,993)  (2,356)
Payment of deferred financing costs  (508)   
    Net cash (used in) provided by financing activities  (30,490)  53,813 
Net change in cash and cash equivalents  (54,458)  (62,993)
Cash and cash equivalents at beginning of period  57,018   65,525 
Cash and cash equivalents at end of period $2,560  $2,532 
       
Supplemental disclosures of cash flow information:      
Cash paid during the period for:      
Interest, net of amounts capitalized $2,349  $905 
Income taxes, net of refunds  16,014   19,494 
       
Supplemental schedule of noncash activities:      
Noncash change in operating lease right of use asset and operating lease liabilities from remeasurement of existing leases and addition of new leases $46,050  $27,979 
Purchases of property and equipment included in accounts payable and accrued expenses $7,223  $6,606 
         


SPORTSMAN’S WAREHOUSE HOLDINGS, INC.
GAAP and Non-GAAP Measures (Unaudited)
(in thousands, except per share data)
 
  
Reconciliation of GAAP net income and GAAP dilutive earnings per share to adjusted net income and adjusted diluted earnings per share: 
                 
  For the Thirteen Weeks Ended  For the Thirty-Nine Weeks Ended 
  October 29,
2022
  October 30,
2021
  October 29,
2022
  October 30,
2021
 
Numerator:                
Net income $ 12,877  $ 21,863  $ 29,489  $ 50,036 
Acquisition costs (3)   -    1,113    -    6,419 
Executive transition costs (4)   289    -    1,214    - 
Less tax benefit   (75)   (301)   (316)   (1,733)
Adjusted net income $ 13,091  $ 22,675  $ 30,387  $ 54,722 
                 
Denominator:                
Diluted weighted average shares outstanding   38,681    44,582    41,672    44,471 
                 
Reconciliation of earnings per share:                
Dilutive earnings per share $ 0.33  $ 0.49  $ 0.71  $ 1.13 
Impact of adjustments to numerator and denominator   0.01    0.02    0.02    0.10 
Adjusted diluted earnings per share $ 0.34  $ 0.51  $ 0.73  $ 1.23 
                 
Reconciliation of net income to adjusted EBITDA:                
  For the Thirteen Weeks Ended  For the Thirty-Nine Weeks Ended 
  October 29,
2022
  October 30,
2021
  October 29,
2022
  October 30,
2021
 
Net income $ 12,877  $ 21,863  $ 29,489  $ 50,036 
Interest expense   1,187    413    2,521    905 
Income tax expense (benefit)   4,436    7,372    10,012    16,519 
Depreciation and amortization   7,839    6,665    23,012    18,801 
Stock-based compensation expense (1)   1,077    194    3,526    2,237 
Pre-opening expenses (2)   1,432    1,712    2,936    3,090 
Acquisition costs (3)   -    1,113    -    6,419 
Executive transition costs (4)   289    -    1,214    - 
Adjusted EBITDA $ 29,137  $ 39,332  $ 72,710  $ 98,007 
                 
(1) Stock-based compensation expense represents non-cash expenses related to equity instruments granted to employees under our 2019 Performance Incentive Plan and Employee Stock Purchase Plan. 
(2) Pre-opening expenses include expenses incurred in the preparation and opening of a new store location, such as payroll, travel and supplies, but do not include the cost of the initial inventory or capital expenditures required to open a location. 
(3) The 13 and 39 weeks ended October 30, 2021, included $1.1 and $6.4 million of expenses incurred relating to the terminated merger with Great Outdoors Group. 
(4) Expenses incurred relating to the recruitment and hiring of various key members of our senior management team. These events are not expected to be recurring. 
  


SPORTSMAN’S WAREHOUSE HOLDINGS, INC.
GAAP and Non-GAAP Measures (Unaudited)
(in thousands, except per share data)
 
  
Reconciliation of fourth quarter 2022 guidance: 
       
  Estimated Q4 '22 
  Low  High 
Numerator:      
Net income (loss) $9,100  $12,700 
Executive transition Costs (1) $200  $400 
Adjusted net income (loss) $9,300  $13,100 
Denominator:      
Diluted weighted average shares outstanding  37,700   37,700 
       
Reconciliation of earnings per share:      
Diluted earnings (loss) per share $0.24  $0.34 
Impact of adjustments to numerator and denominator  0.01   0.01 
Adjusted diluted earnings (loss) per share $0.25  $0.35 
       
(1) Expenses incurred relating to the recruitment and hiring of various key members of our senior management team. These events are not expected to be recurring.