Sportsman’s Warehouse slides after reporting Q2 results, lowering FY24 guidance

Shares of Sportsman’s Warehouse are down 11% to $1.86 in pre-market trading after the retailer announced financial results for the thirteen weeks ended August 3 last night. Net sales were $288.7M, compared to $309.5M in the second quarter of fiscal year 2023, a decrease of 6.7%. Same store sales decreased 9.8% during the second quarter of fiscal year 2024, compared to the second quarter of fiscal year 2023, primarily as a result of lower demand across most product categories and a decline in store traffic resulting from the continued impact of consumer inflationary pressures on discretionary spending, partially offset by increased same store sales growth in the fishing department and the opening of six new stores, the company stated. “We continued to make substantial progress on our initiatives to reset the business and improve our overall operations; however, we were disappointed that sales and margins came in below our expectations. While we were more aggressive with our promotional activities during the quarter, our core customer remains firmly under pressure due to the difficult macroenvironment and pullback in discretionary spending. We will continue to carefully manage the business and find ways to take non-customer facing costs out of the business. Although the current conditions are challenging, we are not slowing our progress to transform our business and get back our edge as the leading outdoor specialty retailer. We still have a lot of work ahead of us, but we remain confident that our strategic initiatives have us on the right path to turnaround this business,” said Paul Stone, Chief Executive Officer and President. Jeff White, Chief Financial Officer of Sportsman’s Warehouse, said, “During the second quarter we successfully obtained a $45 million term loan through a partnership with Pathlight Capital, of which we have drawn $25 million. This strengthens our balance sheet, allowing us to focus our efforts on a continued reset of the business, providing the flexibility to make strategic inventory purchases and targeted marketing campaigns to drive sales. Our expense reduction and business efficiency efforts also continue to yield results, with operating expenses down versus the prior year,” continued White. “In the quarter, to stay market competitive, we offered a series of aggressive promotions and markdowns, including a push to end the summer outdoor season with clean inventory. This placed additional pressure on second quarter gross margins and we expect, given the current environment, to continue this level of promotional activities to stay competitive in the market. Given these factors we are taking a more cautious approach to the back half of the year and are updating our guidance to reflect the ongoing consumer pressure. We are confident in the health of our inventory and strength of our balance sheet and expect to generate positive free cash flow for the full year, which we intend to use to pay down our debt.” The company is adjusting its guidance for fiscal year 2024 and expects net sales to be in the range of $1.13B to $1.17B and adjusted EBITDA to be in the range of $20M to $35M. The low end of the adjusted EBITDA range still assumes positive free cash flow for the full year. The company continues to expect capital expenditures for 2024 to be in the range of $20M to $25M, primarily consisting of technology investments relating to merchandising and store productivity. No new store openings for the remainder of fiscal 2024 are currently anticipated, Sportsman’s Warehouse added.