Business context and reporting period
Sportsman’s Warehouse Holdings, Inc. operates sporting-goods stores and an e-commerce platform as one reportable segment. It operated 119 stores in 29 states as of October 30, 2021.
Period clarification: Although the request metadata says “2020 Q3,” this filing is for the 13 and 39 weeks ended October 30, 2021—fiscal Q3 2021—with comparisons to the periods ended October 31, 2020. Fiscal 2021 ends January 29, 2022.
Financial performance and position
Amounts below are in millions of dollars, except per-share data and percentages.
| Metric | Q3 2021 | Q3 2020 | 39 weeks 2021 | 39 weeks 2020 |
|---|---|---|---|---|
| Net sales | $401.0 | $385.7 | $1,089.8 | $1,013.6 |
| Gross profit / margin | $129.6 / 32.3% | $130.6 / 33.9% | $353.7 / 32.5% | $334.5 / 33.0% |
| Operating income | $29.6 | $38.3 | $67.5 | $83.4 |
| Net income | $21.9 | $30.5 | $50.0 | $61.8 |
| Diluted EPS | $0.49 | $0.68 | $1.13 | $1.40 |
| Adjusted EBITDA / margin | $39.3 / 9.8% | $49.9 / 12.9% | $98.0 / 9.0% | $111.7 / 11.0% |
Q3 sales increased 4.0%, but net income fell about 28%; gross margin contracted 1.6 percentage points. For the first 39 weeks, sales rose 7.5%, while net income declined about 19%. SG&A rose 8.4% in Q3 and 14.0% year to date, reflecting new stores, wage increases, and merger-related costs.
Same-store sales decreased 1.5% in Q3 and increased 1.5% year to date. Q3 growth in total sales was primarily supported by seven stores opened since October 31, 2020; those stores contributed $24.7 million. Hunting and shooting represented 55.4% of Q3 sales.
For the 39 weeks, operating cash flow was negative $78.3 million, versus positive $171.7 million a year earlier, principally due to a $185.1 million inventory cash outflow as the company rebuilt stock amid supply constraints and prepared for the holiday season. Investing cash outflow was $38.5 million, mainly capital expenditures; financing cash inflow was $53.8 million, mainly revolving-credit borrowings. Cash fell to $2.5 million from $65.5 million at fiscal year-end.
At October 30, total assets were $814.7 million and total liabilities were $560.1 million. Merchandise inventory was $428.5 million, up from $243.4 million at January 30. The credit facility had $73.8 million of gross borrowings, $149.3 million of stated availability subject to borrowing-base restrictions, and $1.9 million of standby letters of credit. The balance sheet presents $57.6 million of revolving debt after $16.2 million of lock-box/depository offsets. Operating lease liabilities totaled $271.3 million. The company reported compliance with credit-agreement covenants.
Changes, outlook, risks, and unusual items
- Margin and cost pressures: Higher freight costs reduced gross margin and were expected to continue through the rest of fiscal 2021 and likely into 2022. Management also cited supply-chain disruption and ammunition demand exceeding supply.
- Outlook: Management expected Q4 net sales to stabilize or decrease versus the prior year, which had unusually strong demand. It forecast fiscal 2021 net capital expenditures of $45–$50 million and planned ten store openings for the year. Its longer-term target is annual square-footage growth of more than 8%–10%, subject to opportunities.
- Merger termination: After the quarter, on December 2, 2021, the company and Great Outdoors Group terminated their merger agreement following FTC feedback indicating clearance was unlikely. Sportsman’s Warehouse received a $55.0 million termination fee that day; management had not determined its use. The filing cites potential effects of the termination, including on the company’s business and employee relationships.
- Legal matters: The filing reports no other legal matter for which management considered a material loss both probable and reasonably estimable. In a firearms-related case, the Nevada Supreme Court ruled on December 2, 2021 that the state immunity statute barred the claims; plaintiffs could seek reconsideration. A separate store-lease dispute remains unresolved, and potential losses could not be reasonably estimated.
- Other risks: Management highlighted firearms and ammunition regulation, COVID-19 effects, consumer spending and economic conditions, regional concentration in the Western U.S., competition, changing preferences, and execution of new-market expansion. The filing reported no material change from the prior annual report’s risk-factor assessment.
- Controls and contingencies: Management concluded disclosure controls were effective as of October 30, 2021 and reported no material change in internal control over financial reporting during the quarter. No off-balance-sheet arrangements were reported.
Important facts for investors to verify
- Confirm the period: this is fiscal Q3 2021, not Q3 2020.
- Track inventory conversion, operating cash flow, and revolving-credit use; the large inventory build drove the year-to-date operating cash outflow.
- Assess whether freight and supply-chain costs continue to pressure gross margin, and whether ammunition supply catches up with demand.
- Review the $55.0 million merger termination payment’s subsequent accounting and eventual use; it was received after the reporting date.
- Reconcile the filing’s Adjusted EBITDA table: its Q3 2020 net-sales figure is $380.989 million, while the financial statements report $385.748 million. The financial statements are used above.