Business context and reporting period
Sportsman’s Warehouse operates outdoor sporting goods stores and an e-commerce platform, reported as one segment. It had 112 stores in 27 states as of May 1, 2021. This filing covers the 13 weeks ended May 1, 2021, compared with the 13 weeks ended May 2, 2020. The request identifies “2020 Q1,” but the filing is for fiscal 2021’s first quarter.
Financial performance and liquidity
| Metric | Q1 FY2021 | Q1 FY2020 |
|---|---|---|
| Net sales | $327.0 million | $246.8 million |
| Same-store sales growth | 24.1% | — |
| Gross profit / margin | $104.0 million / 31.8% | $74.8 million / 30.3% |
| SG&A | $90.4 million / 27.7% of sales | $75.2 million / 30.5% of sales |
| Operating income (loss) | $13.6 million | $(0.4) million |
| Net income (loss) | $10.5 million; diluted EPS $0.23 | $(1.1) million; diluted loss per share $0.03 |
| Adjusted EBITDA and margin | $23.5 million / 7.2% | $8.2 million / 3.3% |
| Operating cash flow | $(4.0) million | $31.3 million |
| Cash at period end | $59.7 million | $22.1 million |
At May 1, 2021, total assets were $705.9 million and total liabilities were $492.0 million. The company had no outstanding debt and reported $190.1 million available under its $250 million revolving facility, subject to borrowing-base restrictions; $1.955 million of standby letters of credit were outstanding. Operating lease liabilities totaled $262.6 million, with $384.1 million of undiscounted lease payments. The company said cash, operating cash flows, and revolver availability should fund operations for at least 12 months.
Material changes versus the prior comparable period
- Sales rose 32.5%, supported by outdoor activity participation, e-commerce demand, and pandemic-related shifts in consumer behavior. Newer stores excluded from same-store sales contributed $23.0 million.
- Gross margin improved 1.5 percentage points, reflecting a greater contribution from higher-margin clothing and footwear, volume incentives, and other adjustments. Hunting and shooting remained the largest department at 58.6% of sales, down from 65.6%.
- SG&A increased 20.2% in dollars, including higher payroll associated with seven store openings and minimum-wage increases, plus $2.8 million of merger-related costs; as a share of sales, it declined with higher revenue.
- Interest expense fell to $0.2 million from $1.5 million, primarily because there was no debt balance in the current quarter.
- Operating cash flow swung to an outflow, mainly due to a $43.6 million inventory build and payments of accrued expenses; higher accounts payable partly offset these uses.
Outlook, commentary, risks, and unusual items
- Management expected fiscal 2021 net capital expenditures of $42–$52 million, primarily for store refurbishments and 8–12 new stores. Its stated long-term target is annual square-footage growth of more than 8%–10%, subject to attractive opportunities.
- Management cautioned that unusually strong pandemic-era demand may not persist, and seasonal sales in the third and fourth quarters may not follow typical patterns. It also expects firearms and ammunition and e-commerce to remain a higher-than-normal share of sales, potentially pressuring gross margin, partly offset by stronger apparel and footwear margins.
- Firearm sales increased $19.6 million, while ammunition sales fell $3.8 million because demand exceeded available supply amid market and supply-chain constraints. The company reported some vendor interruptions but did not believe these were causing significantly less supply overall.
- The pending merger with Great Outdoors Group provides for $18.00 cash per share, subject to conditions including antitrust clearance and other closing requirements. Shareholders approved it on March 23, 2021; management expected closing in the second half of calendar 2021, assuming timely satisfaction of conditions.
- Risks include merger noncompletion and related disruption, COVID-19 effects, consumer spending and regional economic conditions, competition, regulation of firearms and ammunition, and supply availability. Two disclosed lawsuits have no reasonably estimable potential loss; management said it was not aware of a probable, reasonably estimable material loss. The company reported compliance with revolver covenants and effective disclosure controls.
- Adjusted EBITDA is a non-GAAP measure; merger costs and other specified items are excluded, so it should not be treated as a substitute for GAAP earnings or cash flow.
Important facts for investors to verify
- Confirm the reporting-period label: this is Q1 fiscal 2021, despite the request’s “2020 Q1” metadata.
- Track whether pandemic-driven sales and same-store growth are sustained, particularly as firearms, ammunition, and e-commerce mix shift.
- Monitor inventory and working-capital cash use, revolver availability, and the company’s ability to fund planned capital expenditures.
- Check merger closing progress, antitrust clearance, remaining conditions, and any effect of delay or termination.
- Review lease commitments and the status of disclosed litigation; potential losses in the two identified cases were not estimable in this filing.