Sportsman’s Warehouse Holdings, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended February 3, 2024 (53 weeks), compared with the 52-week fiscal year ended January 28, 2023. Although the request metadata says “2022 Q4,” this filing reports FY2023 annual results, not a standalone 2022 quarterly period.
Business context
Sportsman’s Warehouse operates 146 outdoor sporting goods stores across 32 states and an e-commerce business, reported as one segment. Hunting and shooting represented 57.4% of FY2023 sales. E-commerce-driven sales exceeded 18% of total sales.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net sales | $1,288.0 million | $1,399.5 million |
| Same-store sales change | -14.4% | -12.2% versus FY2021 |
| Gross profit / margin | $383.4 million / 29.8% | $460.2 million / 32.9% |
| Operating income (loss) | -$25.3 million | $58.1 million |
| Net income (loss) | -$29.0 million | $40.5 million |
| Diluted EPS | -$0.77 | $1.00 |
| Adjusted EBITDA and margin | $24.6 million / 1.9% | $97.9 million / 7.0% |
| Cash from operating activities | $52.3 million | $46.8 million |
At year-end, cash was $3.1 million and working capital was $65.4 million. The company had $135.3 million outstanding under its $350 million revolving facility and $88.3 million available to borrow, subject to borrowing-base restrictions. The weighted-average borrowing rate was 7.01%, up from 5.86%. Total committed operating lease payments were $468.9 million.
Material changes versus FY2022
- Sales fell 8.0%; same-store sales declined 14.4%. Management cited inflation and recession concerns, reduced discretionary spending, lower store traffic, and unusually wet and snowy Western U.S. conditions. Fifteen new stores and the extra fiscal week partly offset the decline.
- Gross margin contracted 3.1 percentage points to 29.8%, reflecting weaker ammunition margins and promotions to reduce inventory, particularly in apparel and footwear. The fourth-quarter inventory-reduction effort lowered gross margin by about 500 basis points year over year.
- SG&A rose 1.6% to $408.8 million, while SG&A as a share of sales rose to 31.7% from 28.7%. Lower payroll and other operating costs partly offset higher rent, depreciation, executive-transition costs, severance, and legal costs.
- Interest expense increased to $12.9 million from $4.2 million, as borrowing levels and interest rates rose.
- Operating cash flow increased to $52.3 million, primarily reflecting a $44.4 million inventory reduction; investing outflows were $79.9 million. Inventory fell to $354.7 million from $399.1 million.
Outlook, commentary, and risks
- Management does not plan to open new stores in FY2024 while it reviews its near-term expansion strategy. It expects FY2024 capital expenditures, net of tenant allowances, of $20–$25 million.
- The company expects its cost-reduction plan to generate at least $25 million in annualized savings in FY2024. Management said gross margins should return toward historical levels after completing the inventory-reduction plan.
- Management believes cash, operating cash flow, and revolver availability will be sufficient for at least the next 12 months. This outlook depends on operating performance and borrowing-base availability.
- Key risks include discretionary-spending weakness, competition, weather and Western U.S. concentration, firearm and ammunition regulation, variable-rate debt, labor and freight costs, reliance on one distribution center, and cybersecurity and privacy threats.
- Unusual items included $4.8 million of executive-transition costs and a $0.7 million one-time legal settlement and related costs in FY2023. A putative stockholder class action filed in January 2024 challenges certain advance-notice bylaws; management said it was not aware of legal matters with a probable, reasonably estimable material loss.
- The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting; it reported no critical audit matters.
Important facts for investors to verify
- Whether sales trends, same-store sales, and gross margins stabilize after the inventory clearance and as consumer demand evolves.
- Whether the cost-reduction plan achieves the stated savings without impairing store operations or customer service.
- Revolver availability, borrowing-base headroom, interest costs, and compliance with the facility’s minimum-availability covenant.
- FY2024 capital spending and the timing of any renewed store-expansion plans.
- Developments in firearm-related laws, the Oregon litigation and regulatory process, and the stockholder bylaw lawsuit.