Business context and reporting period
Sportsman’s Warehouse Holdings, Inc. operates 136 outdoor sporting goods stores in 31 states and an e-commerce platform, reported as one segment. This unaudited Form 10-Q covers the 13 weeks ended April 29, 2023 (fiscal Q1 2023), compared with the 13 weeks ended April 30, 2022. The filing period does not match the request metadata of “2022 Q1.” Fiscal 2023 is a 53-week year ending February 3, 2024.
Financial performance and liquidity
Amounts below are in millions of dollars, except per-share data and percentages.
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Net sales | $267.5 | $309.5 |
| Gross profit / margin | $80.0 / 29.9% | $99.1 / 32.0% |
| SG&A | $99.0 | $96.1 |
| Operating income (loss) | $(19.0) | $3.0 |
| Net income (loss) | $(15.6); $(0.42) per diluted share | $2.0; $0.05 per diluted share |
| Adjusted EBITDA (non-GAAP) / margin | $(5.6) / (2.1)% | $12.9 / 4.2% |
| Operating cash flow | $(37.0) | $(16.8) |
| Investing cash flow | $(22.8) | $(12.0) |
| Financing cash flow | $60.4 | $29.5 |
Cash at April 29, 2023 was $3.0 million; working capital was $100.0 million, down from $130.1 million at January 28, 2023. The revolving credit facility had $162.6 million of gross borrowings, with $150.5 million available subject to borrowing-base limits and letters of credit. The balance sheet reports $150.3 million of revolving debt, reflecting lock-box cash offsets. The $350 million secured facility matures May 27, 2027; the company reported covenant compliance. Operating lease liabilities totaled $343.3 million and are separate from revolving borrowings.
Material changes versus prior period
- Sales fell 13.6%; same-store sales declined 17.8%. New stores opened since the prior-year quarter contributed $15.5 million of sales.
- Management attributed weaker sales to prolonged winter weather in the West, lower outdoor participation, inflationary pressure and recession concerns. Ammunition sales fell $16.9 million (27.1%), partly reflecting normalization from prior-year demand and improved in-stocks.
- Gross margin contracted 2.1 percentage points, primarily from a less favorable Camping and Fishing mix and lower comparable product margins, mainly ammunition.
- SG&A rose 3.0%, while its share of sales increased to 37.0% from 31.0%, reflecting lower sales against store and other costs, including new-store expenses.
- Interest expense rose to $2.0 million from $0.6 million as borrowings and rates increased. Operating cash use worsened, mainly due to a $70.4 million inventory investment; financing cash flow included $62.7 million of net line-of-credit borrowings.
Outlook, risks and unusual items
- The company planned to open 15 stores in fiscal 2023 and expected capital expenditures, net of tenant allowances, of $48–$56 million. It gave no specific earnings or sales guidance in the supplied filing text.
- Management said it was developing a company-wide expense-reduction plan in response to inflationary pressure and adverse weather, with greater emphasis on financial discipline. It expected payroll expense to increase during fiscal 2023.
- Management believed cash, operating cash flow and revolver availability would fund operations and requirements for at least the next 12 months. This outlook depends on operating performance and borrowing availability.
- Key risks include consumer spending weakness, inflation, rates and tighter credit, weather, competition, labor costs, and firearm and ammunition regulation. Management highlighted Oregon legislation that could constrain firearm sales; enforcement was temporarily blocked by a state court as of the filing discussion. Sales are seasonal, typically stronger in Q3 and Q4.
- The CEO retired in April 2023; the company incurred $1.1 million of transition-related costs, including retention bonuses and search and communications fees. It also paid $2.1 million to settle a store-lease lawsuit; claims were to be dismissed.
- The company repurchased 97,500 shares for $0.7 million in the quarter. Its repurchase authorization was extended through March 31, 2024, with $9.6 million remaining. A 100-basis-point rate increase was estimated to add $1.7 million of annual interest expense at the quarter-end debt level.
Important facts for investors to verify
- Confirm the intended reporting period: the supplied filing is Q1 fiscal 2023, not Q1 2022.
- Track same-store sales, inventory levels and seasonal demand recovery, especially after weather-related disruption.
- Monitor gross-margin trends and the mix and profitability of ammunition, Camping and Fishing sales.
- Assess revolver usage, borrowing-base availability, interest-rate exposure and covenant headroom as cash generation remains negative.
- Check execution of the expense-reduction plan, 15-store opening target and $48–$56 million capital-spending outlook.
- Follow CEO and board succession developments and the outcome or implementation of relevant firearm regulations, including in Oregon.