Release Date: June 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sportsman's Warehouse Holdings Inc (SPWH, Financial) saw positive comp sales growth in the fishing category for Q1, driven by early store setups and relevant inventory.
- The company successfully reduced overall costs by $4.6 million year-over-year, reflecting effective expense management.
- Total inventory was down approximately $75 million compared to the same time last year, indicating improved inventory health.
- Sportsman's Warehouse Holdings Inc (SPWH) identified an additional $5 million to $7 million in annualized cost savings, primarily from renegotiated freight contracts.
- The company relaunched value-add service programs like the Firearm Service Plan and Safeguard Warranty Program, which are margin accretive.
Negative Points
- Net sales for the first quarter were $244 million, down from $267 million in the prior year, with same-store sales decreasing by 13.5%.
- Hunting department sales were down about 7% compared to the prior year, primarily due to fewer customers purchasing firearms and ammunition.
- Apparel and footwear sales were significantly down, by approximately 26% and 28% respectively, compared to the previous year.
- The company reported a net loss of $18.1 million for Q1 2024, compared to a net loss of $15.6 million in the same period last year.
- SG&A expenses as a percentage of net sales increased to 38.6% from 37% in the prior year, despite absolute dollar reductions.
Q & A Highlights
Q: Given the slightly weaker Q1 and more promotional Q2, what gives you confidence to reiterate the guidance for the year?
A: Despite Q1 softness, it's our smallest quarter. We see opportunities in the rest of the year, especially in the back half, as we anniversary heavy discounting from last year. Improved merchandising and relevant seasonal inventory will drive sales and profitability. (Jeff White, CFO)
Q: Have you seen any change in recent weeks due to political and regulatory chatter?
A: We haven't seen significant changes in trends due to political or regulatory chatter. The market hasn't shown a notable shift from these factors. (Jeff White, CFO)
Q: Any other categories showing improved trends besides fishing?
A: Fishing is the standout success in Q1. We see potential in apparel and footwear as we lean into new inventory and strategic merchandising. Early market entry and investment in inventory are key. (Paul Stone, CEO)
Q: Can you unpack the progression of comps during Q1 and any quarter-to-date trends?
A: Q1 started tough due to low inventory from prior clearancing. As new merchandise arrived, comps improved, especially in fishing. We continue to see good trends in fishing and are focusing on aggressive promotions to drive traffic. (Jeff White, CFO)
Q: What are the implications for gross margins with increased promotions?
A: Promotional activity in summer will be similar to last year. Significant margin improvement is expected in the back half as we avoid heavy discounting and maintain clean inventory. (Jeff White, CFO)
Q: Can you elaborate on the $5-7 million incremental cost savings?
A: Most savings will be seen in gross margin from renegotiated freight contracts. These savings are immediate and will also impact SG&A through improved purchasing processes. (Jeff White, CFO)
Q: Where are you in terms of retail adjustments and resetting stores?
A: We're in a good position, aiming to have all stores set by August. Physical adjustments are nearly complete, and we're focusing on seasonal merchandising for the back half of the year. (Paul Stone, CEO)
Q: How clean is the current inventory mix?
A: Inventory is fairly clean, with ongoing efforts to clear seasonal items. We're focusing on promotional activities to ensure clean inventory for Q3 and Q4. (Paul Stone, CEO)
Q: Insights on the hunt and shoot category, specifically firearms?
A: The firearms category faces discretionary spending pressure. We're adjusting assortment and pricing strategies to maintain competitiveness and drive traffic. (Jeff White, CFO)
Q: How are you managing apparel and footwear segments differently today?
A: We've reduced suppliers and focused on key partners, improving inventory management. We're leaner in inventory, allowing for strategic depth and timely markdowns. (Paul Stone, CEO)
Q: Changes in private label assortment and early successes?
A: We're seeing positive consumer response to private label products. The focus is on quality and value, with a gradual build-out to ensure customer confidence. (Paul Stone, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
