SPWH - Earnings call transcript Q3 2019 | Sportsman's Warehouse Holdings, Inc.

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Operator

Greetings, and welcome to Sportsman's Warehouse Third Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now turn the conference over to your host, Rachel Schacter of ICR. Please go ahead.

Rachel Schacter

Thank you. call Chief Barker, Financial the and Executive on Julian, Robert Officer. me is Chief Jon Officer; With

materially Before we Actual statements our expectations get risks meaning XX-K industry. of you demand will Risk suggested of future XXXX, started, made operations, forward-looking those our future from of of X, I the differ to would of those the for company's contain our such may number statements described Litigation for Harbor growth results like the Safe February filings ended which Private and of with SEC. language. XXXX, due Reform statements within company's and includes about The year Factors in statements caption in the we Securities results today and the other make including products the to Act the under remind a the our regarding uncertainties, company's

measures in at will of furnished the financial We GAAP call. measures supplemental directly section today, are our to is most to Exhibit financial disclose as non-GAAP Investor financial well which the available comparable investors.sportsmanswarehouse.com[ph]. measures website to Definitions also provided such also as the as reconciliations non-GAAP during information today's as on of SEC X-K Form our press Relations included the release, we XX.X

Barker, Officer of Executive Chief Sportsman's like I'd Jon call turn to to Now over the Warehouse.

Jon Barker

for over after in detail fiscal will to well I'll as are up which of Good joining the that questions. discuss and year, Thank by review as today. share our strategic thoughts then then the and remainder quarter the outlook, go you market gains more us our the we our you, Rachel. driving third highlights and your performance afternoon call thank open everyone our reviewing Robert results begin of financial on initiatives will

the quarter the with stores eight We and bottom our are at in not excluding on included original guidance third line, top high-end that our of were results, our were pleased recently which very outlook. the acquired

million comp new X.X% at increased Sportsman's locations new new two weeks For the QX. X.X% stores $XXX.X in net and and opened sales XX to rebranded of end as were grand by QX. eight driven Warehouse a These the of quarter, stores stores, the including acquired last eight increase

The in opening lift, devastating growth eight also sales an Comparable wildfires lift outages. to non-comp for expectations by sales and due to saw stores point increased the our a California, quarter. nice driven came which sales grand XX which X.X% ahead basis generator related sales our power of partially from in contributed

Our thoughts efforts. are with with we everyone our store associates helped recovery are many grateful the and responders who impacted and to first the

e-commerce per modest Continued approximately earnings $X.XX stores. inventory eight diluted transaction a Operating points of included prior as the attributed margins This with XXX inclusive strong of the and eight across largely for part with headwind were by of of also quarter. notable to pre-opening $X.XX stores QX sell-through platform, acquired. resulted lower flat share in basis our performance the were were expenses from acquired deleverage, a locations in acquisition from eight benefit Gross mature of drivers the including period, year of comp and the cost expenses stores. impacted associated adjusted

combined Our consolidating execution with disciplined are QX a our industry. unique the outperformance of strong and team's within results to testament positioning a industry our strategies, growth

we've third and industry our our commitment in to outdoor and customer sporting these engagement across against business made and of quarter. positioning. I a few goods them in strengthen to the acquisition further innovation focus Our will and the us helping differentiating is drive competitive strategies now the progress to highlight

opportunity base and we our continue see to white Beginning our space store grow for includes platform, e-commerce on and with which store stores flexible our omnichannel our we the formats. strategy, capitalize

aware, purchase to markets as acquisition in the allowed already we given $XX a of of you're and brick existing the have new eight footprint store million. quarter, approximately new markets. and both didn't each foundation we stores appealing, mortar These expand York in presence total during our New for that where on well-established opportunistic these As price were us customer a acquisition of and closed the and markets This Pennsylvania. respective such announced the was an

XX, October at XXth. The were on openings new interact eight customers October each and each Warehouse XXth way opening stores officially to opened stores converted showcase grand celebrations respective The and to with products Sportsman's our a with in great on and grand were community.

the In terms the feet, average stores than store. which an average Warehouse Sportsman's is approximately acquired of square larger eight are economics, of unit XX,XXX

them EBITDA least digit to rates, at we are ROIC, with pleased far. XX% store the four-wall still consistent Sportsman's expect margins We traditional while stores thus new, with their double and performance hurdle these Warehouse are

our capabilities, years, debt and reduction return two growth omnichannel over are to in past the Following typical excited a to more we a investment technology period store of pattern.

or up With XX or in store five base XX.X% from the stores expanded our fiscal stores foot X.X% foot square XXXX stores, fiscal acquired to-date, square XXXX. by in we've which is

first a concept Center additional archery launch new shooting test and as brand in the structure This of well us We Center. store will physical have participants. Jordan, retail our firearms Shooting the one small brand allow new in new as corporate Shooting new to This fourth store in under plan Legacy indoor same sports will our range Legacy an West appealing to our will spectrum quarter. store Utah. store be be office our The as broad

the e-commerce we've including the on new capabilities improved XX% pleased sportsmans.com, traction to from increased be our which website year. digital quarter with continue over well as prior very as we Touching seen BOPUS, versus our performance, in briefly

reduce on for store expense are In with home inventory. transit from customers, transportation XX from we increase a now capability ship our phase rollout leverage to this for improve addition, utilizing moving to stores and test to time our

updated these you keep enhance progress. grow to on and features continue additional will We and

approximately We and acquisition of XX% customer in have QX, our Next, members, X loyalty strong our in growth program engagement. driving million we revenue. now over saw

loyalty our our best-in-class launched Data. Visa at of $X every for Warehouse, in Sportsman's program, customers Alliance card the including program to or with a five and Store sportsmans.com. extension an the through our quarter, Explorewards provides during to online credit we new for This points greater a Sportsman's partnership benefits As access ability earn spent Warehouse

Turning to merchandising.

by product we quarter to known a providing with offering, proving – influencer. expectation expand continue with customers exceeded has third the well our rifle a support win brands the rifle right During a reception to win of developed including and and exclusive exclusive product. package – The hunting new right of key continue to with launched our this an our

expansion discuss assortment Killik, focus camouflage our in brand As for initiatives section. mentioned sales, in on Marquee which the fall his season Robert in apparel and in the outerwear increase will supported QX, an

QX our sales performance composition to gears quarter third Shifting comp of comparable our the and results.

offering used in-store at the reflection sportsmans.com of driving and positioning shopping acquisition In within partnerships to are customer best-in-class addition online and over firearms. to mentioned the firearms in continues remarks, generator sales increased QX differentiators our performance and ammunition the services year. I again leveraging a company value-added FFL extensive in and XXXX. our and XX points industry, X.X% and increased lift, earlier including This firearms be Firearm prior basis our my dominant These engagement. units across

by X.X% firearm broad a units products. third the of increased For across firearms quarter, driven growth spectrum

midpoint we line. a summary, In guidance the the third top strong and bottom quarter on had very exceeded of both our and

strength we positioning business momentum pleased with completion share the the the are our remain as building acquisitions, on our of combines of all of on Sportsmen's competitive The business store of focused we We underlying the continue forward. eight initiatives. on core our and gains our new core strengthens moving make progress very to further successful growth

As discuss press we year are guidance, you in detail. saw which will our in more increasing full our release, Robert

about We in these but near the short-term there are are positioning, guidance. are changes the hunting These term our reflected landscape our sell feel sales retailers large good currently deemphasizing category, inventory. creating causing and competitors as competitive pressure headwinds which very through shooting in sales long-term

However, share expanding growing retail through uniquely e-commerce capitalize positioned we to reach our given opportunities. and long-term are market the brand and expansion, on

to the to turn I'll over financials. Robert that, With discuss our call

Robert Julian

in the open we reported the please the our earnings we my I'll and with measures today. non-GAAP remarks financial the for outlook results quarter a weeks discussed have which on figures and Jon. QX call both of of QX measures instances final then that eight on full U.S. for our release, press new In for a review financial issued two begin Also impact include the stores that results and discuss GAAP year note, of corresponding today's of report XXXX. reported projected earlier where were non-GAAP the our business reconciled to third measures, are our you, Thank Most basis. we GAAP XXXX.

generator The men's compared and men's hunting category growth. previously rods fishing of by Third the to sales product camping tackle which same-store X.X% by sales X.X% quarter was quarter high-end of and X.X% million impacted rate apparel, significantly had third increase X.X% year, to Firearms every sales associated growth X.X% range highest We X.X%. the fishing year. million led in prior led XXXX. were in or clothing which our by quarter of and of also strong QX growth Same-store and XXXX $XX.X an led net the grew to in saw showed The fiscal fires above X.X% year department sales, outages. at California $XXX.X in was grew at one prior ammunition terminal sportswear. reels, our and lures. growth of guided men's categories The XXXX, department X.X% increased compared apparel, by power million versus sales the $XXX.X the

Gross was XXX quarter with compared QX growth the XXXX, fiscal $X.X XX.X% an of XXXX States. fiscal We in ended the compared increase third $XX.X the of quarter square in footage million, was gross to year $XX.X third quarter operating profit million of million or of XX year approximately was we to QX received year stores Total XXXX. to XX.X% a stores. discount included XX.X% points, inventory eight X.X%. in of versus Gross prior the lift flat the the period. when new margin purchase basis the due we XXXX margin at on in acquired XX relatively

pre-opening XXXX. XXXX of to was expenses costs the quarter. of an million SG&A for of XX.X%, quarter end the includes the at or $X.X and third related million $XX.X stores opened to QX eight year transaction of $X.X that increase compared million of fiscal This the new expense

benefit payroll to support due and to piece. growth. expense expense million approximately increased incremental of due $X.X software $X.X approximately store due primarily minimum additional store operating primarily new marketing incurred We openings. Other wage primarily to increases plus increased million, new million, and $X.X expense expenses Rent

increase point for percentage to of expenses opening costs XX.X%. approximately a the sales includes increased eight and XX net transaction As pre-opening XX.X% to the SG&A from of points new This basis related stores. basis an XXX

from prior $X.X million efforts. a Income the fiscal a QX – QX improvement operations million million from result operations $X.X third million, total reduction inventory of was attributable to $X.X our XXXX QX adjusted expense million year, the compared XXXX, last year. year to XXXX. We of borrowings, $X.X in compared recorded of or XXXX, income lower primarily income of in reduction QX in compared this $X.X $XX.X $XX.X Interest in was of was QX to to million. million, in as million quarter expense $XX.X tax

net share or million XX.X quarter XX.X million in $X.XX or on on quarter for million to Adjusted net million third quarter million income average adjusted income weighted count in per share average of million XX.X the weighted share diluted per period. share year. third average compared was $XX.X $XX.X $XX.X diluted or $XX.X of year year. $X.XX the diluted share of for weighted on share XXXX, a share third income in million based a to or Net a weighted the of as based of of XXXX share million of to of last based per prior compared quarter a EBITDA diluted the net Adjusted average based count million, was $XX.X XX.X count per million, on $X.XX last count $X.XX $XX.X compared income was

quarter to Turning $XX now third sheet. inventory of ending last reduction QX million a million of the as year, compared to the of was million. balance XXXX $XXX $XXX at end

the We per Our of had a inventory the million but a eight capital associated build of quarter leaseback compared the million $X.X compared and to headquarters, ending $XX eight with of includes new enter of to acquired year. related corporate stores. balance of equipment $X.X our XXXX, XX.X% year in to year the The includes end. stores. primarily prior to period, On an inventory increase fiscal new of was which QX approximately of the we into This by arrangement increase is furniture, $X.X new during increase basis, million out million. down million expect acquisition the with third expenditures store inventory $XX.X last fixtures sale remaining

QX versus was year-over-year tight XXXX. million year-to-date million positive operating negative inventory $XX.X for cash both capital year-to-date due flow improvement and of QX management $XX.X to XXXX is primarily operating cash This flow in payables. million $XX.X working

we Our liquidity remains $XXX borrowings under million outstanding ended strong and quarter approximately revolving as the million of in $XX with credit facility. availability

last end on to credit lower long-term XX same the XXXX, compared was to the million. the million end period same balance the of $XX at outstanding on of utilizing of balance revolving new in facility fund even million $XX a million $X of stores is eight the QX The reduction QX quarter. The line during our last to at outstanding period our acquisition compared the XXXX, the the year, debt while year,

our Turning XXXX. to for QX now and outlook fiscal year

results, competitive As came our impact you the guided saw end stores in environment guidance opening the high press project approximately positive at eight short-term release, top our $XXX Jon at occurred of line earlier. our growth adjusted referenced year per year of in diluted QX which common XXXX flat fiscal the that end on new average now million sales range, $X.XX We to full of are diluted X.X%, the million to to net our of year which weighted of revising in the we reflect and XXXX. QX the compared earnings sales XX.X We $X.XX fiscal XXXX $XXX range outstanding. of expect to share of to in shares same-store million in

minus $XXX Same-store Our sales is income million weighted of million. of million. sales of to average diluted outlook Adjusted to to QX range net $XXX share fiscal compared in shares the quarter in earnings $XX.X Adjusted of positive year Net as range approximately on for of the X.X% per $X.XX X.X%, follows. the XXXX million to of XXXX. fourth million diluted to growth common $XX.X $X.XX outstanding. of XX.X

sale $XX approximately in $XX by $XX to transactions. million gross expect with landlord of incentives net expenditures capital million fiscal approximately to million expenditures We $XX offset in capital million million in $XX year $XX to XXXX and leaseback million

questions. back to now I over turn that, With will the call for the operator

Operator

proceed Instructions] Thank with you. conducting Your question we'll line question-and-answer At be a from this first your the session. Peter comes [Operator time, of with Keith Piper Jaffray. Please question.

Peter Keith

is healthy a nice like Hi. expenses. QX in results. but there I'm pretty a little and you're margin comp acquisition towards like performance. But inflection a million looking of quantification Field of where bit it more the Good Congrats which us was of calling solid sales for impact QX, pressure, pretty gave I’m It that's seem in looks everyone. EPS. afternoon, about Stream $X.X the – I guess, you on taking the that some it in for

Stream So factor a the us gross better if better on impact and help understand with big in the sales? Field stores or there is swing could a QX, model you of the margins

Jon Barker

Good purchase Hey acquired is a Peter, it's to to with the were in One discount to talk is stores, things normal you. the rates. outlook two to Jon. influencing that able eight QX. inventory margin the purchased at we There

and we holiday ever prepared as solid. of better that margins and on entered understand year, we've true to season been we our our were this And critical stayed cadence. is that we've very kept marketing thing other The into promotional our QX to than

stay that just and our remainder margins stayed of stay to first some rigorous and came with goods strategy strategy, expect from the clear that with we profit a really and marketing and our Some on marketing to have negotiation, of rebate quarter. the of cost

for two driving the So outlook in are things those optimism combined margin our QX.

Peter Keith

Very by majority as expect and of through – will the that a I you Field follow-up that of on helpful. or we discounted as some into on And sold QX guess well? Stream end carryover should a be largely XXXX the inventory,

Jon Barker

XXXX Peter, be will – fiscal minimal. carryover the into XXXX

Peter Keith

on the Yes, okay. then topic landscape. competitive different to pivoting And

profile you point discounting channel? Walmart, at any has next you pretty seeing in Walmart are announcement this category. the ammunition of emphasizing furthermore, the the I from have stores that perhaps sales a had Are So some seeing know right to are about share maybe ammo high you market benefits a And gains?

Jon Barker

Yes.

So Peter, good question.

and you communicated As there three shooting that or is major know assessing to limit are hunting retailers clearly desire their have sports.

ammunition get and AR from We those exiting start Walmart categories platform pricing stores. ammunition. As handgun around saw is aggressive to mid-November you in more MSR, the mentioned,

through it price promotional. that into a seeing We very our the dwindling are that very, inventory where they And stopped. have are Walmart appears now understanding new situation is at that's that point receipts a

over pricing chasing. That's call sold through. few pressure class, So the it, next see in expect not to which ammunition commodity be creating that some, we near-term I'll are we weeks, ammunition on that

Walmart in We forward probably than pricing exciting lot staying parking one with of is everyday dozen couple stores promotional eight every distance to us some a The thing are we of cases them, our miles within as actually in cadence. a hundred XX look The and yards. XXXX, average at about more for share our we miles. traditional of our a low least one has

long-term are somewhere it after. near-term, nationwide. opportunity creating million a $XXX on and million us we go for while pressure is exit category, $XXX which So as There's the those categories, market between some to for sales nice they that expect

started in-stock purchases XXXX. we position already we've that you ensure we press on maintain their our known And their the to in inventory our reforecast and work of and happening side with as what's that, for business can margin to on our releases through – – vendors. have position imagine our We've time some

Peter Keith

question one helpful from rate Jon, on that it attractive October. you me. interesting. in and presented look last for interest financing. The points the Maybe launched, That's quite very I think a that credit the website card benefits and had are mentioned perspective was Okay.

So consumers but at this starting curious it's early, on what card point? reaction is the the is, little with a maybe to resonate initial

Jon Barker

Yes. I can credit points. the for an can never card, – partner what any Visa card tell or created you point, – give of Peter, that rate credit prior you, for give prepared in-store the is not some the consumers we've we're combination for with so data our the on and in-store. this seen before is acceptance our But I color to at

So the with really that card presented the the the on had you our unable can experienced the know rate in an Sportsman's credit option Data. our we Alliance Data better Visa tell as that's the by Alliance qualify Alliance right for in-store on is rate response card, have acceptance consumers that backed Visa we've past and consumer And significantly the expectations card, I to track Warehouse is you is and as we what with Data. through prior through

more So believe I week the we'll that talk at of right earnings call, a end – the little first we the next October. that. about At of around card launched bit

a have weeks few we're only in, we So progress. with really pleased the

Peter Keith

Okay.

good Sounds good. you Thank and luck.

Jon Barker

Thanks Peter.

Operator

comes [Operator Benedict Peter the of line Instructions] Please your Baird. proceed next with question. Your question from with

Peter Benedict

Hey guys.

use implied margin able Field jumped seems contribution impact fourth basis late. margins, of sense do it Field apologize EBIT we taking quarter you for XX is then the that? gross up you a about in if are I is give revenue is question have just But Stream? points what the And thanks think little – within for And to then and How kind maybe out and so this, from as year-over-year. you here. the look or Sorry, what like missed your XQ plan? Stream the can I on a I us

Robert Julian

QX, A filings. is this of we our In of have couple this Peter, So comments. Robert. part

about We of have contributed Field in and the disclosed $X.X that QX. revenue stores Stream million

versus guidance. So of $X.X we our beat QX million revenue by about the midpoint

of Half a higher range. at growth the same-store and even top of end was it Let's midpoint exceeding say and sales of was than stores. half Field certainly Stream than higher the it our

and Stream disclosing We the impact projected much stores how to not Field are QX. are

We're into and math on, get specific way We do Lansing reduced we flat any last that there you triangulate. in of habit not store the We Fort want Wayne to for same the are sales growth reporting the guidance. same to probably our or QX business outlook, projecting specifically be new so although, some opening, growth the or do haven't effectively of sort store baseline did can time provided outlook numbers of that our we to to more for gave less. sales

So we probably probably haven't triangulate but than there, provided stores, in is something new increase you some to overall specifically. due more that guidance the could

time received impact. As is XX it margin over it it projected relates roughly inventory has period, basis in given transaction XX points to QX the that lift a this basis had in discount gross impact point we say in would that two the margin, I in true to about QX a so. week is or

expect you of questions. answer at see that sold relative And Jon and – gross your if discount we [ph] inventory, will would impact hope quarter be, view out margins. margins, not as of to the I so that out end our which by said, that primarily the the you lift look in sold QX probably that to is in our QX

Peter Benedict

and there [indiscernible] bang of it. guess maybe of framing, the the Can great. just just least was excellent. similar those of can I kind color Walmart stepping is headwinds you who cadence a That might that's kind doing that timing maybe – at of I there, mean great – fall-off? I the when maybe back, other the were No, was kind the Yes. players job on

Jon Barker

Is happen. bit, Peter, your a accurate? out are question little you question? when that retailers I other that but deemphasizing that think that Was was cut your will the

Peter Benedict

they're us. color behind And processes you then Yeah, what any when those around see doing. just being

Jon Barker

those they I deemphasizing will their of to that that the can folks their know activity change their a between announced the close it at of assume referencing, other are promotional and has We because of categories. in in is one there that materials part by in assortment you about inventory, which know that that's that We retailers tell XX and we're are up that and those strategic their as marketing. stores can we promotional XX does not retailers only a fit goal. two strategy seeing two other do there's happening I significant reduce effort looking to

a or and we QX assume expect that through sales move lot this that excess to they're flow of of We inventory. will during advantage the traffic cycle the through taking

that's time them So part XXXX. reflection is seeing what be those real to we're from guidance, QX a our of of more of into retailers expect QX and we going normalized

Peter Benedict

my you Thank the trend that be of those, any in but on there Okay. guess question the we Jon. quality more your within for just overall some, I of background around recently from the And last last recent a latest [indiscernible] would down maybe is think from saw background industry month that sort bit, of standpoint? were I view checks one the checks,

Jon Barker

sure not that were look mid-XXXX. sorry Yes. There this in that's you you passed the beginning there that tell in significant the I I'm state-by-state, question a connection, the can but adjusted was checks. X.X%. enacted legislation state-by-state, believe me, at then of kind of around or I Washington. was year think state I phone November, think XXXX you mix changes specifically November was of up cadence for again, Peter, if the if is of some I your mix

Washington state checks. of units the background in firearm adjusted you XX% mix mix November If data, adjusted down was in on the look at

seen November depending which look that pretty some state on in significant we're in are volatility seeing at. other up range. So the double-digit states you We've

over in very that can with we're performance be business pleased you solid. just we key our I were and We holiday shopping Our same to unit continued pleased QX with saw tell we through. expansion store went the

Peter Benedict

I great. for Thanks. struck. connection the apologize Okay,

Jon Barker

No, bother. Good Peter. talking to you

Operator

closing the would and for question the we session and gentlemen, back answer the I to like Ladies remarks. of call and to turn end have reached management

Jon Barker

quarter are again thank I contributed for time successful who to customers and our A to our want members, our today. working your thanks hardworking diligently Thank time. to third holiday you to all during special team of this everyone their season. for serve

Operator

This concludes conference. today's

participation. You time. you disconnect Thank at your may lines for this your

Sportsman's Warehouse (SPWH) 4 Dec 192019 Q3 Earnings call transcript