Q3 2020 Sportsmans Warehouse Holdings Inc Earnings Call

[music].

Greetings and welcome to the sportsman warehouse third quarter at 2020 earnings Conference call. At this time all parts of it relies on a listen only mode. A question and answer session will follow on the formal presentation.

Anyone should require operating systems during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.

Now I'll turn the conference over to your host Capex <unk> head of Investor Relations, maybe you could.

Thank you with me on the call today is John Barker, Chief Chief Executive Officer, and Robert Julian Chief Financial Financial Officer of Sportsman warehouse.

Before we get started I would like to remind you of the company Safe Harbor language the.

The statements we make today will contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Which include statements regarding our expectations about our future results of operations demand for our products and growth of our industry at.

Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, including those described under the caption risk factors in the company's 10-K for the year ended February Onest 2020, and the company is other filings made with the EPS easy we will also disclose non.

Non-GAAP financial measures during today's call definition.

Definitions of such non-GAAP measures as well as reconciliations to the most directly comparable GAAP financial measures are provided as supplemental financial information in our press release included as exhibit 99.1 for the form 8-K, we furnished to the FCC today, which is also available on the Investor day.

Relations section of our website at for thin dotcom.

I'd also like to note that today's materials, including earnings conference call, a Powerpoint presentation, which is available at sportsmen dot com in the Investor Relations section of the website you can utilize this debt to follow along with today's prepared remarks.

I would now like to turn the call over to John Barker, Chief Executive Officer of Sports men's warehouse.

Thanks.

Good afternoon, everyone on the call. Thank you for.

Moving on to join Us today.

Hopefully you on your families of remain stayed at healthy.

Last vote.

In my remarks, I will discuss high level Q3 financial results and for that.

I will provide some commentary on quarter to date shoot for results [noise].

In my comments, Robert will provide more detail on our third quarter end year to date financial result, as well as an outlook for the fourth quarter at all year 2025.

Finally, we will open up the call for questions.

I'm going to start on slide for for the presentation. During the third quarter, we remain open and operational in all markets, while continuing to prioritize at health and safety of our associates and customers.

Im very pleased with the efforts of the sports and warehouse associates as they continue to navigate record levels of demand.

In our stores, we provided exceptional service for our customers, while continuing our strict adherence to health and safety protocols, including cleaning based mass and social distancing.

We believe that one of the key keys to our extraordinary success in the current environment as of the dedication of our associates our stores distribution Center care Center at the corporate office.

In recognition of the sustained commitment from our associates, we provided another round of hero page use free to all of non executive team members.

Totally at approximately $2 million.

During the third quarter, our ecommerce driven sales growth continued at a rapid pace.

Allowing us to safely sort of customers and expand our digital reach.

In stores and online demand was elevated at across all of our categories.

During the quarter, we work closely with our vendors and provide for our customers with inventory levels that we believe were on matched by our direct competitors. However, we are not satisfied it is our belief that inventory constraints and not a decrease in demand was the governor on our growth during the quarter.

We ended Q3 with improved inventory position compared to Q2 and all departments.

With the exception of this year in sports.

Turning to slide five I'll now discuss outdoor activity participation trends and the growth of our loyalty program at email database.

All vital statistics are not yet available hunting for participation across many states up double or even triple digits. This season [noise] yeah.

End of this increased participation our demand firearms ammunition and related accessories continued to be elevated during Q3.

In addition to honey.

Participation at fishing camping and hiking continued at an elevated rate throughout Q3 as confirmed by National Park attendance and hunting and fishing license sales.

During this period, we grew our loyalty programs at nearly 2.6 million customers and increase our overall email database by 84% year over year. We believe we are capitalizing on our best in class credit card and loyalty program and our expanded database to better engage with customers.

It helps us drive traffic in stores and online.

Turning to slide six.

Multiple factors in Q3 led by elevated participation now for activity market share gains in firearms.

Cash and cycle and social unrest resulted in very favorable financial results net sales in Q3 were $386 million, an increase of 59% over prior year sales.

Same store sales increased 41% in Q3 versus prior year same store sales for firearms and ammunition at were up 98% at 53% respectively. Total sports is warehouse fire on unit sales increased 134% compared to Q3 of last year, while adjusted.

Nics checks were up 57% during the same period.

Therefore, once again in the third quarter, we achieved significant market share gains of firearms confirming sportsman warehouse of leadership in this category.

Our optics electronics and accessory category increased 26% during the third quarter on a same store sales basis apparel grew 19% and footwear salt sales grew 8% during the quarter.

We saw particular strength in our functional apparel and footwear, what camouflage outerwear at hunting boot outperforming our expectations.

Turning to slide seven I will not I will now comment on on our omni channel strategy and E Commerce results.

The events of 2020 combined with evolving consumer behaviors have accelerated adoption of our E commerce platform, including BOPUS and shipped at home during the third quarter, our ecommerce driven sales grew over 200% year over year. This growth rate was notable given our strategic decision to.

To prioritize inventories in stores and materially reduce digital marketing efforts, which limited online growth during the quarter.

Through the first three quarters of 2020 E Commerce, driven sales accounted for more than 10% of total net sales.

We believe there is meaningful opportunity for sustained ecommerce channel growth and therefore, we plan to continue to invest in our team platform and capabilities.

We will also continue to expand our store footprint in 2020, we opened nine new sports is warehouse stores. Our latest store opened in early Q4 and is located in Corona, California and total there are currently at 111 stores operating under the sports men's warehouse banner.

In addition, our first legacy shooting center, which opened earlier this year earlier. This year is performing ahead of expectations.

We are currently assessing expansion opportunities for this concept in 2021.

Finally, I'd like to share some insight on early Q for trends end results [noise].

Overall total net sales for the fiscal month of November were up approximately 70% compared to prior year. This is a continuation of the sales growth trend we saw in Q3.

While firearms and ammunition continue be at to be in high demand, we're seeing strong results across all major product categories. This.

This broad based growth confirms our belief that increased participation and activity is like camping and fishing is a sustainable trend.

In regards to this past weekend. Unlike many unlike many retailers we saw increased foot traffic on our stores during the Black Friday weekend. Additionally, online traffic saw significant increases versus prior year was of online demand of triple digits.

These results give us optimism that our categories are continuing to grow and that our product assortment and the sports is warehouse brand is resonating with customers.

Turning to slide eight end.

In summary, while there is significant uncertainty surrounding the path of the pandemic and its impact on the economy. We are highly encouraged by the surge of new participants in the activities on which we specialize the sustained factors impacting our society in 2020 of motivated millions of people to engage.

Our reengage with the outdoors.

We believe sports was warehouse is well positioned to meet this heightened demand and we're just beginning to engage with new customers across multiple product categories.

We also believe we are strategically positioned to continue to capitalize on meaningful growth opportunities from heightened outdoor activity participation.

E Commerce growth and new store expansion, which we believe will create long term shareholder value.

We look forward to speaking with you again in late March what we report our fourth quarter and full year 2020 results.

With that I'll turn the call over to Robert to discuss our financial results and our outlook for Q4 at full year 2020.

Thank you John.

I'll begin my remarks today with a review of our Q3 and year to date 2020 financial results.

I will then review our outlook for the fourth quarter and F. wide 2020.

Turning to slide 10 of the presentation third quarter 2020, net sales were $385.7 million.

Compared to $242.5 million in the third quarter of 2019.

An increase of $143.2 million or 59.1% over the prior year period.

Same store sales increased 41% in the quarter led by firearms, and ammunition, which increased 98% and 53% respectively over the prior year.

Camping fishing and apparel also had strong quarters, increasing over the prior year period of by 26%, 25% and 19% respectively.

Finally, footwear increased nicely as well over the prior year of 8% on a same store basis.

Q3, 2020, gross profit was $130.6 million compared to $84.2 million in the third quarter of 2019 and increase of $46.4 million or 55.1%.

Gross margin was 33.9% for the quarter, a decline of 80 basis points versus prior year. This.

This decline can be attributed to several factors.

Product and channel mix led to a 260 basis point headwind in gross margin due.

Due to a higher proportion of revenue coming from firearms and ammunition.

At a higher level of sales transacted through our E Commerce platform.

This impact was partially offset by higher product margins volume incentives and other adjustments, which in aggregate positively impacted gross margin by 180 basis points.

[noise] SGN expense of $92.3 million for Q3, 2020 was an increase of $23.9 million or 35% compared to the third quarter of 2019, However, SDMA expenses as a percentage of revenue improved approximately 430 day.

Basis points coming in at 23.9% for the quarter.

We incurred additional payroll expense of $14.3 million versus prior year.

Including the $2 million of hero pay for our frontline non executive back office Associates that John mentioned earlier, the remaining increase was primarily due to new store growth.

Rent expense increased approximately $2.4 million versus prior year, primarily due to new store openings.

Other operating expense increase approximately $7.3 million versus the prior year, which is primarily a result of higher credit card fees due to increased sales volume.

Income from operations was $38.3 million for Q3, 2020 compared to $15.9 million in the prior year period, an increase of $22.4 million.

Interest expense in Q3, 2020 was zero point $5 million compared to $2.1 million in Q3 of 2019, a reduction of $1.6 million. This improvement is primarily the result of lower total borrowings.

We recorded income tax expense of $9.5 million in Q3, 2020 compared to $3.3 million. In Q3 2019. This was the result of improved profitability year over year.

Net income for the quarter was $30.5 million or 68 cents per diluted share as compared to net income of $10.5 million or 24 cents per diluted share in the prior year period. This represents a year over year improvement of 44 cents per diluted share.

Adjusted net income in Q3, 2020 was $31.5 million or 71 cents per diluted share compared to adjusted net income of $10.8 million or 25 cents per diluted share in Q3 2019.

This represents a year over year improvement of 46 cents per diluted share on an adjusted basis.

Adjusted EBITDA for Q3, 2020 was $49.9 million compared to $23.2 million in the prior year period, an increase of $26.7 million or 115%.

Turning now to slide 11 of the presentation.

Q3 year to date 2020, net sales were $1.0 billion compared to $628.2 million in the first three quarters of 2019 and increase of $385.3 million or 61.3%.

Q3 year to date 2020 same store sales increased 44% compared to prior year.

Q3 year to date 2020, gross profit was $334.5 million compared to 211.6 million in 2019, an increase of $122.8 million.

Q3 year to date 2020 gross margin was 33.0% of decline of 70 basis points versus prior year.

Q3 year to day 2020, EPS GNS expense of $251.1 million was an increase of $59.8 million or 31% compared to the copper period in 2019 of.

As a percentage of net sales Q3 year to date 2020, SGN a leverage improved approximately 570 basis points.

To 24.8% of net sales.

Q3 year to date 2020 income from operations was $83.4 million compared to $20.3 million in the prior year period.

Q3 year to day 2020 interest expense was $3.1 million compared to $6.6 million in 2019.

We recorded year to date 2020 income tax expense of $20.7 million compared to $3.2 million in 2019.

Q3 year to date 2020, net income was $61.8 million or $1.40 cents per diluted share compared.

Compared to $10.5 million or 24 cents per diluted share in the comparable period of the prior year.

Q3 year to day 2020, adjusted net income was $65.6 million or $1.48 cents per diluted share.

Compared to adjusted net income of $11.3 million or 26 cents per diluted share in 2019.

Q3 year to date 2020, adjusted EBITDA was $111.7 million compared to $39.4 million in the prior year period, an increase of $72.3 million or 184%.

Turning to slide 12, I will now comment on our balance sheet and liquidity.

Q3, 2020, ending inventory was $322 million compared to $338 million at the end of Q3 2019, a decrease of $16 million.

We had at 10, new stores and closed one store during this time.

Inventory is down approximately 20% on a same store for wall basis compared to prior year.

Year to date in 2020, we have incurred for $15.4 million of net capital expenditures compared to $22.9 million in the same period of 2019, a decrease of $77.5 million year over year.

Q3 year to date 2020, operating cash flow was $171.7 million versus $57.8 million for Q3 2019.

This 114 million dollar improvement in operating cash flow year over year is primarily due to higher net income accounts payable and accrued expenses versus prior year.

While our accounts payable balance increased year over year, our days payable outstanding metric declined slightly compared to prior year.

Our liquidity continues to improve as we ended Q3 with no outstanding borrowings on our line of credit compared to $142 million at the end of Q3 2019.

At this reduction was achieved while holding an incremental $17 million of cash balances versus prior year.

At the end of Q3, 2020, we had approximately $218 million of availability on our revolving credit facility.

The outstanding balance on our term loan was $8 million at the end of Q3 2020 compared to $30 million at the end of Q3 2019, a reduction of $22 million. This includes an accelerated payment on our term loan of $8 million made in Q3 2012.

Our total liquidity, including cash on hand at the end of Q3, 2020 was $238 million compared to $80 million in the prior year period.

Turning now to slide 13 of the presentation.

As I mentioned previously we will be providing an outlook for Q4 and fiscal year 2020.

Starting with our net sales outlook, we estimate Q4 net sales would be in the range of 356 million to $386 million.

In fiscal year 2020, net sales to be in the range of $1.37 billion to $1.400 billion.

Same store sales growth in the fourth quarter of 2020 is anticipated to be in the range of 32% to 42%, resulting in fiscal year 2020 same store sales growth in the range of 42% to 46%.

Adjusted EBITDA for Q4, 2020 is expected to be on the range of $31 million to $35 million in fiscal year 2020, adjusted EBITDA is expected to be on the range of $143.6 million to $147.2 million.

Adjusted EPS for Q4 is expected to be in the range of 39 cents to 45 cents.

In full year adjusted EPS in the range of one dollar at 87 cents to $1.93 cents.

Finally at fiscal year 2020 capital expenditures are anticipated to be approximately $17 million to $19 million.

That concludes our prepared remarks for today, we look forward to updating you on our business and financial results. During our next earnings call planned for late March 2021.

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

At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad a confirmation on will look at your line is in the question queue you repurchase starting to if you like to remove your question from the queue for participants using speaker equipment, you may be necessary to big of you answered before.

Mr. Keith.

John when we present on the pull for questions.

And our first question is from rising sea down with Craig on capital.

Please proceed with your question.

Great.

Congratulations on the strong results and guide and thanks for taking my questions here.

One of start kind of pre election post election of you've seen any change in demand for either guns or animal.

Hey, Ryan its John we've seen of mix change starting in Q3.

With a heavier concentration of sales of units in demand in hunting products.

While personal protection, which includes hand guns and shotguns remains strong as well as the MSR category. We did start to see more of a transition into hunting in Q3, which lined up of very closely with the increase in hunting license sales of the hunting participation across the country.

And then as as a follow up John.

As far as the supply chain Goads spin constrained for a while.

Can you talk of what kind of the puts and takes between the hunting categories versus personal protection and others and how the supply chains are going on.

Yeah, the the flow is.

The flow on all of our shooting sports.

Both of firearms and ammunition is still solid but demand is exceeding on I think we mentioned we did 134% growth in units in Q3 of firearms is a company that's all units all stores.

And next we're up 57, so it's clearly an indicator of just looking at the math high level of demand is still outstripping production of.

We are gaining market share of through items are our position in the industry relationships, we have in our ability to forecast and pure goods.

And I see a shortage of firearms and ammunition continuing.

For at least a few more months Ryan again, I don't have a crystal ball, but it looks to me like we've got a couple more months before.

The supply chain could get back into end to end normals of state.

Good man.

Switching over wildfires Western us on can you walk through kind of store impact good bad and then kind of in that overall impact of the company.

Yeah, we as you remember Ryan end 2019, we saw significant increases in generator sales in California related to fire on it.

Buyers and rolling blackouts, we did not expect to comp those numbers. This year on what ended up happening because of a combination of activities around forest fires in the west and northwest of us as well as blackouts, we did really well and generators again this year.

Math end the numbers what was the impact of hunting, we have quite a few of public land areas in Idaho spec.

Especially that were shut down this year end people could not Colorado as well in Wyoming.

Could not actually participate and get into the mountains. So that was a little bit of of I'll call at a negative of two of the industry and certainly to us, but it was masked within just a large quantity of participation across the board.

And one more for me and then I'll turn it over just I know, you're only giving guidance for this year, one more quarter, but any commentary you can give kind of longer term as we look out for next year I know rewards members are up significantly et cetera, but how do you think about outdoor participation.

Trends and any directional commentary kind of on margins and outlook for next year would be helpful. Thanks, Yeah again, thanks, Ryan we're not going to provide.

Any guidance on exact financials, but I can tell you as we think about the future of for the outdoor industry at specific to sports on his warehouse. We are of very very bullish on the participation Weve seen this year, we've had millions of new at Reengage participants across the board and every activity in which.

We participate and I don't believe that's a one time flash in the Pan as we've gotten into November on we shared some high level trends were up over 70% for the fiscal month of November what we're seeing as far as basket demand inside the store in on line is a continuation of per.

Products for what I believe our holiday gift, giving that are outside season.

For the amount of demand were seeing in camping fishing hiking activities at hunting of course.

Is related to the holiday demand and I believe that's individuals' at Reengage during games for the first time or asking for their next product for that for the next step up in the product they're going to use next season of spring summer and fall of 2021, Robert I don't know if you want to give any comments on the the margin piece or just no.

No I think that you know we intend to we hope to give guidance for this and we prefer to give guidance and hopefully at the end of the year end as we enter into 2021 on our next earnings call, we'll be able to give specific guidance around on revenue and EPS and so on but at this time I think that.

We're just not prepared to do that.

Thanks, guys. Good luck.

Thanks Ryan.

Your next question is from Daniel Hofkin with William Blair. Please proceed with your question.

Hi, Good afternoon, I, just want to make sure I understood a little bit better about you know kind of the and apologize if you addressed this earlier on but as far as the.

Kind of end demand in categories relative to what you would have expected or what you've seen over the course of at quarter end.

Mid November whether you feel like Thats kind of fully held operating issues.

Issues, where you're seeing some constrained and constraints.

Constrained supply if that's kind of the only thing that's kind of holding things back or if you're seeing any any differences and end demand for much you can tell obviously.

You know sometimes that can be tough to gauge, but just curious what you're seeing that's my first question.

Yes, Dan how are ya on on demand across categories November we've seen an uptick of strength at a more balanced demand across our business in November and of Tonight, I see that pointing to holiday gift, giving a round outdoor products. So we've seen at.

Across the board even at a higher rate across the board in some categories that we saw on Q3 of firearms and ammunition again continued to be strong mixed a little bit more towards the hunting seasons recently than personal protection and potential regulatory of at that demand.

End continues.

But across the board at November we've seen really really strong sales were excited about the holiday season.

And in terms of end of its great to hear on that in terms of sort of.

I guess, what you're seeing for manufacturers of your access to product and all of that.

And also just channel inventory of sounds like channel inventories remain very very lean in general or at least you know.

Excess demand situation.

Yes that was on a fairway to read of any any additional color on that on.

It it Dan I think you are directionally correct.

What I would tell you is that our inventory position today as we sit here are very good across the chain.

End camp fish hike apparel footwear, even hunting accessories in pretty good shape. We are continued to be thin in firearms and ammunition and I think thats just a matter of.

We did a great job of forecasting hunting season, we had the product in house demand for hunting. This fall far exceeded what the industry expected. What we expected. We're now then across the board on all firearms and ammunition. So we've got some some supply chain make up to do.

And that will take several months for the industry to accomplish the nice thing about I guess, where we're at today as we think about the future. If there is a more normalization of firearms demand in 2022, we will have visibility into that demand as a retailer and as as an industry.

As were building inventory up to normal stock levels.

And in terms of your kind of relative position with vendors you know how thats kind of evolving at in terms of access to product at.

You know inventory position on sets or ability to pick up your product you know as soon as anyone Chris any commentary there.

Yeah, absolutely again, Dan I think across the board outside of firearms and ammunition were warehouse and really goods. Good position today, they'll I can't really speak to exactly what the competitors are getting or not getting we're certainly going on on channel checks and were out of visiting the competitors on a on a regular basis I can only point.

Moving to the Nics checks at Q3, we were up 134% firearms sales and mix were up 57, I think that's a that's a that's a proof point that we have done a better job in forecasting planning and we do have the right relationships with the key vendors on we've had those long term on that.

That's what has helped us exceed our competitors in access to product during this recent surge.

Great Best of luck Capex for the color.

Thanks, Dan.

And our next question is from Peter Keith with Piper Sandra. Please proceed with your question.

Hi, Thanks, Good afternoon, everyone, Hi, John maybe just to follow up on that that last question with.

Your performance versus mix it looks like that that GAAP to nicks has widened in Q3 relative to Q2, which I guess would suggest market share acceleration.

Could you just help us understand that do you think you're just getting more more inventory or do you think your model is resonating even more with with customers today because of the selection.

I think at a three parts of Peter I think our brand on assortment is resonating better than anyone else's in the shooting sports and I think you can see that just by looking at the assortment of our direct competitors against ours as well as our pricing our geographic position I think we are getting.

On a larger portion or percentage of the available supply and our direct competitors I also think to a small percentage in Q3, we did open three stores, which helped a little bit in increasing that gap, but we expect to continue to have a gap in our growth impaired.

Two next which we've shown for many many quarters as a proof point to our ability to grow market share in the firearms industry.

Okay very good and.

Yeah. It makes a very good comments had been made around November and the broadening of demand.

I guess John to put maybe words into your mouth.

If we look to.

The first half of next year, and there's concern around having to lap lap. These compares or are you guys getting more optimistic around lapping. This compares that you you'll see year on year gross with maybe categories, such as camping and fishing based on.

Sort of this off season demand that you're seeing right. Now is is that at a fair statement to make.

I I'm not prepared to make that statement today, Peter I think we need some additional time to really model out at the category at level on traffic at demand cycles for 2022 before we provide any insight on how we're thinking about next year I think it's fair to say that we're at.

Site at about the future of we've got a lot of participation.

But on the other hand theres been some significant increases in same store sales at I think we have to we have to be thoughtful in our modeling against for 2021.

Okay, that's that's for for but fair.

And and just lastly, being that the the guidance is great. The we do like transparency at it does suggest a obviously a slowdown and so I'm assuming that no one's going to anticipate you maintained 70, but anything to call out for December or January with regard to inventory constraints or for issues that debt or foreseeable.

Yeah. It's a great question I think we should probably hit a little bit on on consumer demand on what we've seen at some of the changes a day.

This year compared to previous holidays are starting to be in November we saw significant growth across the business at holiday demand, we changed our marketing cadence dome, which facilitated that I also think that customer was thinking differently about of shopping behavior of given the impact.

Tactically, good and limitations on ability to visit retail stores on.

So we saw strong sales from the very beginning of them on it continued through.

You know cyber Monday.

And while many retailers and again I I visit a lot of stores on Black Friday, we as a team rounds of stores, we read all of the all the articles.

What many retailers at all in a decline in traffic from Wednesday through Sunday, we actually saw an increase in traffic at our same store sales.

We did see the customers come in a little stronger on Wednesday on that curve than we normally do little slightly lighter on Friday, and Saturday and Sunday were strong again. So my perspective is customers were a little more conservative.

And being in a crowded retail center on Black Friday, and they made up work by coming in on Wednesday, Saturday and Sunday as well as online sales. So again of I think the customers been strong they continue to show strength.

Even through Monday, as I think about the rest of the season, Peter We I think the unknown for US is January we.

We feel like we're in a very strong through Christmas holiday season, the comps once we get to January a little tougher for us on remember last year, we sort of return to more normal in January and weird, we're being somewhat conservative on how we think of the post holiday shopping season for Jan.

On you wary as we frame up Q4's guidance and Peter I'll, just add and expand on something that John said, just a reminder of the comparison period at last year, leading into December of Walmart had announced that they were exiting the ammunition category.

Oh, there was significant discounting and promotional activity by our competitors, who we chose not to participate in a we did take a hit for that in revenue.

And then you will recall that once that was finished at Walmart was out of our.

Our business returned to much normal trends in January so relatively speaking the comparison for January of this year versus last year as tougher relative to what we saw sort of November in certainly in December when all of that promotional activity was going on as Walmart was exiting ammunition.

Okay, Great color guys. Good luck with the rest of the holiday season. Thanks.

Thanks Peter.

And next question is from Mark Smith with Lake Street Capital Markets. Please proceed with your question.

Hi, guys at first I just wanted to look at the sales shift at you talked about within firearms kind of moving more towards traditional kind of hunting firearms can you talk at it maybe if we just look at MSR and nine millimeter did.

Did you see any decline in that demand during the quarter or is it just that you started to see the hunters come out during the quarter and become a larger piece of the mix.

More of the latter Mark we continue to see strong demand on personal protection on end MSR and certainly the election cycle of drove additional interest in MSR is and we can see that in an increase in the S.P. within the at for personal protection and MSR category.

The honor of hunting.

Consumer increased significantly at brought that percentage up so again light on inventory for personal protection light on GAAP, we started to see light of.

Numbers on available inventory at MSR of demand there continued to be strong, but we were well positioned going into hunting season.

And those customers. They arrived and we found we could have had even more inventory in both hunting shotgun hunting rifles, and Centerfire rifle ammunition for hunting, we were a little light on and continue to be light.

Okay and <unk> per.

Post quarter end through kind of the holiday season, thus far any change in that demand for kind of personal protection MSR.

On handguns.

I'll say the demand is still out it's exceeding the supply.

Okay, and then as we look at kind of the the ammunition trends versus maybe the firearm trends do you feel like this kind of fits with historical precedent, where we've seen ammo demand with much longer legs. Maybe then then fire on demand once supply kind of catches up do you feel like this.

On the ammo industry has maybe changed due to the fact that we have so many new shooters that are out there.

I do I think a you know some of the Mark you know Weve said over 40% of the firearms the industry as communicated reported 40% of the firearms sold this year for the first time buyers and those consumers are starting to shoot and they will continue to shoot and we expect to see the demand for ammunition to kinda.

When you further in the future at an elevated rate and we do firearms themselves.

Okay, and then just looking at the gross profit margin for break down I I think Robert talked a little bit about the mix, obviously on a year over year basis.

Hurting a little bit as well as the growth in E. Com hurting that I don't know if there's any more data that you can give us around that but for the other question on that is what you've seen from from on a pricing basis from Oems and if you've been able to successfully pass through those price increases and if you have opportunity to take price increase.

At this maybe above that.

That.

Yeah, Mark we've spoken about this little bit of passed on to be very clear, we one of balance margins in those key categories again consumer.

Perception and price elasticity of we have received multiple rounds of price increases this year from ammunition manufacturers, especially.

In most cases, we pass those on and our margins at ammunition today are better than they've been of since.

Since I've been with the company. The other thing that has helped on that front for as there's much less promotional activity across the board. This year end firearms and ammunition again, Robert mentioned, a moment ago, especially in ammunition last year other significant black Friday deals across the board at at the same time you had.

A couple of retailers pulling back materially end clearing out their shelves. So the margins. We're seeing in ammunition are very very solid today, we feel good about where we're priced we are priced very competitively and we believe we're creating long term relationships with shooters because we are.

Approaching the model from a long term view not a short term profit only focus.

[noise] excellent.

And is we look kind of big picture at unit growth, obviously, the balance sheets in great shape, you've got strong demand at and really strong core customers for new customers at it sounds like you're doing a good job retaining them and getting their information how do you feel about your your unit growth opportunities.

And you know how quickly for you want or two could you could you ramp unit growth.

Mark This is Robert.

I think that we still feel good about our stated strategy of opening eight for 12, New sports is warehouse stores, a year and it maybe we'd like to be at the higher end of that range of we have been a on the last couple of years at the higher end of that range, but we also want to continue to be very mindful about.

GAAP being able to open these stores.

Intelligently and to be able to get the right mix of inventory a end to be able to execute with the store openings in the grand openings and get the right workforce in place and so it is not really our intention to change. Our stated you know store expansion strategy of Ace.

At 12, a as I said, maybe we'll try to be at the higher end of the range of like we have been but I think we feel like that that 12 is the number that we can do really really well certainly not constrained financially to move to do more than that but from a human resources point of view on an execution point of view, we feel good about.

That that eight to 12 range.

Excellent and then I think the last question for me and I apologize if I missed it or whats the with all the numbers that you guys have given US a day did you give on if not can you give us the comp number of same store sales in November.

We did mark we did not provide the comp sales numbers of we're not going to be providing those for the month of November we gave a total number of sales are up over 70% as what we framed up I will say one thing mark in that regard in terms is your low.

Looking at the trends.

In Q for the new store growth will be a little lower than what you've seen through the first three quarters and same store sales growth will be a little higher because we will anniversary the acquisition of the eight field at stream stores that we made in October of last year and those will.

I'll start to appear as same store sales growth not new store growth. So there is going to be a shift in that going forward.

And if I recall right <unk> correct me if I'm wrong, you did see some of our gross profit margin increased from those acquisitions on the inventory that you purchased with those as well right. We.

We did there was a discount for the inventory acquired end those transactions and that gave us a little bit of a boost in the first couple of months as we sold through that inventory.

Okay, great. Thank you guys.

Thanks Mark.

And again as a reminder, if you have any questions you may be per store one of your telephone keypad.

At our next question is from Justin Kleber with Baird. Please proceed with your question.

Yeah. Good afternoon, guys. Thanks for taking the questions on just.

Maybe first can you give us an update in terms of.

What you've seen from that first time firearm buyers of came in your store at the onset of the pandemic.

Have they returned to make other purchases within the category are they shopping other categories across the store to store.

On any color there would be helpful.

Yeah, Justin good good to speak with the I can just give you some high level, we've started to get enough data on our first time gun buyers by monthly cohort at in that first couple of months. They are trending similar for its slightly above previous new gun buyer.

Hires we've also done some external surveying using a third party and first time gun buyers. This year of indicated of over one third of a third of those survey recipients of respondents have said they expect to buy a second firearm in the next 12 months little early on the basket analysis to.

Communicate their cross department were little early on that analysis, but the initial indicators are positive, but they're returning trips and transactions of the stores look very good compared to previous years first time buyers. So we're excited about that customer keeping them in the fold.

There was another interesting bit at day to the this is broad industry data not just for SUNS warehouse data about the demographics around I think at that time as for the 5 million new fire as purchases of the first half of the year at 58% of them for African American and 40% of them for female.

Which again is quite interesting demographic in an opportunity I think to attract new customers to the business.

Okay. Thanks for that color just.

Maybe a follow up on the on the guidance make sure I understand how you're you're kind of building it up even though.

December was very difficult for you last year it doesn't sound like you're planning.

December sales to accelerate from there.

The November run rate is that accurate.

Accurate.

I'd say that that is generally fair that well, what we'd expect to sort of a continuation of current trends more or less in November and December and then with a little bit of a tougher compare as our business returned to normal last January and maybe a little bit more conservative for the month of January.

Okay and then last question maybe for you going for you Robert gets could you maybe break out the 260 basis point headwind from product and channel mix during the quarter and then how you're thinking about those two variables within your your for Q outlook, which seems to imply you know go.

Gross margin is going to be down, which I assume is just largely mix related but any other any additional color there. Thank you.

Sure.

So the breakout there the the separation between what is product mix in channel mix has been very very consistent pretty much all year you know starting in Q1 Q2 on in Q3. It end in round numbers I would say you know the product mix has been about 200 basis points of.

Headwinds and the channel mix has been about 50 or 60 basis points of headwinds in net has been very consistent and then I I don't have a good reason to think of that that trend is going to change.

As it relates to queue for gross margin Q4 is traditionally I think you have to pay attention to the normal seasonality.

Of our gross margin and usually highest gross margins for our businesses in Q2 and Q3, the lowest gross margin in our business and that's just based on mix and seasonality of normal promotional activity. During holiday is Q4, so I would say that the differentiate the differential beach.

Tween did year over year margins by quarters should not be expected to be very different what you're just seeing in Q4 in terms of what's assumed in our forecast is typical seasonality and the same influences that are impacting Q2, and Q3 year over year will impact Q4 and.

On a similar way.

Okay, Yeah that makes sense, thanks for the color and best of luck at.

Thanks, Justin.

And we have reached the end of a question of next recession and I will now turn the call over to John Barker for closing remarks.

I want to thank you for joining the conversation today I would also like to take a moment to express my appreciation to everyone who works at sportsman warehouse I couldn't be prouder of the team's dedication of accomplishment. So far this year together, we look for continuing to serve customers throughout the holiday season.

[noise] into 2021, thank you.

This concludes today's conference and you may disconnect your lines at this time the free for dissipation.

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Greetings and welcome to the sportsman warehouse third quarter at 2020 earnings Conference call at this time all.

All parts of the relies on a listen only mode of course.

At energy session will follow the formal presentation, if anyone should require operator at this was turned at conference. Please press star Zero and John.

You bet. Please note. This conference is being recorded I would now turn the conference where would you correctly now head of Investor Relations you may begin.

Thank you with me on the call today is John Barker, Chief Chief Executive Officer, and Robert Julian Chief Financial Financial Officer of Sports was warehouse.

Well, we get started I would like to remind you of the company Safe Harbor language.

The statements we make today will contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Which include statements regarding our expectations about our future results of operations demand for our products and growth of our industry.

Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, including those described under the caption risk factors in the company is 10-K for the year ended February 1st 2020, and the company is other filings made with the FCC. We will also disclose non.

Non-GAAP financial measures during today's call.

Definitions of such non-GAAP measures as well as reconciliations to the most directly comparable GAAP financial measures are provided a supplemental financial information in our press release included as exhibit 99.1 to the form 8-K, we furnished to the FCC today, which is also available on the investor.

Relations section of our website at sportsmen dotcom.

I'd also like to know the today's materials, including earnings conference call, a Powerpoint presentation, which is available at sportsmen dot com in the Investor Relations section of the website.

You can utilize this debt to follow along with today's prepared remarks.

I would now like to turn the call over to John Barker, Chief Executive Officer of Sportsman warehouse.

Thank you Kate.

Good afternoon to everyone on the call at thank you for taking the time to join us today hopefully.

Hopefully you on your families of remains saved at healthy since we last spoke.

In my remarks, I will discuss high level Q3 financial results and trends.

And then I will provide some commentary on quarter to date.

For results.

Following my comments, Robert will provide more detail on our third quarter end year to date for result, as well as an outlook for the fourth quarter at all year at 2020.

Finally, we will open up the call for questions.

I'm going to start on slide four of the presentation.

During the third quarter, we remain open and operational at all markets, while continuing to prioritize the health of safety of our associates and customers on.

Very pleased with the efforts of the sports and warehouse associates as they continue to navigate record levels of demand.

In our stores, we provided exceptional service for our customers.

Continuing our strict adherence to help.

At this safety protocols, including leaning based math and social distancing.

We believe that one of the key.

These two are extraordinary success in the current environment at the dedication of our associates for stores distribution Center care Center at the corporate office.

In recognition of the sustained commitment from our associates, we provided another round of hero paid in Q3, it's all non executive team members totaling approximately $2 million.

During the third quarter, our E commerce, driven sales growth continued at a rapid pace, allowing.

Allowing us to safely sort of customers and expand our digital reach both.

In stores and online demand was elevated across all of our categories.

During the quarter, we work closely with our vendors at provider customers for the inventory levels that we believe were on matched by our direct competitors. However, we are not satisfied it is our belief that inventory constraints at not a decrease in demand was the governor on our growth during the quarter.

We ended Q3 with improved inventory position compared to Q2, and all departments with the exception of the shooting sports.

Turning to slide five I'll now discuss the outdoor activity participation trends and the growth of our loyalty program and email database.

All five of statistics are not yet available hunting for participation across many states of double or even triple digits. This season.

Your deposits increased participation our demand firearms ammunition and related accessories continues to be elevated during Q3.

In addition to honey.

Participation at fishing camping and hiking continued at an elevated rate relative to Q3 as confirmed by National Park attendance and hunting and fishing license sales.

During this period, we grew our loyalty programs at nearly 2.6 million customers.

And increase our overall email database by 84% year over year.

We believe we are capitalizing on our best in class credit card and loyalty program and our expanded database to better engage with customers, which helps us drive traffic in stores and online.

Turning to slide six.

Oh it factors in Q3 led by elevator participation outdoor activity market share gains of firearms the election cycle and social unrest resulted at very favorable financial result, net.

Net sales in Q3 were $386 million.

Increase of 59% over prior year.

Same store sales increased 41% in Q3 versus the prior year same store sales for firearms and ammunition at were up 98% at 53%, respectively. Total orphans warehouse fire on unit sales increased 134 per cent compared to Q3 of last year, while Ajay.

Adjusted Nics checks were up 57% during.

During the same period.

There or once again in the third quarter, we achieved significant market share gains of firearms confirming sports men's warehouse leadership in this category.

Our optics electronics and accessory category increased 26% during the third quarter on a same store sales basis of.

Apparel grew 19% at footwear salt sales grew 8% during the quarter.

We saw particular strength in our functional apparel and footwear, what camouflage outerwear at hunting boot outperforming our expectations.

Turning to slide seven at.

Not I will now comment on on our omni channel strategy at E Commerce results the other.

Best of 2020, combined with evolving consumer behaviors have accelerated adoption of our ecommerce platform, including BOPUS at shipped to halt during.

During the third quarter, our ecommerce driven sales grew at over 200% year over year. This growth rate was notable given our strategic decision to prioritize inventory in stores and materially reduce digital marketing efforts, which limited online growth during the quarter.

Through the first three quarters of 2020 ecommerce driven sales accounted for more than 10% of total net sales.

We believe there is meaningful opportunity for sustained ecommerce channel growth and therefore, we plan to continue to invest in our team platform at capability.

We will also continue to expand our store footprint in 2020, we opened nine new sports is warehouse stores. Our latest store opened in early Q4 and is located in Corona, California and total they're currently at 111 stores operating under the sportsman warehouse banner in.

In addition, our for.

First legacy shooting center, which opened earlier this year earlier. This year is performing ahead of expectations.

We are currently assessing expansion opportunities for this concept.

In 21 one.

Finally, I'd like to share some insight on early Q for trends end result.

Overall total net sales for the fiscal month of November were up approximately 17% compared to prior year. This is a continuation of the sales growth trend we saw in Q3.

While firearms and ammunition continue be at to be in high demand, we're seeing strong results across all major product categories debt.

This broad based growth confirms our belief that increased participation in activities like camping and fishing is a sustainable trend.

In regards to this past weekend. Unlike many unlike many retailers we saw increased foot traffic at our stores during the Black Friday weekend. Additionally, online traffic saw significant increases versus prior year with online demand of triple digits.

These results give us optimism that our categories are continuing to grow and that our product assortment and the sport for his warehouse brand is resonating with customers.

Turning to slide eight inch.

In summary, while there is significant uncertainty surrounding the path of the pandemic and its impact on the economy. We are highly encouraged by the surge of new participants in the activities on which we specialize on the sustained factors impacting our society in 2020 of motivated millions of people to engage.

Our reengaged with the outdoors we.

We believe sportsman warehouse is well positioned to meet this heightened demand and we're just beginning to engage with new customers across multiple product categories.

We also believe we are strategically positioned to continue to capitalize on meaningful growth opportunities from heightened outdoor activity participation.

E Commerce growth at new store expansion, which we believe will create long term shareholder value.

We look forward to speaking with you again in late March when we report our fourth quarter at full year 2020 for results.

With that I'll turn the call over to Robert to discuss our financial results and our outlook for Q4 at full year 2020.

Thank you John.

I'll begin my remarks today with a review of our Q3 and year to date 2020 financial results.

I will then review our outlook for the fourth quarter end up why 2020.

Turning to slide 10 of the presentation third quarter 2020, net sales were $385.7 million.

Compared to $242.5 million in the third quarter of 2019.

An increase of $143.2 million or 59.1% over the prior year period.

Same store sales increased 41% on the quarter led by firearms, and ammunition, which increased 98% and 53% respectively over the prior year.

Camping fishing and apparel also had strong quarters, increasing over the prior year period, like 26%, 25% and 19% respectively.

Finally, footwear increased nicely as well over the prior year of 8% on a same store basis.

Q3, 2020, gross profit was $130.6 million compared to 84.2 million in the third quarter of 2019 and.

An increase of $46.4 million or 55.1%.

Gross margin was 33.9% for the quarter, a decline of 80 basis points versus prior year.

This decline can be attributed to several factors probably.

Product and channel mix led to a 260 basis point headwind in gross margin due.

Due to a higher proportion of of revenue coming from firearms and ammunition.

At a higher level of sales transacted through our E Commerce platform.

This impact was partially offset by higher product margins volume incentives and other adjustments, which in aggregate positively impacted gross margin by 180 basis points.

SGN expense of $92.3 million for Q3, 2020 was an increase of $23.9 million or 35% compared to the third quarter of 2019, However, SDMA expense as a percentage of revenue improved approximately 430.

Basis points.

Looking at at 23.9% for the quarter.

We incurred additional payroll expense of $14.3 million versus prior year.

Including the $2 million apparel pay for our frontline non executive back office Associates that John mentioned earlier, the remaining increase is primarily due to new store growth.

Rent expense increased approximately $2.4 million versus prior year, primarily due to new store openings other.

Other operating expense increase approximately $7.3 million versus prior year, which is primarily a result of higher credit card fees due to increased sales volume.

Income from operations was $38.3 million for Q3, 2012 compared to $15.9 million in the prior year period, an increase of $22.4 million.

Interest expense in Q3, 2020 was zero point $5 million compared to $2.1 million in Q3 of 2019, a reduction of $1.6 million. This improvement is primarily the result of lower total borrowings.

We recorded income tax expense of $9.5 million end, Q3, 2020 compared to $3.3 million in Q3 2019. This.

This is the result of improved profitability year over year.

Net income for the quarter was $30.5 million or 68 cents per diluted share.

As compared to net income of $10.5 million or 24 cents per diluted share in the prior year period. This represents a year over year improvement of 44 cents per diluted share.

Adjusted net income in Q3, 2020 was $31.5 million or 71 cents per diluted share.

Pair to adjusted net income of $10.8 million or 25 cents per diluted share in Q3 2019.

This represents a year over year improvement of 46 cents per diluted share on an adjusted basis.

Adjusted EBITDA for Q3, 2020 was $49.9 million compared to $23.2 million in the prior year period, an increase of $26.7 million or 115%.

Turning now to slide 11 of the presentation.

Q3 year to date 2020, net sales were $1.0 billion compared to $6 million to $28.2 million.

In the first three quarters of 2019, an increase of $385.3 million or 61.3%.

Q3 year to date 2020 same store sales increased 44%.

Compared to prior year.

Q3 year to date 2020, gross profit was $334.5 million compared to $211.6 million in 2019, an increase of $122.8 million.

Q3 year to date 2020 gross margin was 33.0% of decline of 70 basis points versus prior year.

Q3 year to date 2020, EPS GNS expense of $251.1 million was an increase of $59.8 million or 31% compared to the copper period in 2019.

As a percentage of net sales Q3 year to date 2020, SGN a leverage improved approximately 570 basis points.

To 24.8% of net sales.

Q3 year to date 2020 income from operations was $83.4 million compared to $20.3 million in the prior year period.

Q3 year to day 2020 interest expense was $3.1 million compared to $6.6 million in 2019.

We recorded year to date 2020 income tax expense of $20.7 million compared to $3.2 million in 2019.

Q3 year to date 2020, net income was $61.8 million or $1.40 cents per diluted share compared.

Compared to $10.5 million or 24 cents per diluted share on the comparable period of the prior year.

Q3 year to date 2020, adjusted net income was $65.6 million or one dollar at 48 cents per diluted share.

Compared to adjusted net income of $11.3 million at 26 cents per diluted share in 2019.

Q3 year to date 2020, adjusted EBITDA was $111.7 million compared to $39.4 million in the prior year period, an increase of $72.3 million or 184%.

Turning to slide 12, I will now comment on our balance sheet and liquidity.

Q3, 2020, ending inventory was $322 million compared to $338 million at the end of Q3 2019, a decrease of $16 million.

We had at 10, new stores and closed one store during this time.

Inventory is down approximately 20% on a same store for wall basis compared to prior year.

Year to date in 2020, we have incurred at $15.4 million of net capital expenditures compared to $22.9 million on the same period of 2019, a decrease of $77.5 million year over year.

Q3 year to date 2020, operating cash flow was $171.7 million versus $57.8 million for Q3 2019.

This 114 million dollar improvement in operating cash flow year over year is primarily due to higher net income accounts payable and accrued expenses versus prior year.

While our accounts payable balance increased year over year, our days payable outstanding metric declined slightly compared to prior year.

Our liquidity continues to improve as we ended Q3 with no outstanding borrowings on our line of credit compared to $142 million at the end of Q3 2019.

At this reduction was achieved while holding an incremental $17 million of cash balances versus prior year.

At the end of Q3, 2020, we had approximately $218 million of availability on our revolving credit facility.

Outstanding balance on our term loan was $8 million at the end of Q3 2020 compared to $30 million at the end of Q3 2019, a reduction of $22 million. This includes an accelerated payment on our term loan of $8 million made in Q3 2020.

Our total liquidity, including cash on hand at the end of Q3, 2020 was $238 million compared to $80 million in the prior year period.

Turning now to slide 13 of the presentation.

As I mentioned previously we will be providing an outlook for Q4 and fiscal year 2020.

Starting with our net sales outlook, we estimate Q4 net sales would be on the range of 356 million to 386 million.

In fiscal year 2020, net sales to be in the range of $1.37 billion to $1.400 billion.

Same store sales growth in the fourth quarter of 2020 is anticipated to be on the range of 32% to 42%, resulting in fiscal year 2020 same store sales growth in the range of 42% to 46%.

Adjusted EBITDA for Q4, 2020 is expected to be on the range of $31 million to $35 million in fiscal year 2020, adjusted EBITDA is expected to be on the range of $143.6 million to $147.2 million.

Adjusted EPS for Q4 is expected to be in the range of 39 cents to 45 cents.

And full year adjusted EPS in the range of one dollar at 87 cents to $1.93 cents.

Finally at fiscal year 2020 capital expenditures are anticipated to be approximately $17 million to $19 million.

That concludes our prepared remarks for today, we look forward to updating you on our business and financial results. During our next earnings call planned for late March 2021.

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

At this time, we'll be conducting a question of Nexus action, if you'd like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate your items in the question queue you repurchase starting to if you like to remove your question from the queue for participants using speaker equipment, you may be necessary to bigger of your hands free before.

Mr. Keith.

On when we put you on the pool for questions.

And our first question is from Ryan as you know Weve Craig on the capital.

Please proceed with your question.

Great.

Congratulations on the strong results and guys and thanks for taking my questions here.

One of start kind of pre election post election of you seen any change in demand for either of guns or animal.

Hey, Ryan its John we've seen of mix change starting in Q3.

With a heavier concentration of.

Sales of units end demand in hunting products, while personal protection of which includes hand guns and shotguns remained strong as well at the MSR category. We did start to see more of a transition at the hunting in Q3, which lined up very closely with the increase of hunting license.

Sales of the hunting participation across the country.

And then as as a follow up John.

As far as of supply chain goes at the spin constrained for a while.

Can you talk about kind of the puts and takes between the hunting categories versus personal protection and others and how the supply chains are going on.

Yeah. The the flow is the.

The flow on all of our shooting sports.

Well firearms and ammunition is still solid but demand is exceeding at I think we mentioned we did a 134% growth in units in Q3 of firearms is a company. That's all units all stores and next we're up 57, so it's clearly an indicator.

Just looking at the math high level of demand is still outstripping production.

We are gaining market share of through our our position in the industry relationships, we have at our ability to forecast and pure goods.

And I see a shortage of firearms and ammunition continuing for.

For at least a few more months Ryan again, I don't have a crystal ball, but it looks to me like we've got a couple of more months for of the supply chain could get back into end to end normals of state.

Good man.

Switching over wildfires Western us on can you walk through kind of store impact good bad and then kind of in that overall impact of the company.

Yeah, we as you remember Ryan end 2019, we saw significant increases in generator sales in California related to fire.

Buyers and rolling Blackout, we did not expect to comp those numbers. This year on what ended up happening because of a combination of activities around forest fires in the west and northwest of this as well as blackouts, we did really well in generators again this year.

Math and the numbers of it was the impact of hunting, we have quite a few of public land areas in Idaho.

Especially that were shut down this year and people could not Colorado as well in Wyoming.

Could not actually participate and get into the mountains. So that was a little bit of of I'll call at a negative of to the industry and certainly to us, but it wasn't mass within just a large quantity of participation across the board.

On one more for me and then I'll turn it over just I know you are on the given guidance for this year, one more quarter, but any commentary you can give kind of longer term as we look out to next year I know rewards members are up significantly et cetera, but how do you think about outdoor participation and.

And trends and any directional commentary at kind of on margins and outlook for next year of be helpful. Thanks, Yeah again, thanks, Rob we're not going to provide any.

Any guidance on exact financials, but I can tell you as we think about the future of the outdoor industry at specific to sports on this warehouse. We are very very bullish on the participation weve seen this year, we've had millions of new at Reengage participants across the board and every activity in which.

We participate at I don't believe that's a one time flash in the Pan as we've gotten into November on we shared some high level trends were up over 17% for the fiscal month of November what we're seeing as far as basket demand inside the store and on line is a continuation of per.

Products for what I believe our holiday gift, giving that are outside season.

So the amount of demand were seeing in camping fishing hiking activities at hunting of course.

Is related to the holiday demand and I believe that's individuals at Reengaged are engaged for the first time or asking for their next product for that the next step up in the product they're going to use next season of.

Spring Summer and fall of 2021, Robert I don't know if you want to give any comments on that the margin piece or just.

No I think that you know we intend to we hope to give guidance for this and we prefer to give guidance and hopefully at the end of the year and as we enter into 2021 on our next earnings call, we'll be able to give specific guidance around revenue and EPS and so on but at this time I think that we're just not prepared.

To do that kind of.

Thanks, guys. Good luck.

Thanks Ryan.

Our next question is from Daniel Hofkin with Leerink. Please proceed with your question.

Hi, Good afternoon, just wanted to make sure I understood a little bit better about you know kind of.

And I apologize if you addressed this earlier on but as far as the.

Kind of end demand in categories relative to what you would have expected or what you've seen over the course of the quarter at the end.

Yes, I mean November.

Do you feel like that's kind of fully held up at night.

For years, where you're seeing some.

Constrained.

Constrained supply if at all.

Kind of be all of that you take what's kind of holding things back or if you're seeing any any differences in end demand for what you can tell obviously.

Sometimes that can be tough period, but just curious what you are saying that's my first question.

Yeah, Dan how are you on on demand across categories November we've seen an uptick of strength at a more balance demand across our business in November and again, I I see that pointing to holiday gift, giving a round outdoor products. So we've seen at.

Across the board even at a higher rate across the board in some categories that we saw on Q3 of firearms and ammunition again continue to be strong mixed a little bit more towards the hunting seasons recently than personal protection at potential regulatory of at that day.

Man continues but.

But across the board at November we've seen really really strong sales were excited about the holiday season.

And in terms of of its great to hear on that in terms of sort of.

I guess, what you're seeing for manufacturers of your access to product and all of that.

And also just channel inventory of top like channel inventories remain very very lean in general or at least you know.

Excess demand situation.

Yes that was on a fairway to read of any kind of any additional color on that.

Dan I think you are directionally correct.

What I would tell you is that our inventory position today as we sit here are very good across the chain.

At camp fish hike apparel footwear, even hunting accessories are in pretty good shape. We are continued to be sent in firearms and ammunition and I think thats just a matter of.

We did a great job of forecasting hunting season.

We had the product in house demand for hunting this fall far exceeded what the industry expected and what we expected. We are now then across the board on all firearms and ammunition. So we've got some some supply chain of make up to do and that will take several months for the industry.

To accomplish the nice thing about I guess, where we're at today as we think about the future if theres a more normalization of firearms demand in 2022, we will have visibility into that demand as a retailer and as as an industry as were building inventory up to normal stock.

Levels.

And in terms of your kind of relative position with vendors you know how thats kind of evolving at in terms of access to product.

You know inventory position on sets her ability to GAAP product you know as soon as anyone any commentary there.

Yeah, absolutely again, Dan I think across the board outside of firearms and ammunition were were really good good position today.

They don't I can't really speak to exactly what the competitors are getting or not getting we're certainly on our channel checks at were out of.

Visiting the competitors on a on a regular basis I can only point to the nics checks on in.

In Q3, we were up 134% firearm sales and next we're up 57 I think that's a that's a that's on proof point that we have done a better job at forecasting planning and we do have the right relationships with the key vendors on we've had those long term and that's what has helped us ex.

See our competitors in access to products. During this recent surge.

Great.

For Locke Capex for the color.

Thanks, Dan.

And our next question is from Peter Keith with Piper Standard. Please proceed with your question.

Hi, Thanks, Good afternoon, everyone. John maybe just a follow up on that last question with.

Your performance versus Nics, it looks like that that GAAP to index has widened in Q3 relative to Q2, which I guess would suggest market share acceleration.

Could you just help us understand that you think you're just getting more more inventory or do you think your model is resonating even more with with customers today because of the selection.

I think it's a free parts of Peter I think our brand on assortment is resonating better than anyone else's in the shooting sports and I think you can see that just by looking at the assortment of our direct competitors against ours was on pricing our geographic position I think we are getting.

A larger portion or percentage of the available supply and our direct competitors I also think to a small percentage in Q3, we did open three stores, which helped a little bit in increasing that gap, but we expect to continue to have a gap in our gross impaired.

To Nics, which we've shown for many many quarters as a proof point to our ability to grow market share in the firearms industry.

Okay very good and.

Make some very good comments.

They have been made around November and the broadening of demand.

I guess.

John to put maybe words into your mouth.

If we look to the.

The first half of next year, and there's concern around having to lap lap. These compares or are you guys getting more optimistic around lapping. This compares that you you will see year on year gross with maybe categories, such as camping and fishing based on.

End of this off season demand that you're seeing right now is that of a fair statement to make.

I I'm not prepared to make that statement today, Peter I think we need some additional time to really model out at the category at level of traffic at demand cycles for 2022 before we provide any insights on how we're thinking about next year on.

I think it's fair to say that we're excited about the future of we've got a lot of participation.

But on the other hand theres been some significant increases in same store sales at I think we have to we have to be thoughtful in our modeling against for 2021.

Okay, that's fair for what's there.

And and just lastly, being that the the guidance is great, but we do like and transparency at it does suggest a obviously a slowdown and assume that no one's going to anticipate maintaining 70, but anything to call out for December or January with regard to inventory constraints or for issues that are foreseeable.

Yeah. It's a great question I think we should probably hit a little bit on on consumer demand and what we've seen at some of the changes a day.

This year compared to previous holidays are.

Starting that began in November we saw significant growth across the business at holiday demand, we changed our marketing cadence Dom which facilitated that I also think that customer was thinking differently about shopping behavior of given the impact of co of it and limitations on of.

Billy to visit at retail stores so.

We saw strong sales from the very beginning of them on it continued through on.

Yes, cyber Monday.

And while many retailers at and again I I visit a lot of stores on Black Friday, we of the team route of stores, we read all of the all the articles.

What many retailer Sol and a decline of traffic from Wednesday through Sunday, we actually saw an increase in traffic at our same store sales.

We did see the customers come in a little stronger on Wednesday on that curve than we normally do little slightly lighter on Friday, and Saturday and Sunday were strong again. So my perspective is customers were a little more conservative and being in a crowd at retail center on black.

Friday, and they made up for by coming in on Wednesday, Saturday and Sunday as well as online sales so again of.

I think the customers have been strong they continue to show strength.

Even through Monday, as I think about the rest of the season, Peter We I think the unknown for US is January we.

We feel like we're going on were very strong through Christmas holiday season, the comps once we get to January a little tougher for us on remember last year, we sort of return to more normal on January and weird, we're being somewhat conservative on how we think of the post holiday shopping season for Jan.

On wary as we frame of Q4's guidance and Peter I'll, just add and expand on something that John said, just a reminder of the comparison period at last year, leading into December of Walmart had announced that they were exiting the ammunition category.

There was significant discounting and promotional activity by our competitors of we chose not to participate in a we did take a hit for that in revenue.

And then you will recall that once that was finished at Walmart was out.

Our business returned to much normal trends in January so relatively speaking the comparison for January of this year versus last year as tougher relative to what we saw sort of November and certainly in December when all of that promotional activity was going on as Walmart was exiting ammunition.

Okay, Great color guys. Good luck with the rest of the holiday season.

Thanks Peter.

And next question is from Mark Smith with Lake Street Capital Markets. Please proceed with your question.

Hi, guys first I just wanted to look at the sales shift that you talked about within firearms kind of moving more towards traditional kind of on team firearms can you talk at maybe if we just look at MSR and nine millimeter did.

Did you see any decline in that demand during.

During the quarter or is it just that you started to see the hunters come out during the quarter and become a larger piece of the mix more.

More of the latter Mark we continue to see strong demand on personal protection on end MSR and certainly the election cycle of drove additional interest in MSR at and we can see that in an increase in the ASP within the at a per day personal.

Personal protection at MSR category.

The honor of hunting.

Consumer increased significantly and brought that percentage up so again light on inventory for personal protection.

Light on GAAP, we started to see light of numbers.

Numbers on available inventory at MSR of demand there continues to be strong, but we were well positioned going into hunting season.

And those customers they arrive and we found we could have had even more inventory in both hunting shotgun hunting rifles, and Centerfire rifle ammunition for hunting, we were a little light on and continue to be light.

Okay and <unk> per.

Post quarter end through kind of the holiday season, thus far any change in that demand for kind of personal protection MSR.

On handguns.

I'll say the demand is still out it's exceeding the supply.

Okay, and then as we look at kind of the ammunition trends versus maybe the firearm trends.

Do you feel like this kind of fits with historical precedent, where we've seen ammo demand with much longer legs. Maybe then then fire on demand once supply kind of catches up do you feel like this the ammo industry has maybe changed due to the fact that we have so many new shooters that are out there.

I do I think you know some of the Mark you know, we said over 40% of the firearms the industry as communicated reported 40% of the firearms sold this year for the first time buyers and those consumers are starting to shoot and they will continue to shoot and we expect to see the demand for ammunition to Ken.

When you further in the future at an elevated rate than we do firearms themselves.

Okay, and then just looking at the gross profit margin for break down I I think Robert had talked a little bit about the mix, obviously on a year over year basis.

Hurting that a little bit as well as the growth in E. Com hurting that I don't know if there's any more data that you can give us around that but the other question on that is what you've seen from firm on of pricing basis from Oems and if you've been able to successfully pass through those price increases and if you have opportunity to take price increase.

At this maybe above that.

Yep.

Yeah, Mark we've spoken about this a little bit of past to be very clear, we one of balance margins in those key categories against consumer.

Of per.

Perception at price elasticity of we have received multiple rounds of price increases this year from ammunition manufacturers, especially.

In most cases, we pass those on and our margins at ammunition today are better than they've been.

Since I've been with the company. The other thing that has helped on that front for as there's much less promotional activity across the board. This year in firearms and ammunition again, Robert mentioned, a moment ago, especially in ammunition last year other significant black Friday deals across the board at at the same time.

On a couple of retailers pulling back materially in clearing out their shelves. So the margins. We're seeing in ammunition are very very solid today, we feel good about where we're priced we are priced very competitively and we believe we're creating long term relationships with shooters because we are.

Approaching the model from a long term view not a short term profit only focus.

Okay.

Excellent.

[music].

And is we look kind of big picture at unit growth, obviously, the balance sheets in great shape, you've got strong demand at and really strong core customers and new customers at it sounds like you're doing a good job retaining them and getting their information how do you feel about your your unit growth opportunities at.

How quickly for your water to could you could you ramp unit growth.

Mark This is Robert I.

I think that we still feel good about our stayed at strategy.

Of opening eight for 12, New sports is warehouse stores, a year end and maybe we'd like to be at the higher end of that range and we had been a for the last couple of years at the higher end of that range, but we also want to continue to be very mindful about being able to open these stores Intel.

Intelligently end to be able to get the right mix of inventory.

And to be able to execute with the store openings and the grand openings and get the right workforce in place and so it is not really our intention to change. Our stated you know store expansion strategy of eight to 12, a as I said, maybe we'll try to be at the higher end of the range of like we have total.

At I think we feel like that that 12 is the number that we can do really really well certainly not constrained financially to move to do more than that but on the human resources point of view on an execution point of view, we feel good about debt debt eight to 12 range.

Excellent and then I think the last question for me and I apologize if I missed that are with me with all the numbers that you guys have given US a day did you give and if not can you give us the comp number of same store sales in November.

We did mark we did not provide the comp sales numbers of we're not going to be providing those for the month of November we gave a total number sales are up over 17% as what we framed up I will say one thing mark in that regard in terms of as you're looking at.

At the trends.

Into for the new store growth will be a little lower than what you've seen through the first three quarters and same store sales growth will be a little higher because we will anniversary the acquisition of the eight field <unk> stream stores that we made in October of last year and those.

We will start to appear as same store sales growth not new store growth. So there is going to be a shift in that going forward.

Okay, and if I recall right and Robert <unk> Correct me, if I'm wrong, you did see some of our gross profit margin increased from those acquisitions on the inventory that you purchased with those as well right.

We did there was a discount for the inventory acquired at those transactions and that gave us a little bit of a boost in the first couple of months or as we sold through that inventory.

Okay, great. Thank you guys. Thanks.

Thanks Mark.

<unk>.

And again as a reminder, if you have any questions you may of course star one on your telephone keypad.

And our next question is from Justin Kleber with Baird. Please proceed with your question.

Yeah. Good afternoon, guys. Thanks for taking the questions on me.

Maybe first can you give us an update in terms of.

What you've seen from that first time firearm buyer that came in your store at the onset of the pandemic.

Have they returned to make other purchases within the category of the shopping other categories across the store.

On any color there would be helpful.

Yeah, Justin good good to speak with you I can just give you some high level, we started to get enough data on our first time gun buyers by monthly cohort at in that first couple of them on they are trending similar or slightly above previous new gun buyer.

There's lots of done some external surveying using a third party at first time gun buyers. This year of indicated over one third of a third of those surveyed recipients of respondents of said they expect to buy a second firearm in the next 12 months little early on the basket analysis to.

Communicate their cross department or little early on that analysis, but the initial indicators are positive, but they're returning trips and transactions of the stores look very good at compared to previous years first time buyers. So we're excited about that customer keeping on the full.

There was another interesting bit of data that this has brought industry data not just for SUNS warehouse data about the demographics around I think at that time as for the 5 million new fires purchases of the first half of the year debt.

58% of them were African American and 40% of them for female.

Which again is quite interesting demographic and an opportunity I think to attract new customers to the business.

Okay. Thanks for that color just.

Maybe a follow up on that on the guidance make sure I understand how you're you're kind of building it up even though.

December was very difficult for me last year, it doesn't sound like you're planning December.

December sales to accelerate from.

The November run rate of is that accurate.

Accurate.

I'd say that that is generally fair that well, what we'd expect to sort of a continuation of current trends more or less in November and December and then with a little bit of a tougher compare as our business returned to normal last January and may be a little bit more conservative for the month of January.

Okay and then last question maybe for you can see Robert gets could you maybe break out the 260 basis point headwind from product and channel mix during the quarter and then how you're thinking about those two variables within your your for Q outlook, which.

Seems to imply.

Gross margin is going to be down, which I assume is just you know largely mix related but any other any additional color there. Thank you.

Sure.

So the breakout there the the separation between what is product mix and channel mix has been very very consistent pretty much all year you know starting in Q1 Q2 on in Q3 and in round numbers I would say you know the product mix has been about 200 basis points of.

Headwinds and the channel mix has been about 50 or 60 basis points of headwinds and net it's been very consistent on that I I don't have a good reason to think of.

That that trend is going to change.

As it relates to queue for gross margin Q4 is traditionally I think you have to pay attention to the normal seasonality.

Of our gross margin and usually highest gross margins for our businesses in Q2 and Q3, the lowest gross margin in our business and that's just based on mix and seasonality of normal promotional activity. During holiday is Q4, so I would say that the differentiate the differential beat.

Between the year over year margins by quarters should not be expected to be very different what you're just seeing in Q4 in terms of what's assumed in our forecast is typical seasonality and the same at influences that are impacting Q2, and Q3 year over year will impact Q4 and.

In a similar way.

Okay, Yeah that makes sense, thanks for the color and best of luck at.

Thanks, Justin.

And we have reached the end of our question and answer session and I will now turn the call over to John Barker for closing remarks.

I want to thank you for joining the conversation today I would also like to take a moment to express my appreciation to everyone who works at sportsman warehouse.

I couldn't be prouder of the team's dedication of accomplishments. So far this year together, we look for to continuing to serve customers throughout the holiday season.

And into 2021, thank you.

This concludes today's conference and you may disconnect your lines at this time the free participation.