Q3 2024 Sportsman's Warehouse Holdings Inc Earnings Call

Given the current consumer environment and the emphasis on value and promotion driven shopping we were more aggressive with our sales driving initiatives, which pressured gross margins this quarter were.

We also saw pressure from a shift in product mix to more firearms. Additionally, we made a commitment to end each season with clean merchandise, ensuring that our stores remain fresh highlighting newness and staying relevant with our customers.

While this approach requires the price markdown cadence it allows us to significantly minimize excess seasonal inventory and reinvest those dollars into our core products.

Lastly, we continue to clean up small pockets of localized inventory, which was also impacting gross margins in the fourth quarter by doing this we create a more steady and predictable pattern of markdowns as we move through the different seasons.

While we expect pressure on gross margins to persist in Q4, we look to grow topline and improve our margins next year.

One of our strategic objectives, the continued investment buildout and implementation of it systems and tools.

Once in place these tools will assist in our improvement of overall in stocks gross margin and inventory productivity.

These investments are a key part of resetting and rebuilding our business fundamentals to enhance our operational effectiveness.

As part of our ongoing store reset strategy great gear, Great service, we continue to enhance product displays and provide additional training to our outfitters.

Focus on elevated customer experience not only improves satisfaction, but also provides an opportunity improve sales through better attachment. We continue to see <unk> from attachment and an all time high from the in store work being done around great service.

E Com driven sales comp positive in the quarter as we continue to refine and improve our overall marketing and media mix model to drive incremental sales through the channel.

As part of our Omnichannel strategy, we continue to test learn and understand through data driven consumer insights the impact of different marketing activities on sales customer acquisition and brand awareness.

Looking ahead.

As we move through the holiday season, we remain optimistic about our growth potential and the strategies in place to achieve our short and long term objectives. We will continue to emphasize newness and value as we look to win the balance of the holiday season.

To improve our holiday relevancy and capture incremental traffic during the season, we introduced our new Omnichannel marketing campaign. This year. This campaign highlights great gear that is perfect for gifting or for treating yourself and marks a fresh approach to engaging with our customers during the holidays. Our in store experience has also been upgraded to reflect the fully.

Integrated campaign, creating a cohesive and exciting shopping experience.

We are encouraged by our early holiday sales results, including Black Friday, and cyber week, where we experienced our highest ever E comp transaction count. This gives us confidence that the new marketing strategy. We implemented are showing promise. However, like other retailers, we continue to see a shift in how customers shop more than ever our customers are shopping value and they are willing.

Wait for the right promotion to make a purchase as we continue to navigate the balance of the holiday season and complex consumer environment, We will continue to prioritize traffic driving marketing and product pricing initiatives exceptional customer service and prudent inventory management.

As I conclude I want to emphasize the importance of disciplined expense management, and reducing total inventory levels to generate positive free cash flow for the year, we will prioritize the paydown of our debt as the primary use of excess cash flow maintaining a strong balance sheet is a top priority as we manage the business for improved performance.

Jeff: Thank you and with that I'll turn the call over to Jeff to review, our financial results in greater detail.

Jeff: Thank you Paul and good afternoon, everyone I'll begin my remarks today with a review of our third quarter fiscal 2024 financial results provide additional color on the balance sheet, then cover our updated outlook for fiscal 2024.

Jeff: Net sales for the third quarter of fiscal 2024 were $324 3 million.

Jeff: Compared to $346 million in the third quarter of 2023, a decline of four 8%.

Jeff: Same store sales decreased five 7% compared to the third quarter of 2023. This is the second straight quarter of improved same store sales trends and an improvement of 320 basis points versus the prior quarter.

Speaker Change: As Paul mentioned, we locked event driven demand during the quarter, primarily from our footwear and apparel clearance and liquidation events last year as well as the spike in firearms and ammunition demand from the tragic events in Israel, leading to the war and social unrest in October this tough comp led to a decline on a year over year basis in these categories.

Speaker Change: Gross margin for the third quarter was 31, 8% versus 33% in the prior year comparable period.

Speaker Change: Gross margins for the quarter came in below where we expected due to category and product mix as well as from customer shopping and buying more of our value in promotional products. The.

Speaker Change: The category mix shift was driven by higher than expected penetration of firearms and ammo in October which carries a lower overall gross margin.

Speaker Change: Additionally, we underperformed our expectations in sales and penetration in our apparel and footwear department two of our highest margin category.

Speaker Change: SG&A expense as a percentage of net sales was 38% or $100 million compared with 29, 4% or $100 1 million in the third quarter of last year.

Speaker Change: This is the first quarter, where we comp our cost reduction initiatives implemented last year as evidenced in the smaller year over year decline versus previous quarters.

Speaker Change: That said payroll pre opening and depreciation expenses were all down on a year over year basis. These were offset however by the settlement of an outstanding lawsuit in the state of California.

Speaker Change: Net loss for the third quarter was <unk> 4 million or negative <unk> <unk> per diluted share compared to net loss of $1 3 million or <unk> <unk> per diluted share in the prior year period.

Speaker Change: Adjusted net income in the third quarter of 2024 was $1 3 million or <unk> <unk> per diluted share compared to adjusted net loss of $2 million or one per diluted share in the third quarter of the prior year.

Speaker Change: Adjusted EBITDA for the third quarter was $16 4 million compared to $16 2 million in the prior year period.

Speaker Change: Turning to our balance sheet and liquidity third quarter, ending inventory increased versus last quarter and was $438 1 million compared to $446 3 million at the end of the third quarter of 2023.

Speaker Change: On a per store basis inventory was down two 5% versus last year's third quarter.

Speaker Change: In the third quarter, we made strategic investments in our inventory to drive sales in an effort to one ensure a solid in stock position on our core products to add newness in our stores and three effectively support the hunting and holiday selling seasons.

Speaker Change: As expected this created a seasonal peak for our inventory levels as we ended the third quarter.

Speaker Change: We are confident that we will end fiscal 2024, with an inventory balance less than $350 million as we continue to execute on our holiday strategy and cleanup pockets of unproductive localized inventory across our stores.

Speaker Change: Regarding liquidity, we ended the third quarter with a total debt balance of $154 million and total liquidity of $151 million we.

Speaker Change: We have approximately $148 million available under our credit facilities for borrowing.

Speaker Change: We expect the outstanding balance on our line of credit to end the year below $130 million as we continue to reduce inventory and closely manage expenses.

Speaker Change: Careful management of the balance sheet remains the priority and all and although the company has not yet generating profit, we still expect positive free cash flow for the full year 2024.

Speaker Change: The excess cash will go directly to debt paydown.

Speaker Change: Turning now to our guidance as Paul mentioned in his remarks, the underlying business continues to experience persistent pressure from the difficult consumer environment weighing on discretionary spending which is impacting our sales and gross margins while I am pleased at how the team has executed thus far during holiday given the shift in consumer spending we will.

Speaker Change: To use targeted promotions and value driving campaign to improve store traffic and top line sales similar to last quarter. We expect this to weigh on our gross margins in Q4, which is factored into our updated guidance.

Speaker Change: Now looking at our updated full year 2024 guidance, we now expect fiscal year 2020 for net sales to be in the range of $1 8 billion to $1 2 billion.

Speaker Change: Adjusted EBITDA to be in the range of 23 million to $29 million and total inventory to be below $350 million.

Speaker Change: To reiterate the low end of our adjusted EBITDA range still assumes positive free cash flow for the full year. We also now expect capital expenditures for 2020 for it to be in the range of $17 million to $20 million, primarily consisting of maintenance on our fleet and technology investments relating to merchandising and store productivity.

Speaker Change: That concludes our prepared remarks today I will now turn the call back over to the operator to facilitate any questions.

Speaker Change: Thank you so much MSR reminder, to ask a question simply press star one on your telephone and wait for your name to be announced to remove yourself press star One again, one moment for our first question. Please.

Speaker Change: Okay.

Speaker Change: And he comes from the line of Matt Koranda with Roth. Please proceed.

Speaker Change: Hey, guys. Good afternoon, thanks for taking the questions.

Speaker Change: Curious if maybe you could just cover sort of the cadence of comps that you saw during the third quarter by months.

Speaker Change: It sounds like maybe we leaned on leaned in a bit more on promotions.

Speaker Change: Wondering what the response was your customers' response was to that.

Speaker Change: During the quarter and then maybe just speaking cover what we're seeing quarter to date.

Speaker Change: I guess your fourth quarter.

Implied comp would suggest down call it like 5% to 6%.

Year over year are we tracking in line with that level that you're guiding to for the fourth quarter.

Speaker Change: Maybe just a little more color there as well.

Speaker Change: Yes, Matt Hey, it's Jeff. Thanks for the question as we look at the comps for Q3 first thing I would say as we saw sequential improvement month over month all through Q3.

Speaker Change: We were being more promotional in effort to offset some of the tough comps that we had Q3 is where we lap the liquidation of apparel and footwear last year and then the Israel Hamas.

Speaker Change: War that broke out so we were proactively trying to.

Speaker Change: Address those with being more promotional but we did see that trend improvement and as.

Speaker Change: As we said in our prepared remarks.

Speaker Change: It did surprise us with the performance that we had where we outperformed expectations walking into the month of October specifically as you look at Q4. The one thing on your comment of the down 5% to six comp that I think you need to consider is the 50 <unk> week from last year rolling that over and then what that does in terms of the comp that at Cree.

Speaker Change: <unk>, because youre, taking a week of January and moving it into a weak <unk>.

Speaker Change: Parable against the week of October So you have a very high revenue week last year versus a low revenue weeks. So there is just some nuance there on that that I would say go back and look at it in your numbers.

Yes remind us maybe Jess I think what the calendar shift jeffs.

Speaker Change: The 50 <unk> week last year I think you had in the past said that contributed something like $15 million, but just help us with the math really quickly if you could.

Jess: Yes, the $15 million is what that one week. The 50 <unk> week contributed but again when you're when you're looking at now at a year over year comp you have doubt an additional week thats falling into a January timeframe, which is a much slower time of the year being compared against a weak last year in Q4 that was inclusive of an October week, which.

Jess: A much higher revenue week so.

Jess: I would say that as we look at Q4 with those adjustments being made we're looking at continued sequential improvement in comp store sales through the end of the year.

Speaker Change: Okay. That's helpful. And then maybe just could you guys unpack a little bit more about the new approach to promos that were talking about maybe just a little bit more clarity around what we're doing in terms of everyday value and the gifting.

Speaker Change: Mentioned earlier I know like historically at least over the last call it.

Speaker Change: Six to 12 months you guys have highlighted.

Speaker Change: We're running a promotion that might be around the shooting sports.

Speaker Change: Item.

Speaker Change: That drives traffic and then you work to get attach off of that are we still is that playbook still in place and this is just layering on top of that maybe just a little bit more on the promotional sort of.

Speaker Change: Posture that we have here.

Speaker Change: I would say Matt is Paul October.

Speaker Change: Same approach we took there as we were going against the firm's ammo bump that we had as we've gotten into November December thats really been promotional around being able to drive people to traffic around gifting, which was an arm. We didn't lever we didn't have last year as we had left open.

Speaker Change: To buy so I think strategically if we looked at it and we planned on it as we came into spring to ensure that we're able to look at true gifting.

Speaker Change: And to be able to take that into consideration as we get into November and December So I think a little different look than what we've had.

In October.

Speaker Change: I'd tell you and just to reiterate I mean, the team's really done a nice job around the attach and as we've used this from an <unk> and an attachment standpoint, as we draw people in from the promotion.

Speaker Change: The team has well exceeded our expectation on what we've been able to do from an attach rate and an <unk> to be able to give a total solution to the consumer when they come into the stores and I think the other component would be just to touch on is.

Speaker Change: Really looked at marketing completely different.

Speaker Change: Susan and teams come on to the organization. It has really been focused around.

Speaker Change: Removing the print and be extremely.

Speaker Change: Directional and digital and.

Speaker Change: We're super excited about what that's looked like the fact that we can measure.

Speaker Change: Our ROE adds versus.

With no visibility with <unk> current on what that looks like so both of those things that can come into play and more digital.

Speaker Change: Our focused approach to where we can be extremely targeted on what that looks like and then to be able to play in different channels from from a digital standpoint that the company has not played in so.

Speaker Change: The bullish one on.

Speaker Change: On both of those and what they are doing and in particular from an AUR being attached.

Speaker Change: Okay very helpful.

Speaker Change: Maybe just if I could sneak one more in.

Speaker Change: Jeff on the SG&A side of things it sounds like we're lapping some of the cost cutting initiatives that we had from last year does that mean that were sort of winding down on the savings on SG&A on a year over year basis is there more to come that maybe we see in another sort of round of cost cutting.

Speaker Change: Just help us understand sort of where we have some levers to drive that SG&A.

Speaker Change: The line item lower in the fourth quarter.

Speaker Change: Yes, Matt Great question, Paul and I have made the commitment and we've talked about it in previous calls as we go through these cost cutting exercises.

Speaker Change: In order to meet our great service guarantee to our customers we need to start investing back into store labor. So we will always be looking for additional cost savings in the organization. There is still more cost savings to be had in various back office type functions of the organization and we will keep exploring those but.

Speaker Change: As we realize those savings we're going to be investing back into the service component and the customer facing components of the organization. So as you think about go forward.

Speaker Change: SG&A in Q3, and what your models are going to imply for Q4 is kind of steady state.

Speaker Change: Think about it.

Speaker Change: Okay. Thanks, a lot of sense I'll leave it there. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Anna Gluskin with B Riley. Please proceed.

Anna Gluskin: Hey, guys. Good evening, thanks for taking my questions.

Anna Gluskin: I guess I'd like to start on gross margin I know you've noted thought it came in a little softer than expected in the quarter, but still.

Anna Gluskin: A nice expansion year over year.

Anna Gluskin: Seem to suggest that the rush trying to approach to merchandising has reduced the risk of <unk>.

Anna Gluskin: End of season clearance, even though you noted that.

Speaker Change: It's clearly a priority to each season clean maybe can you speak to that and the extent to which you are seeing that as well.

Speaker Change: Yes, Dan its Jeff Good question as we looked at Q3, and we called it out a little bit.

Speaker Change: We outperformed in areas of the business like the hunt category, specifically firearms and ammo where in our initial forecast we did not expect that outperformance. So when you outperform in that area.

Speaker Change: Rate that youre going to drive there is going to drive gross margins lower also if you look at our inventory build during Q3.

Speaker Change: Significant build and there is some freight costs of bringing that merchandise in that had a.

Speaker Change: Not a large but it was more significant than what we would've seen in the past impact to gross margin. So.

Speaker Change: Looking at the right looking at the mix of the sales, where we are driving the promotions to it was a targeted approach to drive traffic into the stores and then just the freight build and getting in stock for the holiday ultimately led to the less than expected result for gross margins for Q3.

Speaker Change: Got it and then as we turn our eyes Task Force.

Speaker Change: Another question, but guidance assume seems to imply a little bit of a step up in year over year expansion in gross margin.

Speaker Change: As you sit here today level of confidence based on that inventory builds that you.

Speaker Change: Youre not going to have to have.

Speaker Change: The accounting at the end of the quarter.

Speaker Change: Yes, we're very confident in our ability to execute on the guidance. We gave to hit end of quarter inventory and the guidance. We gave for topline sales and bottom line profitability. We were addressing the what is a distressed consumer market and aggressive holiday season.

Speaker Change: And we're making the right moves and were being promotional where we need to in order to make sure. We end the year clean and we drive the right traffic into the stores to meet our expectations for the full year. So I.

I would say that we have a lot of confidence in hitting our year end numbers that we went out with today.

Great and then just.

Speaker Change: Sort of a housekeeping.

Speaker Change: I believe your exposure to tariffs our direct imports should be limited to private label, which is a low single digit percent of sales.

Is that the case.

Speaker Change: Yes, you are correct I think it's a little it's under 3% would be our direct exposure on our private brands to those to those tariffs we've been actively looking and monitoring and finding ways to reduce any increase in tariffs and the exposure we have there.

Speaker Change: Other areas of the business, obviously from the branded side our manufacturers, we're looking at their supply chains. The one thing I'll call out is we probably do penetrate higher from a branded product perspective and products that are made in the United states than other retailers, but that doesn't mean that we wouldn't be impacted or have to look at different price.

Speaker Change: <unk> measures as those tariffs come into effect.

Speaker Change: Moving into 25, so it's something that we're going to actively monitor but from a private brand perspective, you're correct in that it has very little exposure there.

Speaker Change: Great. Thanks, that's it for me.

Speaker Change: Thank you so much.

Our next question comes from the line of Justin <unk> with Baird. Please proceed.

Speaker Change: Hey, good afternoon.

Speaker Change: Hey, guys. Thanks for taking my questions first one Jeff just can you put a finer point for us on fourth quarter.

Speaker Change: Gross margin based on.

Speaker Change: Your response to the SG&A question, if I look at the midpoint of your EBITDA guide it seems to imply <unk> gross margin sub 30% I just want to make sure.

I have that math correct.

Speaker Change: Yes, Justin while we didn't give specific guidance I would say that if you look at the degradation that we had last year with the clear and seeing activity.

We do not foresee an anniversarying of that so you can look at what we lost in margin last year during <unk>.

The liquidation and cleared and seeing and assume that we're going to gain that back as you think about the Q4 results.

Speaker Change: Without giving you specifics.

Speaker Change: That's probably the way that I would guide you on Q4 margin.

Speaker Change: Okay.

Speaker Change: So then maybe I'll ask going back to the SG&A question, if I carve out.

Speaker Change: The items.

Speaker Change: Yes, I guess on an adjusted basis right at your SG&A dollars were around $98 million this quarter end.

Speaker Change: It sounds like Youre, saying that the new base that we should be thinking about in <unk> and into 'twenty five.

Speaker Change: Yes, <unk> may be just a little bit more with holiday and the staffing that we have to do in the store but.

Speaker Change: Back to the previous comment that that's pretty much steady state as we move forward.

Speaker Change: Okay. Okay, and then Paul can you just expand a bit more on the Omnichannel marketing campaign is this more.

Speaker Change: Top of funnel spend to drive brand awareness are you more focused on.

Speaker Change: Targeting existing customers just any any more color on what youre doing and what seems to be working best for you.

Speaker Change: Yes, I think.

Speaker Change: It's clearly bottom and we've got a lot of runway just from an exposure standpoint, as we think about it is for us to be able to attack the bottom of the funnel to move up from a search standpoint.

Speaker Change: I think we truly felt the benefits of it from an E com as we went through the holidays and the entire cyber week.

Speaker Change: The investments being made versus the print component of it. So I would say right now as we look at it we have a lot of different channels, where we're active in social.

Speaker Change: And we've been able to take a.

Speaker Change: Couple of different ones and even working with affiliates as we think about different programs.

Speaker Change: It gives us more exposure to a big part of our business, where we have an opportunity to be able to reinvest what those print dollars would've looked like in the past and be able to put that into work and really work hard for us.

Speaker Change: To answer your question originally took the majority of it is coming and bottom funnel.

Speaker Change: Okay. Thanks for the color guys. Appreciate it best of luck over the rest of holiday.

Speaker Change: Hey, Justin.

Speaker Change: Thank you. Our next question comes from the line of Ryan <unk>.

Speaker Change: With Craig Hallum Capital Group. Please proceed.

Speaker Change: Hey, good afternoon guys.

Speaker Change: Hey, Ryan.

Speaker Change: I wanted to stay on.

Speaker Change: I want to focus on hunting.

Speaker Change: So good to see fishing growth.

Speaker Change: <unk> campaign gift bar hunting was one that I think you guys had commented kind of after fishing was the focus area to right size inventory strategy store layout et cetera.

Speaker Change: <unk> called out some better results in both campaign Hunt earlier today, but I guess.

Speaker Change: A little surprised to see that wasn't one of the categories that had growth in the quarter. So can you kind of put a finer point on kind of performance in the quarter.

Speaker Change: And where you guys are at from a strategic standpoint in that category.

Speaker Change: I'll, let Jeff start then I'll add some comments on the performance for the quarter, we had a big headwind with.

Speaker Change: The lapping of the Israel, Hamas specifically in the ammo category.

Speaker Change: When you compare that it was a really big headwinds so from a firearm perspective, we're very pleased with what we performed in Q3, we outperformed the run rate of mix for the quarter and continued to do so into Q4. So we were very pleased actually walking out of Q3 with the performance of the hunt category, knowing the headwind that we were up.

Speaker Change: Again so.

I know that others have reported differing results, but knowing the headwind we walked into we were very pleased with the results in terms of strategy I'll, let Paul cover kind of where we're at on the merchandize reset and that from a strategic perspective.

Yes, I think the one thing that I would add to is as we think about knowing in particular, what the October comp was in the weight that it has in particular from an ammo and our overall business, but they.

The team has been extremely nice job of being able to offset that and I'll also say I think we took.

Speaker Change: An opportunity there as we went from promotional to drive people into the stores to really be able to clean up one.

Speaker Change: On our firearms non go forward firearms to be able to help us to be able to pull down our inventory levels to allow us to be able to reinvest back into ammo, which is much greater from a consumable standpoint to be able to drive people to the stores. So.

As we look at it we're not calling out as a positive comp, but overall from from an organization standpoint, and the lapping that we had we felt really good with a performance mix on.

Speaker Change: Strong over perform on mix on the firearms piece of it and then holding our own from an ammo, allowing us to be able to reinvest back into that inventory to drive trips to the store.

Speaker Change: Maybe Jeff just.

Speaker Change: A quick clarification question.

Speaker Change: Firearms are down year over year for you guys, but I think mix was plus one in the quarter. So I guess can you reconcile those two and then secondly, you guys ran a second amendment focused.

Speaker Change: Add kind of ahead of the election I guess.

Speaker Change: You see what did you see from a foot traffic conversion standpoint et cetera.

Speaker Change: And did you have any OEM support on those.

Speaker Change: Scott and rebates.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: The Nicks perspective, Ryan one clarification, there so nicks as a unit basis, our report out in our units outperformed mix. So that goes to youre seeing a trade down in price point by the consumer and that's the pressured consumer environment that we're in we've been talking about that all year.

Speaker Change: <unk>, but on a unit basis, we outperformed the Nic substantially for the for the third quarter. So just to clarify there sorry.

Oems support.

Speaker Change: Upfront from the vendor side.

Speaker Change: I would say that we are seeing better.

Deals come to market, especially in the categories that.

Speaker Change: Have slowed down maybe after the election cycle Youre seeing youre seeing more deals from the firearms and ammo manufacturers.

Speaker Change: Fish for US is a good performer in terms of OEM support and what we're seeing there from from the vendor side.

I think we're happy both with second amendment.

Speaker Change: I'll reiterate.

Speaker Change: We didn't see a run up with election I mean, this was an absolute.

Speaker Change: Non event for us from any type of run up from a firearms and ammo standpoint, we didn't see any spikes in our business as we got to the election and we liked the second amendment performed as well as really our first time and being able to engage with our veterans and the veterans day.

Speaker Change: Promotional activity look like in connecting with that consumer that we really haven't paid as much attention to is what we need to for both of those I would say we felt good with what that performance look like.

Speaker Change: Thanks, Paul.

Speaker Change: That's it for me good luck guys.

Speaker Change: Yes.

Speaker Change: Thank you and as I reminder, if you do have a question simply press star one one to get in the queue.

Speaker Change: Our last question is from the line of Mark Smith with Lake Street. Please proceed.

Speaker Change: Hi, guys.

Speaker Change: First question for me is really just around consumer behavior.

Speaker Change: Sounds like at the low end still really need to be promotional to kind of drive transactions I'm curious if you've seen change in behavior for the higher end customers.

Speaker Change: Has it been similar do you need to kind of prompt them to come in and spend.

Speaker Change: Or have you seen kind of the higher end hold up okay.

Speaker Change: I think the one thing I would just say on that Mark was just the.

Speaker Change: The ability now to be able to target our consumers and as we get much more granular one being able to go out through through digital that we have that opportunity to be able to kind of parse that out future state on what thats going to look like one how we go to market both from a price point standpoint.

Speaker Change: <unk>.

Speaker Change: I would say overall I know others that have reported that they've seen uptick from from the higher end consumer and I mean, thats not something that we have seen but I think it.

Speaker Change: In our opinion, we have an opportunity to just be much more precise on the consumers on already.

Speaker Change: The information we have on our consumers is to be much much more targeted approach to them future state than what we had been in the past mark to be able to communicate with them regularly.

Okay.

Speaker Change: And then I wanted to dig back in a little bit more on primarily firearms, but it also hits ammo.

Speaker Change: Maybe your confidence level as we look at Q4 on being able to outperform next in that kind of unit.

Speaker Change: Basis and.

Speaker Change: Do you feel like you can outperform next continued outperform next.

Speaker Change: Is it.

At a big expense to margin.

In that category or do you feel like you can.

Speaker Change: Strategically promote product to drive unit sales without hurting margin too much in that category.

Good question, Paul mentioned it on one of the previous questions. We've been really pleased with the attachment rate.

Speaker Change: Specifically on firearms, so while we've been more promotional from a firearm standpoint, the margin degradation is not such that we're not offsetting it or being more accretive with how high the attachment rate has become we've become really good at making sure we get that additional purchase when someone's coming in for our Fireeye.

We're no longer viewing it just as transactional in nature, meaning they come and pick up the firearm we send them out the door. It's more of a solution type selling thing, where we're selling them all the ancillary goods that go with that firearm and making sure we get additional margin accretive items attached to just the firearm.

Speaker Change: Yes, I think the dot com performance from a firearm standpoint, and just the investment we continue to make in dot com and knowing that that's ultimately going to drive.

Speaker Change: The majority of those firearm purchases to the stores to allow us to be able to capture the attach and the <unk> is something that we think gives us a competitive advantage and allows our our outfitters in the stores to really do their jobs and to be able to serve the customers in the attached and to grow the <unk>. So pleased with.

What the teams have been able to do from an E com standpoint to be able to drive those firearms to the stores and allow us to be able to give the total solution to the consumer.

Okay.

Speaker Change: And then just looking at holiday season, and as that applies to Q4.

Speaker Change: Maybe if you can give us a it seems like you guys feel pretty confident at this point in the guidance that you gave especially the inventory guidance on being able to get that down.

Speaker Change: Maybe if you can tell us whether historically or today kind of at this point in the quarter are you 70% towards your goal. It seems like last year. There were some more catch up on promotions and trying to clear out inventory you'll later through December.

Speaker Change: Feel like you're further along in.

Speaker Change: In the quarter, so far on kind of getting to your guidance numbers.

Speaker Change: Yes.

Speaker Change: Mark Great question in terms of sales were tracking.

Speaker Change: The current quarter sales model versus how 2019 was modeled it's the same shortened holiday season, we have five less selling days this quarter for holiday than we did last year or so.

Speaker Change: I would say we are happy with our progress versus that that model.

We are exceeding that model, but theres still a lot of sales left to occur the lots.

Speaker Change: These last two weeks were 14 days from from Christmas Eve right now so youre down to your last 14 selling days there are some big days between now and Christmas and we need to make sure that we're focused on achieving our sales targets were.

Speaker Change: We're confident that we have the ability that we have the right inventory the right in stock.

Speaker Change: The stores and our outfitters are ready to serve the customers and get the goods out the door, but theres still some work to be done in terms of the size of revenue left for the quarter.

Speaker Change: Yes, I think I would just add that's our biggest concern is that as we think about December and January we will.

We've got.

Speaker Change: We're very I think.

Speaker Change: Opportunistic on being able to close out but at the same time I don't think we're in a position where we're chasing inventory in January.

Speaker Change: In the December as last year, as we looked at and I'm proud of the team and the work that's been done to ensure that we have the core goods that we're going to need the right merchandise as we get into January to where youre, just not putting yourself in a position where it's completely.

Speaker Change: Clearance liquidation that you're allowed to be able to get the consumer really what they want as they come out as well so I think Jeff said it well.

Speaker Change: There's a big lift in front of US for the next 14 days and we don't want to get in front of our skis too much but I think ultimately we think the position. We're in from an inventory standpoint will allow us to be able to serve the customers. The way we need to in January without having to be in a heavy clearance liquidation mode to be able to get that down that inventory level down.

Speaker Change: By the end of the queue.

Speaker Change: Okay and the last one for me is just any additional thoughts around around new stores. I think you guys said you expect to do one.

Speaker Change: Next year can you give us any insight into timing and then.

Speaker Change: As you look at this new store will this be one word you're testing and trying new things or what we see maybe more of a traditional format.

Speaker Change: The new store openings.

Speaker Change: Yes, Mark the new store timing next year will be kind of in the late Q2 early Q3 timeframe in terms of opening it will be a standard 30000 square foot box will incorporate what we've learned over the last year in terms of visual merchandising store layout Sightlines cleanliness.

Speaker Change: Apart mental sizes into that lay out, but I would not say that youre going to see a drastic change it we're not going to tester or look at trying something completely different from what our core.

Speaker Change: Store footprint is it's in an area of the country, where we have a lot of other it's in Arizona. So it's a state that we know we know what the consumer wants we have the brand presence. So I think the go to market strategy. There is pretty set in terms of how we're looking at that yes. I mean, there is an opportunity to lean into and I think test and learn as we.

Speaker Change: Really.

Speaker Change: Focus on personal protection and what that looks like but it's one of our best states for personal protection.

Speaker Change: As well as probably one of our toughest states from a fish.

Speaker Change: Going into it and look at it.

Speaker Change: Other cases, where we could say, we could really test, Florida, and we will do that in some of our existing fleet, but I mean, just as a heavy heavy personal protection.

Speaker Change: And one of our best performing states, so we'll be adding another another store too.

Speaker Change: Excellent. Thank you guys.

Speaker Change: Thank you.

I see no further questions in the queue I will turn it back to Paul for closing remarks.

Speaker Change: Thank you operator by way of note, we will be participating in the Roth capital Deer Valley Conference. This Thursday, and we will be at the ICR conference in Orlando in mid January where we will host in person 101 and group meetings.

Speaker Change: Thank you for everyone for joining today's call.

Speaker Change: And thank you everyone for participating in today's conference and you may now disconnect.

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