Q1 2025 Sportsman's Warehouse Holdings Inc Earnings Call
Okay.
Speaker Change: Hello, everyone and welcome to the Sportsman's warehouse first quarter 2025 earnings conference call.
At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Participate you will need to press star one one on your telephone you will then hear a message of dicing. Your hand. This raced to withdraw your question simply press Star one again please.
Ryan lithium: Please note. This event is being recorded now it's my pleasure to turn the call over to the Vice President of Investor Relations Ryan lithium Sir the floor is yours.
Ryan lithium: Thank you operator participating in our Q1 2025 call today is Paul Stone, our Chief Executive Officer, and Jeff White, our Chief Financial Officer.
I will now remind everyone of the Companys Safe Harbor language.
Ryan lithium: The statements we make today contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095, which include statements regarding expectations about our future results of operations demand for our products.
And growth of our industry.
Ryan lithium: Actual results may differ materially from those suggested in such statements due to a number of risks and uncertainties, including those described in the company's most recent Form 10-K, and the Companys other filings made with the SEC.
Ryan lithium: We will also disclose 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 as supplemental financial information in our press release <unk>.
Paul: Included as exhibit 99, one to the form 8-K, we furnished to the SEC today, which is also available on the Investor Relations section of our website at Sportsman's Dot Com I will now turn the call over to Paul.
Paul: Thank you Roy and good afternoon, everyone before we begin I want to recognize our team of passionate and outfitters across the country every day, they deliver on our promise of great gear and exceptional service.
Paul: This remains the cornerstone of our strategy as we continue to execute our turnaround plan to transform sportsman's warehouse for sustained profitability and growth.
Paul: On our last call we outlined the next phase of our business transformation focus on returning to same store sales growth and improving operating margins.
Paul: Building, our foundation as a leading outdoor retailer hinges on disciplined execution across four key areas.
Paul: One inventory precision.
Paul: Ensuring we win the season.
Paul: Being narrow and deep in hunting and fishing to improve our in stock levels in the 20% of key products that drive 80% of ourselves.
Paul: Two local relevance empowering our talented store outfitters to leverage their deep expertise and community connections to deliver the hyper local knowledge of our customers appreciate.
Paul: Three personal protection.
Paul: Establishing sportsman's warehouse as the authority in personal and situational safety and for brand awareness reinvigorating, our brand and engaging customers to establish our position as the most convenient.
Paul: The destination for outdoor gear and expertise.
Paul: I'm proud of how our team executed against these key initiatives in Q1, delivering our first positive year over year sales comp in nearly four years, despite ongoing consumer microeconomic pressures at a later start to the spring selling season first quarter sales were up 2% compared to last year.
Paul: Notably again this quarter, our firearms unit fell significantly outpaced the adjusted mix data, suggesting we outsold the industry and continue to capture market share.
Paul: Although the adjusted mix declined five 4% in Q1, our firearm unit sales increased nearly 7% over last year, while farm customers continue to trade down.
Paul: For Q1 decreased 8% compared with last year, we've engineered our assortment to capture demand for value priced firearms and refined our accessory mix to drive faster growth and higher attachment rates.
Paul: We also achieved positive sales comps in Q1, and most core categories, including firearms clothing, and footwear ammunition, which was up 3% and especially fishing, which was up 11%.
Paul: Importantly, fishing was the first category, we addressed through our new merchandising strategy. The two year comp stack growth of 12, 3% validates that when we get the right product in the right place at the right time and market in the right channels the results follow.
Paul: While camping sales were down we believe this was largely due to the later spring and the timing of Easter we are well positioned from an inventory standpoint with strong in stocks in our key departments in fact fell.
Paul: Sales were up while inventory was down in many core categories. As we continue adapt and refine our assortment to meet the changing needs of the customer we continue to build our bench strength and our merchandising group to further align our merch refinement strategy to the needs of the customer.
Paul: Our ecommerce business also posted a positive comp up 8% over last year and outpacing the overall business.
Paul: This growth is being fueled by our new digital first marketing strategy and an improved omnichannel customer experience, which is delivering higher engagement and transaction growth.
Paul: The improvement across our business was primarily driven by improved in stocks on the key items, including depth in our top sellers on time readiness with in store merchandising and ecommerce channels for the early spring season, particularly with phishing and a strategic shift to everyday low price on core ammo calibers and other consumables.
Paul: Drive in store and online traffic, where we saw a 12% increase in ammo unit sales during the quarter.
Paul: I am, especially encouraged by our seasonal readiness and how far we've come and localizing, our merchandise assortments and Geo targeting our marketing messages for example in markets like Alaska, where we were historically relate to Q seasons, we are now better aligned with local expectations, including depth in key items and it's showing in our results. We are also seeing.
Paul: Positive customer feedback, which we believe is largely driven by our improved in stock performance and the service provided by our store outfitters.
Paul: Early in Q1, we made proactive decision with select vendors to pull forward spring and summer inventory in categories impacted by tariffs, particularly in fishing and camping, while those temporarily elevated our inventory levels and ensures we are well stocked in our key good heading into these peak selling season, we will continue to apply.
Paul: This approach in Q2 to ensure we're prepared for the critical hunting and holiday season.
Paul: Accordingly, we continue to anticipate ending the year with lower total inventory than last year and generating positive free cash flow, Jeff will speak more to this in his remarks.
Paul: On the personal protection front, we are making significant progress to standard the authority. We recently launched the safety out post on our website a curated experience focused on home defense and situational awareness that signals our commitment to a major growth category that others have largely ignored, but our customers increase.
Paul: Really expect us to lead to underscore our commitment we recently launched a month long campaign with Springfield, one of our top firearm brands and the personal protection space.
Paul: In early May we false launch the less lethal side of our personal protection strategy with our partner Berna 11 stores now feature full shop in shops, and 40 additional locations have smaller tailored assortments.
Paul: All locations offer live fire demonstration capability that from our test pilot resulted in significant conversion versus without trial. The early results are encouraging and we see significant upside as we build out this program.
Paul: This quarter, we're also launching a new Omnichannel brand campaign designed to reignite brand relevance and reestablished Sportsman's warehouse is the preferred destination for hunting fishing and sports shooting adventures for a great year and great service meet trusted local expertise locals are competitive advantage brought to life by passion.
Paul: Outfitters in the community they serve supported by our trade area and customer insights. This campaign is designed to integrate all marketing channels and reflect the strategic foundation of our turnaround and brand evolution. It.
Paul: It is built to reengage, former customers build relationships with new ones and earn loyalty in a fragmented and competitive market.
Paul: Despite the ongoing consumer microeconomic challenges I remain confident in our strategic plan and the team's ability to execute argue need competitive advantage lies in our ability to out local to big boxes at Alice sort, the small specialty retailers delivering a compelling mix of value quality selection and locally.
Paul: <unk> personalized service.
Paul: We are staying disciplined managing what we can control variable costs inventory levels and merchandise margins.
Paul: As we execute on our strategic initiatives. We are confident that this will translate into continued sales growth improved operating margin.
Paul: And further debt reduction in 2025.
Jeff: With that I'll now turn the call over to Jeff.
Jeff: Thank you Paul and good afternoon, everyone I'll begin my remarks today with a review of our financial results for the first quarter of fiscal 2025, followed by an update on our balance sheet inventory strategy tariffs and finally review of our full year outlook for 2025.
Jeff: Net sales for the first quarter were $249 1, million% to 2% increase from $244 2 million in the same period last year. This marks a strong start to the year and reflects continued momentum from our improved Q4 performance.
Jeff: Our positive comp sales underscore the early success of our strategic initiatives, specifically improved in stock levels across core categories, and our refined omnichannel marketing strategy, which is driving more targeted customer engagement.
Jeff: Gross margin for the quarter was 34% up 20 basis points from 32% a year ago. This expansion was largely driven by favorable mix and rate improvement in our fishing business, which carries a higher gross margin profile that said this gain was offset by increased freight expense tied to our strategic.
Jeff: <unk> pulled forward in anticipation of higher tariffs and changes to international trade policy and to ensure we were fully stocked for the key spring and summer selling season.
Jeff: This action resulted in an estimated 50 basis point drag on margin in the quarter and intentional tradeoff that positions us to deliver better full price sell through during peak selling season.
Jeff: SG&A expenses were $95 3 million or 38, 2% of net sales versus 38, 6% in the prior year. This improvement in SG&A leverage reflects our continued focus on expense discipline simplification of the business and higher sales productivity as we move through the year, we will continue to aggressively.
Jeff: We manage controllable expenses, while investing in customer facing areas that directly drive omnichannel traffic and conversion.
Jeff: Net loss for the first quarter of fiscal 2025 was $21 3 million or negative <unk> 56 per diluted share compared with a net loss of $18 1 million or negative <unk> 48 per diluted share in the first quarter of the prior year adjusted net loss in the first quarter was $15 6 million or negative <unk>.
Jeff: <unk> per diluted share compared with adjusted net loss of $17 8 million or a negative <unk> 47 per diluted share in the first quarter of the prior year.
Jeff: Adjusted EBITDA for the first quarter was negative $9 million compared with adjusted EBITDA of negative $8 7 million in the first quarter of 2024, as we head into the stronger selling quarters, we expect to generate positive EBITDA in the second half and full year improvement.
Jeff: Turning now to tariffs inventory total inventory at the end of Q1 was $412 3 million up from $391 6 million in the same period last year.
Jeff: This increase reflects a strategic decision to pull forward approximately $20 million of inventory ahead of rising tariffs and to ensure we are fully prepared for the spring and summer seasons.
Jeff: This was not an across the board build we focus on buying to core items high training products and seasonally relevant merchandising categories like ammunition, fishing camping and personal protection areas, where customer demand is more predictable and we're being in stock matters most to our customers.
Jeff: We believe this was a low risk investment given these are high training products. We will also continue to look for low risk inventory investment opportunities as we navigate the changing tariff environment.
Jeff: During the quarter accounts payable increased disproportionately from the pull forward of inventory, resulting in a higher than planned balance we expect that this will normalize in the second quarter.
Jeff: We also made meaningful progress, reducing SKU count and eliminating underperforming vendors compared to last year, we've reduced total active skus by approximately 20%, helping us simplified assortment improve inventory terms.
Jeff: And drive margin improvement overtime.
Jeff: This is a simplification and efficiency strategy, we will continue to pursue throughout 2025.
Jeff: Looking ahead, we continue to expect to end the year with less total inventories in 2024, while maintaining the right products in the right stores at the right time.
Jeff: Our buying discipline has improved and we are much better positioned to flex into peak periods with a focus on SKU reduction we are confident that we can drive sales increased terms.
Jeff: And use less working capital.
Jeff: In regard to liquidity, we ended the first quarter with a debt balance of $166 million and total liquidity of $122 1 million.
Jeff: Our liquidity position remains strong and we continue to actively manage working capital to ensure flexibility as we navigate through the year.
Jeff: Inventory efficiency and tight control of variable expenses will remain top priorities as we move through 2025, we remain committed to generating positive free cash flow and using excess cash to reduce debt and strengthen the balance sheet.
Jeff: Finally, let me speak to our full year guidance.
Jeff: We continue to focus our efforts on executing our strategic plan for 2025 and closely managing our variable expenses, despite the macroeconomic headwinds and downward pressure from tariffs we are reiterating our guidance for the full year.
Jeff: We continue to expect fiscal 2025 net sales to range between down 1% to up three 5% compared to 2024.
Jeff: Adjusted EBITDA to be between $33 million and $45 million driven by modest gross margin improvement and disciplined expense management and capital expenditures between $20 million and $25 million, primarily relating to technology investments to improve store service and merchandising productivity as well as our normal store maintenance.
Jeff: In summary, we are executing with urgency and discipline. We are seeing early validation of our strategy in the form of improved comp trends and better inventory execution.
Jeff: We remained focused on generating positive free cash flow for the year and returning sportsman's warehouse to consistent sustainable growth.
Jeff: That concludes our prepared remarks today I will now turn the call back to the operator to facilitate questions.
Jeff: Thank you so much and SRA reminder, to ask a question simply press Star one one on your telephone and wait for your name to be announced.
Jeff: To reach all young self simply press star one again.
Jeff: One moment for our first question please.
Ryan lithium: And it comes from the line of Ryan <unk> with Craig Hallum Capital Group.
Jeff: Please proceed.
Jeff Riley: Hey, good afternoon, Paul Jeff Riley.
Jeff: I want to start with comp trends very nice to see that positive comp overall for the quarter first one in four years and curious if you could break that down by month and then also if you could extend that into may what you've seen.
Jeff: Yes, Brian Great question, it's Jeff Thanks for joining us today, so as we as we broke down Q1 saw good trends in February we had an AD shift that really moved demand from March into April So March versus an <unk> comp was a little pressured by just some of the change in AD that we had but April was really strong happy.
Jeff: With the performance in April and that shift that we made to move the adds more in line with Easter and the start of summer and then the trend.
Jeff: <unk> has stayed strong as we've moved into may into the warmer weather into the strong fishing season, so happy with the trends that we've seen thus far in may.
Speaker Change: Are you willing to say if that's positive when you say strong in may.
Jeff: It is a positive comp for me continues to be positive for the month of May.
Speaker Change: Very good.
Jeff: And then just curious within the stores are you seeing primarily.
Jeff: Increased foot traffic or is it due to kind of the inventory assortments and the narrow and deep in certain categories that youre actually getting basket sizes to increase here.
Jeff: It's a mixture of everything that we are seeing better traffic trends transaction trends.
Jeff: Being positive on a year over year basis, we're seeing higher basket size from a <unk> perspective, and higher <unk> on the average order value of the basket, So I would say.
Jeff: The strategy the attachment what we're doing in terms of in stocks.
Jeff: Scott the key metrics that we're looking at firing in a direction that we are really pleased with given the tough consumer environment that we're operating in.
Jeff: And I think I would just add trends transaction.
Jeff: Continue to build from from April as we go into May and then.
Jeff: E Comm performance continues to be a big part.
Jeff: Part of the message from just a total omnichannel, which is helping you get an 8% lift in Q1 on that is driving folks to the stores.
Jeff: We like the way that works.
Jeff: Last one for me.
Jeff: Bernard.
Jeff: Kind of shop within the shops.
Jeff: Lethal option, there, but curious if there is opportunity to lean more into kind of a shop within a shop highlight brands I know there has been a focus to do a little bit more of that but any way to really emphasize the key brands that you're leaning into in a bigger better way than you currently are.
Jeff: Yes, I would say from a personal protection standpoint, we have the opportunity we think.
Jeff: Just continue to have.
Jeff: Up side based on what we're seeing from unit performance in firearms in particular with handguns and what's happened within that sub category over the last few months. We think we have great opportunity from accessory standpoint work with our partners to really blow out what that looks like to drive the overall basket and then we do have even as we think about it from <unk>.
Jeff: And shops as we start to build out the personal protection story, even greater as we go through the year.
Jeff: Other partners to be able to join along with US as we really tell the story around personal protection, it's not isolated to one subcategory non lethal from a long term standpoint, but we can really expand that both from a lethal from a technical gear and built on a true total thanks.
Jeff: Zinc story as we think about the overall personal protection, there, but a huge opportunity to continue to build upon some of the momentum we have with shop in shops there.
Jeff: Great I'll turn it over the other it's nice progress guys.
Speaker Change: Thanks Ryan.
Moderator/Operator: Thank you. Our next question comes from Mark Smith with Lake Street. Please proceed.
Mark Smith: Hi, guys.
Mark Smith: First question for me just wanted to clarify it sounds like you pulled forward about $20 million inventory here in Q1.
Jeff: Yeah, as we stated in our prepared remarks, Mark we looked at addressing some of the headwinds or uncertainty with tariffs and made a strategic decision to pull forward about $20 million of inventory as we highlighted heavy penetration in that pull forward in the hunt category.
Jeff: Your arms ammo now some of the accessories fish a lot of fish product was brought in to preempt the spring and summer season, and then just a little bit in the camp category. As we are looking at the exposure there to make sure that we were in stock on the items that truly matter have a high turn no that we can sell so we looked at it as a very risk free.
Jeff: Investment and was able to preempt some of the uncertainty that's in the market right now.
Jeff: Okay.
Jeff: As we think about sales mix you gave us the breakdown on gross profit margin on things that helped and where you saw some pressure, but it did sales mix.
Jeff: A negative impact on gross profit margin here in Q1, yes.
Jeff: Yes, we did penetrate heavier on the firearms and ammo side.
Jeff: Than we normally would have especially with the late start on Easter holiday Easter fell the latest it's been since 2017. Following at the end of April So I saw a slow start to the campaign season.
Jeff: That.
Jeff: We hopefully will see trends change as we move into Q2 and are optimistic and confident in where we have the merchandising what we have in terms of performance there, but I would say that Q1 was pressured by heavy penetration in firearms and ammo.
Jeff: But that's what our strategy is leaning in towards heavy and we're happy with our performance versus the adjusted Knicks and taking market share in Q1.
Jeff: Perfect.
Jeff: Last one for me you talked about.
Jeff: I guess confidence and lowering inventory year over year here by the time, we get to the end of the year I am curious your thoughts around that and Doug bass.
Jeff: <unk> sheet and your ability to repay some debt this year knocked that down.
Jeff: I'll start by just saying Q1, we came in.
Jeff: With the pull forward Q2, we're going to continue to see inventory come in in Q2, we're going to hit our <unk> and Mark for the first time in a long time to be able to have the in stock actually we missed it last year and to be able to hit the season with the start date, we wanted to so I think it gives us an opportunity to queue.
Jeff: <unk> Q2, as we build here in Q3 Q4 to be completely clean and to be able to to run that inventory level down where we've been pushing those.
Jeff: Inventory dollars into Q3.
Jeff: Causing a quick pullback in Q4 alone I think we're going to have all of Q2 be able to capture the sales from the top side of it and to be able to pull the inventory down at the right appropriate level as we get through Q3 and Q4.
Jeff: Yes, Mark I would just add from a free cash flow standpoint, we feel confident in our ability to generate positive free cash flow ultimately our top priority is deploying any excess cash flow generated to a debt pay down. So we will use the free cash flow, we generate by the end of the year in order to pay down debt.
Jeff: Excellent. Thank you guys.
Jeff: Thank you.
Speaker Change: Our next question comes from Matt Koranda with Roth Capital Partners. Please proceed.
Matt Koranda: Hey, guys, thanks, and congrats on the positive comps.
Jeff: <unk>.
Jeff: Just wanted to explore the reiteration on the guide you mentioned there is still some some pressure from tariffs maybe can you just talk about what you've built in in terms of like the unmitigated dollar pressure from tariffs that you are seeing or that you expect as of now I know, it's a fluid situation.
Jeff: And then are we taking price to offset.
Jeff: Some of that unmitigated impact or are we offsetting through efficiency actions, maybe just talk a little bit about what youre doing to sort of mitigate the gross impact of tariffs.
Jeff: Yes, I think the third thing I would say on that matter, but we're constantly assessing it.
Jeff: Looking at pricing down to the item and SKU level and this is something that we.
Jeff: Consistently do and we've got a better cadence than we ever have.
Jeff: I think we're fluid here, but with the ability to be able to make adjustments and change prices as needed as we go there and then.
Jeff: The thing I would just touch on too is that we will continue to balance the everyday low price really working on the efficiency of the ammunition, we've seen that from a customer sentiment.
Jeff: All time high on that promoter scores in the pricing action that we've taken I think correlates hand in hand, with the pricing strategy that we've put on ammunition to be able to drive traffic to the store and then our opportunity is to continue.
Jeff: To work on the attachment piece of it we like what it looks like from <unk> were at all time highs now and continue from an EOG standpoint, but I think it's going to be fluid. We like the actions we took in the first half.
Jeff: The first half of Q1 to be able to pull forward any private label that we have in particular in Tampa to.
Jeff: To mitigate any risks that we had there.
Jeff: But I think as you said, it's going to constantly be fluid as we navigate this just like everybody else.
Speaker Change: Yeah, Matt I would say on the guide front, we feel confident in our in the guide that we published barring any drastic reduction in consumer health.
Jeff: That can obviously have a significant impact on the business, but outside of those macroeconomic pressures. We felt we feel confident in the guidance and reiterating the guide for the quarter.
Jeff: This is a pull forward in inventory.
Jeff: Mainly likely Shouldnt expect any real tariffs impact to the P&L until probably at least.
Jeff: Part of the end of the third quarter or the fourth quarter of this year.
Jeff: Given that you sort of brought in on burden inventory yes.
Jeff: Yes, I do think it helps prevent or get ahead of the game on some of that where we feel comfortable from an in stock perspective that we've brought in enough good to last us through the summer selling season, and probably into early fall in particular Tampa.
Jeff: Fish.
Jeff: Position, we've been in from a geo and from a localization standpoint.
Jeff: And the team really got in front of that Matt to ensure that we're going to be able to have and be at the pricing, we need to and to be able to get through the season and really clean position. So that's what's in front of US right now and we feel good with the positioning we have there we'll go through the first half of the year.
Speaker Change: Okay, Great and then maybe just last one if I could sneak one more in.
Jeff: You mentioned in the release significant outperformance of mix is that on a unit basis or dollar basis for the quarter, I guess youll get a little bit more information in the queue, but any callouts on what's driving.
Jeff: That outperformance relative to sort of the industry.
Jeff: It would be on a unit basis, we're significantly outperforming nicks and the terms of.
Jeff: Greater than double digit versus what they are reported and I know that the main Nick numbers just came out I would tell you that that trend has continued into may.
Jeff: Outperforming significantly on a unit basis as Paul mentioned in his prepared remarks, we are seeing pressure from the AUR perspective, but we're meeting the customer with the value. They demand we've made that strategic move to make sure. We're assorted correctly. We got ahead of that and so we feel very confident in our strategy around making sure we have the goods.
Jeff: The product that the customers are attracted to and the price point that they want to buy it at.
Jeff: Okay I appreciate it I'll leave it there guys. Thanks.
Jeff: Thank you so much and with this I will conclude our Q&A session and pass it back to Paul Stone for final remarks.
Speaker Change: Yes. Thank you for joining the call today and thank you to all of our passionate outfitters around the country for their commitment to Sportsman's warehouse together, we look forward to providing our customers with great care and exceptional services. Thank you.
Speaker Change: Thank you and this concludes our program for today you may all disconnect have a great day to everyone.
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Jeff: Hello, everyone and welcome to the Sportsman's warehouse first quarter 2025 earnings conference call at.
Jeff: At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Speaker Change: Participate you will need to press star one one on your telephone you will then hear a message I buy senior hand, this waste to withdraw your question simply press Star one again please.
Ryan lithium: Please note. This event is being recorded now it's my pleasure to turn the call over to the Vice President of Investor Relations Ryan lithium Sir the floor is yours.
Speaker Change: Thank you operator participating in our Q1 2025 call today is Paul Stone, our Chief Executive Officer, and Jeff White, our Chief Financial Officer.
Speaker Change: I will now remind everyone of the Companys Safe Harbor language.
Speaker Change: The statements we make today contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095, which includes statements regarding expectations about our future results of operations demand for our products.
Jeff: And growth of our industry.
Jeff: Actual results may differ materially from those suggested in such statements due to a number of risks and uncertainties, including those described in the Companys. Most recent Form 10-K, and the Companys other filings made with the SEC.
Jeff: We will also disclose 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 as supplemental financial information in our press release <unk>.
Paul Stone: Included as exhibit 99, one to the form 8-K, we furnished to the SEC today, which is also available on the Investor Relations section of our website at Sportsman's Dot Com I will now turn the call over to Paul.
Paul Stone: Thank you Raj and good afternoon, everyone before we begin I want to recognize our team of passionate outfitters across the country every day they deliver on our promise of a break here and exceptional service.
Paul Stone: This remains the cornerstone of our strategy as we continue to execute our turnaround plan to transform sportsman's warehouse for sustained profitability and growth.
Paul Stone: On our last call we outlined the next phase of our business transformation focus on returning to same store sales growth and improving operating margins.
Jeff: Building, our foundation as a leading outdoor retailer hinges on disciplined execution across four key areas.
Jeff: One inventory precision.
Jeff: Ensuring we win the season.
Jeff: A narrow and deep in hunting and fishing to improve our in stock levels in the 20% of key products that drive 80% of ourselves.
Jeff: Two local relevance empowering our talented store outfitters to leverage their deep expertise and community connections to deliver the hyper local knowledge of our customers appreciate.
Jeff: Three personal protection.
Jeff: Establishing sportsman's warehouse as the authority in personal and situational safety and for brand awareness reinvigorating, our brand and engaging customers to establish our position as the most convenient.
Jeff: The destination for outdoor gear and expertise.
Jeff: Proud of how our team executed against these key initiatives in Q1, delivering our first positive year over year sales comp in nearly four years, despite ongoing consumer microeconomic pressures at a later start to the spring selling season first quarter sales were up 2% compared to last year.
Jeff: Notably again this quarter, our firearm unit fell significantly outpaced the adjusted mix data, suggesting we outsold the industry and continue to capture market share.
Jeff: Although the adjusted mix declined five 4% in Q1, our firearm unit sales increased nearly 7% over last year, while farm customers continue to trade down.
Jeff: For Q1 decreased 8% compared with last year, we've engineered our assortment to capture demand for value priced firearms and refined our accessory mix to drive faster growth and higher attachment rates.
Jeff: We also achieved positive sales comps in Q1, and most core categories, including firearms clothing, and footwear ammunition, which was up 3% and especially fishing, which was up 11%.
Jeff: Importantly, fishing was the first category, we addressed through our new merchandising strategy. The two year comp stack growth of 12, 3% validates that when we get the right product in the right place at the right time and market in the right channels the results follow.
Jeff: While camping sales were down we believe this was largely due to the later spring and the timing of Easter we are well positioned from an inventory standpoint with strong in stocks in our key departments in fact fell.
Jeff: Sales were up while inventory was down in many core categories. As we continue adapt and refine our assortment to meet the changing needs of the customer we continue to build our bench strength and our merchandising group to further align our merch refinement strategy to the needs of the customer.
Jeff: Our E Commerce business also posted a positive comp up 8% over last year and outpacing the overall business.
Jeff: This growth is being fueled by our new digital first marketing strategy and an improved omnichannel customer experience, which is delivering higher engagement and transaction growth.
Jeff: The improvement across our business was primarily driven by improved in stocks on key items, including depth in our top sellers on time readiness with in store merchandising and e-commerce channels for the early spring season, particularly with phishing and a strategic shift to everyday low price on core ammo calibers and other consumables.
Jeff: Drive in store and online traffic, where we saw a 12% increase in ammo unit sales during the quarter.
Jeff: I am, especially encouraged by our seasonal readiness and how far we've come and localizing, our merchandize Assortments and Geo targeting our marketing messages for example in markets like Alaska, where we were historically relates to key seasons, we are now better aligned with local expectations, including depth in key items and it's showing in our results. We are also seeing.
Jeff: Positive customer feedback, which we believe is largely driven by our improved in stock performance and the service provided by our store outfitters.
Jeff: Early in Q1, we made proactive decision with select vendors to pull forward spring and summer inventory in categories impacted by tariffs, particularly in fishing and camping, while those temporarily elevated our inventory levels and ensures we are well stocked in our key good heading into these peak selling season, we will continue to apply.
Jeff: This approach in Q2 to ensure we're prepared for the critical hunting and holiday season.
Jeff Riley: Accordingly, we continue to anticipate ending the year with lower total inventory than last year and generating positive free cash flow, Jeff will speak more to this in his remarks on.
Jeff Riley: On the personal protection front, we are making significant progress to standup. The authority. We recently launched the safety out post on our website a curated experience focused on home defense and situational awareness that signals our commitment to a major growth category that others have largely ignored, but our customers increasingly.
Jeff Riley: Escalate to underscore our commitment we recently launched a month long campaign with Springfield, one of our top firearm brands in the personal protection space.
Jeff Riley: In early May we forethoughtful less lethal side of our personal protection strategy with our partner Berna 11 stores now feature full shop in shops, and 40 additional locations have smaller tailored assortments.
Jeff Riley: All locations offer live fire demonstration capability that from our test pilot resulted in significant conversion versus without trial. The early results are encouraging and we see significant upside as we build out this program.
Jeff Riley: This quarter, we're also launching a new Omnichannel brand campaign designed to reignite brand relevance and reestablished sportsman's warehouse as the preferred destination for hunting fishing and sports shooting adventures.
Jeff Riley: <unk> and great service meet trusted local expertise.
Jeff Riley: <unk> is our competitive advantage brought to life by passionate outfitters in the communities they serve.
Jeff Riley: Ported by our trade area and customer insights. This campaign is designed to integrate all marketing channels and reflect the strategic foundation of our turnaround and brand evolution. It spilt to reengage former customers build relationships with new ones and earn loyalty in a fragmented and competitive market.
Jeff Riley: Despite the ongoing consumer macroeconomic challenges I remain confident in our strategic plan and the team's ability to execute argument competitive advantage lies in our ability to out local to big boxes and out of fourth a small specialty retailers delivering a compelling mix of value quality selection and locally.
Jeff Riley: Centric personalized service.
Jeff Riley: We are staying disciplined managing what we can control variable cost inventory levels and merchandise margins as.
Jeff Riley: As we execute on our strategic initiatives. We are confident that this will translate into continued sales growth improved operating margin.
Jeff Riley: And further debt reduction in 2025.
Jeff: With that I'll now turn the call over to Jeff.
Jeff: Thank you Paul and good afternoon, everyone I'll begin my remarks today with a review of our financial results for the first quarter of fiscal 2025, followed by an update on our balance sheet inventory strategy tariffs and finally review of our full year outlook for 2025.
Jeff: Net sales for the first quarter were $249 1, million% to 2% increase from $244 2 million in the same period last year. This marks a strong start to the year and reflects continued momentum from our improved Q4 performance.
Jeff: Our positive comp sales underscore the early success of our strategic initiatives, specifically improved in stock levels across core categories, and our refined omnichannel marketing strategy, which is driving more targeted customer engagement.
Jeff: Gross margin for the quarter was 34% up 20 basis points from 32% a year ago. This expansion was largely driven by favorable mix and rate improvement in our fishing business, which carries a higher gross margin profile that said this gain was offset by increased freight expense tied to our strategic.
Jeff: <unk> pull forward in anticipation of higher tariffs and changes to international trade policy and to ensure we were fully stocked for the key spring and summer selling seasons.
Jeff: This action resulted in an estimated 50 basis point drag on margin in the quarter and intentional tradeoff that positions us to deliver better full price sell through during peak selling season.
Jeff: SG&A expenses were $95 3 million or 38, 2% of net sales versus 38, 6% in the prior year. This improvement in SG&A leverage reflects our continued focus on expense discipline simplification of the business and higher sales productivity as we move through the year, we will continue to aggressively.
Jeff: We manage controllable expenses, while investing in customer facing areas that directly drive omnichannel traffic and conversion.
Jeff: Net loss for the first quarter of fiscal 2025 was $21 3 million or negative <unk> 56 per diluted share compared with a net loss of $18 1 million or a negative <unk> 48 per diluted share in the first quarter of the prior year adjusted net loss in the first quarter was $15 6 million or negative <unk>.
Jeff: <unk> per diluted share compared with adjusted net loss of $17 8 million or a negative <unk> 47 per diluted share in the first quarter of the prior year.
Jeff: Adjusted EBITDA for the first quarter was negative $9 million compared with adjusted EBITDA of negative $8 7 million in the first quarter of 2024, as we head into the stronger selling quarters, we expect to generate positive EBITDA in the second half and full year improvement.
Jeff: Turning now to tariffs inventory total inventory at the end of Q1 was $412 3 million up from $391 6 million in the same period last year.
Jeff: This increase reflects a strategic decision to pull forward approximately $20 million of inventory ahead of rising tariffs and to ensure we are fully prepared for the spring and summer seasons.
Jeff: This was not an across the board build we focused on buying to core items high training products and seasonally relevant merchandising categories like ammunition, fishing camping and personal protection areas, where customer demand is more predictable and we're being in stock matters most to our customers.
Jeff: We believe this was a low risk investment given these are high turning products. We will also continue to look for low risk inventory investment opportunities as we navigate the changing tariff environment.
Jeff: During the quarter accounts payable increased disproportionately from the pull forward of inventory, resulting in a higher than planned balance we expect that this will normalize in the second quarter.
Jeff: We also made meaningful progress, reducing SKU count and eliminating underperforming vendors compared to last year, we've reduced total active skus by approximately 20%, helping us simplify the assortment improved inventory turns.
Jeff: And drive margin improvement overtime.
Jeff: This is a simplification and efficiency strategy, we will continue to pursue throughout 2025.
Jeff: Looking ahead, we continue to expect to end the year with less total inventory than 2024, while maintaining the right products in the right stores at the right time.
Jeff: Our buying discipline has improved and we are much better positioned to flex into peak periods with a focus on SKU reduction we are confident that we can drive sales increased turns.
Jeff: And use less working capital.
Jeff: In regard to liquidity, we ended the first quarter with a debt balance of $166 million and total liquidity of $122 1 million or.
Jeff: Our liquidity position remains strong and we continue to actively manage working capital to ensure flexibility as we navigate through the year.
Jeff: Inventory efficiency and tight control of variable expenses will remain top priorities as we move through 2025, we remain committed to generating positive free cash flow and using excess cash to reduce debt and strengthen the balance sheet.
Jeff: Finally, let me speak to our full year guidance.
Jeff: We continue to focus our efforts on executing our strategic plan for 2025 and closely managing our variable expenses, despite the macroeconomic headwinds and downward pressure from tariffs we are reiterating our guidance for the full year.
Jeff: We continue to expect fiscal 2025 net sales to range between down 1% to up three 5% compared to 2024.
Jeff: Adjusted EBITDA to be between $33 million and $45 million driven by modest gross margin improvement and disciplined expense management and capital expenditures between $20 million and $25 million, primarily relating to technology investments to improve store service and merchandising productivity as well as our normal store maintenance.
Jeff: In summary, we are executing with urgency and discipline. We are seeing early validation of our strategy in the form of improved comp trends and better inventory execution. We remain focused on generating positive free cash flow for the year and returning sportsman's warehouse to consistent sustainable growth.
Jeff: That concludes our prepared remarks today I will now turn the call back to the operator to facilitate questions.
Jeff: Thank you so much and SRA reminder, to ask a question simply press Star one one on your telephone and wait for your name to be announced.
Speaker Change: So Richard all young self simply press Star one again.
Jeff: One moment for our first question please.
Ryan lithium: And it comes from the line of Ryan <unk> with Craig Hallum Capital Group.
Speaker Change: Please proceed.
Jeff Riley: Hey, good afternoon, Paul Jeff Riley.
Jeff Riley: I want to start with comp trends very nice to see that positive comp overall for the quarter first one in four years and I'm curious if you could break that down by month and then also if you could extend that into may what you've seen.
Jeff Riley: Yes, Brian Great question, it's Jeff Thanks for joining us today, so as we as we broke down Q1 saw good trends in February we had an AD shift that really moved demand from March into April So March versus an <unk> comp was a little pressured by just some of the change in AD that we had but April was really strong happy.
Jeff Riley: With the performance in April and that shift that we made to move the adds more in line with Easter and the start of summer and then the trend I would say has stayed strong as we've moved into may into the warmer weather into the strong fishing season, so happy with the trends that we've seen thus far in may.
Jeff Riley: Are you willing to say if that's positive when you say strong in may.
Jeff Riley: It is a positive comp for me continues to be positive for the month of May.
Speaker Change: Very good and then just curious within the stores are you seeing primarily.
Speaker Change: Increased foot traffic or is it due to kind of the inventory assortments and the narrow and deep in certain categories that youre actually getting basket sizes to increase here.
Jeff Riley: It's a mixture of everything that we're seeing better traffic trends transaction trends being positive on a year over year basis, we're seeing higher basket size from a <unk> perspective, and higher <unk> on the average order value of the basket. So I'd say the strategy the attachment what we're doing in terms of in stocks.
Jeff Riley: It's got the key metrics that we're looking at firing in a direction that we are really pleased with given the tough consumer environment that we're operating in.
Jeff Riley: I would just add trends transaction.
Jeff Riley: Continue to build from from April as we go into May and then.
Jeff Riley: E Comm performance continues to be a big part.
Jeff Riley: Part of the message from just the total Omnichannel, which is helping you did 8% lift in Q1 on that is driving folks to the stores. So we like the way that works.
Speaker Change: Last one for me you mentioned Bernard.
Speaker Change: Kind of shop within the shops less lethal option there, but curious if there is opportunity to lean more into kind of a shop within a shop highlight brands I know there has been a focus to do a little bit more of that but any way to really emphasize the key brands that you are leaning into in a bigger better way than you currently are.
Speaker Change: Yes, I would say from a personal protection standpoint, we have the opportunity we think.
Speaker Change: We just continue to have.
Speaker Change: Upside based on what we're seeing from unit performance in firearms in particular with handguns and what's happened with the net sub category over the last few months. We think we have great opportunity from accessory standpoint worked with our partners to really blow out what that looks like to drive the overall basket and then we do have even as we think about it.
Speaker Change: From shop in shops, as we start to build out the personal protection story, even greater as we go through the year.
Speaker Change: Other partners to be able to join along with US as we really tell the story around personal protection, it's not isolated to one subcategory non lethal from a long term standpoint, but we can really expand that both from a lethal from a technical gear and built on a true total.
Speaker Change: Think story as we think about the overall personal protection, there, but a huge opportunity to continue to build upon some of the momentum we have with shop in shops there.
Speaker Change: Great I'll turn it over the other it's nice progress guys.
Speaker Change: Thanks Ryan.
Mark Smith: Thank you. Our next question comes from Mark Smith with Lake Street. Please proceed.
Mark Smith: Hi, guys.
Mark Smith: Last question for me just wanted to clarify.
Speaker Change: It sounds like you pulled forward about $1 million in inventory here in Q1.
Speaker Change: Yes, as we stated in our prepared remarks, Mark we looked at addressing some of the headwinds or uncertainty with tariffs and made a strategic decision to pull forward about $20 million of inventory as we highlighted heavy penetration in that pull forward in the hunt category firearms ammo some of the accessories.
Speaker Change: Fish a lot of fish product was brought in to preempt the spring and summer season, and then just a little bit in the camp category. As we are looking at the exposure there to make sure that we were in stock on the items that truly matter have a high turn.
Speaker Change: Note that we can sell so we looked at it as a very risk free investment and was able to preempt some of the uncertainty that's in the market right now.
Speaker Change: Okay.
Speaker Change: Should we think about sales mix you gave a good breakdown on gross profit margin on things that helped and where you saw some pressure, but it did sales mix.
Speaker Change: Negative impact on gross profit margin here in Q1.
Speaker Change: Yes, we did penetrate heavier on the firearms and ammo side then.
Speaker Change: And then we normally would have especially with the late start on Easter holiday Easter fell the latest it's been since 2017. Following at the end of April So I saw a slow start to the campaign season.
Speaker Change: The debt.
Speaker Change: Hopefully, we'll see trends change as we move into Q2 and are optimistic and confident in where we have the merchandising what we have in terms of performance there, but I would say that Q1 was pressured by heavy penetration in firearms and ammo.
Speaker Change: But that's what our strategy is leaning in towards heavy and we're happy with our performance versus the adjusted Knicks and taking market share in Q1.
Speaker Change: Perfect.
Speaker Change: Last one for me you talked about.
Speaker Change: I guess confidence in lowering inventory year over year here by the time, we get to the end of the year I am curious your thoughts around that.
Speaker Change: And.
Speaker Change: The balance sheet and your ability to repay some debt this year knock that down.
Speaker Change: I'll start by just saying Q1, we came in.
Mark Smith: With the pull forward Q2, we're going to continue to see inventory come in in Q2, we're going to hit our <unk> and Mark for the first time in a long time to be able to have the in stock.
Speaker Change: We missed it last year and to be able to hit the season with the start date, we wanted to so I think it gives us an opportunity to Q1 Q2 as we build here in Q3 Q4 to be completely clean and to be able to to run that inventory level down.
Speaker Change: <unk> been pushing those.
Speaker Change: Inventory dollars into Q3.
Speaker Change: Causing a quick pullback in Q4 alone I think we're going to have all of Q2 be able to capture the sales from the top side of it and to be able to pull the inventory down at the right appropriate level as we get through Q3 and Q4, yes.
Mark Smith: Yes, Mark I would just add from a free cash flow standpoint, we feel confident in our ability to generate positive free cash flow ultimately our top priority is applying any excess cash flow generated to a debt pay down. So we will use the free cash flow, we generate by the end of the year in order to pay down debt.
Mark Smith: Excellent. Thank you guys.
Mark Smith: Thank you.
Speaker Change: Our next question comes from Matt Koranda with Roth Capital Partners. Please proceed.
Matt Koranda: Hey, guys, thanks, and congrats on the positive comps.
Mark Smith: <unk>.
Mark Smith: Just wanted to explore the reiteration on the guide you mentioned there is still some some pressure from tariffs maybe can you just talk about what you've built in in terms of like the unmitigated dollar pressure from tariffs that you are seeing or that you expect as of now I know, it's a fluid situation.
Speaker Change: And then are we taking price to offset.
Speaker Change: Some of that unmitigated impact or are we offsetting through efficiency actions, maybe just talk a little bit about what youre doing to sort of mitigate the gross impact of tariffs.
Speaker Change: Yes, I think the thing I would say on that matter, but we're constantly assessing it.
Speaker Change: Looking at pricing down to the item and SKU level and this is something that we.
Speaker Change: Consistently do and we've got a better cadence than we ever have.
Speaker Change: I think we're fluid here, but with the ability of people to make adjustments and change prices as needed as we go there and then.
Speaker Change: The thing I would just touch on too is that we will continue to balance the everyday low price really working on the efficiency of the ammunition, we have seen that from a customer sentiment.
Speaker Change: All time high on that promoter scores in the pricing action that we've taken I think correlates hand in hand, with the pricing strategy that we've put on ammunition to be able to drive traffic to the store and then our opportunity is to continue.
Speaker Change: To work on the attachment piece of it we like what it looks like from <unk> were at all time highs now and continue from an EOG standpoint, but I think it's going to be fluid. We like the actions we took in the first half.
Speaker Change: Our first half of Q1 to be able to pull forward any private label that we have in particular in camp to.
Speaker Change: To mitigate any risks that we had there.
Speaker Change: But I think as you said, it's going to constantly be fluid as we navigate this just like everybody else and that I'd say on the guide front, we feel confident in our in the guide that we publish barring any drastic reduction in consumer health.
Speaker Change: That can obviously have a significant impact on the business, but outside of those macroeconomic pressures. We felt we feel confident in the guidance and reiterating the guide for the quarter.
Speaker Change: Does the pull forward in inventory.
Speaker Change: Maine.
Speaker Change: We shouldnt expect any real tariffs impact to the P&L until probably at least.
Speaker Change: Part way into the third quarter or the fourth quarter of this year.
Speaker Change: Given that you sort of brought in on burdened inventory yes.
Speaker Change: Yes, I do think it helps prevent or get ahead of the game on some of that where we feel comfortable from an in stock perspective that we've brought in enough good to last us through the summer selling season, and probably into early fall in particular Tampa.
Speaker Change: Fish.
Speaker Change: Position, we've been in from a geo and from a localization standpoint.
Speaker Change: And the team really got in front of them at to ensure that we're going to be able to have them be it the pricing, we need to and to be able to get through the season and really clean position. So that's what's in front of US right now and we feel good with the positioning we have there we will go through the first half of the year.
Speaker Change: Okay, Great and then maybe just last one if I could sneak one more in.
Speaker Change: You mentioned in the release significant outperformance of mix is that on a unit basis or dollar basis for the quarter I guess, we'll get a little more information in the queue, but any callouts on what's driving.
Speaker Change: That outperformance relative to sort of the industry.
Speaker Change: It would be on a unit basis, we're significantly outperforming nicks and the terms of.
Speaker Change: Greater than double digit versus what they reported and I note that the may make numbers just came out I would tell you that that trend has continued into may.
Speaker Change: Outperforming significantly on a unit basis as Paul mentioned in his prepared remarks, we are seeing pressure from the AUR perspective, but we're meeting the customer with the value. They demand we've made that strategic move to make sure. We're assorted correctly. We got ahead of that and so we feel very confident in our strategy around making sure we have the goods.
Speaker Change: The product that the customers are attracted to and the price point that they want to buy it at.
Speaker Change: Okay I appreciate it I'll leave it there guys. Thanks.
Speaker Change: Thank you so much and with this I will conclude our Q&A session and pass it back to bolster <unk> for final remarks.
Speaker Change: Yes. Thank you for joining the call today and thank you to all of our passionate outfitters around the country for their commitment to Sportsman's warehouse together, we look forward to providing our customers with great care and exceptional services. Thank you.
Speaker Change: Thank you and this concludes our program for today you may all disconnect have a great day everyone.