Sportsman's Warehouse Holdings, Inc. (SPWH) 2026-09-01 Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the Sportsman's Warehouse Second Quarter 26 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question-and-answer session. To ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. I would now like to hand the conference over to your speaker today, Riley Timmer.

Thank you, operator. Participating on our Q2 26 earnings call today is Paul E. Stone, our Chief Executive Officer and Jennifer Fall Jung, our Chief Financial Officer. I will now take a moment and remind everyone of the company's safe harbor language. The statements we make today contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 2000, which includes statements regarding expectations about our future results of operations, demand for our products, and growth of our industry. 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, the company's other filings made with the SEC.

Thank you, Riley, and good afternoon, everyone. Before we begin, I want to recognize our dedicated outfitters across the country. Every day, they deliver on our promise of great gear and great service. Strengthening our connection with customers and supporting the progress to transform Sportsman's Warehouse. We were pleased to report same store sales in the second quarter were essentially flat compared to last year. And in line with our expectations. In the quarter, we experienced headwinds as our core customer continues to be pressured by tough macroeconomic conditions. Including fuel prices that remain persistently elevated. Despite these pressures, I am proud of how the team responded with speed and quickly adjusted to meet the customer where they are.

Thank you, Paul, and good afternoon, everyone. Net sales for the second quarter were $295.6 million a 0.6% increase from $293.9 million in the same period last year. Same store sales in Q2 were essentially flat versus last year. Our performance was driven by 6.7% same-store sales growth in our hunting and shooting sports department, led by increased sales and 1% in our optics, electronics, accessories and other departments. Our other categories declined in Q2, reflecting continued pressure on The U. S. Consumer and drought conditions in the Western U. S, partially offsetting our overall sales growth.

Thank you. To withdraw your question, please press 11 again. 1 moment for questions. Thank you for joining the call today. And our first question comes from Mark Smith with Lake Street. You may proceed.

Hi, guys. Wanted to ask a little bit about camping and soft line categories here. Know, overall, inventories look really good, but I am curious how you feel in your comfort levels with inventories in those categories.

Hey, Mark. This is Jennifer. So we are feeling really good about our inventory levels. We spent the past year plus cleaning up the assortments, making sure that we were not over assorted. Getting, putting bigger buys on our core category. So feel really Q2, the performance was not there, but we did not expect it to be. Q3 is when we really feel the assortment will be back in check. So, yeah, we are feeling good at where we are. Terms of the inventory levels, they are very clean. We think the majority of our work around assortment and SKU reduction has kind of been done, and now it is just really optimizing on a seasonal basis.

Okay. And then within that, you know, it sounds like you guys feel pretty good about kind of your outlook for some of these categories in the second half. Given still pressure on consumers, I am curious maybe what gives you that confidence in second half?

Yes, Mark. I think where we were placed in camp last year with really the cleanup and burn down on a lot of our non-go-forward merchandise that we had last year. And with the buys this year and the timeliness of the buys, we have already started to see it in August. And even as we start September, but huge improvement in camp apparel. This will be the first time where we have really put clearance in the best position the company has ever seen and really allow us to be able to have the newness to be able to flow through in those categories.

Okay. And maybe 1 more for me. Just as we think about your performance in hunt shoot, obviously, it was it was positive, up about 7%. Curious kind of how you feel about that category versus mix and versus trends? And then if you can give us any insight into just-- pull up, looks like, next data, up 2%-plus here, adjust mix in August. Kind of curious what trends you are seeing today?

Yeah. I think first, I mean, both firearms and ammo extremely strong. Firearms up 8% and ammo is up nearly 11% on the Q. So we like where that is heading and what it looks like We knew as we looked at next, we are looking at it more on 2 year stack. Last year, we had 1 really launch personal protection and have some key supplier partnerships as we made those launches. To really set up that program around personal protection and to I mean, we had to have the inventory, but we have really pushed that we are aged firearms.

Perfect. Thank you.

Thank you. Our next question comes from Matt Koranda with Roth Capital. You may proceed.

Hey, guys. Good afternoon. Maybe could you dimension for us the size of the tariff refund benefit in the quarter? And then you said, I think, you invested in price. Any particular categories, I guess, where that showed up most acutely, I guess?

Yeah. So if you look at the quarter as a whole, you know, it is pretty evident. Fuel prices hit in May. That was probably our toughest month of the quarter. And then it got progressively better as we went through. But firearms and ammo is where we heavily penetrated. As we just noted, camp and apparel were lagging behind, you know, bigger categories and fish just due to weather, you know, dinner performance we would have expected.

Yeah. No. Okay. I appreciate that, Jennifer. Thank you. And then yeah. And you kinda maybe preaddressed 1 of the questions I wanted to ask. But I guess maybe asking the demand cadence in a different way. What are you seeing from your consumer, terms of behavioral changes in response to elevated gas prices? Any discernible changes that they have been making or that you can discern throughout the quarter and into August?

Yes. So it is a great question. What we are seeing, I mentioned the gas and that hit in May. That was, again, our toughest quarter of the month and it got progressively better throughout the quarter. In terms we are seeing high kind of penetration in consumables, whether it be lures, whether it be ammo. So the consumer is really continues to purchase the consumable aspect of our business. A little bit of trade down, and some of it might be simply because of the weather dichotomy between the West and the East where fish performed very well in the East. Not as well in the West where we are strapped for water and we had tough weather.

Okay. Alright. That makes sense. And then maybe just you mentioned some improved trend in August. I think that was in particular in apparel, but maybe just if you could just speak to the other categories and any demand trends you have seen, in the August period.

Yes. The thing I would say, Matt, is we are encouraged with what we are seeing in both camp and apparel from where we have been. I think a couple of the things, a couple of the factors as we were hit with tariffs last year and some delay of product that was coming in or some that was pushed completely out based on the uncertainty of the product and the cost of the product that we elected to pass on. That now we are getting those goods flowing and feel really good with what that looks like. And it does align with you know, the pursuits.

Okay. that is great to hear. Thanks, Paul. Maybe if I could sneak 1 more in. Maybe just on the cash flow outlook and working capital discipline, it is really good to see the inventory coming down on a year over year basis in the second quarter. Maybe just speak to your level of confidence in sort of reducing inventory balance year over year by the end of fiscal year here. And how we should be thinking about the working capital benefits that come from that?

Extreme high confidence. We review this very frequently with the teams. We know exactly where we are headed. We know, we have our plans lined up. We have our inventory buys that match our promotional cadence. I would say we are in a much better position even than we were last year when we took a big chunk out. But we feel very confident we will be able to go get below last year's levels by the end of the year.

Yeah. I will just say, Matt. I mean, as you think about it, I mean, I have been retail a lot of years. I have never seen really a team be able to stand up a 10% reduction year-over-year over year in inventory and be able to get to a position where you are up for a Q.

Excellent. I will leave it there, guys. Thank you. Thanks, Matt.

Thank you. Next question comes from Anna Glaessgen with B. Riley Securities. You may proceed.

Questions. I would like to follow up on the questions around the promotional environment. You noted that the promotional cadence was heavier than expected in the second quarter based on what you are seeing from competitors. Are you expecting that, that persists through the back half?

Yes. We expect given that we-- we cannot predict fuel price but I do not see those letting up anytime soon. And since that is what really pinches our consumer, we do have that expectation for the remainder of the year.

Got it. And is that concentrated to any particular category in specific, or is it kind of broad based?

I would say it is-- I will not say it is broad based because as we mentioned earlier, clearly, our consumer is still purchasing firearms and ammo. Some of the less attached categories have seen a little bit more pressure. Choose across the industry have been seeing a lot of pressure, but you know, shoes and apparel seem to be the ones that the consumer might you know, think twice about spending. When it comes to the pursuits, they are still very invested.

Got it. Thanks. And then turning to camp and apparel, it is nice that we have seen some improvement in August. I guess, are you expecting that those categories inflect to positive within the current fiscal year? Or is that more of a 2027 story?

I think expectation is that we see this you know, we are coming off of, you know, both those categories, inventory being down 11% and 14% as we ran through and then finally, being able to put herself in a position to buy towards 1, the holiday and 2, being able to hit newness during the seasonality and the pursuit that is needed, Anna. So I feel comfortable that, you know, our expectation is based on the run rate that we have been running is that we are able to get that to where it is it is flattish to positive.

We will probably see a little bit more recovery in camp prior to apparel just some of the timing of some of the newest Yeah.

I think 3 would Q3 with camp is going to be fast, and then Q4 and then based on our position last year and where we were at. From an inventory standpoint, clearness versus newness. We will I think that is a good call in Jennifer. Q3 first for camp, and then Q4, we start to see apparel follow suit.

Great. Thanks.

Thank you. Our next question comes from Mark Smith with Lake Street. You may proceed.

Hey, guys. Thanks for the time. I just have a couple of quick ones. Is there any change on how you are thinking about any store closure plans since last quarter?

No, not necessarily. We do have 1 store confirmed close on January 31st. We do have another store. it is really-- it is in flux. We have another store that we expect that will have an agreement to close by the 30 first, but it might push into 2027 and a third, probably a little less certain, but, you know, definitely coming soon. And still making traction on negotiations with all the other ones as well.

Okay. Great. And I am not sure if Matt asked this directly, but are you able to break out the tariff component of the gross margin expansion? And then can you talk about kind of gross margin trends just within the hunting category you know, going forward just kind of in general, in the hunting season? Is there anything that could move the needle way or the other besides just the ebb and flow of promos within firearms?

Yeah. So as I said earlier, the tariff refund was not that significant for us. We only have 3% of our assortment on private label. So we did not call it out you know, or notice it as a headwind, last year. So it is it is really not that large for us. As we think about gross margin go forward, we do see opportunity in the firearms and ammo categories. it is a little different in ammo because we are kind of that is more of a mix shift because as we do more bulk ammo, you will see a little bit more pressure on the rate, but, you know, more margin dollars, obviously.

Yes, Mark. I mean, we were happy with Q2. It was accretive for us in Q2 from a mix standpoint and the volume that we have there and encouraged with what we are going to be able to do in the back half of the year as well. I mean, we have what we believe is large opportunity to continue to be able to grow ammo with those greater margin than what we have with our firearms.

Okay. Great. Maybe just 1 more. As we kind of think about the attachment of product to the ecom business when it is picked up in the store. Is that something we should think about? And how can that grow? Is it significant now? And, I mean, do people physically have to go always to the back of the store to pick up their firearm if it is online or to pick it up in the front? How are you kind of capturing and trying to get extra add-ons for those people?

Yes. They absolutely have to go and pick it up at the store. Unless they pick it up at an FFL, but I do not you know, those that are coming to Sportsman's have to go to the back of the store And I think the biggest opportunity there is really our e comm improvement. We have been working on our search, been working on our site experience. that is where you are going to get the bump in the lift. So as they come in, they will, you know, have their entire order ready to go, or they might, to your point, they are going to the back of the store.

Thank you.

I would now like to turn the call back over to Paul E. Stone for any closing remarks.

Thank you for joining the call today, and thank you to all our outfitters around the country for their commitment to Sportsman's Warehouse. Together, we look forward to providing our customers with great gear and exceptional service. Thank you.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.