Sportsman’s Warehouse(SPWH)2025-04-02 12:31Store Operations and Expansion - Sportsman's Warehouse operates 146 stores across 32 states, with an average store size of approximately 37,000 gross square feet[45]. - The company plans to open one new store in fiscal year 2025, continuing its strategy of expanding its store base[43]. - The average net investment for a new store is approximately 1.8 million[35]. - The company maintains a disciplined approach to new store development, utilizing comprehensive market research and technology to select optimal locations[32]. - The company plans to open one new store in fiscal year 2025, with a net investment of approximately 1.8 million[56]. - The company utilizes a rigorous site selection process based on local demographics, traffic patterns, and hunting and fishing license density[52]. - The company faces risks in expanding into new markets, with some new stores not generating historically expected Adjusted EBITDA margins[194]. - Delays in opening new stores due to various factors could adversely affect financial results and profitability[195]. Financial Performance and Sales - In fiscal year 2024, approximately 46% of unit sales and 20% of dollar sales were consumables, driving repeat traffic and increasing average ticket value[33]. - Sportsman's Warehouse aims to achieve four-wall Adjusted EBITDA margins of 10% or more for most new stores after 24 months of operation[35]. - The average four-wall Adjusted EBITDA margin target after 24 months of a new store opening is over 10%[56]. - The company experienced decreased revenue and operated at a net loss during fiscal years 2024 and 2023 due to elevated inflationary pressures and higher interest rates[164]. - The company incurs additional expenses in the third and fourth fiscal quarters due to higher sales volume and increased staffing, impacting overall profitability[117]. - Approximately 26.4% and 28.0% of net sales were generated in the third and fourth fiscal quarters, respectively, due to seasonal factors such as hunting seasons and holiday buying patterns[117]. - The company generated 26.4% and 28% of its annual net sales in the third and fourth fiscal quarters, respectively, indicating significant seasonal fluctuations in sales[170]. Product Offerings and Sales Composition - The Hunting and Shooting department contributed 57.4% of total sales in fiscal year 2024, maintaining its position as the largest sales contributor[70]. - Private label offerings accounted for approximately 4.4% of total sales, while special make-up offerings contributed an additional 2.5%[65]. - The company employs a "good, better, best" merchandise strategy, focusing on "better" products to meet diverse customer needs[64]. - The camping department represented approximately 11.7% of net sales in fiscal year 2024, catering to both casual and heavy-use campers[71]. - Fishing represented approximately 10.3% of net sales during fiscal year 2024[73]. - Footwear accounted for approximately 6.3% of net sales during fiscal year 2024[74]. - Hunting and shooting is the largest merchandise department, representing approximately 57.4% of net sales during fiscal year 2024[75]. - Optics, electronics, accessories, and other products represented approximately 6.8% of net sales during fiscal year 2024[76]. E-commerce and Omni-channel Strategy - In fiscal year 2024, e-commerce sales accounted for over 20% of total sales, with the website receiving more than 112 million visits[61]. - Sportsman's Warehouse is focused on leveraging its omni-channel presence to increase same-store sales through various customer experience initiatives[39]. - The retail stores feature kiosks for online orders, enhancing the omni-channel shopping experience[59]. Customer Engagement and Loyalty - As of February 1, 2025, there were more than 4.9 million participants in the loyalty program, generating approximately 53% of revenue from loyalty customers[79]. Vendor Relationships and Supply Chain - The company has established strong vendor relationships, allowing for favorable terms and competitive pricing for customers[33]. - The company purchased merchandise from approximately 1,100 vendors during fiscal year 2024, with no vendor accounting for more than 10% of total purchases[83]. - The company relies on a single distribution center in Salt Lake City, Utah, which poses risks related to natural disasters or disruptions that could impair merchandise delivery[172]. - Supply chain disruptions and vendor relationships are crucial, as losing key vendors could adversely impact product availability and profitability[175]. Labor and Training - The company employs approximately 5,100 outfitters, including 2,050 full-time and 3,050 part-time outfitters, with no labor union representation[142]. - The company emphasizes extensive training for outfitters, with approximately 20 hours of initial training and 16 hours of ongoing training annually for sales associates[144]. - Labor costs and the ability to attract and retain qualified personnel are critical to the company's success, with competition for skilled labor increasing[191]. Regulatory and Compliance Issues - The company is subject to various federal, state, and local laws regarding firearm sales, including the National Firearms Act and the Gun Control Act, which require compliance with strict regulations[121]. - The company has implemented company-wide standard operating procedures to ensure compliance with applicable laws and regulations related to the sale of firearms and ammunition[132]. - The company has never had an FFL revoked since its operations began in 1986, demonstrating strong compliance with federal regulations[133]. Market Conditions and Risks - U.S. outdoor activities and sporting goods retail sales total over 60 billion on equipment in 2022, approximately 40% higher than in 2016[103]. - The company’s retail operations are concentrated in the Western United States, making it susceptible to regional economic downturns and adverse weather conditions[165]. - The company’s sales of firearms represent a significant percentage of net sales, and new regulations could materially adversely impact profitability[159]. - The company is exposed to litigation risks related to the products it sells, particularly firearms and ammunition, which could adversely affect profitability[160]. - Changes in consumer preferences and macroeconomic factors could lead to fluctuations in same-store sales, affecting stock price volatility[169]. - The company is vulnerable to cybersecurity risks, including potential data breaches and system disruptions, which could negatively impact operations and reputation[201]. Marketing and Advertising - The total marketing expense for fiscal year 2024 was approximately $17.4 million[90]. - The company faces competition in the outdoor activities and sporting goods market, which may require increased spending on advertising and promotion[167]. Challenges and Future Outlook - The company has experienced elevated levels of inventory shrink, which has adversely affected its financial condition and operational results[171]. - The company may face increased expenses and delays due to new tariffs and trade restrictions imposed by the U.S. government on imports from certain countries[178]. - In fiscal year 2023, 90 stores were impacted by minimum wage increases, leading to increased selling, general, and administrative expenses[192]. - In fiscal year 2024, 55 stores are expected to be affected by minimum wage increases, potentially increasing labor costs and impacting financial results[192]. - The company anticipates that hiring additional personnel and system enhancements will require capital expenditures, impacting operating results[214]. - The company may encounter challenges in integrating acquired operations, affecting overall business performance[220].