Sportsman’s Warehouse(SPWH) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales for Q3 2020 were $386 million, an increase of 59% compared to the prior year [15][23] - Same-store sales increased by 41% in Q3 2020, with firearms and ammunition up 98% and 53% respectively [15][23] - Gross profit for Q3 2020 was $130.6 million, a 55.1% increase year-over-year, with a gross margin of 33.9%, down 80 basis points from the previous year [24] - Net income for Q3 2020 was $30.5 million or $0.68 per diluted share, compared to $10.5 million or $0.24 per diluted share in Q3 2019 [27][31] - Adjusted EBITDA for Q3 2020 was $49.9 million, an increase of 115% year-over-year [27] Business Line Data and Key Metrics Changes - The Optics, Electronics, and Accessory category saw a 26% increase in same-store sales during Q3 [16] - Apparel sales grew by 19%, while footwear sales increased by 8% [16] - E-commerce-driven sales grew over 200% year-over-year, accounting for more than 10% of total net sales [17] Market Data and Key Metrics Changes - Hunting participation increased significantly, leading to elevated demand for firearms, ammunition, and related accessories [13] - The company reported a 134% increase in total firearms unit sales compared to Q3 of the previous year [15] - The overall market for outdoor activities, including fishing and camping, remained strong, supported by increased participation [14] Company Strategy and Development Direction - The company plans to continue expanding its store footprint, having opened nine new stores in 2020, with a total of 111 stores currently operating [18] - The focus remains on capitalizing on the growth in outdoor activity participation and e-commerce, which are expected to create long-term shareholder value [21] - The company is optimistic about sustaining growth opportunities from heightened outdoor activity participation and e-commerce growth [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustained demand for outdoor activities, despite uncertainties surrounding the pandemic [21] - Early Q4 trends showed total net sales for November up approximately 70% compared to the prior year, indicating continued strong performance [19] - Management noted that while there is a strong demand for firearms and ammunition, supply chain constraints are expected to persist for several months [41] Other Important Information - The company provided hero pay totaling approximately $2 million to non-executive team members in recognition of their efforts during the pandemic [11] - The company ended Q3 2020 with no outstanding borrowings on its line of credit, compared to $142 million at the end of Q3 2019 [33][34] Q&A Session Summary Question: Changes in demand for guns or ammo pre-election and post-election - Management noted a shift towards hunting products, while personal protection products remained strong [40] Question: Supply chain constraints and their impact - Demand is exceeding supply, particularly in firearms and ammunition, with expectations of shortages continuing for a few more months [41] Question: Impact of wildfires on store performance - The company experienced strong generator sales due to wildfires, but hunting participation was negatively impacted in some areas [42] Question: Long-term outlook on outdoor participation and trends - Management is bullish on future outdoor participation, with millions of new participants expected to continue engaging in outdoor activities [44] Question: Demand for personal protection and MSRs - Demand for personal protection and MSRs remains strong, with inventory levels being light [75] Question: Trends in ammunition demand - The company expects ammunition demand to continue at elevated rates due to a significant number of first-time buyers [77] Question: Gross profit margin and pricing strategies - The company has successfully passed on price increases from manufacturers, and margins in ammunition are currently strong [79] Question: Unit growth opportunities - The company plans to continue opening 8 to 12 new stores annually, focusing on intelligent expansion [81] Question: Same-store sales in November - Management did not provide specific same-store sales numbers for November but indicated overall sales were up over 70% [83]