Smith & Wesson Brands(US:SWBI)2022-09-08 23:34Financial Data and Key Metrics Changes - Net sales for Q1 2023 were $84.4 million, down 69.3% from $190.2 million in the prior year comparable quarter and $11 million lower than Q1 2020 [31] - Gross margin for Q1 2023 was 37.3%, significantly below the 47.3% from the prior year but equal to Q1 2020 [32] - Net income for Q1 2023 was $3.3 million, compared to $76.9 million in the prior year, but $1.1 million higher than Q1 2020 [35] - GAAP earnings per share were $0.07, down from $1.57 last year but $0.03 higher than Q1 2020 [36] Business Line Data and Key Metrics Changes - Total units shipped were below fiscal 2020 levels due to an inventory correction [31] - Average selling prices (ASPs) were approximately 50% above fiscal 2020 levels, with handguns even higher than fiscal 2022 levels [32] Market Data and Key Metrics Changes - Distributor inventory of Smith & Wesson products currently sits at 14.5 weeks of supply, higher than the average target of eight weeks but typical for this time of year [21] - The firearms market is returning to a more normal seasonal demand model, with increased order rates observed in August [40] Company Strategy and Development Direction - The company is focused on maintaining long-term profitability and strong returns for stockholders, despite the firearms market being expected to decline in fiscal 2023 [28] - A new national branding campaign has been launched to enhance the company's market presence [25] - Product innovation is emphasized, with new products launched and more scheduled for release [26] Management's Comments on Operating Environment and Future Outlook - Management noted that the inventory correction is largely behind them, and they expect Q2 to pick up significantly as consumer demand increases [14][40] - The company anticipates operating expenses to increase by 10% to 15% over Q1 levels as they replenish headcount and revenue increases [43][72] Other Important Information - The company generated $7.1 million in cash from operations during the quarter and spent $11.6 million on capital expenditures, resulting in a net free cash used of $4.4 million [37] - The Board has authorized a quarterly dividend of $0.10 to be paid to stockholders [39] Q&A Session Summary Question: Can you talk about inventory in the channel? - Management indicated that inventory units in the channel are now comparable to levels seen in 2019, with demand higher than during the summer period [52] Question: How does your inventory compare to competitors? - Management noted that competitive products were understocked during the pandemic, but now they are seeing a more balanced inventory situation [55] Question: What are the expectations for promotional pricing? - Management expects a more muted promotional environment compared to the pandemic, focusing on creative sales strategies rather than aggressive discounting [58] Question: Can you quantify sales from new products? - New products launched in the last year contributed 21.3% to the quarter's revenue, with expectations for a larger impact in the upcoming quarters [61] Question: What is the status of the relocation process? - The relocation is on track, with construction progressing well and no significant changes to costs expected [63] Question: What are the strengths in different market segments? - Management highlighted personal protection and shooting sports as resilient segments, with hunting also showing signs of growth [68]