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Sportsman's Warehouse Holdings, Inc. Announces Third Quarter 2020 Financial Results

WEST JORDAN, Utah, Dec. 02, 2020 (GLOBE NEWSWIRE) -- Sportsman's Warehouse Holdings, Inc. ("Sportsman's Warehouse" or the “Company”) (Nasdaq: SPWH) today announced financial results for the thirteen and thirty-nine weeks ended October 31, 2020.

“Sportsman’s Warehouse continued its exceptional performance in the third quarter of 2020. We were extremely pleased with the efforts of associates in all of our facilities as we worked as a team to safely and effectively serve customers, both new and returning,” said Jon Barker, Sportsman’s Warehouse CEO. “During the third quarter, same store sales increased 41% compared to the same period last year, driven by elevated participation in fishing, camping and hunting, and our continued market share gains in firearms.”

Mr. Barker stated, “We continue to be excited about the expansion of our ecommerce capabilities, with ecommerce-driven sales up over 200% from the prior year period. We are also highly encouraged by the strong visitor traffic on both our website and inside of our stores. We opened 9 new stores year-to-date in 2020, taking the total Sportsman’s Warehouse store count to 111. In addition, our first Legacy Shooting Center, which opened earlier this year, is performing ahead of expectations.”

“We believe we are well positioned to continue to capitalize on substantial growth opportunities, including heightened participation in outdoor activities, ecommerce growth, and new store expansion to create long-term shareholder value.”

For the thirteen weeks ended October 31, 2020:

  • Net sales were $385.7 million, an increase of $143.2 million, or 59.1%, as compared to the third quarter of fiscal year 2019. The net sales increase was primarily due to a surge in demand across all major categories, led by our hunting and shooting category, as well as strong growth in our ecommerce platform compared to the prior year period.

  • Same store sales increased 40.9% during the third quarter of 2020 compared to the third quarter of 2019.

  • Gross profit was $130.6 million or 33.9% of net sales, compared to $84.2 million or 34.7% of net sales in the comparable prior year period, a year-over-year increase of $46.4 million in gross profit and an 80-basis point decrease in gross profit margin.

  • Net income was $30.5 million compared to net income of $10.5 million in the third quarter of 2019. Adjusted net income was $31.5 million compared to adjusted net income of $10.8 million in the third quarter of 2019 (see “GAAP and Non-GAAP Measures”).

  • Adjusted EBITDA was $49.9 million compared to $23.2 million in the comparable prior year period (see "GAAP and Non-GAAP Measures").

  • Diluted earnings per share were $0.68 compared to a diluted earnings per share of $0.24 in the comparable prior year period. Adjusted diluted earnings per share were $0.71 compared to adjusted diluted earnings per share of $0.25 for the comparable prior year period (see "GAAP and Non-GAAP Measures").

For the thirty-nine weeks ended October 31, 2020:

  • Net sales were $1,013.6 million, an increase of $385.3 million, or 61.3%, as compared to the first three quarters of fiscal year 2019. The net sales increase was primarily due to a surge in demand across all major categories, led by our hunting and shooting category, as well as strong growth in our ecommerce platform compared to the prior year period.

  • Same store sales increased 44.4% during the first three quarters of 2020 compared to the comparable period in 2019.

  • Gross profit was $334.5 million or 33.0% of net sales, as compared to $211.6 million or 33.7% of net sales for the comparable prior year period, a year-over-year increase of $122.9 million in gross profit and a 70-basis point decrease in gross profit margin.

  • Net income was $61.8 million compared to net income of $10.5 million in the first quarters of 2019. Adjusted net income was $65.6 million compared to adjusted net income of $11.3 million in the first three quarters of 2019 (see “GAAP and Non-GAAP Measures”).

  • Adjusted EBITDA was $111.7 million compared to $39.4 million in the first three quarters of 2019 (see "GAAP and Non-GAAP Measures").

  • Diluted earnings per share were $1.40 for the thirty-nine weeks ended October 31, 2020 compared to diluted earnings per share of $0.24 for the same period last year. Adjusted diluted earnings per share were $1.48 for the thirty-nine weeks ended October 31, 2020 compared to adjusted diluted earnings per share of $0.26 for the same period last year (see "GAAP and Non-GAAP Measures").

Balance sheet highlights as of October 31, 2020:

  • The Company was in a net cash position at the end of the third quarter of 2020 with of $19.3 million in cash on hand, no borrowings under the Company’s revolving credit facility, and $8.0 million outstanding under the term loan, net of unamortized debt issuance costs. This is an improvement in net debt of $170.1 million year-over-year.

  • Total liquidity was $238 million as of the end of the second quarter of 2020, comprised of $218 million of availability on the revolving credit facility and $19 million of cash on hand, compared to $80 million in total liquidity at the end of the third quarter of 2019.

Fourth quarter and fiscal year 2020 outlook:

For the fourth quarter of fiscal year 2020, net sales are expected to be in the range of $356 million to $386 million based on same store sales growth in the range of 32% to 42% compared to the corresponding period of fiscal year 2019. Adjusted EBITDA is expected to be in the range of $31.0 million to $35.0 million with diluted earnings per share of $0.39 to $0.45 on a weighted average of approximately 44.5 million estimated common shares outstanding.

For fiscal year 2020, net sales are expected to be in the range of $1,370 million to $1,400 million based on same store sales growth in the range of 42% to 46% compared to fiscal year 2019. Adjusted EBITDA is expected to be in the range of $143.6 million to $147.2 million with adjusted earnings per diluted share of $1.87 to $1.93 on a weighted average of approximately 44.3 million estimated common shares outstanding (see “GAAP and Non-GAAP Measures”).

Conference Call Information:

A conference call to discuss third quarter and third quarter year-to-date 2020 financial results is scheduled for today, December 2, 2020, at 4:30 PM Eastern Time. The conference call will be webcast and may be accessed via the Investor Relations section of the Company’s website at www.sportsmans.com.

Non-GAAP Information

This press release includes the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission (the “SEC”): adjusted income from operations, adjusted net income, adjusted diluted earnings per share and Adjusted EBITDA. We define adjusted income from operations and adjusted net income as income from operations and net income, respectively, in each case, plus expenses incurred relating to bonuses and increased wages paid to front-line and non-executive back office associates due to COVID-19, costs incurred for the recruitment and hiring of key members of management, certain expenses incurred relating to the acquisition of Field and Stream stores, tax benefits recognized, a legal settlement accrual, and the costs and impairments recorded relating to the closure of one store during the first quarter of 2020, as applicable. We define adjusted diluted earnings per share as diluted earnings per share excluding the impact of expenses incurred related to the bonuses and increased wages paid to front-line and non-executive back office associates due to COVID-19, expenses incurred relating to the recruitment and hiring of key members of management, certain expenses incurred relating to the acquisition of Field and Stream stores, a legal settlement accrual, and the costs and impairments recorded relating to the closure of one store during the first quarter of 2020, as applicable. We define Adjusted EBITDA as net income plus interest expense, income tax (benefit) expense, depreciation and amortization, stock-based compensation expense, bonuses and increased wages paid to front-line and non-executive back office associates due to COVID-19, pre-opening expenses, and other gains, losses and expenses that we do not believe are indicative of our ongoing expenses. The Company has reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures under “GAAP and Non-GAAP Measures” in this release. The Company believes that these non-GAAP financial measures not only provide its management with comparable financial data for internal financial analysis but also provide meaningful supplemental information to investors. Specifically, these non-GAAP financial measures allow investors to better understand the performance of the Company’s business and facilitate a more meaningful comparison of its diluted earnings per share and actual results on a period-over-period basis. The Company has provided this information as a means to evaluate the results of its ongoing operations. Other companies in the Company’s industry may calculate these items differently than the Company does. Each of these measures is not a measure of performance under GAAP and should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements in this release include, but are not limited to, statements regarding our outlook for the fourth quarter and fiscal year 2020, our ability to execute on our growth strategy. Investors can identify these statements by the fact that they use words such as "continue", "expect", "may", “opportunity”, "plan", "future", “ahead” and similar terms and phrases. The Company cannot assure investors that future developments affecting the Company will be those that it has anticipated. Actual results may differ materially from these expectations due to many factors including, but not limited to: the potential effects of COVID-19 and measures intended to reduce its spread on the Company’s operations; the Company’s retail-based business model; general economic, market and other conditions and changes in consumer spending; the Company’s concentration of stores in the Western United States; competition in the outdoor activities and specialty retail market; changes in consumer demands; the Company’s expansion into new markets and planned growth; current and future government regulations; risks related to the Company’s continued retention of its key management; the Company’s existing distribution center or the Company’s planned new distribution center; quality or safety concerns about the Company’s merchandise; events that may affect the Company’s vendors; trade restrictions; public health crises and social unrest; and other factors that are set forth in the Company's filings with the SEC, including under the caption “Risk Factors” in the Company’s Form 10-K for the fiscal year ended February 1, 2020 which was filed with the SEC on April 9, 2020, and the Company’s other public filings made with the SEC and available at www.sec.gov. If one or more of these risks or uncertainties materialize, or if any of the Company’s assumptions prove incorrect, the Company’s actual results may vary in material respects from those projected in these forward-looking statements. Any forward-looking statement made by the Company in this release speaks only as of the date on which the Company makes it. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

About Sportsman's Warehouse Holdings, Inc.

Sportsman’s Warehouse Holdings, Inc. is an outdoor specialty retailer focused on meeting the needs of the seasoned outdoor veteran, the first-time participant, and everyone in between. We provide outstanding gear and exceptional service to inspire outdoor memories.

For press releases and certain additional information about the Company, visit the Investor Relations section of the Company's website at www.sportsmans.com.

Investor Contacts:
Robert Julian, Chief Financial Officer
Caitlin Howe, Vice President, Corporate Development & Investor Relations
(801) 566-6681
investors@sportsmans.com


                   
SPORTSMAN’S WAREHOUSE HOLDINGS, INC.  
Condensed Consolidated Statements of Loss (Unaudited)  
(in thousands, except per share data)  
                   
                   
  For the Thirteen Weeks Ended    
                   
  October 31, 2020   % of net
sales
    November 2, 2019     % of net
sales
  YOY
Variance
                   
Net sales $ 385,748     100.0 %   $ 242,466   100.0 %   $ 143,282  
Cost of goods sold   255,166     66.1 %     158,256   65.3 %     96,910  
Gross profit   130,582     33.9 %     84,210   34.7 %     46,372  
                   
Operating expenses:                  
Selling, general and administrative expenses   92,252     23.9 %     68,336   28.2 %     23,916  
Income from operations   38,330     10.0 %     15,874   6.5 %     22,456  
Bargain purchase gain   (2,218 )   (0.6 %)     -   0.0 %     (2,218 )
Interest expense   536     0.1 %     2,094   0.9 %     (1,558 )
Income before income tax expense   40,012     9.9 %     13,780   5.6 %     26,232  
Income tax expense   9,530     2.5 %     3,287   1.4 %     6,243  
Net income $ 30,482     7.4 %   $ 10,493   4.2 %   $ 19,989  
                   
Earnings per share                  
Basic $ 0.70         $ 0.24       $ 0.46  
Diluted $ 0.68         $ 0.24       $ 0.44  
                   
Weighted average shares outstanding                  
Basic   43,609           43,230         379  
Diluted   44,510           43,559         951  



                   
SPORTSMAN’S WAREHOUSE HOLDINGS, INC.  
Condensed Consolidated Statements of Income (Unaudited)  
(in thousands, except per share data)  
                   
                   
  For the Thirty-Nine Weeks Ended    
                   
  October 31, 2020     % of net
sales
    November 2, 2019     % of net
sales
  YOY
Variance
                   
Net sales $ 1,013,572     100.0 %   $ 628,249   100.0 %   $ 385,323  
Cost of goods sold   679,122     67.0 %     416,644   66.3 %     262,478  
Gross profit   334,450     33.0 %     211,605   33.7 %     122,845  
                   
Operating expenses:                  
Selling, general and administrative expenses   251,077     24.8 %     191,326   30.5 %     59,751  
Income from operations   83,373     8.2 %     20,279   3.2 %     63,094  
Bargain purchase gain   (2,218 )   (0.2 %)     -   0.0 %     (2,218 )
Interest expense   3,088     0.3 %     6,552   1.0 %     (3,464 )
Income (loss) before income tax expense   82,503     7.9 %     13,727   2.2 %     68,776  
Income tax expense (benefit)   20,690     2.0 %     3,195   0.5 %     17,495  
Net Income $ 61,813     5.9 %   $ 10,532   1.7 %   $ 51,281  
                   
Earnings per share                  
Basic $ 1.42         $ 0.24       $ 1.18  
Diluted $ 1.40         $ 0.24       $ 1.15  
                   
Weighted average shares outstanding                  
Basic   43,490           43,126         364  
Diluted   44,260           43,316         944  



             
SPORTSMAN’S WAREHOUSE HOLDINGS, INC.            
Condensed Consolidated Balance Sheets (Unaudited)            
(in thousands)            
             
             
Assets            
  October 31, 2020   February 1, 2020  
Current assets:            
Cash $ 19,314   $ 1,685  
Accounts receivable, net   462     904  
Merchandise inventories   322,078     275,505  
Income tax receivable   -     812  
Prepaid expenses and other   14,564     12,732  
Total current assets   356,418     291,638  
Operating lease right of use asset   239,254     224,520  
Property and equipment, net   99,495     98,767  
Goodwill   1,496     1,496  
Definite lived intangible assets, net   299     220  
Total assets $ 696,962   $ 616,641  
             
Liabilities and Stockholders’ Equity            
Current liabilities:            
Accounts payable $ 135,949   $ 38,157  
Accrued expenses   106,430     70,118  
Operating lease liability, current   35,730     34,487  
Income taxes payable   5,315     -  
Revolving line of credit   -     116,078  
Current portion of long-term debt, net of discount and debt issuance costs   -     5,936  
Total current liabilities   283,424     264,776  
             
Long-term liabilities:            
Long-term debt, net of discount, debt issuance costs, and current portion   7,950     23,781  
Deferred income taxes   4,154     562  
Operating lease liability, noncurrent   227,333     217,254  
Total long-term liabilities   239,437     241,597  
Total liabilities   522,861     506,373  
             
Stockholders’ equity:            
Common stock   436     433  
Additional paid-in capital   88,823     86,806  
Accumulated earnings   84,842     23,029  
Total stockholders’ equity   174,101     110,268  
Total liabilities and stockholders' equity $ 696,962   $ 616,641  
             



               
SPORTSMAN’S WAREHOUSE HOLDINGS, INC.              
Condensed Consolidated Statements of Cash Flows (Unaudited)              
(in thousands)              
               
    October 31, 2020   November 2, 2019  
CASH FLOWS FROM OPERATING ACTIVITIES              
Net income   $ 61,813     $ 10,532    
  Adjustments to reconcile net income to net              
    cash provided by operating activities:              
Depreciation and amortization     15,992       14,070    
Amortization of discount on debt and deferred financing fees     422       252    
Amortization of Intangible assets     21       20    
Loss (gain) on asset dispositions     937       (311 )  
Gain on bargain purchase     (2,218 )     -    
Noncash operating lease expense     17,760       22,132    
Deferred income taxes     2,801       (245 )  
Stock based compensation     2,436       1,567    
    Change in assets and liabilities, net of amounts acquired:              
Accounts receivable, net     442       (371 )  
Operating lease liabilities     (20,781 )     (22,571 )  
Merchandise inventory     (38,887 )     (42,142 )  
Prepaid expenses and other     (2,021 )     165    
Accounts payable     94,900       70,270    
Accrued expenses     31,992       3,449    
Income taxes payable and receivable     6,127       1,030    
            Net cash provided by operating activities     171,736       57,847    
               
CASH FLOWS FROM INVESTING ACTIVITIES:              
Purchase of property and equipment, net of amounts acquired     (15,394 )     (22,914 )  
Acquisition of Field and Stream stores, net of cash acquired     (4,778 )     (19,074 )  
Proceeds from sale of property and equipment     -       311    
            Net cash used in investing activities     (20,172 )     (41,677 )  
               
CASH FLOWS FROM FINANCING ACTIVITIES:              
Net (payments) borrowings on line of credit     (116,078 )     (13,541 )  
(Decrease) Increase in book overdraft     4,559       3,756    
Proceeds from issuance of common stock per employee stock purchase plan   273       174    
Payment of withholdings on restricted stock units     (689 )     (369 )  
Principal payments on long-term debt     (22,000 )     (6,000 )  
            Net cash used in financing activities     (133,935 )     (15,980 )  
               
Net change in cash     17,629       190    
Cash at beginning of year     1,685       1,547    
Cash at end of period   $ 19,314     $ 1,737    
               



                             
SPORTSMAN’S WAREHOUSE HOLDINGS, INC.                          
GAAP and Non-GAAP Measures (Unaudited)                            
(in thousands, except per share data)                            
                             
Reconciliation of GAAP net income and GAAP dilutive earnings per share to adjusted net income and adjusted diluted earnings per share:    
                             
      For the Thirteen Weeks Ended     For the Thirty-Nine Weeks Ended    
                             
    October 31, 2020   November 2, 2019   October 31, 2020   November 2, 2019    
Numerator:                            
Net income   $ 30,482     $ 10,493     $ 61,813     $ 10,532      
Acquisition costs (1)     297       -       332       387      
Hazard pay (2)     2,000       -       4,600       -      
Store closing write-off (3)     -       -       1,039       -      
Legal accrual (4)     2,125       -       2,125       -      
Gain on bargain purchase (6)     (2,218 )     -       (2,218 )     -      
Executive transition costs (5)     -       387       -       623      
Less tax benefit     (1,154 )     (100 )     (2,113 )     (262 )    
Adjusted net income   $ 31,532     $ 10,780     $ 65,578     $ 11,280      
                             
Denominator:                            
Diluted weighted average shares outstanding     44,414       43,559       44,260       43,316      
                             
Reconciliation of earnings per share:                            
Dilutive earnings per share   $ 0.69     $ 0.24     $ 1.40     $ 0.24      
Impact of adjustments to numerator and denominator     0.02       0.01       0.08       0.02      
Adjusted diluted earnings per share   $ 0.71     $ 0.25     $ 1.48     $ 0.26      
                             
                             
Reconciliation of net income to adjusted EBITDA:                            
      For the Thirteen Weeks Ended     For the Thirty-Nine Weeks Ended    
    October 31, 2020   November 2, 2019   October 31, 2020   November 2, 2019    
Net income   $ 30,482     $ 10,493     $ 61,813     $ 10,532      
Interest expense     465       2,094       3,016       6,552      
Income tax expense (benefit)     9,530       3,287       20,691       3,195      
Depreciation and amortization     5,404       4,832       16,085       14,090      
Stock-based compensation expense (7)     882       619       2,436       1,567      
Pre-opening expenses (8)     958       1,482       1,778       2,483      
Acquisition costs (1)     297       387       332       387      
Hazard pay (2)     2,000       -       4,600       -      
Store closing write-off (3)     -       -       1,039       -      
Gain on bargain purchase (6)     (2,218 )     -       (2,218 )     -      
Legal accrual (4)     2,125       -       2,125       -      
Executive transition costs (5)     -       -       -       623      
Adjusted EBITDA   $ 49,925     $ 23,194     $ 111,697     $ 39,429      
                             
(1) Expenses incurred relating to the acquisition of Field & Stream stores.    
(2) Expense incurred relating to bonuses and increased wages paid to front-line and non-executive back office associates due to COVID-19.    
(3) Costs and impairments recorded relating to the closure of one store during the first quarter of 2020.                
(4) Accrual relating to pending labor litigation in the state of California.                      
(5) Costs incurred for the recruitment and hiring of key members of management.                    
(6) Excess of fair value over the purchase price of tangible assets acquired in connection with the Field & Stream stores acquired during fiscal year 2020.    
(7) Stock-based compensation expense represents non-cash expenses related to equity instruments granted to employees under our 2019 Performance Incentive Plan and employee stock purchase plan.  
(8) Pre-opening expenses include expenses incurred in the preparation and opening of a new store location, such as payroll, travel and supplies, but do not include the cost of the initial inventory  
or capital expenditures required to open a location.                            



                   
SPORTSMAN’S WAREHOUSE HOLDINGS, INC.  
GAAP and Non-GAAP Measures (Unaudited)  
(in thousands, except per share data)  
                   
Reconciliation of fourth quarter and 2020 fiscal year guidance:              
                   
    Estimated Q4 '20   Estimated FY '20  
    Low   High   Low   High  
Numerator:                
Net income $ 17,160   $ 19,800   $ 78,973     $ 81,613    
Acquisition costs (1)   -     -     332       332    
Hazard pay (2)   -     -     4,600       4,600    
Store closing write-off (3)   -     -     1,039       1,039    
Legal accrual (4)   -     -     2,125       2,125    
Gain on bargain purchase (5)   -     -     (2,218 )     (2,218 )  
Less tax benefit   -     -     (2,113 )     (2,113 )  
Adjusted net income $ 17,160   $ 19,800   $ 82,738     $ 85,378    
Denominator:                
Diluted weighted average shares outstanding   44,450     44,450     44,300       44,300    
                   
Reconciliation of earnings per share:                
Diluted earnings per share $ 0.39   $ 0.45   $ 1.78     $ 1.84    
Impact of adjustments to numerator and denominator     -   $ -     0.08       0.08    
Adjusted diluted earnings per share $ 0.39   $ 0.45   $ 1.87     $ 1.93    
                   
(1) Expenses incurred relating to the acquisition of Field & Stream stores.
(2) Expense incurred relating to bonuses and increased wages paid to front-line and non-executive back office associates due to COVID-19.
(3) Costs and impairments recorded relating to the closure of one store during the first quarter of 2020.      
(4) Accrual relating to pending labor litigation in the state of California.              
(5) Excess of fair value over the purchase price of tangible assets acquired in connection with the Field & Stream stores acquired during fiscal year 2020.

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