Sportsman's Warehouse (SPWH), which made its IPO debut in April 2014, is trading lower (-13%) today after it reported Q4 (Jan) results/guidance last night. In case you're not familiar, Sportsman's Warehouse is an outdoor sporting goods retailer (camping, hunting, fishing), primarily in the western US.
The company was founded in 1986 as a single retail store in Utah and has grown to 70 stores across 20 states. Today, SPWH has the largest outdoor specialty store base in the Western US and Alaska. Management notes that its sales associates are extremely well trained and know the local areas (hunting, fishing) very well.
SPWH is still quite small with 75 stores but they have been picking up the pace in terms of openings. From FY11-FY13, SPWH opened an average of four stores per year. However, in FY14, the company stepped up that pace to eight new stores and nine new stores opened in FY15. Another step up happened in FY16 as SPWH opened 11 stores this year. And for FY17, SPWH expects to open 12 stores.
For the next several years, the goal is to open 8-13 stores annually. So as you can see, SPWH is ramping up its footprint. Most of the new stores will be in the western US although they are branching eastward as SPWH has recently opened stores in North Carolina and West Virginia. Management believes its existing infrastructure (distribution, IT etc.) in the western US should allow it to ramp to 100 or more stores without significant additional capital. Longer term, SPWH believes 300+ locations is very doable.
SPWH is one of the few large outdoor sportsman chain in the western US where the market is more fragmented and has more mom-and-pop stores. Big 5 Sporting Goods (BGFV) is based in California and has a good presence on the west coast with a huge presence in California. However, it seems SPWH has more of an emphasis on outdoor activities like camping, fishing etc. So it's a little different. More similar competitors, such as Cabela's (which is being acquired by Bass Pro Shops) and Gander Mountain (which recently declared bankruptcy) do not have a large western US presence. SPWH competes mostly against smaller chains and mom & pop stores so it's in a good position.
Turning to the Q4 (Jan) results, non-GAAP EPS fell 7% YoY to $0.25, which was a good bit below prior guidance of $0.27-0.30. Revenue rose 6.2% year/year to $221.4 mln, which also was a good bit below prior guidance of $230-235 mln. Same store sales in JanQ fell -5.2%, which was below prior guidance of -1% to +1%.
In terms of guidance for Q1 (Apr), SPWH expects a loss of $(0.08)-(0.06) per share and it expects revenue of $150-155 mln. Both numbers are below market expectations. The same store comp guidance for AprQ was pretty rough as management expects a decline of -11% to -9%.
Consistent with what other sporting good retailers have been saying, the retail environment is really tough. Also impacting SPWH's results was the fact that it anniversaried both the San Bernardino tragedy and the executive orders from December and January which created a difficult comparison for its hunting and shooting category.
Looking at fiscal year 2017, SPWH is taking a conservative approach when planning its hunting and shooting business, particularly for the first half of the year until the company anniversaries the unfortunate events that took place in Orlando in June 2016. Despite the choppy current environment, SPWH believes there is significant market share opportunity in the outdoor goods space.
In sum, this was a difficult quarter for the sporting goods space and SPWH clearly has felt the impact. While they did not mention it directly in the press release, it's likely that SPWH is being hurt by online competition like Amazon (AMZN). Management has said in the past that it is fairly well insulated from online competition. Specifically, about 30% of revenue is completely shielded from the internet (firearms, knives, powder cannot be sold on internet). For another 25% of revenue, it just does not make sense to buy online (99 cent fishing flies for example). Also, SPWH sells online and can offer in-store pick ups that an Amazon cannot offer.
With that said, the retail environment generally and the sporting goods retail sector in particular seems like it's getting hurt by online competition. Just look at Gander Mountain, they recently declared bankruptcy. Also, Sports Authority (filed for bankruptcy in 2016 and liquidated its stores) and Sport Chalet (closed all of its stores in 2016) recently closed up shop. It's tough right now in the sporting goods space, we'll see if it improves later this year.