Executive Summary / Key Takeaways

• Sportsman's Warehouse is executing a multi-phase turnaround strategy focused on returning to same-store sales growth, improving operating margins, and reducing debt, showing early validation with a positive Q1 FY2025 comparable sales increase after nearly four years of declines.
• Key strategic pillars for FY2025 include achieving inventory precision (narrow and deep in core hunting/fishing), leaning into local expertise, establishing authority in personal protection, and strengthening brand awareness through a digitally-led omnichannel approach.
• Recent financial performance reflects progress, with Q1 FY2025 net sales up 2.0%, gross margin expanding slightly to 30.4%, and SG&A leveraging down to 38.2% of sales, contributing to a narrower operating loss compared to the prior year period.
• The company reiterated its full-year FY2025 guidance, projecting net sales between down 1% and up 3.5%, Adjusted EBITDA between $33 million and $45 million, and expects to generate positive free cash flow for the year, prioritizing debt reduction.
• Despite macroeconomic headwinds, regulatory risks, and competitive pressures from larger, more diversified rivals, SPWH is leveraging its niche specialization, local presence, and strategic technology investments to drive efficiency and capture market share, particularly in key categories like firearms and fishing.

Setting the Scene: A Niche Player in a Competitive Arena

Sportsman's Warehouse Holdings, Inc., born from a single store in Midvale, Utah, in 1986, has grown into a significant regional retailer operating 146 stores across 32 states, complemented by an e-commerce platform at sportsmans.com. Its mission is centered on providing gear and service to outdoor enthusiasts, aiming to inspire memorable experiences. Unlike broad sporting goods chains, SPWH carves out a niche, specializing heavily in hunting, fishing, camping, and shooting sports, including firearms and ammunition.

This specialization positions SPWH distinctly within a highly fragmented and competitive retail landscape. Larger, more diversified players like Academy Sports and Outdoors (ASO) and Dick's Sporting Goods (DKS) offer broader assortments spanning athletic wear, team sports, and general recreation, alongside some outdoor categories. Value-focused retailers like Big 5 Sporting Goods (BGFV) compete primarily on price for basic sporting goods. SPWH's strategy is to leverage its deep category expertise and local presence – aiming to "out-local the big boxes and out of sorts of small specialty retailers" – to deliver a compelling mix of value, quality, selection, and personalized, locally-centric service.

The company is currently in the midst of a multi-phase business transformation initiated in fiscal year 2024. This turnaround effort is a strategic response to navigating persistent macroeconomic pressures, evolving consumer behavior, and the need to enhance operational efficiency and competitive positioning. A core component of this transformation involves strategic investments in technology, such as the implementation of Blue Yonder, aimed at improving critical functions like inventory management, merchandising, and store productivity. While specific, quantifiable advantages of SPWH's technology over competitors are not detailed, the strategic intent is clear: to use these tools to achieve greater precision in inventory allocation (especially for seasonal and local needs), enhance merchandising effectiveness, and improve overall operational efficiency to better compete with rivals who may possess more advanced supply chain or e-commerce infrastructure. The e-commerce platform itself, particularly its role in driving firearm sales traffic to stores for completion and attachment opportunities, is viewed as a competitive advantage supporting their omnichannel model.

The Turnaround Journey: From Headwinds to Positive Momentum

Fiscal year 2024 marked "Phase 1" of SPWH's transformation, focused on resetting foundational retail operations. This involved significant store resets to improve layouts and merchandising, a strategic shift towards a digital-first marketing approach, and a concerted effort to refine inventory management by addressing distressed stock and focusing on core merchandise. These initiatives were undertaken against a backdrop of challenging macroeconomic conditions, including inflation and elevated interest rates, which pressured consumer discretionary spending. The company also faced regulatory uncertainties, particularly concerning firearms sales, and lapped tough prior-year comparisons influenced by unique events like clearance sales and demand spikes.

Despite these headwinds, the foundational work began to yield results. The company successfully managed inventory, ending fiscal year 2024 with lower and cleaner stock levels than the prior year. Cost reduction measures were implemented, contributing to improved expense management. Throughout fiscal year 2024, SPWH demonstrated sequential improvement in same-store sales trends, culminating in a -0.5% comparable sales performance in the fourth quarter (on a comparable 13-week basis) – a significant improvement from earlier quarters. This operational progress also translated to a notable improvement in profitability, with Adjusted EBITDA reaching $14.6 million in Q4 fiscal 2024, up substantially from $5.3 million in the prior year period.

Building on this momentum, the first quarter of fiscal year 2025 provided further validation of the turnaround strategy. Net sales increased by 2.0% year-over-year to $249.1 million. Crucially, the company achieved its first positive same-store sales comparable in nearly four years, increasing by 2.0%. This positive comp was primarily attributed to improved inventory management and in-stock levels on core items.

Departmental performance in Q1 FY2025 highlighted the impact of strategic focus. The Fishing department saw a significant 11% increase in same-store sales, demonstrating the effectiveness of being seasonally ready and regionally relevant – a key learning applied from prior inventory challenges. This strength in Fishing also contributed favorably to the gross margin mix. While the overall Hunting and Shooting department sales saw a slight decrease, firearm unit sales increased by nearly 7%, significantly outpacing the adjusted NICS data and indicating market share gains despite a consumer trade-down to lower average unit price firearms. Ammunition sales also saw a 3% increase, supported by strategic everyday low pricing efforts on key calibers aimed at driving traffic. Conversely, the Camping department experienced a sales decrease, which management attributed partly to a later spring season and the timing of Easter.

Gross profit in Q1 FY2025 increased by 2.5% to $75.6 million, resulting in a modest gross margin expansion to 30.4% from 30.2%. This improvement was primarily driven by the favorable mix from the strong Fishing performance, although it was partially offset by increased freight expenses associated with a strategic inventory pull-forward undertaken in anticipation of rising tariffs. Selling, general, and administrative expenses, while increasing slightly in dollar terms, decreased as a percentage of net sales to 38.2% from 38.6%, reflecting continued expense discipline and fixed cost leverage gained from higher sales. The net loss for the quarter was $21.3 million, compared to $18.1 million in the prior year, while Adjusted EBITDA was -$9.0 million compared to -$8.7 million, reflecting the typical seasonal pattern where Q1 is a lower sales/profitability period. The e-commerce business continued to perform strongly, posting an 8% comp and comprising over 20% of total sales, underscoring the importance of the omnichannel approach.

Strategic Pillars for Growth and Profitability in FY2025

Entering fiscal year 2025, SPWH is focused on "Phase 2" of its transformation, with clear goals to return to sustained same-store sales growth, improve operating margins, and further reduce debt. This phase is built upon four strategic pillars designed to leverage the company's strengths and address past operational challenges:

1. Inventory Precision: The core of this pillar is to be "narrow and deep" in the key hunting and fishing products that drive the majority of the business (approximately 20% of SKUs accounting for 80% of sales). This involves improving merchandising efforts to "win the seasons" at a local level. Learning from past periods where inventory was too low or spread too thin, the company made a strategic decision in Q1 FY2025 to pull forward approximately $20 million of inventory, primarily in categories like fishing, camping, and hunting/shooting, ahead of anticipated tariff increases and to ensure seasonal readiness. This pull-forward, while impacting Q1 operating cash flow and freight costs, is intended to secure sufficient stock of core, high-turning products. The company has also focused on SKU reduction, decreasing total active SKUs by approximately 20% compared to the prior year to simplify assortments and improve inventory turnover. The goal is to end FY2025 with lower total inventory than FY2024 while being better positioned with the right products in the right locations.
2. Lean into Local: This pillar emphasizes leveraging the expertise and community connections of the company's store employees, now referred to as "outfitters." By empowering outfitters and providing them with a "merchandising voice" for their specific store's needs, SPWH aims to provide hyper-local knowledge and product assortments that resonate with regional customer preferences. This is seen as a key differentiator against larger, less localized competitors.
3. Become the Authority in Personal Protection: Recognizing the significant growth potential in personal and situational safety, SPWH aims to establish itself as a leader in this category. Currently representing nearly 25% of total sales (primarily firearms and ammunition), this segment appeals to a broader demographic than traditional hunting and fishing. The strategy involves building depth in key personal protection products from partners like SEG, Springfield, and GLOCK, focusing on range shooting consumables, and expanding offerings beyond lethal options. A notable initiative is the exclusive omnichannel partnership with Byrna Less-Lethal (BYRN), including in-store shop-in-shops and live demonstrations, seen as an incremental opportunity appealing to both existing firearm owners and those seeking less intimidating alternatives.
4. Strengthen Brand Awareness: To address historically low brand awareness in its trade areas, SPWH is executing a focused plan to reengage core customers and attract new ones. This includes redefining brand equity, launching a new omnichannel brand campaign, building content marketing capabilities, and implementing integrated grassroots programs aligned with local sales planning. The shift towards a digitally-led marketing approach aims to improve targeting and return on investment compared to traditional mass marketing.

These strategic initiatives are supported by ongoing investments in infrastructure and technology. The implementation of systems like Blue Yonder is intended to provide better tools and processes for inventory management, seasonality planning, and localized merchandising, enhancing operational effectiveness and productivity. Store resets, completed in 87 locations with minimal capital expenditure by leveraging outfitter labor, are aimed at improving the in-store shopping experience.

Financial Health and Outlook

As of May 3, 2025, Sportsman's Warehouse reported cash and cash equivalents of $3.6 million and working capital of $62.9 million. The company maintains a $350 million revolving credit facility ($155.5 million outstanding) and a $45 million term loan facility ($25 million outstanding), providing $118.5 million in total available liquidity. The $20 million delayed draw under the term loan was recently extended to July 31, 2025, providing continued flexibility.

Cash flows in Q1 FY2025 reflected the strategic inventory decisions. Net cash used in operating activities increased significantly to $60.2 million from $34.7 million in the prior year period, primarily driven by the increased inventory purchases ahead of tariffs and seasonal demand. This was largely funded by increased net borrowings under the revolving credit facility, resulting in $64.8 million provided by financing activities, up from $37.0 million in the prior year. Capital expenditures in Q1 were $3.8 million, focused on technology and store maintenance, slightly up from $3.3 million.

A key financial priority for management is the generation of positive free cash flow for both fiscal year 2024 (achieved $19.7 million) and fiscal year 2025. Any excess cash flow generated is explicitly prioritized for debt reduction to strengthen the balance sheet. The company expects fiscal year 2025 capital expenditures to be between $20 million and $25 million, primarily allocated to strategic technological investments (such as planogramming, merchandising, replenishment, and store scheduling tools) and general store maintenance, with one new store planned for the latter half of the year.

For the full fiscal year 2025, Sportsman's Warehouse reiterated its guidance despite ongoing macroeconomic uncertainty and potential tariff impacts. The company expects net sales to range between down 1% and up 3.5% compared to fiscal year 2024. Adjusted EBITDA is projected to be between $33 million and $45 million. This outlook is based on the expectation of modest gross margin improvement driven by inventory productivity and disciplined expense management, contributing to positive EBITDA in the second half of the year and overall full-year improvement. While acknowledging potential modest gross margin pressure from tariffs, management believes their direct exposure is low and they are working to mitigate downstream impacts.

Risks and Competitive Dynamics

Despite the positive momentum and strategic clarity, Sportsman's Warehouse faces several pertinent risks. Macroeconomic conditions, including persistent inflation, elevated interest rates, and potential recessionary pressures, continue to weigh on consumer discretionary spending, creating an uncertain demand environment. Changes in international trade policies and increased tariff rates pose a risk of increased inventory costs, particularly if mitigation efforts like alternative sourcing or vendor negotiations are unsuccessful.

The complex regulatory environment surrounding firearms and ammunition sales remains a significant challenge. Changes in state, local, or federal laws, such as the ongoing legal challenges and potential implementation of Oregon's Measure 114 (prohibiting magazines over ten rounds and imposing permitting/training requirements), could substantially impact sales and store traffic in affected regions. Weather conditions also introduce variability, directly impacting demand for outdoor gear.

In the competitive arena, SPWH is up against larger, more financially robust players. Academy Sports and Outdoors demonstrates stronger overall financial performance with higher gross and operating margins (ASO TTM Gross Margin ~34%, Operating Margin ~9% vs. SPWH TTM Gross Margin ~30%, Operating Margin ~-1.5%) and more consistent revenue growth. DKS also exhibits superior scale and profitability (DKS TTM Gross Margin ~36%, Operating Margin ~11%). These larger competitors often possess more sophisticated supply chains and digital capabilities. BGFV competes effectively on price in basic gear, potentially drawing away budget-conscious customers.

SPWH's strategic response involves leveraging its niche specialization and local presence as competitive advantages. Its deep expertise in hunting and fishing, coupled with services like license issuance and equipment tuning, differentiates it from generalist retailers. The focus on personal protection, including expanding into less-lethal options, targets a growing market segment that may be underserved by some competitors. The omnichannel strategy, particularly the integration of e-commerce with in-store services for firearms, is a key effort to compete in the digital space while driving traffic to its physical locations where outfitters can provide personalized service and drive attachment sales. The success of the turnaround hinges on the effective execution of these strategies to improve operational efficiency, enhance the customer experience, and capture market share despite the formidable competitive landscape and external pressures.

Conclusion

Sportsman's Warehouse is actively engaged in a critical turnaround effort, and the first quarter of fiscal year 2025 provided tangible evidence that the strategy is beginning to resonate. Achieving the first positive comparable store sales growth in nearly four years, coupled with market share gains in key categories like firearms, signals a potential inflection point after a period of significant headwinds and operational adjustments. The strategic focus on inventory precision, local relevance, personal protection, and brand awareness, supported by targeted technology investments, forms a clear roadmap for future growth and profitability.

While macroeconomic uncertainty, regulatory risks, and intense competition from larger rivals persist, management's reiteration of the full-year guidance and commitment to generating positive free cash flow underscore confidence in the path forward. The ability to improve gross margins through better inventory management and mix, coupled with disciplined expense control, will be crucial for translating top-line improvements into enhanced profitability. For investors, the story of SPWH is one of a specialized retailer working to leverage its unique strengths and local connections to navigate a challenging market. The success of the ongoing transformation, particularly the effective execution of the strategic pillars and the realization of efficiencies from technology investments, will be key determinants of whether the recent positive momentum can be sustained and translated into consistent, profitable growth and further balance sheet strengthening through debt reduction.