Sportsman's Warehouse Holdings, Inc.

Greetings. Welcome to the Sportsman's Warehouse second quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Riley Timmer. You may begin.

Thank you, operator. With me on the call today is John Barker, Chief Executive Officer, and Jeff White, Chief Financial Officer of Sportsman's Warehouse. I will now remind everyone of the company's Safe Harbor language. The statements we make today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which includes statements regarding our expectations about our future results of operations, demand for our products, and growth of our industry. Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, including those described under the caption risk factors in the company's most recent Form 10-K and the company's other filings made with the SEC. We will also disclose non-GAAP financial measures during today's call. Definitions of such non-GAAP measures, as well as reconciliations to the most directly comparable GAAP financial measures, are provided as supplemental financial information on our press release, included as Exhibit 99.1 to the Form 8K we finished to the SEC today, which is also available on the Investor Relations section of our website at sportsman.com. I would also like to note that today's materials include an earnings conference call PowerPoint presentation. which is available at sportsmans.com in the investor relations section of the website. You can utilize this deck as a reference with today's prepared remarks. I will now turn the call over to John Barker, our CEO.

Thank you, Riley. Good afternoon to everyone on the call, and thank you for joining us today. I'll begin by reviewing the highlights of our second quarter performance, comment on the current trends we are seeing with our consumers, and review a few key elements of the growth strategy for our omnichannel business model. Following my comments, Jeff will provide additional details on our second quarter results, as well as discuss our outlook for the third quarter of 2022. Finally, we will open up the call for questions. Our second quarter results were stronger than we originally anticipated, exceeding the high end of our guidance for both sales and earnings per share. To highlight the overall strength of our business, we will compare certain financial and non-financial metrics to our 2019 results. The ongoing participation in the outdoors is greater than it's been in decades. And whether it's hiking, camping, or hunting, we continue to see strong demand for the merchandise consumers need to enjoy these outdoor activities. For example, according to KOA's 2022 camping report, 40% of all leisure travel in North America involved a camping trip. Leisure travelers have found a new form of recreating, which for many is now the preferred method of choice for their travel. Stats such as these increase our confidence in the future. And while 2020 and 2021 were aided by people forced to stay close to home, the new norm for many now includes participating in some form of outdoor activity. Now turning to performance. In the second quarter, same-store sales performed slightly better than guidance, down about 10% compared to the second quarter of 2021. As compared to the second quarter of 2019, same-store sales were up nearly 32%. Our hunting category performed above expectations during the second quarter, driven by sales of firearms in certain categories, which benefited from political rhetoric and elevated media exposure. Other categories of firearms such as centerfire rifles continue to perform well. Seasonal demand for these products remains strong as consumers continue to participate in outdoor activities such as hunting and shooting sports. Comparing our hunting and shooting category to 2019, it has increased 61%. This reflects both an increase in participation and additional market share capture. Ammunition sales were very strong during the quarter as certain ammo types came back in stock after nearly two years of supply shortages. These improvements helped drive traffic to both our stores and our website. Through operating execution and industry market share gains, our ammo sales were up 82% versus 2019. We continue to focus our efforts on serving our customers to capitalize on this ammo demand by leveraging our omnichannel capabilities. Moving on to other categories, we are pleased with our apparel and footwear category performance in relation to the overall performance of the business. We continue to improve our merchandising efforts in this category to expand both our in-store and online assortment. As we expand our vendor base, we were able to leverage our omnichannel capabilities, allowing us to acquire and retain customers through increased assortment with limited investments in inventory. Compared to 2019, apparel is up 21% and footwear is up 25%. Along these same lines, we are making good progress expanding our private label program with our first hunting boot coming to market in the next few weeks, just in time for the core hunting season. We are also excited to launch a new technical camouflage pattern within the Killick premium brand. This pattern is designed to be used in a variety of geographies. By leveraging our private brands to fill in our good, better, best merchandising strategy, we continue to serve all levels of consumers. These initiatives support our long-term strategy of building a high single-digit penetrated private brand business. Transitioning to the progress within our supply chain. While many large retailers have communicated elevated inventories, causing significant markdowns within certain categories, we are comfortable with the overall health of our inventory. Although we are not 100% insulated, a large portion of what we carry is hard goods that are not exposed to seasonal trends or at risk of going out of fashion. The team has done a great job of managing our supply chain to keep our in-stock positions healthy in key product categories while managing inventory levels to meet changing consumer demand trends. It's important that we are well positioned to support the seasonal needs of our customers while not overweighting us in areas where discounting may be needed to flush through excess inventory. As the majority of our inventory is purchased through vendors, this provides us the flexibility to quickly adjust to changes in demand. Given our investments over the last few years in technology and omnichannel capabilities, We continue to increase the leverage of our existing store footprint through forward deployment of inventory. Over 70% of our online sales during Q2 were serviced through our stores and dropship partners. This allows us to serve the customer faster while managing expenses through reduced freight and labor. The success of this initiative will allow us to gain one additional year from our existing distribution center, pushing the permanent need for a second distribution center into 2024. Looking ahead to Q3, we have several exciting new growth initiatives coming soon that are both e-com and digitally focused to acquire more consumers and capture additional market share. During this quarter, we are launching Knives.com, a new online-only brand. This e-com expansion will allow us to leverage our existing inventory and infrastructure, offering a premier range of top-quality knives and cutlery. This will include premium brands and a user-friendly shopping experience with featured products and special curations endorsed by industry experts and relatable influencers. We are excited about this organic go-to-market strategy to attract an adjacent customer that expands beyond our current reach. During the third quarter, we expect to add four new stores to our fleet. bringing our total to 130 stores in 30 states before the holiday season. This will include our 16th store in California, our eighth store in Colorado, our second store in the state of Florida, and our first ever store in the state of Ohio. We also expect to open one additional store in early Q4. With these five new stores, we will open a total of nine during calendar 2022. Given the timing of construction, our 10th store will likely push into 2023. As we've mentioned in the past, we have a robust funnel of real estate and development and remain committed to executing on our store footprint growth. We have a strategically unique formula for expanding our geographic reach through our flexible store format, providing us the opportunity to continue to be the fastest growing outdoor retailer in the country. In closing, We remain confident in both the short and long-term growth strategies of Sportsman's Warehouse. Leveraging our knowledgeable associates, flexible store formats, and fast-growing website is key to maintaining our position as a premier outdoor specialty retailer. Our company has never been stronger or better positioned to successfully navigate a macro environment like we're in today. With that said, I will turn the call over to Jeff to review our second quarter 2022 results and discuss our Q3 guidance.