Sportsman's Warehouse Holdings, Inc.

Greetings and welcome to the Sportsman's Warehouse third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A brief 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. And as a reminder, this conference call is being recorded. And it is now my pleasure to introduce to you Riley Timmer, VP of IR. Thank you, Riley. 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 in our press release, included as Exhibit 99.1 to the Form 8K we furnished to the SEC today, which is also available on the Investor Relations section of our website at sportsmans.com. I would also like to note that today's materials include an earnings conference called PowerPoint Presentation, which is also available at sportsman.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, our CEO.

Thank you, Riley. Good afternoon, everyone, and thank you for joining us today. I'll begin by reviewing the highlights of our third quarter performance, comment on the current trends we are seeing with our consumers, and review key elements of the growth strategy for our omni-channel business model. Following my comments, Jeff will provide additional details on our third quarter results, as well as discuss our outlook for the fourth quarter and full year 2022. Finally, we will open up the call for questions. Turning first to our performance. We were pleased with our third quarter results, with net sales in line with guidance and EPS above the high end of our estimate. These results reflect our discipline efforts and efficient management of the business as we carefully navigate the challenging macroeconomic environment. Similar to prior quarters, on our call today, we will provide comparisons to our 2019 results to highlight the strength of the business and market share gains achieved. In the third quarter, same-store sales performed in line with our guidance down 15% compared to the third quarter of 2021. When comparing to the third quarter of 2019, same-store sales were up 19.5%. Looking now at our key departments, during the last couple of years, event-driven cycles have elevated sales levels in our hunting and shooting sports department, especially in personal protection firearms. While elevated over pre-pandemic levels, Personal protection firearms sales have softened greater than the overall business, putting pressure on the top line when compared with last year. Offsetting the downward trend in personal protection firearms during the quarter, our hunting rifle category continued to perform well, driven by seasonal demand and our geographic expansion into the eastern markets. To enhance customer acquisition and retention and keep our competitive advantage, We carry an industry-leading assortment of firearms with a focus of expanding our exclusive partnerships and offerings. The customer response to these unique products continues to be positive, proving our right to win with exclusive products. To further leverage our extensive offering and leading industry position, we maintain over 500 federal firearms license dealer partnerships across the U.S. allowing us to serve over 95% of our country's population. Comparing our hunting and shooting sports department to 2019, it increased nearly 33%. This increase reflects both increased participation and additional market share capture. Ammunition sales remained strong during the quarter as we saw continued improvement with both our in-stock position and assortment. We experienced positive trends on both rimfire and handgun ammo as supply and demand has stabilized in these two key areas. On hunting rifle ammunition, an important element of Q3 seasonal demand, inventory levels improved over the prior year, allowing us to service our customers significantly better than the prior year. During the back half of the quarter, we started to see improvements in shot shell supply. While the domestic manufacturing and supply of shot shells has improved, and the recent progress is encouraging, there is still progress to be made before we reach healthy in-stock levels. Comparing ammunition sales to 2019, we were up 30.5% in the third quarter. With industry-leading assortment and expertise, we remain confident in our positioning within our hunting and shooting sports department and look to capture additional market share given the shift over the last two years to greater outdoor participation, including 16-plus million first-time firearm owners. Moving on to other areas of the business, our apparel and footwear departments continue to outperform in relation to the overall performance of the business. Our improved in-store and online assortment, expanded vendor base, and omni-channel capabilities provide customers greater opportunities to find the merchandise they are looking for. This quarter, we saw strong results in both women's and men's outerwear. While it's a small portion of the business, this is an emerging growth category in both branded and private label. Comparing our results to 2019, apparel is up 21% and footwear is up 17%. During the quarter, we launched a new technical camouflage pattern within our acrylic and premium hunting brand. Early indicators suggest a greater level of penetration from the sales of this new product, which carries a higher overall gross margin. Also launched during Q3 was our first private brand hunting boot from Rustic Ridge. This new boot with an improved overall margin is seeing strong sell-through both online and in stores. Our private brands offer fill-in products such as these, which are resonating with our customers. They also provide features and benefits that are similar to our core hunting brands while at a lower price point. These two examples support the strategic roadmap to reach our 2025 target of 7 to 9% private brand penetration. Turning now to our omnichannel development. Our e-commerce driven business continues to grow and outpace the overall company with strong performance again during the third quarter. With total penetration now in the mid to high teens, our e-commerce driven sales increased 3.7% over Q3 of last year. This was primarily driven by strong sales from ammunition, apparel, and scopes and optics. The investments made in technology over the last few years allow us to leverage our existing store footprint and inventory to better service our customer. We are utilizing more effective targeted marketing and digital ad campaigns to leverage our growing customer databases and maximize the lifetime value of these customers. Our omnichannel platform continues to provide increased leverage on our inventory. The platform's ability to utilize existing store inventory, as well as our rapidly growing dropship network, allows us to better service our customers with increased product assortment, while at the same time minimizing the capital investment required. During the third quarter, over 70% of our online sales were serviced with inventory from our stores or through dropship partners. These capabilities provide us with greater confidence in achieving our 2025 target of 25% e-com penetration. Turning now to real estate. During the third quarter, we opened three new stores. We also opened our final two stores of the year during the month of November. This now brings the number of new stores opened in 2022 to nine total, for a total of 131 stores in 30 states. Our unique approach to new store development using our flexible store format provides us the opportunity to reach consumers in all markets. The size of box for the nine new stores opened during 2022 ranges from approximately 9,000 square feet to nearly 40,000 square feet. This is a strategic advantage that is unmatched by our competition. I'm proud of the team for successfully managing supply chain constraints, construction delays, and other external factors to successfully open nine new stores during this year. As we look ahead, our funnel of real estate remains robust. and we are moving with discipline and rigor to accelerate the growth of our store footprint. Our funnel, as we sit here today, is well over 100 locations, and we see a path to our target of 190 to 210 total stores in the fleet by the end of fiscal 2025. We expect continued expansion into states such as Florida and California, with new stores planned in underpenetrated areas of the Midwest, including the state of Wisconsin. Regarding the fourth quarter, we are pleased with the underlying strength of the core sportsman's business as we continue to make progress on our key growth strategies. While we continue to face tough macroeconomic consumer headwinds, we feel confident about our competitive positioning and the investments made over the last few years to successfully serve our customers. While we have a long way to go in the season, early Q4 indicators are positive. including Black Friday being the single largest day in customer visits and sales in the history of the company, suggesting that the holiday selling season is off to a good start. I will now turn the call over to Jeff to review our third quarter results and discuss our Q4 and full year 2022 guidance.

Thank you, John. I'll begin my remarks today with a review of our third quarter fiscal 2022 financial results. I will then review our outlook for the fourth quarter and full year 2022. Net sales for the third quarter of fiscal 2022 were $359.7 million compared to $401 million in the third quarter of 2021, a decrease of 10.3% over the prior year period, but in line with our guidance range. This decrease was primarily driven by lower demand from consumer inflationary pressures and recession concerns, partially offset by the opening of 11 new stores since October 30th of 2021. Same-store sales decreased 15% in the quarter compared with the same quarter of the prior year, which was in the middle of our guided range. This decrease was primarily driven by lower sales demand across our product categories due to inflationary pressures and tough year-over-year calms. Comparing our same-store sales results to the third quarter of 2019, we saw an increase of 19.5%. We saw significant increases in most categories as compared to Q3 2019, with hunting up 32.9%, apparel up 21.2%, footwear up 17.3%, camping up 6.7%, and optics, electronics, and accessories up 4.8%. These positive pre-pandemic same-store sales trends provide us continued confidence in the health of our industry and of our business. Third quarter 2022 gross profit was $120.8 million compared to $129.6 million in the third quarter of 2021. Gross margin percentage was 33.6% for the quarter, an improvement of 130 basis points versus the prior year comparable period. This year-over-year improvement as a percentage of net sales was due to improved trends in shipping freight and logistical expenses, increased product margins, and favorable product mix. SG&A expense of $102.3 million for the third quarter of 2022 was an increase of $2.3 million, or 2.3%, compared to the third quarter of the prior year. As a percentage of net sales, SG&A expense increased to 28.4%, compared to 24.9% in the third quarter of the prior year. This increase was primarily driven by the resumption of our normal marketing and travel related activities during the quarter and higher rent and depreciation, mostly related to our new stores open during the year. We will stay disciplined and continue to closely manage our non-fixed operating costs on a store by store basis to keep expenses in balance with our sales. Income from operations was $18.5 million in the third quarter of 2022, compared to $29.6 million in the prior year period, a decrease of $11.1 million. Net income for the third quarter was $12.9 million, or 33 cents per diluted share, as compared to net income of $21.9 million, or 49 cents per diluted share in the prior year period. Adjusted net income in the third quarter of 2022 was $13.1 million, or 34 cents per adjusted diluted share, compared to adjusted net income of $22.7 million, or 51 cents per adjusted diluted share in the third quarter of the prior year. Adjusted EBITDA for the third quarter of 2022 was $29.1 million, or 8.1% of net sales, compared to $39.3 million, or 9.8% of net sales in the prior year period. Turning to our balance sheet and liquidity. Third quarter 2022 ending inventory was $485.2 million compared to $437.4 million at the end of the second quarter of 2022. This quarter over quarter increase is primarily due to the recent opening of five new stores and build up for the holiday shopping season. Looking at our inventory on a per square foot basis compared to the third quarters of 2017, 18, and 19, We are within the range of those periods with approximately $95 of inventory per square foot. We will continue to closely manage our inventory levels to ensure we have the right mix of merchandise to better service the needs of our customers. Looking at cash flow for the first nine months of 2022, cash provided by operating activities was $14.5 million versus cash used in operating activities of $78.3 million for the first nine months of 2021. This increase in our cash inflows was due to the normalization of our inventory levels versus the buildup needed during the prior year nine month period. Our liquidity continues to be strong as we ended the third quarter of 2022 with $120.2 million outstanding on our line of credit. We have approximately $193 million available for borrowing under our credit facility. and will continue to manage our borrowings to ensure we stay within our goal of less than 1.5 times leverage. During the third quarter, we repurchased 1.2 million shares in the open market. This was a return of $10.4 million of capital to our shareholders. Year-to-date, we have repurchased a total of 6.5 million shares for a return of capital of $62.4 million. At the end of the quarter, we have $12.6 million remaining under the Authorized Share Repurchase Program and will continue to opportunistically execute in the open market. Turning now to our guidance. Starting with our net sales outlook, we estimate fourth quarter net sales to be in the range of $370 million to $385 million. This implies our full year 2022 sales will be in the range of $1.39 billion to $1.4 billion. Same store sales in the fourth quarter of 2022 are anticipated to be in the range of down 13% to down 9%, and earnings per share for the fourth quarter of 2022 is expected to be in the range of 25 cents to 35 cents per diluted share. This implies that our full year 2022 EPS will be in the range of 98 cents to $1.08 per diluted share. To give you some additional perspectives on the quarter and the full year, Given the ongoing global uncertainties, our forecast for Q4 includes continued inflationary pressure and difficult macroeconomic conditions, which is putting pressure on consumers. We will continue to control costs and carefully manage our variable operating expenses without compromising our industry-leading customer service levels with a disciplined approach to spending. We remain confident in our ability to achieve our target of high single-digit adjusted EVITDA margins for the full year. Looking now to 2023, as John mentioned in his remarks earlier, we see significant expansion opportunities in front of us and are accelerating our new store growth over the next three years. Our current view for 2023 is to open between 13 and 18 new stores during the year. This would be the highest number of new stores opened in any single year. This concludes our prepared remarks today. With that, I will now turn the call back over to the operator to facilitate any questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove that question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for any questions. And our first question comes from the line of Ryan Sigdahl with Craig Hallam. Please proceed with your question.

Hi, guys. This is Will on for Ryan. Thanks for taking our questions. First, I wanted to touch on Black Friday. Sounds like it was pretty good for you guys. How did that compare to your expectations? Were there any segments that stood out? And how do you compare it for brick and mortar and e-comps?

Hey, Will, it's John. Thanks for the question. As we referenced in my script, Black Friday was the single largest day in the history of the company when you think about visitors to our website store combined as well as gross sales from the two combined. I actually saw a nice lift across the board in the business. I will tell you that the consumer during this holiday season appears to be promotionally item-driven. up to this point. So while we've seen our competitors promote in a more normal cadence as compared to more of a 2018, 2019 timeframe, the basket of the consumer tends to be a little more focused on promotional items. So we're keeping close track on that, and we believe that's contributed by the fact that the consumer continues to see inflationary pressures on their disposable income.

Oh, that's great. Thanks for the color. Maybe a quick follow-up on that. How did sort of promotions and discounting look like during the quarter? And I think that's going to trend as we go into 23 here.

Yeah, again, as we think about this end of Q3 and the holiday season, we expected the market to return to a more normal cadence on promotion, referring back to pre-COVID. And that's what we experienced. Our primary competitors in the outdoor sporting goods industry returned to their normal promotional cadence. There was some key items to drive traffic that we saw this year we hadn't seen in the last couple of years. We were prepared in a similar manner with our planning. And we expect that to continue in, again, a more normal cadence through the end of Q4. We've provided some insights into inventory. We don't see a high pressure, as we sit here today, for us to promote, to drive inventory through the system. So we will maintain rigor in our promotional cadence to ensure that we acquire and retain our consumers as priority one while maintaining the margin profile that we believe is important for running this business in the long term.

Great. And then one last one, if I might. I wanted to ask on private label. Sounds like you guys are doing pretty well with that. How do you think about brand assortment and mix as we head into 23 here?

Will, is it specific to our private label brands? Was that your question? I want to make sure I get it clearly. Yeah. Again, as we think about evolving the strategy on our private label with a path to high single-digit penetration by the end of 2025, the apparel and footwear categories are the two areas that we're most focused on in serving our consumers with features and benefits at a value they can't find in some of the brands in the market today. It does not mean we will displace the key brands that our customers come to Sportsman's Warehouse looking for. but we will compliment those brands on the good, better, best strategy and a broader assortment. Speaking specifically into the hunting camouflage category, our Rustic Ridge brand, which is an entry-level value-based product, connects extremely well with the first-time consumer that is on more of a budget for their camouflage, whereas the Killick brand is on the best side of camouflage, higher price point, but also provides the technical fabrics and the key features and benefits that someone needs when they're spending multiple days on the mountains. So we feel like those two brands are a good indicator of what's possible in areas where we can continue to evolve and develop new product and gain market share, both in private label, but also against the overall market.

All right. Thanks, guys. Good luck. Thanks, Will. Thanks, Will.

And our next question comes from the line of Eric Wald with B. Reilly Securities. Please proceed with your question.

Thanks. Good afternoon, guys. Two questions. I guess two questions, but they have a couple parts each. On the inventory, you noted it's relatively in line with where you were in 17, 18, 19 on a per-square-foot basis. Kind of more generally, Any areas of the store where you feel you're a little light or a little heavy? And then how would you characterize your restocking patterns with the OEMs right now? Are you still more on the cautious side or are you generally restocking along with sales?

Yeah, Eric, this is Jeff. Thanks for the question. With inventory, you know, as we look at the total inventory – If you compare it to where we were year over year versus Q3 of last year as we walked into the holiday, I think the numbers are we're really only up 13% in total inventory dollars. We have roughly 6% more square feet than we did at this time last year, not taking into account the inflationary impacts on inventory. As I think about the totality of those numbers, our inventory is very healthy. Are there pockets here and there where we have issues that bubble up? Absolutely, every retailer does. But as we take a step back and look at the entire inventory, we're very pleased with what the team's done in managing that. Much like we spoke to earlier in the year, as we see pockets where there are softness we make strategic moves to pull back in those areas. An example of that would have been pellet grills early in the year. We called the softness in that sometime in Q1, Q2, and we right-sized the inventory and got out of the areas that were seeing softness in demand. And as we sit here today, we're very comfortable with that position of inventory. That type of mentality and rigor is spread across our entire industry. book of inventory. We are looking at everything. So as we think about throughput from the vendors and suppliers, we're going to continue to manage the areas where we're seeing softness. We're going to reduce the flow of inventory in those areas. But on the other side of that, in areas that we're continuing to see strength, consumables would be a highlight there. We can't run out of the product that the consumer is still using as they participate in outdoor activities.

Perfect. And then last question, kind of a little bit more on ammo.

As you've seen inventory in the various calibers improve, have you seen traffic and demand kind of go lockstep with, you know, the certain caliber? Have you gotten inventory back in the store? Are you becoming over inventory in any areas? We know obviously where you are, you know, under inventory, but are you becoming maybe a little concerned around any certain areas? And then... I know you have a lot of data on your consumer purchase behavior, but so as you see those that ammo attract the buyer or the consumer back into the store, are they coming in just for ammo? Are they coming in and kind of filling up the basket with other items? Maybe talk about their purchase behavior.

Eric, it's John. Thanks for the question. Regarding ammo, I'll just give you the highlights. Target ammo for pistol and NATO rounds is an exceptional feature. Shape when I think about supply and demand dynamics We continue to be in stock every day on those products and consumers are returning to more normal cadence of demand cycle Versus what we've seen the last year or two when there's been such a shortage Premium hunting ammunition for the most part returned to very good shape during mid q3 and as I sit here today and is in solid shape overall as we exit, actually, the big game hunting season across the country. Within rifle ammo, there are a couple of components on what I'll consider the ultra-premium long-range shooting calibers that we're still light on, some specific calibers there that I believe we have some opportunity. And then shot shell has improved greatly over the last eight weeks. Still has some pockets that are short, and I don't believe we will see SHOT Shell in stock across the board until spring of next year based on supplier feedback. I think about what the customer is buying. The basket's about the same. We haven't promoted materially on ammo. We have no intent to promote material on ammo. Our inventory is in good shape. And we can actually flow that product in a very balanced way, given that nearly all of the ammunition we buy is domestic and it's manufactured here. So that provides us with greater flexibility on the supply and demand dynamics on the ammunition side.

Perfect. Thank you.

And our next question comes from the line of Justin Kleber with Baird. Please proceed with your question.

Hey, good evening, guys. It's Justin Kleber. Just to follow up on the 4Q outlook, you mentioned, you know, the strong Black Friday, and, John, your comment on early positive indicators. So can you help me reconcile those comments with the comp guidance of down 9 to 13? You know, what category or categories are still feeling the most pressure?

Justin, this is Jeff. While we saw a very good trend on Black Friday, to the point that John made, what we're seeing out of the consumer is still very cautious behavior when it comes to their disposable income, where in a normal holiday period, we would see a focus on not just the promotional items, but also other items going into their basket. It is very apparent that this holiday season, the consumer is focused on the deals that are out there to be had, given the recessionary and inflationary pressures that are on their pocketbook. So as we think about the guidance and what's incorporated there, the the consumer behavior is going to be some of the largest pressure that you're seeing on those top-line numbers.

Got it. Thanks, Jeff. I mean, maybe a follow-up there. Is anything you can – any color, I guess, on how we should be thinking about gross margins then in the fourth quarter? You guys have obviously shown nice expansion over the first half this year and even more so in 3Q, but given your comments on consumer being price-sensitive and promotions – Do you think you can expand gross margins again in the fourth quarter, or should we not be assuming that?

Given the environment that we're operating in, I do think it's going to be a headwind for us in the gross margin area, given just what the consumer is out there buying and the margin profile that accompanies those promotional items that they are grabbing more into their basket rather than some of the other items in the store.

Okay, got it. Thanks for that. Last one, just nice to see the acceleration of the store growth for next year. Obviously, I know you're not providing 23 guidance, but can you give us a sense for how much SG&A you expect related to new store growth? I mean, at a minimum, I assume we would anticipate SG&A dollars to accelerate in 23 versus 22.

Justin, just to clarify, are you – Yeah, are you referencing the pre-opening dollars going into those new stores or in totality what those stores will add to overall SG&A?

Yeah, you guys are doing a very nice job managing SG&A dollars, right? Only up a few percentage points year on year despite adding 11 stores over the last 12 months. Now you're accelerating store growth, right? Rent comes with that, payroll. So just trying to understand in totality how much SG&A builds just from new stores. I know you're obviously managing labor and payroll within existing stores, but just trying to get a sense for as you ramp up store growth, how much SG&A is associated with that in 23 or just any way to think about that I think would be helpful.

Yeah, I think the best way to think about that from a pre-opening perspective, those stores that we open are going to incur roughly $350,000 to $400,000 of pre-opening. That's before the grand opening of the store. That will hit SG&A, but ultimately is added back to your adjusted EBITDA calculation. As we think about the rest of the expenses as the store gets operational, all of the stores that we have in the pipeline or that we look at for the pipeline and we open are held to the same requirements of the 10% EBITDA and 20% ROIC threshold upon maturity, which is 18 to 24 months. Granted, as we ramp up those stores, when you take into account grand opening activities, getting traffic flowing in, those are going to be heavier weighted up front. Those metrics, again, are going to be, and any store that we open are going to be held to those same metrics that all of our previous stores have been.

Okay. Thanks for all that color, Jeff. Appreciate it. Good luck on the holiday, guys.

Thanks, Justin. And our next question comes from the line of Mark Smith with Lake Street Capital. Please proceed with your question.

Hi, guys. Just wanted to jump back to Black Friday just a little bit. As we look at the next data, you know, this Friday being kind of a top 10 firearm sales day, do you guys feel like you got your fair share and you had the right mix and promotions at the firearm counter on Black Friday?

Hey, Marcus, John, and I'm going to ask one word. Absolutely. I was so proud of what the team did. pulled together for this year's Black Friday on the firearms demand. When I look at the number of units that we sold on Black Friday compared to the total numbers that were shared from NSSF and NICS, it's clear we continue to take significant market share in the firearms category in this country. So we absolutely executed in a way that I couldn't be any prouder of this Black Friday.

Perfect.

And then just as we look at new stores, can you talk about looking, rearview mirror first, kind of the performance of your new stores? And we'd love to hear any, you know, breakdown that you have on some of the spike camp versus kind of full-size stores. And then if this performance is what really gives you the confidence to kind of up and accelerate the growth here in 2023? Sure.

Yeah, Mark, this is Jeff. Thanks for the question. If you look at what we published in our investor deck back in September, the new stores that we opened, I think it showed 19, 20, and 21. We are very happy with the performance of those from both an EBITDA and an ROIC. Those stores far exceed our expectations that we put out publicly. So we're very happy with what we have done from the new store front. To your point, that gives us confidence in putting a number of 13 to 18 stores out there for next year, as well as putting a number of 190 to 210 stores out there for the end of fiscal year 2025. I think we have proven with a very successful track record that we can open very profitable stores. We know how to pick the markets, and we still see a lot of opportunity out there as we sit here today.

Hey, Mark, it's John. I'll add that we opened stores in brand new geographies this year, which stretched our regional assortment quite a bit. But the team did a fantastic job of preparing for those new markets and executing on the assortment. The southern Florida market of Seminole was new for us this year. The team did a fantastic job on that store. It's performing very, very nicely. We just opened Jacksonville, Florida. a few weeks ago. And the assortment adjustments we made for Seminole, we were able to take some of those and more into Jacksonville. That store is, again, really, really proud of the team. And then going all the way to San Diego in Southern California is our first endeavor with the Santee store this year. I think the team, again, hit it out of the park in that real estate choice, but also in the assortment to meet the needs. So again, a lot of preparation goes in each of those new markets boots on the ground a lot of data being analyzed to ensure that we open we've hit that assortment correctly for the regional differences and how people participate in the outdoor activities perfect and then last one for me any update just as we think about loyalty programs credit cards and in particular i'd love to hear you know

trends that you're seeing in some of these new geographies? Does it take time to kind of build up this loyalty program, or do you see people kind of adopting and opting in early on in new geographies?

Yeah, you know, it's interesting, Mark. We've always had really, really strong databases on our loyalty program with almost 50% of sales coming through that customer base, and that continues today at roughly 50%. What we're seeing is the response to our credit card has a greater return for the company and lifetime value. That program's a few years old, a couple years now, and it's making great trends, and that continues to be our focus, is trading those customers or existing loyalty customers into the credit card, and new customers coming into the store, starting with the credit card and then offering the loyalty program if the credit card doesn't meet the needs. So I'm really proud of what the team has done there. Our databases on loyalty, firearm consumers, and overall email databases continue to grow at a very, very nice trajectory, providing us the opportunity to expand our reach segment, our communication, our assortment, and really personalize the retention elements within the tools we have today to ensure that we're serving the consumer in the season in which they're in, but also in which the categories they've shown indicators of being interested in.

Maybe I'll sneak in one more.

As we look at maybe Oregon and what's happening there with some firearm legislation, are you seeing anything geographically that's driving sales for your stores, primarily at the firearm counter?

Yeah, certainly, Mark, as you're aware, in our industry, political rhetoric, events, regulatory changes can drive short-term demand. As we think about how we forecast the business, we do not include those elements in our forecast and guidance because they're just so hard to predict. So as we navigate the Oregon Measure 114, which I believe will have feedback from the court systems as early as tomorrow, today or tomorrow, we believe that the courts will side on what's right on a constitutional right to own firearms under the Second Amendment in the state of Oregon. If for some reason in Oregon or any other state there becomes new regulations, we feel like that can be a long-term advantage for us Our compliance and regulatory team, the technology we've invested in over the years, has provided us with the opportunity that when changes happen in local, state, or federal requirements, we can adjust quickly where our competition sometimes can't or doesn't decide to do so. So while we are certainly disappointed with Measure 114, we believe that through the court system, we have a good outcome that will happen. And if not, we are certainly prepared with technology and compliance to meet the legal requirements of any state, local, or federal law changes.

Great. Thank you, guys. Thanks, Mark.

And our next question is a follow-up from Eric Wald with B. Reilly Securities. Please proceed with your question.

Thanks for letting me back on. Just a couple follow-ups, but really it's one topic on the 13 to 18 store outlook for next year? I guess, what is the biggest delta between the 13 and the 18? If you only do, I don't want to say only, if you do 13 next year, do the five stores then just shift into 24? Or is it more than just a timing issue? Are you still in the go or no-go decision process on all those stores so that they may not open at all? Or is it merely how many you can actually get open in the next year. And then if we do assume just the low end of that in our model and the normal cadence you would have in a given year, assuming it is normal cadence, if you go anywhere above that 13, is it only in kind of Q4 or is there a chance you actually be heavier earlier in the year?

Yeah, great question, Eric. I'll take the first question, and that was the timing. So clearly we have a funnel in excess of 100 locations that we're looking at today. Our flexible store format, the regional growth we've seen, new states like Wisconsin and Florida provide us with greater confidence to hit our short-term 2025 goals of 190 to 210, but also long-term a clear path to 300-plus stores in the out years. So as I sit here and provide a range, It's basically timing-based. I've got dozens of properties right now that are in LOI review. I've got quite a few properties in negotiations. And whether we have 13, 14, 15, 16, 17, or 18 next year is the timing of those lease negotiations. In some cases, the lease negotiations will not come to fruition. In some cases, the lease negotiations will come to fruition in 2024 openings. just depending on the timing of lease, architecture, permit, and construction. So that's the reason you're getting a range from us at this point today. On your second part of the question, I'm sorry. Oh, timing. Oh, this is one of the most exciting things for me. In the first time in four years, we are ahead of our real estate funnel plans And we'll be able to open stores in a more balanced sequence across Q1, 2, and 3 versus such as in 2022 where we open most of our stores in the back half of the year. So it provides us with a much better opportunity to be well prepared for those stores, balance them throughout the year, do our grand openings on time, and serve our customers better. It does not mean we couldn't have stores in late Q3 or in early Q4 of 2023, but it will be the most balanced opening of stores, at least since I've been with the company.

Perfect. Very helpful. Thank you, guys.

There are no further questions at this time, and I would like to turn the floor back over to John for any closing comments.

Thank you for joining the conversation today. And thank you to all of our dedicated employees around the country for their commitment to making Sportsman's Warehouse the leading company in the outdoor industry. Together, we look forward to continuing to serve our customers. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.