Sportsman's Warehouse Holdings, Inc.

Greetings. Welcome to SportsBiz Warehouse second quarter 2023 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 Riley Timmer, Vice President, Investor Relations. Thank you. You may begin.

Thank you, Operator. Participating with me on the call today is Joe Schneider, our interim CEO and chair of the board, and Jeff White, our chief financial officer. I will now remind everyone of the company's Safe Harbor language. The statements we make today contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which includes statements regarding expectations about our future results of operations, demand for our products, and growth of our industry. Actual results may differ materially from those suggested in such statements due to a number of risks and uncertainties, including those described in the company's most recent form 10-K and the company's other filings made with the SEC. We 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 sportsman.com. I'll now turn the call over to Joe.

Thank you, Riley. And good afternoon, everyone. I'll begin my prepared remarks by first providing an update on our CEO search. Next, I'll talk through the key areas where the leadership team and I have been focused. Then review our second quarter results, followed by the actions we are taking. The search for Sportsman's Warehouse next CEO is the board's number one priority. This search is progressing well, and we are very pleased with the quality and experience we are seeing in candidates. The search committee continues to filter candidates, and the board is expecting to fill the position soon. We'll keep you posted. Frankly, the second quarter was a disappointment from a net sales, gross margin, and profitability perspective. Sales in the quarter were down nearly 12% versus last year, with comp sales down 16%, both lower than we expected. Gross margins were 32.6, which is 90 basis points lower than the second quarter last year. In addition, adjusted EBITDA was 4.2%, which is down from 8.7%, versus last year. In the quarter, we saw a deterioration in revenue as we did not see store traffic improve from the first quarter like we had anticipated. This resulted in year-over-year declines in each of our departments. While we did experience a late start to our spring selling season and later in the quarter unseasonable warm weather, we believe that the difficult macroeconomic environment is leaving fewer dollars available for discretionary spending. We did, however, see a bright spot in our omnichannel business when e-commerce continued to outpace the performance of our stores. Since I stepped in as interim CEO, I've been working with our strong management team looking at all aspects of our business. Specifically, we've been focusing on the following areas, supply chain and inventory, real estate, omni-channel and e-commerce, and operating expense, CapEx. We quickly reviewed these four key areas, and a result of the performance took immediate action to address the following. steps to reduce our total inventory, and have identified the areas of inventory that need to be accelerated for short-term promotions and markdowns, adjusted the company's expense structure to right size to the current sales trends, and significantly reduced investments in future new stores, openings, and other capital spend. These aggressive actions we are taking to reduce inventory combined with increasing store traffic through short-term focus promotions and markdowns will further reduce gross margins during the back half of this year. In addition, we will continue to streamline our expense structure and focus our debt pay down so we are well poised to start fiscal 2024 and a strong position to return Sportsman's Warehouse to profitable growth. Over the last several months, we have added additional talent in both our merchandising group and our distribution center. Brian Westfall, our chief merchant, brings nearly 30 years of specialty outdoor retail experience to the team. Having worked in senior roles for both Cabela's and Academy Sports. Brian is driving our inventory and merchandising realignment efforts, and I'm confident in his ability to execute at a very high level. While I'm not happy with our Q2 performance, we are taking swift and aggressive action to get the business back on track to return to profitability. I'm very confident in the team the adjustments we have made, and our ability to execute with a sense of urgency. We are confident that we will successfully navigate through challenging business environment. With that, I'll turn the call over to Jeff.