Sportsman's Warehouse Holdings, Inc.

Greetings and welcome to the Sportsman's Warehouse fourth quarter and full year 2023 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Riley Timmer, Vice President of Investor Relations. Thank you. You may begin.

Thank you, Operator. Participating with me on the call today is Paul Stone, our Chief Executive Officer, 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 include 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 will also disclose non-GAAP financial measures during today's call. Definitions of such non-GAAP measures, as well as reconciliation for 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 8-K we furnished to the SEC, which is also available on the Investor Relations section of our website at sportsman.com. I will now turn the call over to Paul.

Thank you, Riley, and good afternoon, everyone. Let me start by reminding everyone the mission of Sportsman's Warehouse is to provide outstanding gear and exceptional service to inspire outdoor memories. This is the core of our company and what we will continuously lean into as we carefully navigate a tough microeconomic environment. As we reported earlier in the earnings release, the business remained under pressure during the fourth quarter with net sales coming in at the low end of our guided range. However, earnings per share exceeded the top end of our guidance range with both our inventory and debt levels finishing the year better than we expected. We will continue to prioritize the pay down of debt with free cash flow generation as we move through 2024. We view 2024 as a year to reset the organization and return the business to profitability, creating a strong foundation for anticipated profitable growth in 2025. During my first four months, I spent my time visiting stores, getting to know our associates, talking with our customers, and getting to know many of our vendors and their perspectives. I also reviewed the technology and talent needs for the organization. My early assessments confirmed why I chose to join Sportsman's Warehouse and also provided visibility into the opportunities that exist to become the leader in specialty outdoor retail. Our strategy centers on resetting and rebuilding the fundamentals of great retail. which for Sportsman's Warehouse are great gear and exceptional service. While some of our key initiatives are still taking shape, we took several early actions in the areas I mentioned just a moment ago. Given the importance of technology, culture, and operating great stores, we made some leadership changes in these areas, bringing in best-in-class talent for our key roles. We now have an experienced retail team, including veteran outdoor retail professionals who each have a track record of successful execution with organizations like Walmart and Sam's, Target, Academy Sports, and Cabela's. Importantly, I've worked with many of these executives at other high-performing organizations. We speak the same language, know what's expected, and we're already moving very quickly. Other areas where our strategic efforts will be highly focused in 2024 include creating stronger omnichannel capabilities, making improvements to our loyalty program, and precise execution of our digital and traditional marketing strategies. We also see opportunities to better support the customer through the use of technology. By creating and equipping our store associates with improved tools, we will be better prepared to service the customers. Additionally, we are refining our marketing mix model to better understand what resonates with our customer. This allows us to be more productive with our current marketing dollars, to capture more share of the online sales, and further increase our omnichannel customer base. This is another way for us to further streamline and gain greater efficiency within the current organization. Currently, we are reviewing the foundational techniques for marketing, as well as making sure we're building the right tools and capabilities to support our omnichannel efforts. Today, our focus will be on finding the most productive uses of our marketing resources as we continue to improve our capabilities, evolve our programs, invest strategically, and leverage our current omnichannel platform. I also see opportunities to refine and evolve our loyalty program. While over 50% of our sales come through our loyalty members, I believe there's an opportunity to improve the value proposition of the program, drive more engagement with our members through personalization, attract and retain more members, and increase the lifetime value of our existing customers. As I mentioned earlier, part of the reset of 2024 will include investments in needed tools and technology to support our base of stores. We recently partnered with Blue Yonder, a best-in-class supply chain management solution, to develop a comprehensive merchandising assortment and planning software system. With this tool, we will have improved capabilities with inventory management, store planogramming, seasonal and regional auto replenishment, as well as improved in-stock and productivity reporting. This will also help facilitate the expansion of our omnichannel capabilities, which support regional and seasonal customer expectations. The other area of technology investment involves workforce management software. This tool will allow us to efficiently staff our stores and be closer aligned with the peak hours of customer visits. This alignment, along with changes we have made in our store compensation and leadership structure, are important investments as we navigate towards our continuous goal of exceptional service. As we reported, during the fourth quarter, we further reduced our inventory levels and made significant progress to get out of products and brands that simply do not resonate with our core customer. While we made good progress during the fourth quarter, we will continue to closely manage our inventory levels and merch mix. This will ensure we have the right products in the right location at the right time, creating inventory efficiency, which allows us to better service our customers and improve our overall merchandise productivity. Significantly reducing inventory also allowed us to invest in newness and relevant seasonal products as we repaired and bought into our key spring outdoor seasons. We are currently seeing positive trends in camp and fish as we invested in newness and depth going into these early spring seasons. Another piece to our inventory management strategy includes rationalizing our SKUs and refining our overall product assortment. This will allow us to drive the following. Improved inventory productivity and turns, better depth of the key and never-out items, new local and regional product offerings, and improved overall in-stocks and customer shopping experience. Over the last few months, our merchant team has successfully worked through this initiative in a number of product areas. As we navigated through lowering Q4 inventory, we were very purposeful in how we prepared for our key spring seasons, particularly fishing. This is a category where we have a right to win, especially at the local and regional level. For the first time ever, our fishing set was in place by mid-February with depth and critical items. I talked about 2024 being a reset year. Here's what the spring reset meant to the fishing category. First, we rationalized the assortment, removing 40% of the SKUs and 30% of the vendors. Next, we reassorted the category across all regions and stores with local relevance and accuracy. Then, we invested in depth. into key products and our local product offerings. And finally, we reset the sales floor to align our in-store presentation with the new assortment, including better productivity of our end caps and expanded feature space. It's the execution of key initiatives such as this that gives me confidence we are moving the business in the right direction, to once again merchandise and operate great stores. Along with tight inventory management, we expect to maintain both rigor and discipline on our variable SG&A costs. Last year, we eliminated about $25 million of indirect costs out of the business and will continue to manage these efforts carefully. My objective is to first sweat the assets of the business, using 2024 as a reset year to get us back to operating profitably. Regaining our edge of being the best local and convenient choice is what separates Sportsman's Warehouse from the competition. This means having great gear and providing exceptional service in each of our 146 stores every day. I firmly believe we are implementing the right strategies and making the necessary improvements to solidify the foundation of this company to return us to profitability and increase shareholder value. With that, I'll now turn the call over to Jeff.