Sportsman's Warehouse Holdings, Inc.

Hello, everyone, and welcome to Sportsman's Warehouse fourth quarter and full year 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To participate, you will need to press star 1-1 on your telephone, and you will hear a message advising your hand is raised. To withdraw your question, simply press star 1-1 again. Please be advised that today's conference is being recorded. You can also go to the company's investor relations page where you can find the presentation and follow along. Now it's my pleasure to turn the call over to the Vice President of Investor Relations, Riley Timmer. The floor is yours.

Thank you, Operator. Participating on our Q4 and fiscal year-end 2024 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 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 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 8-K we furnished to the SEC today, 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. First, I want to thank the thousands of outfitters across Sportsman's Warehouse who work every day to provide our customers with great gear and great service. Those two guiding principles remain the foundation of our strategy as we continue to execute and deliver improved top-line performance. As we've been sharing each quarter through 2024, phase one of our transformation strategy this past year was centered on resetting and rebuilding the critical fundamentals of great omnichannel retail. That included a reset of over 100 stores to improve sightlines, enhance feature space, showcase end caps with relevant merchandise, and convert the drive aisles into sellable space. all providing a much improved shopping experience for the customer. Additionally, we hired a seasoned retail veteran with expertise in turnarounds to lead our marketing and e-commerce teams. Under her leadership, we've made a significant shift in marketing platforms to better align with modern shopping behaviors and has already contributed to improved traffic both online and in our stores. Throughout 2024, we carefully managed our inventory and continued to refine our merchandise to meet local and seasonal demands. As a result, we ended the year with both lower and much cleaner inventory versus the prior year, and we generated positive cash flow. As I look ahead, I believe there's an opportunity to gain greater inventory efficiency as we narrow our focus on what the customer values most. Jeff Dunn, as our new Chief Merchandising Officer, will lead that charge, bringing decades of experience His leadership is making an immediate impact. I'm confident in his ability to execute our merchandising strategy. Throughout my remarks, any comparisons I make to last year will be a comparison to the same 13 weeks and will remove the extra week from fiscal 2023. Now I will highlight the financial progress achieved this year, which again, was phase one of our company transformation and turnaround strategy. Q4 comp sales down 0.5 versus down 12.8 in Q4 last year. Q4 adjusted EBITDA of 15 million versus 5 million in Q4 of last year. Reduced our net debt by 27 million. We decreased inventory 13 million versus last year, and ended the year with liquidity of 131 million, an increase of 40 million compared to the end of last year. As we move through 2024, we steadily improve with sales trends each quarter, giving us confidence that the turnaround strategy is gaining traction and has us on a path for a return to comp store sales growth in 2025. In firearms, I'm pleased that once again this quarter we outpaced the adjusted NICS data, suggesting we outsold the industry. In Q4, the adjusted NICS was down 4.5. However, our firearm unit sales increased mid-single digits. That trend carried into February, where we once again outpaced the adjusted NICS, this time by a double-digit margin. What we are seeing, however, is lower sales dollars from lower average unit price, as the consumer is trading down to more affordable firearms. That said, we will strategically continue to lean into our core firearms, making the necessary adjustments to our assortments and inventory, meeting the customer where they see value, which is critical given the continued pressure on the consumer. In the quarter, our camping and fishing departments both saw growth with fishing up double digits. We were well prepared for holiday. This, coupled with our ongoing merchandise and inventory productivity strategy, provided our customers with the core goods and promotions they were looking for as they shopped for the holiday. With inventory now in a much better position, we can make the necessary strategic buys that support the seasons and have depth in what the customer needs when they shop for their hunting and fishing solutions. Building on 2024's momentum, e-comm driven sales once again comp positive. of double digits in the quarter, more effective marketing, and an improved user experience for higher traffic and transaction trends that have carried into 2025. We remain focused on strengthening our omnichannel strategy to enhance the seamless customer experience across our digital channels and our stores. Looking ahead now to the next phase of our business transformation plan. Our goal in 2025 is to return the company to same-store sales growth, improve our growth and overall operating margins, and pay down our debt. We will get there by simplifying our operations to focus on our core business, hunting and fishing solutions. Going back to our founding in 1986, these two areas are the DNA of Sportsman's Warehouse and continue to be what most of our customers come to us for. Our 2024 consumer research showed that hunting and shooting remain stable categories with consistent demand based on participation rates. And fishing continues to grow steadily, boasting a 10-year CAGR of about 5%. These are robust businesses with plenty of room for us to grow, and there's a unique role we can play in the market. We have the scale to offer competitive pricing and the community connections to be the local hub for hunting and fishing. We can out-assort the local independents and out-local the big box competitors. We have defined four strategic initiatives for 2025 to leverage and enhance this competitive advantage. Number one, be narrow and deep in hunting and fishing to improve our in-stock levels in the 20% of key products that draft 80% of the business. We do this by improving our merchandising efforts to win the seasons at a local level within hunt and fish. Over the past several years, we've tried to be everything to everyone rather than focusing on the core hunting and fishing items that drive the majority of our business. This spread our inventory dollars too thin, resulting in out of stocks in the items that matter, continually disappointing our customers, Going forward, we've narrowed our assortment focus to be deep in the items that matter most to our customers and our performance on the same or less inventory dollars. We have already missed sales and disappointed the customer by being late to key hunting and fishing seasons, including critical micro-seasons. We've made the necessary adjustments and technology investments to assort and merchandise to the store geography and be seasonally ready by both occasion and species. We are already seeing the benefits of fishing where we are copying double digits by being ready and regionally right for the start of spring fish. Two, lean into local. We do this by leveraging our talented store outfitters who have the local connections in the community and the local knowledge our customers seek. We will also leverage our outfitters as local influencers, sharing their stories and content to connect with local customers. On the merch side of local, we will provide an improved offering of local brands and products hyper-focused on the needs of that market. Each store now has a merchandising voice to help ensure local product needs are met. For example, our Alaska market is unique to all other regions with its local needs. Historically, we have not provided the local autonomy to successfully merchandise those stores. This year, we are already set for spring with local brands and products that the customer expects when shopping our stores. Number three, become the authority in personal protection. Personal protection. A 365-day-a-year occasion has sizable growth potential. Today, personal protection is already near 25% of our total sales with a narrow focus on firearms and ammunition. If you look at the statistics, 72% of U.S. firearm owners cite protection as the primary reason for ownership. This part of our business also appeals to a broader demographic than hunting and fishing, providing opportunity to attract a new type of customer. We are building key product depth with important personal protection partners such as SIG, Springfield, and Glock, names and brands that resonate with our customer. Additionally, range shooting, which is a part of our personal protection business, brings customers in regularly for firearms and ammunition. We have deepened our relationships with a few select vendors to ensure we are always in stock in key items for range shooting. Finally, we signed an exclusive store-in-store partnership agreement with Burna Less Lethal, We believe this is an incremental purchase and complement for the current firearm owner and a less intimidating option for those who are not comfortable owning or carrying a gun. With our already established stores and website, we believe we can drive additional sales by leveraging our marketing platforms and burn a strong base of influencers. Four, strengthen our brand awareness. The core of our business strategy is positioning Sportsman's Warehouse as the go-to destination for local hunting and fishing solutions. Currently, our brand awareness is very low in our trade areas. To address this, we are executing a focus plan to expand brand awareness, drive traffic, and re-engage our core customers. We have significant upside potential in our trade areas, and it starts with ensuring customers know we are there and what we stand for. This starts with redefining our brand equity and launching a new omni-channel brand campaign to ensure we stand out in the marketplace. We are also building a robust content marketing capability and rolling out an integrated grassroots program that aligns local sales planning with community activations. Finally, we are implementing an omnichannel selling approach centered on big bet promotions that capture customer demand. Through this strategy, we will strengthen our brand presence, increase transactions, and reclaim share in our core markets. Setting underneath these four strategic initiatives is the continued strengthening of our infrastructure. For example, we're in the early phases of operating Blue Yonder. This will assist in our improved management of inventory as we define the tools and processes to formalize our approach to seasonally and locally relevant merchandise. I am confident in both our plan for 2025 and the team's ability to execute with speed. We hold a unique position in the outdoor market and believe through these major initiatives We will return sportsmen to sales growth, improve our gross margin, and further pay down our debt. With that, I'll now turn the call over to Jeff.