Sportsman's Warehouse Holdings, Inc.

Hello, everyone, and welcome to the Sportsman's Warehouse first quarter 2025 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. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 1-1 again. Please note this event is being recorded. 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 Q1 2025 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 8K we furnished to the SEC today, which is also available on the Investor Relations section of our website at sportsmans.com. I will now turn the call over to Paul.

Thank you, Riley, and good afternoon, everyone. Before we begin, I want to recognize our team of passionate outfitters across the country. Every day, they deliver on our promise of great gear and exceptional service. This remains the cornerstone of our strategy as we continue to execute our turnaround plan to transform Sportsman's Warehouse for sustained profitability and growth. On our last call, we outlined the next phase of our business transformation. focused on returning to same-source sales growth and improving operating margins. Rebuilding our foundation as a leading outdoor retailer hinges on disciplined execution across four key areas. One, inventory precision, ensuring we win the seasons by being narrow and deep in hunting and fishing to improve our in-stock levels into 20% of key products that drive 80% of our sales. Two, local relevance. Empowering our talented store outfitters to leverage their deep expertise and community connections to deliver the hyperlocal knowledge our customers appreciate. Three, personal protection. Establishing Sportsman's Warehouse is the authority in personal and situational safety. And four, brand awareness. Reinvigorating our brand and engaging customers to establish our position as the most convenient, trusted destination for outdoor gear and expertise. I'm proud of how our team executed against these key initiatives in Q1, delivering our first positive year-over-year sales comp in nearly four years. Despite ongoing consumer microeconomic pressures and a later start to the spring selling season, first quarter sales were up 2% compared to last year. Notably, again this quarter, our firearms unit sales significantly outpaced the adjusted NICS data, suggesting we outsold the industry and continued to capture market share. Although the adjusted NICs declined 5.4% in Q1, our firearm unit sales increased nearly 7% over last year. While firearm customers continue to trade down, AUR for Q1 decreased 8% compared with last year. We've engineered our assortment to capture demand for value-priced firearms and refined our accessory mix to drive basket growth and higher attachment rates. We also achieved positive sales comps in Q1 in most core categories, including firearms, clothing and footwear, ammunition, which was up 3%, and especially fishing, which was up 11%. Importantly, fishing was the first category we addressed through our new merchandising strategy. The two-year comp stock growth of 12.3% validates that when we get the right product in the right place at the right time and market in the right channels, the results follow. While camping sales were down, we believe this was largely due to the later spring and the timing of Easter. We are well positioned from an inventory standpoint with strong in stocks in our key departments. In fact, sales were up while inventory was down in many core categories as we continue to adapt and refine our assortment to meet the changing needs of the customer. We continue to build out bench strength in our merchandising group to further align our merch refinement strategy to the needs of the customer. Our e-commerce business also posted a positive comp, up 8% over last year, and outpacing the overall business. This growth is being fueled by our new digital-first marketing strategy and an improved omnichannel customer experience, which is delivering higher engagement and transaction growth. The improvement across our business was primarily driven by improved in-stocks on the key items, including depth in our top sellers, On-time readiness with in-store merchandising and e-commerce channels for the early spring seasons, particularly with fishing and a strategic shift to everyday low price on core ammo calibers and other consumables that drive in-store and online traffic, where we saw a 12% increase in ammo unit sales during the quarter. I'm especially encouraged by our seasonal readiness and how far we've come in localizing our merchandise assortments and geo-targeting our marketing messages. For example, in markets like Alaska, where we were historically late to key seasons, we are now better aligned with local expectations, including depth and key items, and it's showing in our results. We are also seeing positive customer feedback, which we believe is largely driven by our improved in-stock performance and the service provided by our store outfitters. Early in Q1, we made proactive decision with select vendors to pull forward spring and summer inventory in categories impacted by tariffs, particularly in fishing and camping. While this temporarily elevated our inventory levels, it ensures we are well stocked in our key goods heading into these peak selling seasons. We'll continue to apply this approach in Q2 to ensure we're prepared for the critical hunting and holiday seasons. Importantly, we continue to anticipate ending the year with lower total inventory than last year and generating positive free cash flow. Jeff will speak more to this in his remarks. On the personal protection front, we are making significant progress to stand as the authority. We recently launched the safety outpost on our website, a curated experience focused on home defense and situational awareness. It signals our commitment to a major growth category that others have largely ignored, but our customers increasingly expect us to lead. To underscore our commitment, we recently launched a month-long campaign with Springfield, one of our top firearm brands in the personal protection space. In early May, we soft-launched the less lethal side of our personal protection strategy with our partner, Verna. Eleven stores now feature full shop-and-shops, and 40 additional locations have smaller, tailored assortments. All locations offer live fire demonstration capabilities, That, from our test pilot, resulted in significant conversion versus without trial. The early results are encouraging, and we see significant upside as we build out this program. This quarter, we're also launching a new omnichannel brand campaign designed to reignite brand relevance and reestablish Sportsman's Warehouse as the preferred destination for hunting, fishing, and sports shooting adventures, where great gear and great service meet trusted local expertise. Locals are a competitive advantage brought to life by passionate outfitters and the communities they serve. Supported by our trade area and customer insights, this campaign is designed to integrate all marketing channels and reflect the strategic foundation of our turnaround and brand evolution. It's built to reengage former customers, build relationships with new ones, and earn loyalty in a fragmented and competitive market. Despite the ongoing consumer microeconomic challenges, I remain confident in our strategic plan and the team's ability to execute. Our unique competitive advantage lies in our ability to out-local the big boxes and out-assort the small specialty retailers, delivering a compelling mix of value, quality, selection, and locally-centric personalized service. We are staying disciplined, managing what we can control, variable cost, inventory levels, and merchandise margins. As we execute on our strategic initiatives, we are confident that this will translate into continued sales growth, improved operating margin, and further debt reduction in 2025. With that, I'll turn the call over to Jeff.