Big Lots, Inc.

Hello everyone and welcome to Sportsman's Warehouse's third quarter 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 be advised that today's conference is being recorded. I will pass the call over to the Head of Investor Relations, Riley Timmer. Please go ahead.

Thank you, Operator. Participating on our Q3 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 with 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. First, I want to acknowledge the work being done by our teams all across Sportsman's Warehouse. I'm proud of the collective efforts of our teams, which has enabled us to achieve meaningful progress towards our strategic goals. Their commitment to great gear and great service as we execute our strategy was instrumental in delivering improved top-line performance for the third quarter. When we started this strategic journey early in 2024, we laid out a plan that included the refinement of our merchandising and inventory. This process started with the rationalization and cleanup of SKUs. Last quarter, we strategically expanded our inventory to ensure our stores were stocked with the products our customers wanted most for our two largest seasons, hunting and holiday. We implemented new and targeted promotions and ad campaigns aligned with normal seasonal demand to drive customer traffic and increase transactions. We continue to see a customer that is shopping for value, and we will further refine our marketing efforts and product sale campaigns to align with these consumer behaviors. While total sales were down 5% in the third quarter, we were pleased that our fishing and camping department, along with our gift bar category, which includes optics, electronics, and cutlery, all comp positive for the quarter. with fishing up 13% over last year. We also outpaced the adjusted NICs in Q3 as we continue to lean into firearms and solidify our position as a leader in this category. It's important to note that we were lapping some unique events from last year that impacted our year-over-year comparisons. Jeff will address in greater detail in his prepared remarks. In the three departments where we saw growth, we worked strategically over the last year to meet the needs of our customers and reduce non-performing inventory. This has been part of our ongoing merchandising and inventory productivity strategy to provide our customers with the core goods they are looking for at the right time of year. Strong performance in these three categories underscores the importance of being in stock the entire season, a muscle that we continue to develop as we transform Sportsman's Warehouse. As we deepen the partnership with our key vendors, we are using data and analytics to assist us in being ready for the outdoor season. including key micro-seasons that are geographically unique. Given the current consumer environment and the emphasis on value and promotion-driven shopping, we were more aggressive with our sales driving initiatives, which pressured gross margins this quarter. We also saw pressure from a shift in product mix to more firearms. Additionally, we made a commitment to end each season with clean merchandise, ensuring that our stores remain fresh, highlighting newness, and staying relevant with our customers. While this approach requires a price markdown cadence, it allows us to significantly minimize excess seasonal inventory and reinvest those dollars into our core products. Lastly, we continue to clean up small pockets of localized inventory, which is also impacting gross margins in the fourth quarter. By doing this, we create a more steady and predictable pattern of markdowns as we move through the different seasons. While we expect pressure on gross margins to persist in Q4, we look to grow top line and improve our margins next year. One of our strategic objectives is the continued investment, build-out, and implementation of IT systems and tools. Once in place, these tools will assist in our improvement of overall in-stock, gross margin, and inventory productivity. These investments are a key part of resetting and rebuilding our business fundamentals to enhance our operational effectiveness. As part of our ongoing store reset strategy of great gear, great service, we continue to enhance product displays and provide additional training to our outfitters. The focus on elevated customer experience not only improves satisfaction, but also provides an opportunity to improve sales through better attachment. We continue to see AOV from attachment at an all-time high from the in-store work being done around great service. Econ-driven sales come positive in the quarter as we continue to refine and improve our overall marketing and media mix model to drive incremental sales through the channel. As part of our omnichannel strategy, we continue to test, learn, and understand through data-driven consumer insights the impact of different marketing activities on sales, customer acquisition, and brand awareness. Looking ahead. As we move through the holiday season, we remain optimistic about our growth potential and the strategies in place to achieve our short- and long-term objectives. We will continue to emphasize newness and value as we look to win the balance of the holiday season. To improve our holiday relevancy and capture incremental traffic during the season, we introduced a new omni-channel marketing campaign this year. This campaign highlights great gear that is perfect for gifting or for treating yourself and marks a fresh approach to engaging with our customers during the holidays. Our in-store experience has also been upgraded to reflect the fully integrated campaign, creating a cohesive and exciting shopping experience. We are encouraged by our early holiday sales results, including Black Friday and Cyber Week, where we experienced our highest ever e-com transaction count. This gives us confidence that the new marketing strategies we implemented are showing promise. However, like other retailers, we continue to see a shift in how customers shop. More than ever, our customers are shopping value, and they're willing to wait for the right promotion to make a purchase. As we continue to navigate the balance of the holiday season and complex consumer environment, we'll continue to prioritize traffic driving marketing and product pricing initiatives, exceptional customer service, and prudent inventory management. As I conclude, I want to emphasize the importance of disciplined expense management and reducing total inventory levels to generate positive free cash flow for the year. We will prioritize the pay down of our debt as the primary use of excess cash flow. Maintaining a strong balance sheet is the top priority as we manage the business for improved performance. Thank you. And with that, I'll turn the call over to Jeff to review our financial results in greater detail.