Prepared remarks
Thank you for standing by, and welcome to Sportsman's Warehouse First Quarter 26 Earnings Conference Call. Currently, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. To remove yourself from the queue, you may press *11 again. I would now like to hand the call over to Riley Timmer, Vice President of strategic programs and IR. Please go ahead.
Thank you, operator. Participating on our Q1 2026 call today is Paul E. Stone, our Chief Executive Officer, and Jennifer Fall Jung, our Chief Financial Officer. I will now take a moment and 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 2000, 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 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 dedicated outfitters across the country. Every day they deliver on our promise of great gear and great service, strengthening our connection with customers and supporting the progress to transform Sportsman's Warehouse. I am pleased the same store sales from the first quarter were up just over 2% compared to last year despite ongoing consumer macroeconomic pressure and higher fuel prices. This increase is on top of the 2% growth we achieved in Q1 of last year. We continue to refine our assortment to meet the current needs of the customer, with regionally specific product and brands that strategically align to our core pursuits. First quarter sales in our hunting and shooting sports department increased over 7% versus last year. During Q1, we executed a successful spring range days event showcasing pursuit-led solutions for the shooting sports customer through curated products and accessories. While event-driven demand further supported sales of firearms and ammunition during the quarter, we will continue to strategically build on our authority as a leader in both shooting sports and personal protection. Sales in our fishing department increased about 6% in Q1 and is up approximately 17% on a two-year comp stack, although a softer-than-expected ice fishing season pressured the category in Q1. We are confident in our assortment and position in the market to continue to capture share during the late spring and summer seasons. As we have discussed on prior calls, last year we strategically reduced inventory and the assortment in our camping and softline departments. This decision was intentional to eliminate slow-moving and low gross margin return-on-investment products from our assortment that did not align with our core pursuits, causing a short-term softening in sales. However, this allowed us to free up working capital dollars to buy into products and brands in these two departments that now align to our core pursuits of hunting, fishing, shooting, and personal protection. Newness for the summer season is now landing in our stores with a focus on quality and value with named brands that customers recognize. We will continue to build out these two complementary categories to provide a full solution for our passionate outdoor customers. Our e-commerce business outperformed again, with e-com-driven sales over 6% in the quarter. This underscores the strength of our omnichannel model and the growth potential in our core pursuits. Because firearms and, in certain states, ammunition require in-store pickup, our e-com business naturally drives traffic into our stores. We continue to strategically leverage this advantage to support growth across both digital and store sales. We once again saw improvements in both units per transaction and average order value driven by our merchandising strategy, better in-stocks, and our strategic shift to solution selling. Close management of inventory remains a key priority in our transformation strategy. I am pleased with how the team is timing our flow of merchandise to ensure we are regionally and seasonally relevant to meet shopper demand. This will continue to be a focus as we expect to improve turns and inventory efficiency in 2026. On our call last quarter, we outlined the next phase of our business transformation, centering on strengthening our leadership position in our core pursuits of hunting, fishing, and shooting, and personal protection. These are the core pursuits that make up the DNA of Sportsman's Warehouse. During the first quarter, we made meaningful improvements to our website to enhance the online fishing experience. Early results have been encouraging, contributing to strong e-commerce sales growth in the quarter. We will continue to integrate content with commerce to help anglers more easily build their fishing solution. With participation rates continuing to grow each year, we believe this category represents significant growth upside for the business. Additionally, during the first quarter, we entered into a partnership with one of the top fishing and hunting lifestyle brands, Built and Strong. Together, we are working with leading fishing influencers to create shareable content that enhances our brand exposure, showcases trending new products, and drives traffic to Sportsman's Warehouse. While we are in the early stages of this partnership, we are encouraged by the early results. Turning now to our firearms solution bundling strategy, we made solid progress in Q1 on this initiative with the full solution offering now available online for top-selling products. Many of our customers are first-time firearm owners, so offering carefully selected pairings like gun safes, hearing and eye protection, and our firearm service plan helps first-time buyers feel confident in their initial purchase decisions. That experience then carries into our stores where customers can build on those pairings with support from our experienced outfitters, tailored to local needs and pursuits. This experience supports responsible ownership while increasing the attachment rate and basket size. By combining curated e-commerce pairings with in-store experience, we believe we can expand gross margins in the hunting and shooting sports category while reinforcing our leadership in these key pursuits. Reinventing our loyalty is a key step in Sportsman's Warehouse's effort to build a more durable, higher-value customer model, and our partnership with Epsilon, a leading loyalty and personalization consultancy, marks an important move forward in that transformation. The initiative is designed to improve retention, increase customer lifetime value, and drive more efficient marketing while supporting stronger repeat purchase behavior and a more disciplined promotional strategy. Looking ahead, the U.S. consumer remains under pressure with high fuel costs adding additional weight to discretionary spending. We feel optimistic about our position in the market, our curated assortment of iconic American brands, and our summer readiness where we will celebrate and showcase red, white, and blue for America's 250th anniversary. Our focus remains on driving profitable growth, disciplined management of inventory, generating positive free cash flow to pay down debt, and executing against our strategic priorities. With that, I will turn the call over to Jennifer.
Thank you, Paul, and good afternoon, everyone. Net sales for the first quarter were $256.1 million, a 2.8% increase from $249.1 million in the same period last year. Our same store sales in Q1 increased 2.1% versus last year. This represents a solid start to the year and reflects continued progress against our strategic and operational priorities. Our performance was driven by 6.3% same store sales growth in our hunting and shooting sports department, led by firearms, ammunition, and less-lethal personal protection. Fishing also continues to perform, growing 6% in Q1. This is a key category where we see significant growth upside for the business. Our other categories declined in Q1, partially offsetting overall growth. Gross margin for the quarter was 29.6% compared to 30.4% in Q1 of last year. The decline was primarily driven by category mix with a higher penetration of firearms and ammunition and lower sales in our higher-margin categories. SG&A expenses were $93.9 million or 36.7% of net sales, versus $95.3 million or 38.2% in Q1 of last year. The decrease in SG&A expense was driven by disciplined cost management, overall lower payroll expense, and decreased depreciation. Net loss for the first quarter was $21.8 million or ($0.56) per diluted share, compared with a net loss of $21.3 million or ($0.56) per diluted share in the first quarter of the prior year. Adjusted net loss in the first quarter was $15.1 million ($0.39) per diluted share compared with adjusted net loss of $15.6 million ($0.41) per diluted share in the first quarter of last year. Adjusted EBITDA for the first quarter was ($8.1 million) compared with adjusted EBITDA of ($9.0 million) in the first quarter of 2025, an improvement of $0.9 million. Turning now to the balance sheet, total inventory at the end of Q1 was $387.1 million, down $25.1 million or 6.1% versus Q1 of last year. The decrease in year-over-year inventory is part of our ongoing inventory efficiency strategy including the refinement of receipt timing to match seasonal demand. We expect average inventory to be lower throughout the year as we improve seasonal inventory timing and eliminate slow-moving inventory, resulting in better overall turns. We continue to expect to end the year with less total inventory than 2025. In regard to liquidity, we ended the first quarter with a net debt balance of $148.4 million and total liquidity of $116.7 million. Our liquidity position remains strong, and we continue to actively manage working capital to ensure flexibility as we navigate through the year. Tight management of variable expenses and inventory efficiency remain a key focus. We remain committed to generating positive free cash flow and using excess cash to reduce debt and strengthen the balance sheet, with debt reduction as our top capital allocation priority. Finally, let me speak to our full-year guidance. Despite the continued pressure on the U.S. consumer, which is weighing on our camping and softline departments and elevated fuel prices, we are reiterating our guidance for the full year. We continue to expect fiscal 2026 net sales to range between (1%) and 2% compared to last year. Adjusted EBITDA is expected to be between $30 million and $36 million, driven by better gross margin performance, ongoing expense management, and improved inventory discipline. Capital expenditures are expected to be between $20 million and $25 million, primarily relating to technology investments to improve store service and merchandising productivity, as well as normal store maintenance. To reiterate, our priorities for 2026 are driving profitable comp store sales growth through the execution of our strategic initiatives, managing our inventory efficiently, and using excess free cash flow to pay down our debt and strengthen our balance sheet. That concludes our prepared remarks for today. I will now turn the call back to the operator to facilitate questions.
Questions and answers
Thank you. As a reminder, to ask a question, you will need to press *11 on your telephone. To remove yourself from the queue, you may press *11 again. Our first question comes from the line of Anna Glaessgen of B. Riley Securities. Your line is open, Anna.
Hi, good afternoon. Thanks for taking my questions. I would love to dig a little deeper into the trends you are seeing. Obviously, you called out there is some event-driven demand that is helping the category. But with the data you have in front of you, could you maybe share to what extent is underlying strengthening of the category, maybe you guys gaining share versus maybe the event-driven benefit? Thanks.
Yeah, Anna, this is Jennifer. So what we saw in Q1, as we talked about on our previous call about February, we did see strength across the quarter in this category. February in and of itself, we actually walked away from one of our events to really focus on strategic profitable growth, so February was not as strong as March and April combined. For March and April, we do look at them combined simply because of the Easter shift, and they did outperform prior year in April and March combined. As we are looking towards May, what we are seeing is a little bit more of a stabilization. As we have talked about before, sometimes you see the event-driven or externally driven demand and then a little stabilization post that, and we are experiencing that right now. But we feel really good about where the category is, how it performed in Q1, and what it will do in Q2. We still have a very healthy business. Hunt and shoot were really driving our Q1 business. We have a big month of June ahead of us — one of our largest months of the quarter — so with Father's Day playing into that, that is who our customer is, and that is where we have a lot of advertising and promotional events to really make sure we deliver in June as well.
Great. Thanks. I will hop back in the queue.
Thank you. Our next question comes from the line of Mark Smith of Lake Street. Please go ahead, Mark.
Hi, guys. I wanted to dig into gross profit margin a little bit more here. It was down 80 basis points. Can you just talk about maybe how much of that was driven by mix and then any other pressures that you are seeing?
Yeah. The majority of it was driven by mix. There is a little bit of pressure in some of the other categories. As we look across the board, we are starting to take our marks a lot sooner than we have historically. So across the other categories we saw a little bit of pressure, but really it was mix having so much penetration in hunt and shoot.
Okay. And then I also wanted to ask about e-commerce. Trends there look really solid. Just curious if you can give us any more insight about how that is continuing to trend, how you feel about the progression, and maybe where you think it can go over time.
Yeah. So we have been really putting our elbow against our e-commerce business. We feel it is really well positioned. The team did a lot of work from an experiential perspective on the fishing business, and we are seeing great results from that. We are also focused on our search engine. We think there is work to do there, but we have some great plans in place to continue to drive that. I will let Paul speak a little bit more to it, but we do have a lot of confidence in our e-com business, and we do think that some of the changes we have put into place are helping drive that business.
Yeah, Mark, I think overall we know that we need to invest in it in a couple different areas. One is fishing, and we know we have a lot of upside there from a penetration perspective and from easing the shopping experience for the consumer. We have made some significant changes over the last quarter and then even really dug into the fly component, which is a big part of our business given our locations where we have the majority of our stores. The team over the last three weeks really went back and refined what that shopping experience can look like for the consumer. So we continue to lean into it. We have underinvested in the past in our e-comm business. We are looking at it from a fishing perspective and then from a solution standpoint on how we attach. As we get into the hunt season this year, we expect to have a much better product on our e-commerce platform to allow us to have solution-based selling for the first time and to really take pressure off of our outfitters in the stores. Those consumers flow to the stores and will allow for solution-based selling online versus the more transactional selling that we have done in the past. We will continue to lean into it. We think the beauty of our business is that 70% to 75% of that consumer flows to the store to create traffic and it starts online. The work has been done in the stores and puts them in a better position and allows our outfitters to be able to serve the customers better. We need to do a better job on the initial experience, and I think what we have seen already from overall fishing and then in particular fly with the adjustments we have made — and then on schedule by the time we get into season to have a solution-based offering for our firearms and our hunt business as well.
Perfect. And the last category I wanted to ask about was just camping. Curious if you can kind of rank or talk about the moving parts there — from weather and pressure on the consumer to your planned drawdown on inventory and competition — what is happening there and any focus or work you think you could do to drive camping?
Inventory is in a good position. I think I mentioned it last quarter — the way the team has bought, I think we are positioned well. It has been soft for weather; it has been cold to start the summer as well as wet in comparison to last year and historical data, so it has been a little soft to start. As we went and moved out of some of our low-margin subcategories, in particular in camping, we were able to reinvest those dollars back into our pursuits around hunting, fishing, and personal protection shooting. We have invested those dollars into the categories that resonate with customers. So as you are getting out of some of the subcategories that did not work, you are comping against that. But we feel really good about what the inventory position looks like for summer and with little to no risk as we get out of that product like we have had in the last two to three years. We just continue to work to get out of these categories. I feel really good with what the team's done to position ourselves well for the future.
Thank you. Our next question comes from the line of Matt Koranda of ROTH Capital Partners. Your line is open, Matt.
Good afternoon. It is Joseph on for Matt. I just want to see if you guys could talk about SG&A here. It's nice to see the continued leverage on this line. I want to see how the team's thinking about further savings on this line item. It sounds like payroll efficiency was a driver. Just wanted to know if there are any other labor efficiencies we should be thinking about.
Hey, thanks for the question. Yes, we are always focused on leveraging our SG&A. What you saw in this quarter was really the favorability in payroll as we have gotten more efficient with our inventory as well as we continue to focus on our store labor. We saw a nice benefit there. That was partially offset by some bonus accrual that we did this quarter that we did not have last quarter, and that will be one headwind as we move through the year from an SG&A perspective — the bonus accrual year over year assuming we continue to perform. Payroll is the biggest component of the savings there. It is not an SG&A item, but I will just speak to it: it is more in the margin component. We did see some headwinds in fuel, but we are able to offset those in some of our inventory efficiency. So just to keep it straight, that is in margin, not in SG&A. But expense management is all one bucket, so I thought I would key on that one too.
I would add that the efficiency of the flow of inventory — whether through our distribution center or in the stores — and smoothing the ups and downs from front-loading or back-loading as we come into different seasons has allowed us to look at labor a lot differently. The operations team in the field did a great job aligning sales per labor hour to what they are seeing in the business. So I feel good about the progress, and I think the core of that is how we are managing inventory and the efficiency we are getting from inventory.
Got it. We will go ahead and take the rest offline. Thank you.
Thanks. I would now like to turn the conference back to Paul E. Stone for closing remarks. Sir?
Thank you for joining the call today, and thank you to all the passionate outfitters around the country for their commitment to Sportsman's Warehouse. Together, we look forward to providing our customers with great gear and exceptional service. Thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect.