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Edited Transcript of SPWH earnings conference call or presentation 4-Jun-20 8:30pm GMT

Q1 2021 Sportsmans Warehouse Holdings Inc Earnings Call

MIDVALE Jun 23, 2020 (Thomson StreetEvents) -- Edited Transcript of Sportsmans Warehouse Holdings Inc earnings conference call or presentation Thursday, June 4, 2020 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Caitlin Howe

Sportsman's Warehouse Holdings, Inc. - VP of Corporate Development & IR

* Jon Barker

Sportsman's Warehouse Holdings, Inc. - President, CEO & Director

* Robert K. Julian

Sportsman's Warehouse Holdings, Inc. - Secretary & CFO

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Conference Call Participants

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* Daniel Harry Hofkin

William Blair & Company L.L.C., Research Division - Analyst

* Mark Eric Smith

Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst

* Peter Jacob Keith

Piper Sandler & Co., Research Division - Director & Senior Research Analyst

* Peter Sloan Benedict

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Ryan Ronald Sigdahl

Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst

* Seth Ian Sigman

Crédit Suisse AG, Research Division - United States Hardline Retail Equity Research Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to the Sportsman's Warehouse First Quarter 2020 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to Caitlin Howe of Investor Relations.

Thank you. Please begin.

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Caitlin Howe, Sportsman's Warehouse Holdings, Inc. - VP of Corporate Development & IR [2]

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Thank you. With me on the call today is Jon Barker, Chief Executive Officer; and Robert Julian, Chief Financial Officer of Sportsman's Warehouse. Before we get started, I would like to remind you of the company's safe harbor language. The statements we make today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which includes statements regarding our expectations about future results of operations, demand for our product and growth of our industry. Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, including those described under the caption, Risk Factors in the company's 10-K for the year ended February 1, 2020, 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'd also like to note that today's materials include an earnings conference call PowerPoint presentation, which is available at sportsmans.com in the Investor Relations section of the website. You can utilize this deck to follow along with today's prepared remarks. I would now like to turn the call over to Jon Barker, Chief Executive Officer at Sportsman's Warehouse. Jon?

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [3]

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Thank you, Caitlin. Good afternoon, everyone, and thank you for joining us today. I hope you and your families are safe and healthy during these challenging times. I will begin my remarks by addressing the COVID-19 situation as it pertains to Sportsman's Warehouse. I will then discuss key metrics from the first quarter, and we'll also provide updates on our omnichannel growth strategy. Robert will then provide a summary of our Q1 2020 financial results as well as some commentary on full year 2020. Finally, we will open up the call for questions.

I'm now on Slide 4 of the investor presentation and will address the COVID-19 situation. While the last few months have been challenging for many retailers, we have been fortunate to keep the majority of our stores open throughout the crisis. I could not be prouder of the Sportsman's Warehouse team in navigating both the global pandemic and the surge in our business during this time. While remaining open, we have taken many steps to help protect the health and safety of our associates, customers and their families, including additional cleaning and sanitizing, plastic barriers at registers and face masks for associates. We've also leveraged our e-commerce capabilities like ship-to-home and BOPUS and using our own platform recently launched curbside pickup, which allows us to serve customers while limiting person-to-person contact.

With respect to COVID-19's impact on our supply chain, we did see some interruption in Q1 with products sourced from China, primarily related to camping and fishing. The China related interruption has largely subsided. However, the disruption to our supply chain due to COVID-19 has continued into the second quarter within certain pockets of our business. This disruption has been compounded by surging demand, creating shortages in firearms, ammunition and fishing. Our merchandising and demand planning teams continue to do an exceptional job of working with our vendors to limit the disruption. While we've seen significant increases in sales to date, there is tremendous uncertainty and variability in the economic environment. Therefore, we will not be providing forward guidance today. Given the uncertainty surrounding COVID-19, we will continue to invest in our frontline associates and their safety. Additionally, we will remain financially disciplined as we limit discretionary expenses, reduce our debt load and preserve our liquidity to effectively navigate these uncertain times.

I'm now on Slide 5. The surge in demand resulted in very favorable financial results in the first quarter of 2020. Net sales were $247 million, an increase of 42% year-over-year. We believe the exceptional demand to date is driven by multiple factors, including the COVID-19 situation, exit -- the exit of competitors in our core categories and the current election cycle. However, parsing out the exact contribution of each factor is not possible. Same-store sales for Q1 increased 28.6%. Firearms and ammunition were up 65% and 90%, respectively, while NICS checks were up 56% for the quarter. Our sales increased significantly, exceeded the NICS checks, which gives us confidence that we are not only growing sales but we are continuing to take market share in our core categories.

Additionally, during the Q1 surge in demand, many customers entered our stores or ordered from our website for the very first time. This gives us the opportunity to expose newcomers to Sportsman's Warehouse brand and to our extensive product offering. We believe this bodes well for developing repeat customers by reengaging across new categories, building our loyalty program and customer database and ultimately growing our business. In contrast to firearms and ammunition, apparel and footwear were down materially in the first quarter. During the height of the COVID-19 crisis in Q1, customers, what I referred to as questing. They were far less likely to browse the store. And as a result, we did not experience the traditional sales mix across categories. The combination of surging demand for firearms and ammunition and soft sales in apparel and footwear materially impacted our gross margins in Q1, which Robert will discuss in greater detail during his prepared remarks.

Turning now to Slide 6. The tools and capabilities we've built over the last 2.5 years, along with our extensive assortment, enabled us to capitalize on the increased online traffic during Q1. Before the crisis, we were already seeing robust adoption of our e-commerce platform, including BOPUS and ship to home. As the crisis created the need for social distancing and require people to stay at home, customers embrace these services even more, accelerating our online penetration. Sportsmans.com saw a massive surge in demand during the quarter with our e-commerce channel sales growing over 200% year-over-year.

During the first quarter, we also completed the rollout of ship from store, and we are now utilizing our stores as fulfillment nodes for orders placed online. We've made great progress, but we must continue to invest in our capabilities to remain relevant in the increasingly e-commerce driven retail environment.

With respect to our physical store footprint, we have opened 3 new Sportsman's Warehouse stores year-to-date, including 2 prior field and stream stores located in Crescent Springs, Kentucky; and Kalamazoo, Michigan. Additionally, we closed a store in Milpitas, California during Q1. In a typical year, Sportsman's Warehouse will open 8 to 12 new stores. As we are all aware, this year is not typical. With recent permitting and construction delays, our store expansion strategy has been impacted. We now expect to open 5 to 7 total new stores in fiscal year 2020.

The turning to Slide 7. In summary, we couldn't be more excited with the momentum in our core business coming out of Q1. In the near term, we view the upcoming election cycle as a potential catalyst for our business. Furthermore, we believe COVID-19 is changing consumer behavior and motivating people to spend more time outdoors. Our products fit exceptionally well in an environment in which consumers are spending more time, fishing, camping, hiking and hunting. We will continue to work with our vendors to ensure we have our stores and website stocked with products our customers demand. In the medium term, there is significant uncertainty in the economic environment and we are monitoring this evolving situation very closely. In the long term, we believe we are uniquely positioned to capitalize on market share opportunities and changing consumer behavior to become a larger and more profitable company.

With these factors as the backdrop, we continue to make progress on our growth initiatives, including enhancing our online platform and expanding our store footprint. We look forward to speaking to you again in early September when we report our second quarter results.

With that, I'll turn the call over to Robert to discuss our financial results.

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Robert K. Julian, Sportsman's Warehouse Holdings, Inc. - Secretary & CFO [4]

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Thank you, Jon. I'll begin my remarks today with a review of our Q1 2020 financial results. As Jon mentioned earlier, we are not providing forward guidance at this time. However, I will provide a few parameters for thinking about our expected full year 2020 financial results.

Turning now to Slide 9 of the presentation. First quarter 2020 net sales were $246.8 million compared to $174.0 million in the first quarter of 2019, an increase of $72.8 million or 41.8%. Same-store sales increased 28.6% in the quarter, led by firearms and ammunition. Starting in April, camping and fishing also rebounded nicely for the quarter, increasing over the prior year period by 16.6% and 8.5%, respectively, on a same-store basis.

Q1 2020 gross profit was $74.8 million compared to $54.2 million in the first quarter of 2019, an increase of $20.6 million. Gross margin was 30.3% for the quarter, a decline of 80 basis points versus prior year. This decline can be attributed to several factors. Product and channel mix caused a 250 basis point decline in gross margin due to a higher proportion of revenue coming from firearms and ammunition and more sales volume coming from our e-commerce channel. This was partially offset by higher vendor incentives and improved product margins, which positively impacted gross margin by 120 basis points and 50 basis points, respectively.

SG&A expense of $75.2 million for Q1 2020 was an increase of $15.7 million or 26.3% compared to the first quarter of 2019. As a percentage of net sales, SG&A decreased approximately 370 basis points to 30.5% for the quarter.

During the quarter, we closed one store that resulted in a noncash impairment charge of approximately $1 million in Q1 2020.

We incurred additional payroll expense of $6.5 million versus prior year, including $1.1 million of hero pay for our frontline associates. The remaining increase is primarily due to minimum wage increases and new store growth.

Rent expense increased approximately $1.6 million, primarily due to new store openings.

Other operating expense increased approximately $5.4 million versus prior year. We incurred incremental marketing expense of $2.2 million, credit card fees increased $1.3 million due to the increase in sales volume and insurance expense increased $0.3 million. Store operating expenses, including utilities, janitorial and security, increased by $0.6 million due to new store openings and additional cleaning performed due to the COVID-19 situation. We incurred $0.4 million of preopening expenses and transaction costs associated with the acquisition of 2 Field & Stream stores. Loss for operations was $0.4 million in Q1 2020 compared to a loss of $5.4 million in the prior year period. Interest expense in Q1 2020 was $1.5 million compared to $2.1 million in Q1 of 2019, a reduction of $0.6 million. This improvement is a result of lower total borrowings and lower interest rates.

We recorded an income tax benefit of $0.8 million in Q1 2020 compared to a benefit of $2.0 million in Q1 2019. The $1.2 million reduction in this benefit is primarily the result of our improved financial performance year-over-year.

Net loss for the quarter was $1.1 million or $0.03 per diluted share as compared to a net loss of $5.5 million or $0.13 per diluted share in the prior year. This represents a year-over-year improvement of $0.10 per diluted share.

Adjusted net income in Q1 2020 was positive $0.4 million or $0.01 per diluted share compared to adjusted net loss of $5.2 million or negative $0.12 per diluted share in 2019. This represents a year-over-year improvement of $0.13 per diluted share on an adjusted basis.

Adjusted EBITDA for Q1 2020 was $8.2 million compared to $0.4 million in the prior year period.

Turning to Slide 10. I will now comment on our balance sheet and liquidity. Q1 2020 ending inventory was $301 million compared to $291 million at the end of Q1 2019, a $10 million increase. We have added 14 new stores and closed 1 store during this time period. Inventory is down 9.6% on a per-store basis compared to prior year. We incurred $4.8 million of net capital expenditures in the first quarter of 2020 compared to $3.1 million in Q1 2019, an increase of $1.7 million. This increase was due to new store construction and maintenance on our existing stores. First quarter 2020 operating cash flow was $31.3 million versus $3.4 million for Q1 2019. This $27.9 million improvement in operating cash flow year-over-year is primarily due to higher accounts payable associated with increased sales volume. Our liquidity remains strong as we ended the quarter with $118.4 million in net outstanding borrowings on the line of credit compared to $141.6 million at the end of Q1 2019, a reduction of $23.2 million. This reduction was achieved while holding an incremental $20 million of cash on our balance sheet in order to provide maximum flexibility during these uncertain times.

At the end of first quarter 2020, we had approximately $60.3 million of availability on the revolving credit facility. The outstanding balance on our term loan was $25.7 million at the end of Q1 2020 compared to $33.7 million at the end of Q1 2019, a reduction of $7.9 million. Our total liquidity, including cash on hand at the end of Q1 2020 was $82.4 million compared to $41 million in the prior year.

Turning now to Slide 11 of the presentation. As I mentioned previously, we will not be providing forward guidance at this time due to the significant uncertainty surrounding the current economic situation. However, I would like to provide some data points and commentary on how we are thinking about expected full year 2020 results. Starting with new store growth. We anticipate opening a total of 5 to 7 new Sportsman's Warehouse stores in 2020. With respect to gross margin, we expect a continued higher proportion of revenue to come from firearms and ammunition and a higher volume of sales to be conducted through our e-commerce platform. Both of these factors will continue to put pressure on gross margin. We expect our fiscal year 2020 effective tax rate to be approximately 27%. Fiscal year 2020 interest expense is estimated to be approximately $6.5 million to $7.0 million.

Finally, full year 2020 capital expenditures are anticipated to be approximately $23 million to $28 million.

It is important to note that the current economic situation is fluid, it could change very rapidly. Therefore, we will continue to take a relatively conservative approach to managing our inventory, expenses and liquidity in 2020 and beyond. We look forward to updating you on our business and financial results during our next earnings call in early September.

With that, I will now turn the call back over to the operator for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first questions come from the line of Daniel Hofkin of William Blair.

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Daniel Harry Hofkin, William Blair & Company L.L.C., Research Division - Analyst [2]

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Just wanted to maybe just ask a little bit about sales trends and maybe differences by types of market or anything -- additional color that you can share, as well as trends over the -- you may have said something about the trends over the course of the quarter end since and just sort of how that's developed. And then if there's anything that suggests what -- whether some of the increase in demand and some of the categories that have strengthened recently has been pent-up demand versus more maybe representative of trends we might expect going forward.

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [3]

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Happy to do it. Dan, it's Jon. Hope all is well. Let me give just a little bit of color on what we saw in Q1 from a trend basis and curve. Started off February, the business was right on track with where we expected. We were seeing a nice uptick in some of the categories that others had exited. Following Super Tuesday, we started to see a surge in firearms and ammunition, primarily around our core categories, our core customer, and I attribute that to the fact that the ASP and the actual SKUs we were selling were right in with normal. When COVID-19 started to become a major issue in the country in mid-March, we start to see the types of products change across the business. We saw heavy, heavy demand on personal needs, such as water storage, water filtration, generators, dehydrated foods. On the firearm side, we did see a transition to a lower price point firearm midmonth. There were a lot of new firearms buyers in the market for personal protection, and we were able to serve them well, having a full extensive assortment that we keep in place. When the stimulus checks came out as the next component, we saw our core customer, our core products start to sell again with firearms ASPs increasing and the type of firearm being purchased slightly different or returning to the core. We're not providing any update on May's performance or post-first quarter performance. But what I can share with you that gives us confidence about the long term, as we are seeing a lot of new participants into outdoor activities and not just shooting and hunting but camping, fishing and hiking has seen a significant surge across the industry. We are seeing a lot of new customers that we're educating on those products. And we're seeing a lot of folks coming into the stores that haven't fished for decades, maybe and all of a sudden are getting back to it. I believe that that's an indicator as folks think about how to spend their money, how to spend time with their families. The outdoor is a great way in a cost-effective manner to make memories and to stay safe from a social distancing. So we are very upbeat about what that can bring for us in the long run.

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Daniel Harry Hofkin, William Blair & Company L.L.C., Research Division - Analyst [4]

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That's great. And maybe just one quick follow-up, obviously, with some of the additional civil unrest in the last 1.5 weeks. Anything that you can see just in terms of trends? Or whether you think that's been an additional factor very recently in terms of people wanting to spend less time in more crowded areas than even before?

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [5]

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Yes. Dan, I think that it's a good call out. I don't know how to think about whether it's a trend or not. But certainly, for a few days, we've seen an increase in personal protection equipment being needed. And again, kind of returning back to more of an entry level, personal protection than that core user of firearms. But again, that's only been a few days. So I would be uncomfortable indicating that might be a long-term opportunity for the industry or Sportsman's Warehouse.

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Operator [6]

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Our next questions come from the line of Seth Sigman of Credit Suisse.

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Seth Ian Sigman, Crédit Suisse AG, Research Division - United States Hardline Retail Equity Research Analyst [7]

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Nice job navigating through what I'm sure was a very dynamic environment. I just want to follow-up on one of the last points around new customers coming in and sort of more active activities and things outside of the home. Should we interpret from that, that you're seeing a pickup in some of the non-firearm categories, maybe late April and into May? So if you could comment on some of those category trends, that would be helpful. And then just related to that, can we also assume if that's true, that the margin performance could look a little bit different, a little bit more favorable into the second quarter?

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [8]

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Yes, Seth, I'll try to hit on the categories. And just to be clear, we did start to see a pickup in categories outside of the shooting sports in late April and early May. As COVID restrictions started to be reduced across the country, we saw a significant uptick in participation across camping, fishing and hiking. We expect that will continue throughout the year. And I think that's multiple parts. One is there's uncertainty about the economic situation in the country, where some people may be investing less in their vacation and traveling and maybe spending more time outdoors with their family. I also think the social distancing effect that's happened in the way people are thinking is likely to have more people seeking outdoor activities further away from large masses and groups.

Robert, I'll let you hit on the margin, if you will.

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Robert K. Julian, Sportsman's Warehouse Holdings, Inc. - Secretary & CFO [9]

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So Seth, your question about margins. Certainly, our margin is greatly impacted by sales mix, and we talked about 250 basis points of pressure in Q1 due to the much higher proportion of firearms and ammunition in our total revenue. So it is true if our mix would return to more typical or normal levels, you would see an equivalent improvement in our overall gross margin just on mix alone.

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Seth Ian Sigman, Crédit Suisse AG, Research Division - United States Hardline Retail Equity Research Analyst [10]

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Got it. Okay. And then can you just follow up on the promotional activity in the industry? What are you seeing competitively? And related to that, I think you had one competitor that was expected to fully exit the category and a significant number of stores this year. I think they got part of the way through, but maybe defer that into next year. You can comment on that? Does that have any impact in your view? Let me know.

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [11]

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Yes. I'm happy to do so. Promotional activity during Q1 and into May has been limited. Some -- certainly, some activities were already preplanned by our competition and even Sportsman's Warehouse, and we've maintained that cadence. But from a margin standpoint, the promotional activity has been very limited and helped margins on a per department per category basis. What's the...

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Seth Ian Sigman, Crédit Suisse AG, Research Division - United States Hardline Retail Equity Research Analyst [12]

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The other question is about the competitor, I think you're probably...

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [13]

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Oh, the competitor. You're probably referencing Dick's Sporting Goods. They had announced, I believe it was early March that -- or late February, they were going to exit 440 more hunting lodges, which we knew there was a potential for that to happen. When they announced it, we certainly were interested to see how they might execute on that from an inventory reduction standpoint and whether that would lead to promotional activity. Immediately after they announced it, we went right into a COVID situation, which I suspect helped move some of that inventory out of those hunting lodges within even a few weeks before they shut down because of COVID. I think on their earnings call this week, they may have mentioned the plan is still in place to exit the 440 but may be delayed for some amount of time as they navigate through the reopening of their stores and just the time it will take to make that transition. So we expect that still to happen and provide, again, more market opportunities for Sportsman's Warehouse in the hunting and shooting sports.

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Operator [14]

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Our next questions come from the line of Ryan Sigdahl of Craig-Hallum.

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Ryan Ronald Sigdahl, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [15]

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Congrats on the strong quarter. Maybe just to start, you mentioned higher vendor incentives benefited gross margin in the quarter. Just curious, I guess, what was different this quarter. Were there particular categories? Was it volume-driven, et cetera?

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [16]

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Yes. Go ahead.

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Robert K. Julian, Sportsman's Warehouse Holdings, Inc. - Secretary & CFO [17]

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Yes. Ryan, some of it is just a function of volume. Most of these vendor incentives are tied to purchase orders and our sales activity. So certainly, just on a volume basis alone, there's -- we've seen an improvement in that. And we work very closely with our vendors in these relationships and to be able to support the marketing activities that we do in advertising and so on, it is to both their benefit and our benefit. And so our team, their marketing team and the purchasing team have been working closely with these vendors to look for ways that we can partner and grow both of our businesses together, and the volume has just driven more absolute dollars of incentive.

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Ryan Ronald Sigdahl, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [18]

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Got it. Then just on e-commerce, a really strong quarter there. You mentioned it's a headwind to gross margin. I guess, is there more or less OpEx needed for the e-commerce or said differently, can you compare kind of EBITDA margin of in-store sales versus e-commerce?

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [19]

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Yes, Ryan, let me see if I can provide some color on that. If you think about the work content that's required throughout the supply chain, to fulfill an e-comm order versus a store order, there is more work content required. The difference is some of that work content falls on the last mile delivery on the parcel carrier USPS. So when we think about the cost structure and the unit economics of an e-comm order versus a store order, it's really not a black and white situation. If you think about a unit economics of an e-comm order that are buy online, pick up in-store or ship to store, they're effectively the same as a store unit economics. The difference is when you start shipping that directly to home. That does put pressure on gross margin because of the transportation and packaging related to that item that is not inherent in a buy online, pick up in-store orders. So that will put pressure on gross margins. We did see a significant uptick in the percentage of e-comm orders that were shipped to home during the COVID pandemic as customers were staying home and not shopping the stores. I suspect that over time, we will continue to see an uptick in that percentage of ship to home. As we've introduced a lot, thousands actually, of new customers across the country to Sportsman's over the next few months that are outside of our store region. So it's a nice opportunity for us to engage new consumers and grow the business, but it will have some margin pressure as it relates to transportation expenses.

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Ryan Ronald Sigdahl, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [20]

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Got it. One last one for me, and then I'll turn it over. Inventory, down 10% on a per-store basis. I guess, how do you feel by category? Are there -- you noted guns, ammo strength. Are there certain categories that you wish you had more of? And is that primarily a function of just demand? Or are there any other supply chain constraints out there?

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Robert K. Julian, Sportsman's Warehouse Holdings, Inc. - Secretary & CFO [21]

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Ryan, as you can imagine, we feel very good with the forecasting we put in place and our ability to execute against the increasing demand quickly in March. And I think you can see that in our NICS, our firearms checks compares to NICS, and we absolutely gained significant market share during that period. However, with the type of growth we've seen in some of these categories, the supply chain has been unable to keep up and it's not just specific to Sportsman's Warehouse. Most of our competitors have major holes in firearms and ammunition, in fishing and in some camping related categories. And that is the single largest focus of the demand planning and merchandising team right now is to get back in stock, and make sure that we can serve the customers we expect to -- the way we expect. So if you think about the 10% down per store, that is not our plan. Our plan, we cut quite a bit of inventory out of the system last year. And as I mentioned in my previous calls, as we set up this year, we were not expecting additional declines in per inventory -- per store inventory. We would like to be in a better spot than we are today. So that is our focus is getting our receipt flow back in line and getting that product out to the stores. But this isn't as specific to one category or one vendor. This is the overall supply chain as it relates to outdoor products right now are seeing significant pressure on them.

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [22]

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Yes. I'll just add that we did a really nice job last year of reducing inventory while actually improving our in-stock performance. We're in a little bit of a different situation now. What we have now is demand outstripping supply and we're just trying to chase it a little bit. But frankly, we're probably doing better than most in staying in front of that, but it's a little bit of a different situation now than it was last year while we were reducing inventory while improving in stock.

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Ryan Ronald Sigdahl, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [23]

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Good. If I could sneak one more in actually, too, just kind of as a follow-up on that. You mentioned NICS. And so May was plus 75% for the industry, you guys nicely outperformed in the quarter. Do you think inventory constraints? Or is there any reason why, I guess, you can't perform in line with the industry or better like you have been?

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [24]

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There's no reason why we can't continue to take market share in firearms in the short-term and long term, Ryan.

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Operator [25]

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Our next questions come from the line of Peter Keith of Piper Sandler.

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Peter Jacob Keith, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [26]

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Great job, great results. I was hoping you could talk about your competitive positioning. Certainly, the vendor and sets of benefit of 120 basis points is intriguing. But maybe on a big picture basis, are you finding that you're getting better product margin, even with all the demand, you feel like you maybe first or second in line, you get product? Curious how maybe your competitive positioning has evolved so far this year with some of those other competitor exits.

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [27]

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Yes. I think certainly, Peter, we've continued to have great relationships with our vendor base. That's always been a core principle of our merchandising department as to make sure that we have a collaborative relationship that everybody wins, gross sales and profit. As some of the competitors have exited, that certainly helped us. We've grown. I think we've opened 15 stores in the last year. There's no one in the outdoor sporting goods market that's opened 15 stores in the last year. I think it's been just the opposite. So I'd like to believe from the perspective of the vendors that they would tell you that we approach this collaboratively. We have an exceptional relationship with the vendors, and we want them to grow, we want them to be healthy and we want to share together in the profit that's available. We're heavily focused on improving pricing and our capabilities around that, and making sure that we can be as dynamic as possible to changing market conditions.

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Peter Jacob Keith, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [28]

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Okay. And for Robert. That 120 basis points that you get in Q1, can that type of run rate continue? It sounds like it's -- a lot driven by collaboration or if sales slow, you're just not going to get the same type of benefit?

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Robert K. Julian, Sportsman's Warehouse Holdings, Inc. - Secretary & CFO [29]

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Yes. I think that there's multiple ways that, that impacts us. One is we -- part of that -- those incentives go towards marketing. In Q1, we didn't market as heavily as we would normally would, given the activities. And as or if sales would slow, it would impact those incentives. So I don't think I would bake in that as a true run rate, but it was a testament to what the team accomplished in Q1 to help offset the overall mix margin impact.

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Peter Jacob Keith, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [30]

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Okay. Good. And looking just now with some of the category trends. I guess, it looks like with camping and fishing finishing positive for the quarter is pretty good spike in demand in April continuing with May. But I was hoping you could maybe comment a little more specifically on the footwear and clothing. Is that something that has inflected positive? Is there maybe less questing, more broader shopping in the store?

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [31]

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Yes. So -- yes, we have seen a return to a more normal consumer shopping process, where they're not just coming in and grabbing an item and getting out as quickly as possible. They are starting to cross-shop departments, so all departments are showing improved trends or started to show improved trends. We also reacted pretty quickly to footwear and apparel. The week that we started to see what was happening with COVID-19 and retail potentially getting shut down, we started to pull back on our apparel and footwear purchases. No -- having lived through this downturn in the economic cycle in retail a couple of times. That tends to be one of the areas that has the longest lead time in sourcing, and you end up with too much inventory. So we pulled back very quickly. We feel good about our apparel and footwear inventory position. When you think about what's likely to happen, we feel good about the functional apparel that we're, the camouflage, the fishing apparel. We're in a very good spot. Hiking on the footwear side is showing some really nice trends. And while it's early, we believe that hunting could see a nice uptick this year as people think more about field to table and outdoor activities. I think that leads into an opportunity on the hunting boots this summer and into early fall.

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Robert K. Julian, Sportsman's Warehouse Holdings, Inc. - Secretary & CFO [32]

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And Peter, I'll add one more thing, and I'll answer it within the context -- the financial context in gross margin. It is likely, though, even while there might be some improvement in footwear and apparel, I think throughout the year, you should expect that firearms and ammunition will skew more heavily in our total revenue. And apparel and footwear will be a lower proportion of our total revenue going forward and on a full year basis this year.

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [33]

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That is correct, Robert. Thank you.

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Peter Jacob Keith, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [34]

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Fair enough. One last question for you. I'm intrigued with all of the new customers you might be getting. Is there any way that you could give us the total loyalty members at quarter end and how that looks on a year-on-year basis?

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [35]

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I don't have that number in front of me. Let me -- let us circle back on that one.

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Operator [36]

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Our next questions comes from the line of Mark Smith of Lake Street.

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Mark Eric Smith, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [37]

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I want to circle back to the inventory a little bit than ammo, if we can. Can you talk about maybe how that flowed during the quarter? Were there periods in March or April, where maybe it was lower than where you ended the quarter? And then any insight you can give us into kind of what you're seeing in the supply chain from vendors coming in, in May?

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [38]

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So again, let's go back to what we saw in volume, Mark, just to ensure we set the table. And this is just on a same-store basis. Firearms and ammunition were up 65% and 90%, respectively, during the period. So if you think about from a forecasting and flow, we were very optimistic coming into the year. But I don't think anybody here in the business would have forecasted or expected a 65% and 90% on a same store, not including the new stores that we put up. So we started to see some flow issues kind of third, fourth week to March. And we've been working internally with our vendors to try to keep the flow moving. It hasn't been a situation where any one vendor has been perfect and others have been challenged. It's been an overall situation and not specific to vendors. We've had our own bumps in the road along the way with attendants, et cetera, in moving product. So I think it kind of started the third week of March, fourth week of March, and it has continued. Customers are spending more time fishing, camping and hiking. We're seeing other categories in our business and the industry, not just specific to Sportsman's that are looking thin. And I'm sure, Mark, you've probably been in the store and you've noticed some of the terminal tackle and the lures and the rod and reel combos. It is very thin. And we are working very hard to restock those shelves, both internally and with our vendors.

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Mark Eric Smith, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [39]

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Okay. And then as we look at some of those very picked over categories, what are you seeing as far as pricing that you're paying for, specifically as we look at ammunition and firearms and your ability to pass any price increases on to the customer?

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [40]

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Yes. So again, we've had really good communication with the vendor base on the firearms and ammunition. We historically see a price increase each year early in the year. We have seen some additional increases. And I think those increases are related to the fact that factories are working overtime. They've had to pay extra pay for COVID. They're doing extra work within their factories. And in our situation, we've maintained or improved our margins across the business and kept up with those changes. I do believe it's important for us as a business and as an industry to ensure that we are providing fair prices to our customers. We will not gouge our consumers in this situation where demand is far outstripping supply. But on the other hand, we need to make sure if costs of materials or cost of labor, cost of product when the manufacturers are increasing, we balance that with the elasticity of pricing.

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Mark Eric Smith, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [41]

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Okay. And then I just wanted to look at the cadence of firearm sales. You did a good job kind of walking through what you saw during the quarter. And maybe just a little different, can you give us any insight into maybe where you trended higher than the NICS data? Was it pretty flat, that delta, throughout the quarter? Or when you saw some competitors that closed their doors where you saw an expansion and where you really took market share, was there anything else that really led to your gains in market share this quarter?

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [42]

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Yes. Again, Mark, I think underlying in the data, you would see that personal protection categories were the primary driver of the increase in mix check for the industry, meaning handguns and personal protection shotguns. What we did see though in the cycle that I shared was a little higher price point, handgun early in the process. Then offset by a more entry-level firearm or shotgun. And when the entry-level consumer, the new consumer came in around -- in the COVID process, that's when personal protection shotguns tended to increase more than handguns. Again, I think there was a little bit of a -- it's my first firearm. I need to protect myself, what's the safest way to do that. And certainly, a personal protection shotgun fits that.

As we got into the stimulus checks, we saw a nice return to a more normal mix. I would tell you it's still a little bit heavier on the handguns than it was prior to last year, but the price point has improved. The last few days, and again, I don't want to call this a trend because I, hopefully, as a society, we are we're working together to try to limit some of the activity that's been happening that's created a few days of uptick, it's been more of a return to the entry-level personal protection handgun and shotgun.

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Mark Eric Smith, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [43]

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Okay. And then last one for me, maybe for Robert. SG&A levels, as you walk through some of that, can you just give us any more insight into kind of what you viewed as maybe onetime in nature that drove maybe SG&A in dollars a little bit higher? Any kind of -- any insight you can give us into the rest of the year and how you think that trends?

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Robert K. Julian, Sportsman's Warehouse Holdings, Inc. - Secretary & CFO [44]

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Yes. So in Q1, we did incur, as I mentioned earlier, about $1 million of hero pay for our frontline associates, which is certainly onetime incremental type expense. And the other sort of COVID related or specific unique expenses in Q1 was probably about $0.5 million, between cleaning supplies and other extraordinary items to react to the situation. And so we saw a tremendous leverage based on the incremental revenue. There's also a onetime effect of the closure of the one store, which was also about $1 million. So those 3 items, there's about $2.5 million worth of sort of unusual expense. I would say that going forward, you should see, excluding the unusual items, pretty stable environment. You will see a lower SG&A as a percent of revenue, as we have our normal seasonality in higher revenue in the quarters to come for the year.

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Operator [45]

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Our next questions come from the line of Peter Benedict of Baird & Company.

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Peter Sloan Benedict, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [46]

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Most of mine have been taken here, but just a couple. First, on the 250 basis points of mix within gross margin, was that pretty equal between the categories versus the channel shift? Or was 1 of those 2 more material?

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Robert K. Julian, Sportsman's Warehouse Holdings, Inc. - Secretary & CFO [47]

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Yes. We're estimating that the channel, the e-commerce channel mix is roughly 50 basis points, it's 40 to 50 basis points. The mix created by the higher firearms and ammunition was about 200 basis points.

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Peter Sloan Benedict, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [48]

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All right, Robert. And then on the 50 basis points of product margin, is -- how much of that -- was there still an impact from just the Field & Stream inventory that you guys have been going through? Was that what basically got you the 50? Or is that behind us and not really a factor anymore?

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Robert K. Julian, Sportsman's Warehouse Holdings, Inc. - Secretary & CFO [49]

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No, that is completely behind us and not a factor at all. It is a continuation of a trend, as we had talked about before in our last quarter, that we have been seeing improved product margins really across every category. And so that's been a continuation of that same trend. It has nothing to do with the purchase of the Field & Stream inventory at a discount.

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Peter Sloan Benedict, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [50]

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Got you. Good. And then just the strategy to -- or what's been the shopping behavior of these new customers? I mean, you obviously had the big surge. Are these folks coming back? And then what's your strategy for, I guess, communicating to them going forward? I know, Jon, you said you maybe get back to those with the loyalty stats, but are these folks signing up for the loyalty program? Or were they just kind of coming in, getting that firearm and then moving on?

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [51]

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Yes. It's been a mix, Peter. For a few weeks there at the peak of the COVID situation, these customers were coming in, getting their items and getting out fairly quickly. We've now seen more of a normal seat to where consumers on the fishing, hiking and camping categories that are either reengaging or new, they're signing up for the loyalty program. We are starting to help them with their needs, using the expertise in the store to fulfill whatever that need is for the outdoors. And that's providing us an opportunity not only to engage the first time but reengage through our database, our e-mail program, our loyalty program. So again, the couple of weeks of COVID were somewhat unique in the way people are shopping. We're seeing much more of a return to it now. And as I spend time in the stores interacting with consumers, literally watching people come in and say, I haven't fished in 10 years. I needed a couple of new combos, I'm going drought fishing or bass fishing. It's been interesting to watch that reengagement from consumers that maybe haven't been around a while. So we see that as a really nice long-term opportunity for Sportsman's Warehouse and the overall outdoor industry.

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Operator [52]

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There are no further questions at this time. I'll now pass the call back over to management for any closing remarks.

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Jon Barker, Sportsman's Warehouse Holdings, Inc. - President, CEO & Director [53]

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Yes. Thank you. I want to thank everyone for their time today. And a special thanks to all of our associates in our stores, distribution center, care center and our corporate headquarters. We especially appreciate your commitment and perseverance during this extraordinary times. Thank you, and we will conclude the call.

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Operator [54]

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This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great evening.