Sportsman's Warehouse Holdings Inc (SPWH) Reports Decline in Q3 Sales and Earnings Amid ...
Net sales decreased by 5.3% in Q3 2023 compared to the same period last year.
Gross profit margin contracted by 330 basis points year-over-year in Q3.
Adjusted diluted loss per share was $(0.01) for Q3 2023, compared to adjusted diluted earnings per share of $0.34 in Q3 2022.
Company anticipates aggressive promotional activities to continue in Q4, affecting gross margins.
On December 6, 2023, Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH) released its 8-K filing, detailing its financial results for the third quarter of the fiscal year 2023. The company faced a challenging quarter, with net sales falling to $340.6 million, a 5.3% decrease from the previous year's $359.7 million. This decline was attributed to consumer inflationary pressures and recessionary concerns, which dampened discretionary spending and led to lower store traffic and demand across most product categories.
Financial Performance Overview
SPWH's gross profit for the quarter was $103.2 million, or 30.3% of net sales, a decrease from the prior year's 33.6%. The contraction in gross profit margin was primarily due to reduced product margins in the ammunition category and increased promotional efforts to clear excess apparel and footwear inventory. Selling, general, and administrative (SG&A) expenses saw a slight decrease of 2.2% to $100.1 million, reflecting the company's cost reduction plan, which led to lower payroll and operating expenses.
The company reported a net loss of $(1.3) million for the quarter, compared to a net income of $12.9 million in the same period last year. Adjusted net loss, which excludes certain non-recurring items, was $(0.2) million, compared to an adjusted net income of $13.1 million in Q3 2022. Adjusted EBITDA also declined to $16.2 million from $27.7 million year-over-year.
Balance Sheet and Capital Allocation
As of October 28, 2023, SPWH had net debt of $182.5 million, consisting of $2.9 million in cash and cash equivalents and $185.4 million of borrowings under the company's revolving credit facility. Inventory levels stood at $446.3 million at the end of the quarter. Total liquidity was reported at $113.9 million, including availability under the revolving credit facility and cash on hand.
Outlook and Management Commentary
For the fourth quarter of fiscal year 2023, SPWH expects net sales to range between $365 million to $390 million, with same store sales projected to decline by 11% to 6% year-over-year. Adjusted diluted earnings per share for Q4 are anticipated to be between $(0.35) to $(0.25). The company plans no new store openings during fiscal year 2024 due to the current economic environment.
Our inventory reduction in the quarter was driven by our strategic promotional efforts, primarily related to apparel and footwear and designed to lower our overall operating costs. While these efforts have weighed on our gross margins, our inventory reduction is progressing as planned. We will continue this effort during the fourth quarter and expect our gross margins to be significantly reduced compared with last years fourth quarter. These efforts are a critical piece for us achieving our year-end inventory goal, placing us in a much healthier position, said Jeff White, Chief Financial Officer of Sportsmans Warehouse.
SPWH's management remains focused on executing cost reduction plans and inventory management strategies to navigate the current economic challenges and position the company for improved performance in the upcoming fiscal year.
Investors and analysts interested in further details can access the full earnings report and listen to the earnings call via the Investor Relations section of the company's website.
Explore the complete 8-K earnings release (here) from Sportsman's Warehouse Holdings Inc for further details.
This article first appeared on GuruFocus.
