Guns and ammo take down Sportsman’s Warehouse

Outdoor retailer Sportsman’s Warehouse is off to a rough start as a newly minted public company, reporting an 18.1% decline in first quarter same store sales as firearms and ammunition sales evaporated.

The operator of 50 stores relies on the hunting and shooting category for nearly 50% of its sales so the declining demand for firearms and ammunition took a heavy toll on first quarter results. Sales declined 3% to $132.4 million and same store sales fell a whopping 18.1% . The company was up against a challenging prior year comparison when comps surged 20.8% after concerns among some customer that federal legislation might jeopardize their right to bear arms caused sales to spike. The top line deterioration resulted in a net loss of $3.4 million, or 10 cents a share, compared to a profit of $4.5 million, or 13 cents a share, the prior year.

"Our first quarter results, which came in better than our expectations, were impacted by the general slowdown in firearm sales against the surge-driven comparison from last year, a dynamic we expect to continue until the second half of this year,” said John Schaefer, president and CEO of Sportsman’s Warehouse.

The company, which priced its IPO at $9.50 a share in late April, said it expects second quarter same store sales to decline between 7% and 8% and full year comps to decline between 6% and 8%. The company is forecasting a profit for the second of approximately $3.9 million and full year profits are expected to range from $19.6 million to $21.7 million as sales reach about $670 million.

Despite expectations of weak demand for the category of merchandise upon which it is most dependent, the company contends its differentiated position in the market gives it the opportunity to operate as many as 300 stores.

“We offer easy-in, easy-out, no-frills stores that cater to local communities and offer a broad selection of locally relevant, predominantly branded merchandise, at everyday low prices, delivered by passionate and knowledgeable associates,” Schaefer said. “Our new stores generate attractive returns across a variety of markets, with an average payback period on our investment of two and a half years.”

The company is also looking to reduce its reliance on guns and ammunition by growing apparel and footwear sales through a remerchandising initiative.

“Our store-within-a-store clothing program which has been implemented in 28 stores as of the end of the first quarter has gained traction and is generating a healthy lift in category performance. We plan to roll this initiative out to seven additional stores by early 2015,” Schaefer said.

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