Outdoor specialty retailer Sportsman's Warehouse (NASDAQ: SPWH) fell short of the market’s revenue expectations in Q1 CY2025 as sales only rose 2% year on year to $249.1 million. Its non-GAAP EPS of $0.41 per share was 13.5% above analysts’ consensus estimates.

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StockStory’s Take

Sportsman's Warehouse delivered its first positive same-store sales growth in nearly four years during the first quarter, a milestone CEO Paul Stone attributed to targeted changes in inventory management and merchandising. The quarter’s performance was driven by a narrowed and deeper focus on high-turning hunting and fishing products, paired with a more localized approach to assortments and marketing. Management highlighted particularly strong results in firearms and fishing categories, with fishing up 11% year-over-year and ammunition sales also rising. Stone also pointed to the success of an 8% increase in e-commerce sales, fueled by digital marketing and omnichannel improvements. Despite continued macroeconomic headwinds and a late spring season, the company’s new strategy appears to be resonating with both in-store and online customers.

Looking ahead, Sportsman's Warehouse reiterated its focus on rebuilding margins and sustaining sales growth through disciplined inventory and expense management, even as tariffs and consumer uncertainty persist. Management emphasized ongoing strategic investments in personal protection, digital marketing, and brand relevance, noting early positive results from initiatives like shop-in-shop partnerships and the Safety Outpost website. CFO Jeff White explained that efforts to reduce SKU count and improve inventory turns are expected to drive free cash flow and enable debt reduction by year-end. Stone stated, “We are staying disciplined, managing what we can control, variable cost, inventory levels and merchandise margins.” Management believes that maintaining agility in pricing and assortment, while preparing for tariff impacts later in the year, will be crucial for returning Sportsman’s Warehouse to consistent growth and profitability.

Key Insights from Management’s Remarks

Management credited positive comp sales to improved in-stock levels, an emphasis on local market needs, and a shift toward value-priced, high-demand products. Challenges included tariff-driven inventory strategies and changing consumer behavior.

• Firearms and Fishing Momentum: The company outperformed industry trends in firearms unit sales, with management noting a nearly 7% increase despite broader industry declines. Fishing category sales were highlighted as a success, fueled by localized merchandising and earlier seasonal readiness.
• Inventory Pull-Forward for Tariffs: To mitigate anticipated tariff increases, Sportsman’s Warehouse strategically pulled forward $20 million in inventory, primarily in fishing, camping, and hunting. This move increased short-term inventory levels but was described as a low-risk bet on high-turning products.
• E-commerce and Omnichannel Growth: The company’s e-commerce business grew 8%, exceeding overall sales growth. Digital-first marketing strategies and an improved online experience contributed to higher engagement and transactions, supporting omnichannel customer behavior.
• Personal Protection Category Expansion: Management launched initiatives like the Safety Outpost and new shop-in-shop partnerships (e.g., with Berna for less-lethal options), positioning the company as a leader in personal and situational safety, a category management believes is underpenetrated in the industry.
• SKU Rationalization and Expense Discipline: The company reduced active SKUs by about 20% and eliminated underperforming vendors, a move intended to simplify assortments, improve inventory turns, and enhance margin performance over time.

Drivers of Future Performance

Sportsman's Warehouse’s outlook hinges on local market execution, inventory discipline, and adapting to tariff and consumer demand uncertainties.

• Tariff and Cost Management: Management anticipates that previously pulled-forward inventory will help delay the direct financial impact of tariffs until the latter part of the year. Efforts to optimize pricing and maintain everyday low prices on key consumables are expected to drive traffic and support margins, though tariff pressure remains a risk.
• Personal Protection and Brand Campaigns: Expansion into personal protection through new partnerships and campaigns, such as the Safety Outpost and in-store demonstrations, is expected to attract new customer segments and increase basket size. The omnichannel brand campaign aims to reengage lapsed customers and strengthen loyalty in a competitive market.
• Inventory Efficiency and Debt Reduction: Ongoing SKU reduction and inventory discipline are expected to generate positive free cash flow, which management plans to use for debt reduction. The company believes maintaining flexibility in inventory and expense management will be critical as demand trends and macroeconomic factors evolve.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will watch closely for (1) evidence that inventory discipline and SKU rationalization continue to support healthy margins and free cash flow, (2) sustained performance in core categories—particularly firearms, fishing, and e-commerce, and (3) tangible results from personal protection initiatives and the new omnichannel brand campaign. Execution on cost management and preparation for tariff impacts will also be key indicators of progress.

Sportsman's Warehouse currently trades at a forward EV-to-EBITDA ratio of 2.4×. Should you double down or take your chips? The answer lies in our full research report (it’s free).

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