Release Date: September 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Implemented a culture change by referring to employees as 'outfitters' to enhance customer service.
- Fishing department saw a 6% increase in comp sales, highlighting effective merchandising strategies.
- E-commerce sales grew by 3%, driven by hunting and fishing departments, comprising 19% of total sales.
- Completed the reset of 87 stores, improving the customer shopping experience with minimal capital investment.
- Secured a $45 million term loan to bolster balance sheet and liquidity, allowing strategic inventory investments.
Negative Points
- Net sales for the second quarter were $288.7 million, down from $309.5 million in the prior year.
- Same store sales decreased by 9.8% compared to the previous year.
- Gross margin decreased to 31.2% from 32.6% in the prior-year period, driven by increased costs associated with shrink.
- Net loss for the second quarter was $5.9 million, compared to a net loss of $3.3 million in the prior year.
- Inventory levels were too low in the first half of the year, impacting sales due to insufficient stock of core items.
Q & A Highlights
Q: Can you walk through the changes in your shrink methodology and whether it's due to accounting nuances or actual theft?
A: Jeff White, CFO: It's more of an accounting/operational change. We increased cycle counts in high-velocity SKUs to ensure better inventory accuracy. This change is more about improving our methodology rather than an increase in theft.
Q: Should we expect heavy discounting at the end of each season to ensure clean inventory?
A: Paul Stone, CEO: Yes, our strategy is to ensure we do not carry non-go-forward goods into the next season. This was a strategic move to clean up inventory and ensure we are well-positioned for the next season.
Q: Can you provide more insight into which product categories had tougher quarters?
A: Jeff White, CFO: Apparel and footwear were more pressured due to SKU rationalization. The camp category improved towards the end of Q2, while ammunition faced pressure due to pricing adjustments.
Q: Any updates on loyalty programs, email, and credit card initiatives?
A: Paul Stone, CEO: We are optimistic about improving our loyalty program and see enormous upside in integrating marketing, loyalty, and credit initiatives. This will take work, but we are already making progress.
Q: Can you elaborate on the improving comp trends through the quarter?
A: Jeff White, CFO: We started Q2 with double-digit down comps and ended with single-digit down comps. We are cautious about the back half of the year due to significant headwinds like the anniversary of the Israel-Hamas conflict.
Q: Did the California tax pre-buy impact hunting comps?
A: Jeff White, CFO: Yes, we saw pull-forward demand in California due to the 11% tax effective at the end of June. We also saw better comp trends in July as we focused on the hunt category.
Q: Any commentary on the penetration of firearm service or warranty programs?
A: Jeff White, CFO: We are seeing good traction with our FSP and warranty programs, with attachment rates at an all-time high. We expect this momentum to continue.
Q: How is conversion trending with the change in the labor model?
A: Paul Stone, CEO: Conversion rates are at an all-time high, even higher than during COVID. Our outfitters are doing a great job of attaching additional products, and we are optimistic about this trend.
Q: Why do decremental margins look high in the revised guidance?
A: Jeff White, CFO: Margin pressure is expected in Q4 due to high promotional activity. We are also focusing on managing expenses and leveraging inventory to generate positive free cash flow.
Q: What are the demand signals for the categories you're investing in, and how do you ensure you don't overstock?
A: Jeff White, CFO: We are focusing on core SKUs that drive the majority of demand. We have the data to support these investments and are confident in our ability to turn inventory by the end of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
