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What changed in SPORTSMAN'S WAREHOUSE HOLDINGS, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SPORTSMAN'S WAREHOUSE HOLDINGS, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+494 added−433 removedSource: 10-K (2023-04-13) vs 10-K (2022-03-30)

Top changes in SPORTSMAN'S WAREHOUSE HOLDINGS, INC.'s 2023 10-K

494 paragraphs added · 433 removed · 335 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

143 edited+34 added−32 removed69 unchanged
Biggest changeWe view apparel sales as an important opportunity, given its high gross margins and appeal to a broad, growing demographic. ​ The following table shows our sales during the past three fiscal years presented by department: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year Ended ​ ​ ​ January 29, January 30, ​ ​ February 1, Department Product Offerings 2022 2021 ​ ​ 2020 Camping ​ Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools ​ 13.1% ​ 12.7% ​ ​ 14.4% Apparel ​ Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear ​ 8.4% ​ 7.5% ​ ​ 9.3% Fishing ​ Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats ​ 10.0% ​ 9.9% ​ ​ 11.1% Footwear ​ Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots ​ 6.8% ​ 5.6% ​ ​ 7.5% Hunting and Shooting ​ Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment and shooting gear ​ 54.2% ​ 57.6% ​ ​ 49.1% Optics, Electronics, Accessories, and Other ​ Gift items, GPS devices, knives, lighting, optics, two-way radios, and other license revenue, net of revenue discounts ​ 7.5% ​ 6.7% ​ ​ 8.6% Total ​ ​ ​ 100.0% ​ 100.0% ​ ​ 100.0% ​ ​ ​ 12 Table of Contents Camping .
Biggest changeThe following table shows our sales during the past three fiscal years presented by department: Fiscal year Ended January 28, January 29, January 30, Department Product Offerings 2023 2022 2021 Camping Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools 12.5 % 13.1 % 12.7 % Apparel Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear 9.3 % 8.4 % 7.5 % Fishing Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats 8.9 % 10.0 % 9.9 % Footwear Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots 7.3 % 6.8 % 5.6 % Hunting and Shooting Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment and shooting gear 54.9 % 54.2 % 57.6 % Optics, Electronics, Accessories, and Other Gift items, GPS devices, knives, lighting, optics, two-way radios, and other license revenue, net of revenue discounts 7.1 % 7.5 % 6.7 % Total 100.0 % 100.0 % 100.0 % 13 Camping .
While our primary strategy for expansion is through organic store opening, we believe we can use strategic acquisitions as an additional source of growth, as we did with the 12 stores we acquired from Dick’s Sporting Goods in fiscal 2019 and 2020.
Strategic Acquisitions. While our primary strategy for expansion is through organic store opening, we believe we can use strategic acquisitions as an additional source of growth, as we did with the 12 stores we acquired from Dick’s Sporting Goods in fiscal 2019 and 2020.
We strive to ensure pay equity between our female employees and male employees performing equal or substantially similar work. We are also focused on understanding our diversity and inclusion strengths and opportunities and executing on a strategy to support further progress. As our employees are often outdoor enthusiasts, we offer an industry best in-class discount program to our employees.
We strive to ensure pay equity between our female and male employees performing equal or substantially similar work. We are also focused on understanding our diversity and inclusion strengths and opportunities and executing on a strategy to support further progress. As our employees are often outdoor enthusiasts, we offer an industry best in-class discount program to our employees.
This feature has allowed us to turn all of our retail stores into distribution centers, decreasing the time it takes to fulfill orders, and increasing our ability to leverage our inventory across the Company. ​ In addition, our website features local-area content, including fishing reports and event schedules, as well as online educational resources, including buyer’s guides, how to’s, tips, advice and links to video demonstrations on our dedicated YouTube channel.
This feature has allowed us to turn all of our retail stores into distribution centers, decreasing the time it takes to fulfill orders, and increasing our ability to leverage our inventory across our Company. 11 In addition, our website features local-area content, including fishing reports and event schedules, as well as online educational resources, including buyer’s guides, how to’s, tips, advice and links to video demonstrations on our dedicated YouTube channel.
In addition, we utilize efficient, localized marketing campaigns and our “no frills” warehouse store layout helps us maintain comparatively low operating costs and provides us with the opportunity to achieve four-wall Adjusted EBITDA margins of 10% or more for stores in most new markets after the first 18 to 24 month period after opening the new store.
In addition, we utilize efficient, localized marketing campaigns and our “no frills” warehouse store layout helps us maintain comparatively low operating costs and provides us with the opportunity to achieve four-wall Adjusted EBITDA margins of 10% or more for stores in most new markets after the first 24 month period after opening the new store.
We select sites for new store openings or store acquisitions based on criteria such as local demographics, traffic patterns, density of hunting and fishing license holders in the area, abundance of hunting and fishing game and outdoor recreation activities, store visibility and accessibility, purchase data from our existing customer database and availability of attractive lease terms.
We select sites for new store openings or store acquisitions based on criteria such as local demographics, traffic patterns, density of hunting and fishing license 10 holders in the area, abundance of hunting and fishing game and outdoor recreation activities, store visibility and accessibility, purchase data from our existing customer database and availability of attractive lease terms.
Some of the other specialty retailers that compete with us across a significant portion of our merchandising categories are large-format retailers that generally range in size from 40,000 to 250,000 square feet. These retailers seek to offer a broad selection of merchandise focused on hunting, fishing, camping and other outdoor product categories.
Some of the other specialty retailers that compete with us across a significant portion of our merchandising categories are large-format retailers, with stores that generally range in size from 40,000 to 250,000 square feet. These retailers seek to offer a broad selection of merchandise focused on hunting, fishing, camping and other outdoor product categories.
We have established productive relationships with well-regarded commercial real estate firms and believe that we are a sought-after tenant, given the strength of the Sportsman’s Warehouse brand, the high volume of customers that visit our stores and our strong financial performance since becoming a public company.
We have established productive relationships with well-regarded commercial real estate firms and believe that we are a sought-after tenant, given the strength of the Sportsman’s 7 Warehouse brand, the high volume of customers that visit our stores and our strong financial performance since becoming a public company.
The nature of the outdoor activities to which we cater requires recurring purchases throughout the year, resulting in high rates of conversion among customers. For example, active anglers typically purchase various fishing tackle throughout the year based on seasons and changing conditions.
The nature of the outdoor activities to which we cater, often requires recurring purchases throughout the year, resulting in high rates of conversion among customers. For example, active anglers typically purchase various fishing tackle throughout the year based on seasons and changing conditions.
We believe these factors will continue to foster growth in the outdoor activities and sporting goods market in the future. ​ Within the retail sporting goods sector, we operate primarily in the outdoor equipment, apparel and footwear segment, which includes hunting and shooting, fishing, camping and boating.
We believe these factors will continue to foster growth in the outdoor activities and sporting goods market in the future. Within the retail sporting goods sector, we operate primarily in the outdoor equipment, apparel and footwear segment, which includes hunting and shooting, fishing, camping, hiking, and boating.
These core strategies help position Sportsman’s Warehouse as the “local outdoor experts” and the preferred place to not only shop, but to also share outdoor-based experiences in the communities we serve.
These core strategies help position Sportsman’s Warehouse as the “local outdoor experts” and the preferred place to not only shop, but to also share outdoor-based experiences in the communities we support and serve.
We also have the largest offering of firearms available online for in-store purchase and buy-online-pickup-in-store when compared to the offerings of our major competitors.
We also have the largest assortment and offering of firearms available online for in-store purchase and buy-online-pickup-in-store when compared to the offerings of our major competitors.
Our optics, electronics and accessories department includes brands such as Garmin, Leupold, Leica, Nikon, Swarovski Optik and Vortex Optics. Our other department includes miscellaneous products and services. ​ Loyalty and Co-Branded Credit Card Programs ​ We have a loyalty program through which our customers are able to earn “points” towards Sportsman’s Warehouse gift cards on most of their purchases.
Our optics, electronics and accessories department includes 14 brands such as Garmin, Leupold, Leica, Swarovski Optik and Vortex Optics. Our other department includes miscellaneous products and services. Loyalty and Co-Branded Credit Card Programs We have a loyalty program through which our customers are able to earn “points” towards Sportsman’s Warehouse gift cards on most of their purchases.
We believe this diversification of participant provides us with opportunity to engage a broader group of customers. ​ Furthermore, we believe that specialty retailers have generated incremental sales volume by expanding their presence, especially in smaller communities, which has increased customers’ access to products that formerly were less available.
We believe this diversification of participant provides us with opportunity to engage a broader group of customers. Furthermore, we believe that specialty retailers have generated incremental sales volume by expanding their presence, especially in smaller underserved communities, which has increased customers’ access to products that 17 formerly were less available.
We strive to accomplish this goal by tailoring our broad and deep merchandise assortment to meet local conditions and demand, offering everyday low prices, providing friendly support from our knowledgeable and highly trained staff, and offering a top-tier e-commerce experience, extensive in-store events and educational programming.
We strive to accomplish this goal by tailoring our broad and deep merchandise assortment to meet local conditions and demand, offering everyday low prices and providing friendly support from our knowledgeable and highly trained staff. We also offer a top-tier e-commerce experience, extensive in-store events and educational programming.
We actively monitor the profitability of each product category within each department and adjust our assortment and floor space accordingly. This flexibility enables us to provide customers with more preferred product choices and to enhance the profit potential of each store. ​ Hunting and shooting have historically been the largest contributor to our sales.
We actively monitor the profitability of each product category within each department and adjust our assortment and floor space accordingly. This flexibility enables us to provide customers with more preferred product choices and to enhance the profit potential of each store. Hunting and Shooting has historically been the largest contributor to our sales.
We believe our low-cost, flexible model allows us to access both large and small markets more economically than many of our peers. ​ 6 Table of Contents We maintain a disciplined approach to new store development and perform comprehensive market research before selecting a new site, including partnering with specialized, third-party local real estate firms.
We believe our low-cost, flexible model allows us to access both large and small markets more economically than many of our peers. We maintain a disciplined approach to new store development and perform comprehensive market research before selecting a new site, including partnering with specialized, third-party local real estate firms.
However, we believe that the amount of space at these stores devoted to our outdoor product categories limits the extent of their offerings in these areas. ​ Mass Merchandisers, Warehouse Clubs, Discount Stores, Department Stores .
However, we believe that the amount of space at these stores devoted to our outdoor product categories limits the extent of their offerings in these areas. 18 Mass Merchandisers, Warehouse Clubs, Discount Stores and Department Stores .
Our compliance department administers various restriction codes and other software tools to prevent the sale of such jurisdictionally-restricted items. ​ 19 Table of Contents We have particular expertise in the California market and have passed several California Department of Justice (“CA DOJ”) firearm audits with zero or only minor violations.
Our compliance department administers various restriction codes and other software tools to prevent the sale of such jurisdictionally-restricted items. We have particular expertise in the California market and have passed several California Department of Justice (“CA DOJ”) firearm audits with zero or only minor violations.
On average, over the last three fiscal years, we have generated approximately 26.8% and 28.9% of our net sales in the third and fourth fiscal quarters, respectively, which includes the holiday selling season as well as the opening of the Fall hunting season.
On average, over the last three fiscal years, we have generated approximately 26.3% and 28.3% of our net sales in the third and fourth fiscal quarters, respectively, which includes the holiday selling season as well as the opening of the Fall hunting season.
We cater to the outdoor enthusiast and believe that we have both an in-depth knowledge of the technical outdoor customer and a “grab and go” store environment that is uniquely 16 Table of Contents conducive to their need for value and convenience.
We cater to the outdoor enthusiast and believe that we have both an in-depth knowledge of the technical outdoor customer and a “grab and go” store environment that is uniquely conducive to their need for value and convenience.
These products are designed and priced to complement our branded assortment, by rounding out the offering and ensuring customer choices for good, better and best within key product categories. During fiscal year 2021, private label offerings accounted for approximately 3.0% of our total sales with special make-up offerings accounting for an additional 1.0% of our total sales.
These products are designed and priced to complement our branded assortment, by rounding out the offering and ensuring customer choices for good, better and best within key product categories. During fiscal year 2022, private label offerings accounted for approximately 3.6% of our total sales with special make-up offerings accounting for an additional 2.0% of our total sales.
Each of these ongoing and new initiatives is designed to foster additional shopping convenience, add deeper merchandise selection and provide 7 Table of Contents more product information to the customer. We believe these initiatives have driven and will continue to drive additional traffic, improved conversion and increased average ticket value. ​ Continuing to Enhance Our Operating Margins .
Each of these ongoing and new initiatives is designed to foster additional shopping convenience, add deeper merchandise selection and provide more engaging product information to the customer. We believe these initiatives have driven and will continue to drive additional traffic, improved conversion and increased average ticket value. 8 Continuing to Enhance Our Operating Margins .
We target a pre-tax return on invested capital after the first 18 to 24 month period after opening of over 50% excluding initial inventory cost (or over 20% including initial inventory cost), although our historical returns have often exceeded these thresholds.
We target a pre-tax return on invested capital after the first 24 month period after opening of over 40% excluding initial inventory cost (or over 20% including initial inventory cost), although our historical returns have often exceeded these thresholds.
None of our employees are represented by a labor union or are party to a collective bargaining agreement and we have had no labor-related work stoppages. We pride ourselves on the long tenure of our more than 300 store managers and corporate employees. ​ We believe we offer competitive compensation and benefits packages.
None of our employees are represented by a labor union or are party to a collective bargaining agreement and we have had no labor-related work stoppages. We pride ourselves on the long tenure of our almost 400 store managers and corporate employees. We believe we offer competitive compensation and benefits packages.
Apparel represented approximately 8.4% of our net sales during fiscal year 2021 and includes camouflage, outerwear, sportswear, technical gear, work-wear, jackets and hats. We primarily offer well-known brands in our apparel department, such as Carhartt, Columbia and Sitka. We also intend to grow our private label apparel lines, including Rustic Ridge TM and Killik TM .
Apparel represented approximately 9.3% of our net sales during fiscal year 2022 and includes camouflage, outerwear, sportswear, technical gear, work-wear, jackets and hats. We primarily offer well-known brands in our apparel department, such as Carhartt, Columbia and Sitka. We also intend to grow our private label apparel lines, including Rustic Ridge TM and Killik TM .
Our stores average approximately 38,000 gross square feet. 8 Table of Contents ​ The following table lists the location by state of our 122 stores open as of January 29, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Stores ​ Number of Stores California ​ 14 ​ South Carolina ​ 3 Washington ​ 13 ​ Indiana ​ 2 Utah ​ 10 ​ Kentucky ​ 2 Arizona ​ 9 ​ New York ​ 2 Oregon ​ 8 ​ Tennessee ​ 2 Colorado ​ 7 ​ Florida ​ 1 Pennsylvania ​ 7 ​ Iowa ​ 1 Idaho ​ 6 ​ Louisiana ​ 1 Wyoming ​ 6 ​ Minnesota ​ 1 Alaska ​ 5 ​ Mississippi ​ 1 Michigan ​ 4 ​ Nebraska ​ 1 Nevada ​ 4 ​ North Dakota ​ 1 Montana ​ 3 ​ Virginia ​ 1 New Mexico ​ 3 ​ West Virginia ​ 1 North Carolina ​ 3 ​ ​ ​ ​ ​ ​ Store Design and Layout ​ We present our broad and deep array of products in a convenient and engaging atmosphere to meet the everyday needs of all outdoor enthusiasts, from the seasoned veteran to the first-time participant.
Our stores average approximately 38,000 gross square feet. 9 The following table lists the location by state of our 131 stores open as of January 28, 2023: Number of Stores Number of Stores California 16 Florida 3 Washington 13 North Carolina 3 Utah 12 Kentucky 2 Arizona 9 Tennessee 2 Oregon 8 New York 2 Colorado 8 Indiana 2 Pennsylvania 7 Minnesota 1 Wyoming 7 Virginia 1 Idaho 6 Ohio 1 Alaska 5 West Virginia 1 Nevada 4 Louisiana 1 Michigan 4 Mississippi 1 New Mexico 3 Iowa 1 Montana 3 North Dakota 1 South Carolina 3 Nebraska 1 Store Design and Layout We present our broad and deep array of products in a convenient and engaging atmosphere to meet the everyday needs of all outdoor enthusiasts, from the seasoned veteran to the first-time participant.
We also pride ourselves on the long tenure of our more than 300 store managers and corporate employees. ​ Our Growth Strategy ​ We are pursuing a number of strategies designed to continue our growth and strong financial performance, including the following: ​ Leveraging Our Omni-Channel Presence and Increasing Our Same Store Sales Growth .
We also pride ourselves on the long tenure of our almost 400 store managers and corporate employees. Our Growth Strategy We are pursuing a number of strategies designed to continue our growth and strong financial performance, including the following: Leveraging Our Omni-Channel Presence and Increasing Our Same Store Sales Growth .
Training room sessions are especially important for technical products, with numerous design features and a high unit price, because they enable our sales associates to better educate customers and provide additional assurance that a given product fits the customer’s needs. 20 Table of Contents ​ Available Information ​ Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available on our web site at www.sportsmans.com , free of charge, as soon as reasonably practicable after the electronic filing of these reports with, or furnishing of these reports to, the SEC.
Training room sessions are especially important for technical products, with numerous design features and a high unit price, because they enable our sales associates to better educate customers and provide additional assurance that a given product fits the customer’s needs. 22 Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available on our website at www.sportsmans.com , free of charge, as soon as reasonably practicable after the electronic filing of these reports with, or furnishing of these reports to, the SEC.
We believe our ship-to-store is a valuable service offering to customers, as well as a means to generate additional foot traffic to our retail stores. 10 Table of Contents We also have the ability to ship-from-store to fulfill customer orders.
We believe our ship-to-store is a valuable service offering to customers, as well as a means to generate additional foot traffic to our retail stores. We also have the ability to ship-from-store to fulfill customer orders.
We believe that our expansion of our store base and growth in net sales will result in improved Adjusted EBITDA margins as we take advantage of economies of scale in product sourcing and leverage our existing infrastructure, supply chain, corporate overhead and other fixed costs.
We believe the accelerating expansion of our store base and growth in net sales will result in improved Adjusted EBITDA margins over time, as we take advantage of economies of scale in product sourcing and leverage our existing infrastructure, supply chain, corporate overhead and other fixed costs.
Footwear represented approximately 6.8% of our net sales during fiscal year 2021 and includes work boots, technical footwear, hiking boots, trail shoes, socks, sport sandals and waders. As with apparel, our footwear selection offers a variety of technical performance features, such as different levels of support and types of tread, waterproofing, temperature control and visual attributes.
Footwear represented approximately 7.3% of our net sales during fiscal year 2022 and includes work boots, technical footwear, hiking boots, trail shoes, socks, sport sandals and waders. As with apparel, our footwear selection offers a variety of technical performance features, such as different levels of support and types of tread, waterproofing, temperature control and visual attributes.
We pride ourselves on carrying an extensive selection of branded good, better and best hard goods at everyday low prices. Approximately 39% of our unit sales and 19% of our dollar sales during fiscal year 2021 were consumables, such as ammunition, bait, cleaning supplies, food, certain lures, propane and reloading supplies.
We pride ourselves on carrying an extensive selection of branded good, better and best hard goods at everyday low prices. Approximately 42% of our unit sales and 20% of our dollar sales during fiscal year 2022 were consumables, such as ammunition, bait, cleaning supplies, food, certain lures, propane and reloading supplies.
We believe the support services provided by our highly trained staff technicians differentiate us from our competitors, increase customer loyalty and drive repeat traffic to our stores. 11 Table of Contents Products ​ Our stores are organized into six departments.
We believe the support services provided by our highly trained staff technicians differentiate us from our competitors, increase customer loyalty and drive repeat traffic to our stores. 12 Products Our stores are organized into six departments.
Sportsman’s Warehouse stores, true to their name, are designed in a “no frills” warehouse format that welcomes customers directly from or on the way to an outdoor activity.
Sportsman’s Warehouse stores, true to their name, are designed in a value engineered warehouse format that welcomes customers directly from or on the way to an outdoor activity.
Our footwear department includes brands such as Danner, Keen, Merrell, Red Wing and Hey Dude. ​ Hunting and Shooting . Hunting and shooting is our largest merchandise department, representing approximately 54.2% of our net sales during fiscal year 2021.
Our footwear department includes brands such as Crispi, Danner, Keen, Merrell, Red Wing and Hey Dude. Hunting and Shooting . Hunting and shooting is our largest merchandise department, representing approximately 54.9% of our net sales during fiscal year 2022.
We are committed to leveraging our omni-channel presence and increasing same store sales through a number of ongoing and new initiatives, including (i) improving the user experience on our website through continuous category optimization and personalization and product recommendations for online shopping, (ii) expanding our product assortment and SKU count online (with the assistance of our vendor partners through drop ship and our Federal Firearms License (“FFL”) dealer partners), refining our buy online, pick-up in store capabilities, expanding our apparel, footwear, and camping offerings and private label program (such as our proprietary Rustic Ridge™ and Killik™ apparel lines) and (iii) expanding our online content and expertise through live Q&A and customer reviews and providing exclusive online content, including news, buyer’s guide and how to’s, accessory finders, and wild game recipes.
We are committed to leveraging our omni-channel presence and increasing same store sales through a number of ongoing and new initiatives, including (i) improving the user experience on our website through continuous category optimization and personalization and product recommendations for online shopping, (ii) growing our consumer databases and leveraging them to drive revenue and the long term value of our customers, (iii) expanding our product assortment and SKU count online (with the assistance of our vendor partners through drop ship and our Federal Firearms License (“FFL”) dealer partners), refining our buy online, pick-up in store capabilities, expanding our apparel, footwear, and camping offerings and private label program (such as our proprietary Rustic Ridge™ and Killik™ apparel lines) and (iv) expanding our online content and expertise through live Q&A, product reviews, user-generated imagery, and providing exclusive online informational and education content, including news, buyer’s guide and how to’s, accessory finders, and wild game recipes.
Fishing represented approximately 10.0% of our net sales during fiscal year 2021 and includes products for fresh-water fishing, salt-water fishing, fly-fishing, ice-fishing and boating. Our broad assortment appeals to the beginning and weekend angler, as well as avid and tournament anglers.
Fishing represented approximately 8.9% of our net sales during fiscal year 2022 and includes products for fresh-water fishing, salt-water fishing, fly-fishing, ice-fishing and boating. Our broad assortment appeals to the beginning and weekend angler, as well as avid and tournament anglers.
We believe that our flexible box size, combined with our low-cost, high-service model, also allows us to enter into and serve smaller markets that our larger competitors cannot penetrate as effectively.
We believe that our flexible store format, combined with our low-cost, high-service model, also allows us to enter and serve smaller markets that our larger competitors cannot penetrate as effectively.
Camping represented approximately 13.1% of our net sales during fiscal year 2021. Our camping assortment addresses both the technical requirements of the heavy-use camper, including gear for long-duration or deep-woods excursions, as well as the needs of the casual camper.
Camping represented approximately 12.5% of our net sales during fiscal year 2022. Our camping assortment addresses both the technical requirements of the heavy-use camper, including gear for long-duration or deep-woods excursions, as well as the needs of the casual camper.
We offer products for boat care and maintenance, as well as safety equipment and aquatic products such as float tubes and pontoons. All of our stores also sell fishing licenses. Our fishing department includes brands such as Johnson Outdoors, Normark, Plano, Pure Fishing, Rivers Wild Flies, Orvis and Shimano. ​ Footwear .
We offer products for boat care and maintenance, as well as safety equipment and aquatic products such as float tubes and pontoons. All of our stores also sell fishing licenses. Our fishing department includes brands such as Johnson Outdoors, Normark, Plano, Pure Fishing, RoundRocks Fly Supply Co., Orvis and Shimano. Footwear .
Our experienced distribution management team leads a staff of approximately 700 employees at peak inventory levels heading into the fourth quarter. ​ The distribution center has dynamic systems and processes that we believe can accommodate continued new store growth. We use the HighJump Warehouse Management System (“WMS”) to manage all activities.
Our experienced distribution management team leads a staff of approximately 600 employees at peak inventory levels heading into the fourth quarter. 15 The distribution center has dynamic systems and processes that we believe can accommodate continued new store growth. We use the Warehouse Management System (“WMS”) technology from Korber, also known as HighJump, to manage all activities.
As of the end of fiscal year 2021, the majority of our stores that had been open for more than twelve months were profitable and those stores had an average four-wall Adjusted EBITDA margin of 17.2%.
As of the end of fiscal year 2022, the majority of our stores that had been open for more than twelve months were profitable and those stores had an average four-wall Adjusted EBITDA margin of 14.6%.
The rewards points expire after 12 months of dormancy. ​ In addition, we offer our customers the multi-use Explorewards VISA Credit Card and the Explorewards Credit Card issued by Comenity Bank. Comenity Bank extends credit directly to cardholders and provides all servicing for the credit card accounts, funds the rewards and bears all credit and fraud losses.
In addition, we offer our customers the multi-use Explorewards VISA Credit Card and the Explorewards Credit Card issued by Comenity Bank. Comenity Bank extends credit directly to cardholders and provides all servicing for the credit card accounts, funds the rewards and bears all credit and fraud losses.
We strive to provide competitive compensation and benefits packages, opportunities for advancement, and extensive training programs and learning opportunities for our employees. ​ As of January 29, 2022, we had approximately 7,700 total employees.
We strive to provide competitive compensation and benefits packages, opportunities for advancement, and extensive training programs and learning opportunities for our employees. As of January 28, 2023, we had approximately 6,700 total employees.
However, laws and regulations may be changed, accelerated or adopted that impose significant operational restrictions and compliance requirements upon us and which could negatively impact our operating results and financial condition. See Item 1A, “Risk Factors—Risks Related to the Firearms Business”. ​ Human Capital ​ We appreciate the importance of retention, growth and development of our employees.
However, laws and regulations may be changed, accelerated or adopted that impose significant operational restrictions and compliance requirements upon us and which could negatively impact our operating results and financial condition. See Item 1A, “Risk Factors—Risks Related to the Firearms Business”.
All of our managers and sales associates undergo focused sales training, consisting of both sales techniques and specialized product instruction, both immediately upon hiring (approximately 20 hours) and continuing throughout their career (approximately 16 hours annually). In addition, our sales associates receive loss prevention instruction and departmental training upon hiring.
Our managers and sales associates undergo focused sales training, consisting of both sales techniques and specialized product instruction, both immediately upon hiring (approximately 20 hours) and continuing throughout their career (approximately 16 hours annually).
We have been successful both in remodeling existing buildings and in constructing new build-to-suit locations. ​ Our store model is designed to be profitable in a variety of real estate venues, including power, neighborhood and lifestyle centers as well as single-unit, stand-alone locations. In small- to medium-sized markets, we generally seek anchor locations within high-traffic, easily accessible shopping centers.
Our store model is designed to be profitable in a variety of real estate venues, including power, neighborhood and lifestyle centers as well as single-unit, stand-alone locations. In small- to medium-sized markets, we generally seek anchor locations within high-traffic, easily accessible shopping centers.
We have the capability to both case pick and item pick, which is designed to ensure that our stores have sufficient quantities of product while also allowing us to maintain appropriate in-stock levels.
We have the capability to both case pick and item pick, which is designed to ensure that our stores have sufficient quantities of product while also allowing us to maintain appropriate in-stock levels. This balance allows us to effectively manage inventory and maximize sales in stores.
We select sites based on criteria such as local demographics, traffic patterns, density of hunting and fishing license holders in the area, abundance of hunting and fishing game and outdoor recreation activities, store visibility and accessibility, purchase data from our existing customer database and availability of attractive lease terms.
We select sites using technology to create models and evaluate thousands of data points, including criteria such as local demographics, traffic patterns, density of hunting and fishing license holders in the area, abundance of hunting and fishing game and outdoor recreation activities, store visibility and accessibility, purchase data from our existing customer database and availability of attractive lease terms.
Our Real Estate Committee, which is comprised of members of our senior management, including our Chief Executive Officer, Chief Financial Officer, Vice President of Real Estate, and Senior Vice President of Stores, approves all prospective locations before a lease is signed. ​ We opened 10 new stores in fiscal year 2021.
Our Real Estate Committee, which is comprised of members of our senior management, including our Chief Executive Officer, Chief Financial Officer, Vice President of Real Estate, and Senior Vice President of Stores, approves all prospective locations before a lease is signed.
Our net investment to open a new store is approximately $2.4 million, consisting of pre-opening expenses and capital investments, net of tenant allowances. In addition, we stock each new store with initial inventory at an average cost of approximately $2.4 million.
Our typical new store requires an average net investment of approximately $2.6 million, consisting of pre-opening expenses and capital investments, net of tenant allowances. In addition, we stock each new store with initial inventory at an average cost of approximately $2.1 million.
During such visits, our customers frequently browse and purchase other items, including additional gear and accessories. ​ We also carry a variety of private label and special make-up offerings under the Rustic Ridge TM , Killik TM , Vital Impact TM , Yukon Gold, Lost Creek and Sportsman’s Warehouse brands as well as special make-up items through vendors such as Tikka, Weatherby, Camp Chef and various others.
We also carry a variety of private label and special make-up offerings under the Rustic Ridge TM , Killik TM , Vital Impact TM , Yukon Gold, Lost Creek and Sportsman’s Warehouse brands as well as special make-up items through vendors such as Tikka, Weatherby, Camp Chef and various others.
Lifestyle centers are shopping centers that combine the traditional functions of a shopping mall with leisure amenities such as pedestrian friendly areas, open air seating and inviting meeting spaces. We also operate several single-unit, stand-alone locations.
Neighborhood centers are shopping centers anchored by a supermarket or drugstore that provide convenience goods and services to a neighborhood. Lifestyle centers are shopping centers that combine the traditional functions of a shopping mall with leisure amenities such as pedestrian friendly areas, open air seating and inviting meeting spaces. We also operate several single-unit, stand-alone locations.
The system allows for custom-created reports as required. ​ Intellectual Property ​ Sportsman’s Warehouse ® , Sportsman’s Warehouse America’s Premier Outfitter ® , Lost Creek ® , LC Lost Creek Fishing Gear and Accessories ® , Rustic Ridge TM , Killik TM , K Killik & Design TM , LC & Design TM , and Vital Impact TM are among our service marks or trademarks registered with the United States Patent and Trademark Office.
Intellectual Property Sportsman’s Warehouse ® , Sportsman’s Warehouse America’s Premier Outfitter ® , Lost Creek ® , LC Lost Creek Fishing Gear and Accessories ® , Rustic Ridge TM , Killik TM , K Killik & Design TM , LC & Design TM , Vital Impact TM , and The American Parts Company - TAPCO TM are among our service marks or trademarks registered with the United States Patent and Trademark Office.
The redemption card is then mailed to the customer and operates as a gift card to be used for in-store and/or online purchasing. In addition, customers may choose to redeem loyalty rewards at the point-of-sale to be applied against in-store purchases.
The redemption card is then emailed to the customer and operates as an electronic gift card to be used for in-store and/or online purchasing. In addition, customers may choose to redeem loyalty rewards at the point-of-sale to be applied against in-store purchases. The rewards points expire after 12 months of dormancy.
We believe our existing infrastructure, including distribution, omni-channel capabilities, information technology, loss prevention and employee training, is capable of sustaining our current growth plans without significant additional capital investment, although we may determine to invest in our existing infrastructure to prepare for future growth. ​ Strategic Acquisitions.
We believe our existing infrastructure, including distribution, omni-channel capabilities, information technology, loss prevention and employee training, is capable of sustaining our current growth plans without significant additional capital investment, although we may determine to invest in our existing infrastructure to prepare for future growth. We currently anticipate the need to open a second distribution center in fiscal year 2024.
The Explorewards Visa Card allows customers to earn points whenever and wherever they use their card while the Explorewards Credit Card can be used only in Sportsman’s Warehouse stores and at Sportsman.com.
The Explorewards Visa Card allows customers to earn points whenever and wherever they use their card while the Explorewards Credit Card can be used only in Sportsman’s Warehouse stores and at Sportsman.com. Customers may redeem earned points for products and services just as they would redeem loyalty card points.
Our IT infrastructure is robustly designed to be able to access real-time data from any store or channel. The network infrastructure allows us to quickly and cost effectively add new stores to the wide area network (“WAN”). The private WAN is built on a CenturyLink backbone with all of its resources and support.
Our IT infrastructure is designed to be able to access real-time data from any store or channel. The network infrastructure allows us to quickly and cost effectively add new stores to the wide area network (“WAN”). The private WAN is built on a CenturyLink backbone. Additionally, we have implemented a redundant wireless WAN on Verizon’s infrastructure.
We have also rolled out our social media strategy through our Facebook page and Instagram feed. These platforms allow us to reach our customers more directly with targeted postings of advertisements and in-store events. We leverage technology that aggregates customer location, browsing behavior and purchase history to present a personalized shopping experience.
We are also highly engaged with hundreds of thousands of social media followers on our Facebook and Instagram pages. These platforms allow us to reach our customers more directly with targeted postings of advertisements and in-store events. We leverage technology that aggregates customer location, browsing behavior and purchase history to present a personalized shopping experience.
Our goal in these refreshes is to keep the stores fresh with updated lifestyle type graphics, improving the flow of our merchandise and store to our customer, enhance our technological capabilities within the stores to ensure we are meeting the needs of every customer, and make the stores more energy efficient. ​ In the last 18 months we have also completed a test concept of a very small format store in Laramie Wyoming.
Our goal in these refreshes is to keep the stores fresh with updated lifestyle type graphics, improving the flow of our merchandise and store to our customer, enhance our technological capabilities within the stores to ensure we are meeting the needs of every customer, and make the stores more energy efficient.
Our advertising medium is typically newspaper inserts (primarily multi-page color inserts during key shopping periods such as the Christmas season and Father’s Day), supplemented with modest amounts of digital advertising, email, radio and national television ads.
Our regional and national advertising programs emphasize seasonal requirements for hunting, fishing and camping in our various store geographies. Our advertising medium is typically digital advertising and newspaper inserts (primarily multi-page color inserts during key shopping periods such as the Christmas season and Father’s Day) supplemented with modest amounts of email, radio and national television ads.
Other state or local governmental entities may also explore similar legislative or regulatory initiatives that may further restrict the manufacture, sale, purchase, possession or use of firearms, ammunition and shooting-related products. ​ The Protection of Lawful Commerce in Arms Act (“PLCAA”), which became effective in October 2005, prohibits civil liability actions from being brought or continued in any federal or state court against federally licensed manufacturers, distributors, dealers or importers of firearms or ammunition for damages, punitive damages, injunctive or declaratory relief, abatement, restitution, fines, penalties or other relief resulting from the criminal or unlawful misuse of a qualified product by third parties.
The Protection of Lawful Commerce in Arms Act (“PLCAA”), which became effective in October 2005, prohibits civil liability actions from being brought or continued in any federal or state court against federally licensed manufacturers, distributors, dealers or importers of firearms or ammunition for damages, punitive damages, injunctive or declaratory relief, abatement, restitution, fines, penalties or other relief resulting from the criminal or unlawful misuse of a qualified product by third parties.
The NFA and GCA require our business to, among other things, maintain Federal Firearms Licenses (FFLs”) for our locations and perform a pre-transfer background check in connection with firearms purchases.
The NFA and GCA require our business to, among other things, maintain FFLs for our locations and perform a pre-transfer background check in connection with each firearm purchase.
We proactively modify the timing and content of our message to match local and regional preferences, changing seasons, weather patterns and topography of a given region. Additionally, we sponsor several regional television and radio programs.
We proactively modify the timing and content of our message to match local and regional preferences, changing seasons, weather patterns and topography of a given region. Additionally, we sponsor several regional television and radio programs. Our total marketing expense for fiscal year 2022 was approximately $23.8 million.
This department supplements our other equipment departments with complementary products, such as optics (including binoculars, spotting scopes and rangefinders), GPS devices and other navigation gear, GoPro video cameras, two-way radios, specialized and basic cutlery and tools, including hunting knives, lighting, bear spray and other accessories.
Our optics, electronics, accessories and other department represented approximately 7.1% of our net sales during fiscal year 2022. This department supplements our other equipment departments with complementary products, such as optics (including binoculars, spotting scopes and rangefinders), GPS devices and other navigation gear, two-way radios, specialized and basic cutlery and tools, including hunting knives, lighting, bear spray and other accessories.
These cameras are monitored locally and centrally at our headquarters in our dedicated surveillance room. Our sophisticated systems are a key factor in our shrink rates of approximately 1% and an important component of our comprehensive compliance program. 9 Table of Contents ​ Expansion Opportunities and Site Selection ​ We have developed a rigorous and flexible process for site selection.
Our sophisticated systems are a key factor in our shrink rates of approximately 1% and an important component of our comprehensive compliance program. Expansion Opportunities and Site Selection We have developed a rigorous and flexible process for site selection.
After the first 18 to 24 month period after opening a new store, we typically have a four-wall Adjusted EBITDA margin of more than 10% and a pre-tax return on invested capital of over 50% excluding initial inventory cost (or over 20% including initial inventory cost).
After the first 24 month period after opening a new store, we typically have a four-wall Adjusted EBITDA margin of more than 10% and a pre-tax return on invested capital of over 40% excluding initial inventory cost (or over 20% including initial inventory cost). Omni-Channel Strategy We believe our website is an extension of our brand and our retail stores.
Certain states require a state license to sell firearms and/or ammunition and we have obtained these licenses for the states in which we operate that have such a requirement. ​ We must comply with federal, state and local laws and regulations, including the National Firearms Act of 1934 (the “NFA”), the Gun Control Act of 1968 (the “GCA”), the Arms Export Control Act of 1976 and Internal Revenue Code provisions applicable to the Firearms and Ammunition Excise Tax, all of which have been amended from time to time.
We must comply with federal, state and local laws and regulations, including the National Firearms Act of 1934 (the “NFA”), the Gun Control Act of 1968 (the “GCA”), the Arms Export Control Act of 1976 and provisions of the Internal Revenue Code of 1986, as amended, applicable to the Firearms and Ammunition Excise Tax, all of which have been amended from time to time.
We believe it is less capital-intensive for us to open new stores compared to our principal competitors because our “no frills” store layout requires less initial cash investment to build out and our stores generally require less square footage than the stores of our competitors.
Our store layout is adaptable to both standalone locations and strip centers. We believe it is less capital-intensive for us to open new stores compared to our principal competitors because our value engineered store layout requires lower initial cash investments to build out and our stores generally require less square footage than the stores of our large retail competitors.
We actively engage our customers through in-store features (such as the “Braggin’ Board”), various contests (such as Bucks & Bulls and Fish Alaska), and customer-owned taxidermy displays on the walls. We also host in-store programs (such as ladies’ night) and a wide range of instructional seminars (such as Dutch oven cooking and choosing the right binocular).
We actively engage our customers through in-store features (such as sharing local fishing reports), various contests (such as free-to-enter fishing and hunting contests), and customer-owned taxidermy displays on the walls. We also host in-store programs (such as ladies’ night and local events) and a wide range of educational seminars (such as Dutch oven cooking and choosing the right binocular).
In addition, we host a variety of in-store programs (such as ladies’ night), contests (such as Bucks & Bulls, a free-to-enter big-game trophy contest) and a wide range of instructional seminars (such as turkey frying and firearm operation and safety).
In addition, we host a variety of in-store programs (such as ladies’ nights and local events), contests (such as free-to-enter big-game trophy contests), thousands of educational seminars (such as turkey frying and firearm operation and safety).
We believe this fragmentation within the total addressable market presents an attractive opportunity for us to continue to expand our market share, as customers increasingly prefer a broad and appealing selection of merchandise, competitive prices, high levels of service and one-stop shopping convenience. 17 Table of Contents ​ Seasonality ​ We experience moderate seasonal fluctuations in our net sales and operating results as a result of holiday spending and the opening of hunting seasons.
We believe this fragmentation within the total addressable market presents an attractive opportunity for us to continue to expand our market share, as customers increasingly prefer a broad and appealing selection of merchandise, competitive prices, high levels of service and one-stop shopping convenience.
Key operating systems include Oracle Applications for ERP, SAP Commerce for our e-commerce channel, Retail.net and JPOS for in-store functionality, and HighJump for WMS. Our physical infrastructure is also built on products from premier vendors Cisco, Dell, Oracle Sun and VMWare.
Key operating systems include Oracle Applications for enterprise resource planning (“ERP”), system application processing (“SAP”) Commerce for our e-commerce channel, Retail.net and Java point of sale (“JPOS”) for in-store functionality, and HighJump for WMS. Our physical infrastructure is also built on products from premier vendors Cisco, Dell, Oracle Sun and VMWare.
We believe our level of employee store patronage and employee expertise are unique among our competitors in this industry and enhances our differentiated shopping experience. ​ We took early action regarding employee well-being in response to the COVID-19 pandemic, implementing comprehensive protocols to protect the health and safety of our employees and guests. ​ We believe that the recruitment, training and knowledge of our employees and the consistency and quality of the service they deliver are central to our success.
We believe our level of employee store patronage and employee expertise are unique among our competitors in this industry and enhances our differentiated shopping experience. We believe that the recruitment, training and knowledge of our employees and the consistency and quality of the service they deliver are central to our success.
In fiscal year 2021, our website received more than 100.8 million visits, which we believe demonstrates our position as a leading resource for outdoor products and product education. ​ Our Products and Services ​ Merchandise Strategy ​ We offer a broad range of products at a variety of price points and carry a deep selection of branded merchandise from well-known manufacturers, such as Browning, Carhartt, Coleman, Columbia Sportswear, Federal Premium Ammunition, Honda, Johnson Outdoors, Crispi, Camp Chef, Shakespeare, Shimano, Smith & Wesson and Ruger.
Our Products and Services Merchandise Strategy We offer a broad range of products at a variety of price points and carry a deep selection of branded merchandise from well-known manufacturers, such as Browning, Carhartt, Coleman, Columbia Sportswear, Federal Premium Ammunition, Honda, Johnson Outdoors, Crispi, Camp Chef, Shakespeare, Shimano, Smith & Wesson and Ruger.
Additionally, we have implemented a redundant wireless WAN on Verizon’s infrastructure. All key systems will continue to run in the event of a power or network outage. All data is backed up daily from one storage array to another storage array. ​ We have implemented what we believe to be best-in-class software for all of our major business-critical systems.
All key systems are designed to run in the event of a power or network outage. All data is scheduled to be backed up daily from one storage array to another storage array. 16 We have implemented software for all of our major business-critical systems.
The information provided on our website is not part of this report and is, therefore, not incorporated herein by reference. ​
We may post information that is important to investors on our website from time to time. The information provided on our website is not part of this report and is, therefore, not incorporated herein by reference.
This balance allows us to effectively manage inventory and maximize sales in stores. 14 Table of Contents ​ Marketing and Advertising ​ We believe, based on internal surveys, that the majority of our customers are male, between the ages of 35 and 65, and have an annual household income between $40,000 and $100,000.
Marketing and Advertising We believe, based on internal surveys, that the majority of our customers are male, between the ages of 35 and 65, and have an annual household income between $40,000 and $100,000.
We target acquisitions that will be accretive to our margins and profitability, provide content, private label expansion, or capabilities that would deliver efficiencies in operations and customer acquisition retention.
We target acquisitions that will be accretive to our margins and profitability, provide content, private label expansion, or capabilities that would deliver efficiencies in operations and customer acquisition retention. We have a proven track record of successfully executing around strategic acquisitions and will continue to look for complementary targets.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe future impact of the COVID-19 pandemic will depend on a number of future developments, which are highly uncertain and cannot be predicted, including, not limited to the duration, spread and severity of the COVID-19 outbreak, any resurgence of COVID-19, the effects of the outbreak on our customers and vendors, including any labor shortages experienced by any of our vendors, and the remedial actions and stimulus measures adopted by local and federal governments. ​ Our retail-based business model is impacted by general economic and market conditions, and ongoing economic, market and financial uncertainties, including uncertainties surrounding the impact of COVID-19, may cause a decline in consumer spending that may adversely affect our business, operations, liquidity, financial results and stock price. ​ As a retail business that depends on consumer discretionary spending, we may be adversely affected if our customers reduce, delay or forego their purchases of our products as a result of job losses, bankruptcies, higher consumer debt and interest rates, increases in inflation, higher energy and fuel costs, reduced access to credit, fluctuations in home prices and other adverse conditions in the mortgage and housing markets, lower consumer confidence, uncertainty or changes in tax policies and tax rates, uncertainty due to potential national or international security concerns and adverse or unseasonal weather conditions.
Biggest changeAs a retail business that depends on consumer discretionary spending, we may continue to be adversely affected if our customers reduce, delay or forego their purchases of our products as a result of job losses, bankruptcies, higher consumer debt and interest rates, increases in inflation, higher energy and fuel costs, reduced access to credit, fluctuations in home prices and other adverse conditions in the mortgage and housing markets, lower consumer confidence, uncertainty or changes in tax policies and tax rates, uncertainty due to potential national or international security concerns, adverse or unseasonal weather conditions and uncertainty related to the ongoing COVID-19 pandemic.
As a result, our ability to borrow is subject to certain risks and uncertainties, such as a deterioration in the quality of our inventory (which is the largest asset in our borrowing base), a decline in sales activity and the collection of our receivables, which could reduce the funds available to us under our revolving credit facility. ​ We cannot assure you that our cash flow from operations or cash available under our revolving credit facility will be sufficient to meet our needs.
As a result, our ability to borrow is subject to certain risks and uncertainties, such as a deterioration in the quality of our inventory (which is the largest asset in our borrowing base), a decline in sales activity and the collection of our receivables, which could reduce the funds available to us under our revolving credit facility. 34 We cannot assure you that our cash flow from operations or cash available under our revolving credit facility will be sufficient to meet our needs.
Because we carry these products, such legislation could, depending on its scope, materially harm our sales. ​ Additionally, state and local governments have proposed laws and regulations that, if enacted, would place additional restrictions on the manufacture, transfer, sale, purchase, possession and use of firearms, ammunition and shooting-related products.
Because we carry these products, such legislation could, depending on its scope, materially harm our sales. Additionally, state and local governments have proposed laws and regulations that, if enacted, would place additional restrictions on the manufacture, transfer, sale, purchase, acquisition, possession and use of firearms, ammunition and shooting-related products.
Moreover, complying with increased or changed regulations could cause our operating expenses to increase. ​ We may incur costs from litigation relating to products that we sell, particularly firearms and ammunition, which could adversely affect our net sales and profitability. ​ We may incur damages due to lawsuits relating to products we sell, including lawsuits relating to firearms, ammunition, tree stands and archery equipment.
Moreover, complying with increased or changed regulations could cause our operating expenses to increase. We may incur costs from litigation involving products that we sell, particularly firearms and ammunition, which could adversely affect our net sales and profitability. We may incur damages due to lawsuits involving products we sell, including lawsuits relating to firearms, ammunition, tree stands and archery equipment.
For example, in response to mass shootings and other incidents in the United States, several states, such as Colorado, Connecticut, Florida, Maryland, Minnesota, New Jersey, and New York, have enacted laws and regulations that limit access to and sale of certain firearms in ways more restrictive than federal laws.
For example, in response to mass shootings and other incidents in the United States, several states, such as Colorado, Connecticut, Florida, Maryland, Minnesota, New Jersey, New York, and Washington have enacted laws and regulations that limit access to and sale of certain firearms in ways more restrictive than federal laws.
Changes in these laws and regulations or additional regulation, particularly new laws or increased regulations regarding sales and ownership of firearms and ammunition, could cause the demand for and sales of our products to decrease and could materially adversely impact our net sales and profitability.
Changes in these laws and regulations or additional regulations, particularly new laws or increased regulations regarding sales and ownership of firearms and ammunition, could cause the demand for and sales of our products to decrease and could materially adversely impact our net sales and profitability.
In addition, claims or lawsuits related to products that we sell, or the unavailability of insurance for product liability claims, could result in the elimination of these products from our product line, thereby reducing net sales.
In addition, claims or lawsuits 24 related to products that we sell, or the unavailability of insurance for product liability claims, could result in the elimination of these products from our product line, thereby reducing net sales.
In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our board of directors.
In addition, these provisions may frustrate or prevent any 35 attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our board of directors.
In general, subject to some exceptions, Section 203 prohibits a Delaware corporation from engaging in any “business combination” with any “interested stockholder” (which is generally defined as an entity or person who, together with the person’s affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did 31 Table of Contents own, 15% or more of the outstanding voting stock of the corporation), for a three-year period following the date that the stockholder became an interested stockholder.
In general, subject to some exceptions, Section 203 prohibits a Delaware corporation from engaging in any “business combination” with any “interested stockholder” (which is generally defined as an entity or person who, together with the person’s affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation), for a three-year period following the date that the stockholder became an interested stockholder.
On average over the last three fiscal years, we have generated 26.8% and 28.9% of our annual net sales in the third and fourth fiscal quarters, respectively, which includes the holiday selling season as well as the opening of the fall hunting season.
On average over the last three fiscal years, we have generated 26.3% and 28.3% of our annual net sales in the third and fourth fiscal quarters, respectively, which includes the holiday selling season as well as the opening of the fall hunting season.
Although we believe that our private brand products offer value to our customers at each price point and provide us with higher gross margins than comparable third-party branded products we sell, the expansion of our private brand offerings also subjects us to certain specific risks in addition to those discussed elsewhere in this section, such as: ​ ● potential mandatory or voluntary product recalls; ​ ● our ability to successfully protect our proprietary rights (including defending against counterfeit, knock offs, grey-market, infringing or otherwise unauthorized goods); ​ ● our ability to successfully navigate and avoid claims related to the proprietary rights of third parties; ​ ● our ability to successfully administer and comply with obligations under license agreements that we have with the licensors of brands, including, in some instances, certain minimum sales requirements that, if not met, could cause us to lose the licensing rights or pay damages; and ​ ● other risks generally encountered by entities that source, sell and market exclusive branded offerings for retail. ​ An increase in sales of our private brands may also adversely affect sales of our vendors’ products, which may, in turn, adversely affect our relationship with our vendors.
Although we believe that our private brand products offer value to our customers at each price point and provide us with higher gross margins than comparable third-party branded products we sell, the expansion of our private brand offerings also subjects us to certain specific risks in addition to those discussed elsewhere in this section, such as: • potential mandatory or voluntary product recalls; • our ability to successfully protect our proprietary rights (including defending against counterfeit, knock offs, grey-market, infringing or otherwise unauthorized goods); • our ability to successfully navigate and avoid claims related to the proprietary rights of third parties; • our ability to successfully administer and comply with obligations under license agreements that we have with the licensors of brands, including, in some instances, certain minimum sales requirements that, if not met, could cause us to lose the licensing rights or pay damages; and • other risks generally encountered by entities that source, sell and market exclusive branded offerings for retail.
Other factors that may impact our ability to open or acquire stores in new markets and operate them profitably, many of which are beyond our control, include: ​ ● our ability to identify suitable locations, including our ability to gather and assess demographic and marketing data to determine consumer demand for our products in the locations we select; ​ ● our ability to obtain financing on favorable terms or negotiate favorable lease agreements; ​ ● our ability to properly assess the profitability of potential new retail store locations; ​ ● our ability to successfully rebrand any new stores we acquire and integrate such stores into our existing operations; ​ ● our ability to secure required governmental permits and approvals; ​ ● our ability to attract, hire and train skilled store operating personnel, especially management personnel; ​ 27 Table of Contents ● the availability of construction materials and labor and the absence of significant construction delays or cost overruns; ​ ● our ability to provide a satisfactory mix of merchandise that is responsive to the needs of our customers living in the areas where new retail stores are built; ​ ● our ability to supply new retail stores with inventory in a timely manner; ​ ● our competitors building or leasing stores near our retail stores or in locations we have identified as targets for a new retail store; ​ ● consumer demand for our products, particularly firearms and ammunition, which drives traffic to our retail stores; ​ ● regional economic and other factors in the geographies in which we expand; and ​ ● general economic, political, and business conditions affecting consumer confidence and spending and the overall strength of our business. ​ Once we decide on a new market and find a suitable location, any delays in opening or acquiring new stores could impact our financial results.
Other factors that may impact our ability to open or acquire stores in new markets and operate them profitably, many of which are beyond our control, include: • our ability to identify suitable locations, including our ability to gather and assess demographic and marketing data to determine consumer demand for our products in the locations we select; • our ability to obtain financing on favorable terms or negotiate favorable lease agreements; • our ability to properly assess the profitability of potential new retail store locations; • our ability to successfully rebrand any new stores we acquire and integrate such stores into our existing operations; • our ability to secure required governmental permits and approvals; • our ability to attract, hire and train skilled store operating personnel, especially management personnel; • the availability of construction materials and labor and the absence of significant construction delays or cost overruns; 30 • our ability to provide a satisfactory mix of merchandise that is responsive to the needs of our customers living in the areas where new retail stores are built; • our ability to supply new retail stores with inventory in a timely manner; • our competitors building or leasing stores near our retail stores or in locations we have identified as targets for a new retail store; • consumer demand for our products, particularly firearms and ammunition, which drives traffic to our retail stores; • regional economic and other factors in the geographies in which we expand; and • general economic, political, and business conditions affecting consumer confidence and spending and the overall strength of our business.
See Note 16 to our Consolidated Financial Statements for additional information on the resolution of this litigation. Our insurance coverage and the insurance provided by our vendors for certain products they sell to us may be inadequate to cover claims and liabilities related to products that we sell.
See Note 15 to our Consolidated Financial Statements for additional information on the resolution of this litigation. Our insurance coverage, as well as the insurance provided by our vendors for certain products they sell to us may be inadequate to cover claims and liabilities related to products that we sell.
In fiscal year 2020 and 2021, 62 and 53 of our stores, respectively, were impacted by minimum wage increases, which increased our selling, general and administrative expenses. Base wage rates for some of our employees are at or slightly above the minimum wage.
In fiscal year 2021 and 2022, 53 and 55 of our stores, respectively, were impacted by minimum wage increases, which increased our selling, general and administrative expenses. Base wage rates for some of our employees are at or slightly above the minimum wage.
These provisions include: ​ ● establishing a classified board of directors; ​ ● providing that directors may be removed only for cause; ​ ● not providing for cumulative voting in the election of directors; ​ ● requiring at least a supermajority vote of our stockholders to amend our bylaws or certain provisions of our certificate of incorporation; ​ ● eliminating the ability of stockholders to call special meetings of stockholders; ​ ● establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings; ​ ● authorizing the issuance of “blank check” preferred stock without any need for action by stockholders. ​ In addition, we are subject to Section 203 of the Delaware General Corporation Law.
These provisions include: • establishing a classified board of directors; • providing that directors may be removed only for cause; • not providing for cumulative voting in the election of directors; • requiring at least a supermajority vote of our stockholders to amend our bylaws or certain provisions of our certificate of incorporation; • eliminating the ability of stockholders to call special meetings of stockholders; • establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings; • authorizing the issuance of “blank check” preferred stock without any need for action by stockholders.
The market price for our common stock could fluctuate significantly for various reasons, including, among other things, our operating and financial performance; conditions that impact demand for our products; the public’s reaction to our press releases or other public announcements; changes in earnings estimates or recommendations by securities analysts; market and industry perception of our success, or lack thereof, in pursuing our growth strategy; strategic actions by us or our competitors, such as acquisitions, store closures, or restructurings; actual or anticipated changes in federal and state government regulation, including regulations related to the sale of firearms and ammunition; sales of common stock by us or members of our management team; and changes in general market, economic and political conditions in the United States, including those resulting from natural disasters, health crises or pandemics (including COVID-19), terrorist attacks, acts of war and responses to such events. ​ In addition, if the market for stocks in our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations.
The market price for our common stock could fluctuate significantly for various reasons, including, among other things, our operating and financial performance; conditions that impact demand for our products; the public’s reaction to our press releases or other public announcements; changes in earnings estimates or recommendations by securities analysts; market and industry perception of our success, or lack thereof, in pursuing our growth strategy; strategic actions by us or our competitors, such as acquisitions, store closures, or restructurings; actual or anticipated changes in federal and state government regulation, including regulations related to the sale of firearms and ammunition; sales of common stock by us or members of our management team; and changes in general market, economic and political conditions in the United 36 States, including those resulting from natural disasters, health crises or pandemics (including COVID-19), terrorist attacks, acts of war and responses to such events.
Further, if any of our significant vendors were to become subject to bankruptcy, receivership or similar proceedings, we may be unable to arrange for alternate or replacement products, transactions or business relationships on favorable terms, or at all, which could adversely affect our sales and operating results. ​ We depend on merchandise purchased from our vendors to obtain products for our stores.
Further, if any of our significant 27 vendors were to become subject to bankruptcy, receivership or similar proceedings, we may be unable to arrange for alternate or replacement products, transactions or business relationships on favorable terms, or at all, which could adversely affect our sales and operating results.
Other state or local governmental entities may continue to explore similar legislative or regulatory restrictions that could prohibit the manufacture, sale, purchase, possession or use of firearms and ammunition. In New York and Connecticut, mandatory screening of ammunition purchases is now required.
Other state or local governmental entities may continue to explore similar legislative or regulatory restrictions that could prohibit the manufacture, sale, purchase, possession or use of firearms and ammunition. In New York and Connecticut, mandatory screening of ammunition purchases is now required, as well as electronic recordkeeping that will be audited by the state.
Accordingly, in evaluating our business, we encourage you to consider the following discussion of risk factors, in its entirety, in addition to other information contained in or incorporated by reference into this 10-K and our other public filings with the SEC.
Accordingly, in evaluating our business, we encourage you to consider the following discussion of risk factors, in its entirety, in addition to other information contained in or incorporated by reference into this 10-K, including our consolidated financial statements and the related notes appearing at the end of this 10-K, and our other public filings with the SEC.
Environmental changes and disease epidemics affecting fish or game populations in any concentrated region may also affect our sales. In addition, adverse weather conditions and the impacts of climate change in any concentrated region may temporarily reduce the demand for some of our products and could have a negative effect on our sales, earnings or cash flows.
In addition, adverse weather conditions and the impacts of climate change in any concentrated region may temporarily reduce the demand for some of our products and could have a negative effect on our sales, earnings or cash flows.
Our failure to adequately address some or all of these risks could have a material adverse effect on our business, results of operations and financial condition. ​ We may pursue strategic acquisitions or investments, and the failure of an acquisition or investment to produce the anticipated results or the inability to fully integrate the acquired companies could have an adverse impact on our business. ​ We may from time to time acquire or invest in complementary companies, businesses or assets.
We may pursue strategic acquisitions or investments, and the failure of an acquisition or investment to produce the anticipated results or the inability to fully integrate the acquired companies could have an adverse impact on our business. We may from time to time acquire or invest in complementary companies, businesses or assets.
We continue to work diligently with our partners to mitigate the impact these delays have on our business. While we have begun to see improvement in the supply chain we anticipate that delays are likely to continue throughout the first half of fiscal 2022.
We continue to work diligently with our partners to mitigate the impact these delays have on our business. While we continue to see improvement in the supply chain we anticipate that some delays are likely to continue into fiscal 2023.
Section 203 could have the effect of delaying, deferring or preventing a change in control that our stockholders might consider to be in their best interests. ​ Further, our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be, to the fullest extent permitted by law, the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law; or any action asserting a claim against us that is governed by the internal affairs doctrine.
Further, our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be, to the fullest extent permitted by law, the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law; or any action asserting a claim against us that is governed by the internal affairs doctrine.
Any infringement or other intellectual property claim made against us, whether or not it has merit, could be time-consuming, result in costly litigation, cause product delays or require us to enter into royalty or licensing agreements.
Any infringement or other intellectual property claim made against us, whether or not it has merit, could be time-consuming, result in costly litigation, cause product delays or require us to enter into royalty or licensing agreements. As a result, any such claim could have a material adverse effect on our operating results.
Public ESG and sustainability reporting is becoming more broadly expected by investors, shareholders and other third parties. Certain organizations that provide corporate governance and other corporate risk information to investors and shareholders have developed, and others may in the future develop, scores and ratings to evaluate companies and investment funds based upon ESG or “sustainability” metrics.
Certain organizations that provide corporate governance and other corporate risk information to investors and shareholders have developed, and others may in the future develop, scores and ratings to evaluate companies and investment funds based upon ESG or “sustainability” metrics.
A number of factors have historically affected, and will continue to affect, our same store sales results, including: ​ ● The impact of the COVID-19 pandemic; ​ ● changes or anticipated changes to regulations related to some of the products we sell; ​ ● consumer preferences, buying trends, and overall political and economic trends; ​ ● our ability to identify and respond effectively to local and regional trends and customer preferences; ​ ● our ability to provide quality customer service that will increase our conversion of shoppers into paying customers; ​ ● the success of our omni-channel strategy and our e-commerce platform; ​ ● competition in the regional market of a store; 24 Table of Contents ​ ● atypical weather; ​ ● new product introductions and changes in our product mix; and ​ ● changes in pricing and average ticket sales. ​ Our operating results are subject to seasonal fluctuations. ​ We experience moderate seasonal fluctuations in our net sales and operating results.
A number of factors have historically affected, and will continue to affect, our same store sales results, including: • macroeconomic factors, such as political trends, social unrest, inflationary and recessionary trends; • consumer preferences, buying trends and overall economic trends; • changes or anticipated changes to laws and government regulations related to some of the products we sell, in particular regulations relating to the sale of firearms and ammunition; • the impact of the COVID-19 pandemic; 26 • our ability to identify and respond effectively to local and regional trends and customer preferences; • our ability to provide quality customer service that will increase our conversion of shoppers into paying customers; • the success of our omni-channel strategy and our e-commerce platform; • competition in the regional market of a store; • atypical weather; • new product introductions and changes in our product mix; and • changes in pricing and average ticket sales.
If we misjudge either the market for our products or our customers’ purchasing habits, our net sales may decline significantly and we may not have sufficient quantities of merchandise to satisfy customer demand or we may be required to mark down excess inventory, either of which would result in lower profit margins and harm our operating results. ​ Our same store sales may fluctuate and may not be a meaningful indicator of future performance. ​ Our same store sales may vary from quarter to quarter, and an unanticipated decline in net sales or same store sales may cause the price of our common stock to fluctuate significantly.
If we misjudge either the market for our products or our customers’ purchasing habits, our net sales may decline significantly and we may not have sufficient quantities of merchandise to satisfy customer demand or we may be required to mark down excess inventory, either of which would result in lower profit margins and harm our operating results.
Any increase in the cost of our labor could have an adverse effect on our operating costs, financial condition and results of operations. ​ Risks Related to Our Business Strategy ​ Our expansion into new, unfamiliar markets presents increased risks that may prevent us from being profitable in these new markets. ​ We intend to continue to expand by opening or acquiring stores in new markets, which may include small- to medium-sized markets and which may not have existing national outdoor sports retailers.
Risks Related to Our Business Strategy Our expansion into new, unfamiliar markets presents increased risks that may prevent us from being profitable in these new markets. We intend to continue to expand by opening or acquiring stores in new markets, which may include small- to medium-sized markets and which may not have existing national outdoor sports retailers.
The extended lead times for many of our purchases may make it difficult for us to respond rapidly to new or changing product trends or changes in prices.
We usually must order merchandise well in advance of the applicable selling season. The extended lead times for many of our purchases may make it difficult for us to respond rapidly to new or changing product trends or changes in prices.
In addition, if we are required to close a large portion of our stores or we experience an acceleration of reduced store traffic, we may need additional liquidity to maintain our operations depending on how long these events impact our operations.
If we are required to close a large portion of our stores or we experience an acceleration of reduced store traffic, whether as a result of the COVID-19 pandemic, evolving macroeconomic conditions or geopolitical events, or otherwise, we may need additional liquidity to maintain our operations depending on how long these events impact our operations.
We also may not be able to successfully integrate operations that we acquire, including their personnel, financial systems, supply chain and other operations, which could adversely affect our business.
We also may not be able to successfully integrate operations that we acquire, including their personnel, financial systems, supply chain and other operations, which could adversely affect our business. Acquisitions may also result in the diversion of our capital and our management’s attention from other business issues and opportunities.
If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations, and our ability to fund expansion or take advantage of future opportunities.
If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations, and our ability to fund expansion or take advantage of future opportunities. We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all.
If we are unable to expand our e-commerce business, our growth plans will suffer and the price of our common stock could decline. ​ We are also vulnerable to additional risks and uncertainties associated with e-commerce sales, including rapid changes in technology, website downtime and other technical failures, security breaches, cyber-attacks, consumer privacy concerns, changes in state tax regimes and government regulation of internet activities.
We are also vulnerable to additional risks and uncertainties associated with e-commerce sales, including rapid changes in technology, website downtime and other technical failures, security incidents, cyber-attacks, consumer privacy concerns, changes in state tax regimes and government regulation of internet activities.
Maintaining, promoting and positioning our brand will depend largely on the success of our marketing and merchandising efforts and our ability to provide high quality merchandise and a consistent, high quality customer 22 Table of Contents experience both in-store and online.
The Sportsman’s Warehouse name is integral to our business as well as to the implementation of our strategies for expanding our business. Maintaining, promoting and positioning our brand will depend largely on the success of our marketing and merchandising efforts and our ability to provide high quality merchandise and a consistent, high quality customer experience both in-store and online.
Any of the foregoing factors could have a material adverse effect on our business, results of operations and financial condition and could adversely affect our stock price. ​ Our concentration of stores in the Western United States makes us susceptible to adverse conditions in this region. ​ The majority of our stores are currently located in the Western United States, comprising Alaska, Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming.
Any of the foregoing factors could have a material adverse effect on our business, results of operations and financial condition and could adversely affect our stock price. 25 Our concentration of stores in the Western United States makes us susceptible to adverse conditions in this region.
These laws may change, sometimes significantly, as a result of political, economic or social events. For instance, Washington passed legislation that, among other things, raises the minimum age to purchase certain firearms to 21 from 18 and imposes a five to 10 day waiting period on gun purchases.
For instance, Washington passed legislation that, among other things, raises the minimum age to purchase certain firearms from 18 to 21 and imposes a five to ten day waiting period on gun purchases.
To the extent that we are not able to meet these additional challenges, our sales could decrease and our operating expenses could increase. ​ Our private label brand offerings expose us to various risks. ​ We expect to continue to grow our exclusive private label brand offerings through a combination of brands that we own and brands that we license from third parties.
To the extent that we are not able to meet these additional challenges, our sales could decrease and our operating expenses could increase. 33 Our private label brand offerings expose us to various risks.
We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all. ​ Our revolving credit facility contains restrictive covenants that may impair our ability to access sufficient capital and operate our business. ​ Our revolving credit facility contains various provisions that limit our ability to, among other things, incur, create or assume certain indebtedness; create, incur or assume certain liens; make certain investments; make sales, transfers and dispositions of certain property; undergo certain fundamental changes, including certain mergers, liquidations and consolidations; purchase, hold or acquire certain investments; and declare or make certain dividends and distributions.
Our revolving credit facility contains various provisions that limit our ability to, among other things, incur, create or assume certain indebtedness; create, incur or assume certain liens; make certain investments; make sales, transfers and dispositions of certain property; undergo certain fundamental changes, including certain mergers, liquidations and consolidations; purchase, hold or acquire certain investments; and declare or make certain dividends and distributions.
We may not be able to develop relationships with new vendors, and products from alternative sources, if any, may be of a lesser quality and more expensive than those we currently purchase.
We may not be able to develop relationships with new vendors, and products from alternative sources, if any, may be of a lesser quality and more expensive than those we currently purchase. Any delay or failure in offering products to our customers could have a material adverse impact on our net sales and profitability.
If we lose one or more key vendors or are unable to promptly replace a vendor that is unwilling or unable to satisfy our requirements with a vendor providing equally appealing products at comparable prices, we may not be able to offer products that are important to our merchandise assortment. ​ We also are subject to risks, such as the price and availability of raw materials and fabrics, labor disputes, union organizing activity, strikes, inclement weather, natural disasters, war and terrorism and adverse general economic and political conditions, that might limit our vendors’ ability to provide us with quality merchandise on a timely and cost-efficient basis.
We also are subject to risks, such as the price and availability of raw materials and fabrics, labor disputes, union organizing activity, strikes, inclement weather, natural disasters, war and terrorism and adverse general economic and political conditions, that might limit our vendors’ ability to provide us with quality merchandise on a timely and cost-efficient basis.
A low ESG or sustainability rating by a third-party rating service could also result in the exclusion of our common stock from consideration by certain investors who may elect to invest with our competition instead.
A low ESG or sustainability rating by a third-party rating service could also result in the exclusion of our common stock from consideration by certain investors who may elect to invest with our competition instead. Ongoing focus on corporate responsibility matters by investors and other parties as described above may impose additional costs or expose us to new risks.
Further, should we fail to increase our wages competitively in response to increasing wage rates, the quality of our workforce could decline, causing our customer service to suffer.
Further, should we fail to increase our wages competitively in response to increasing wage rates, the quality of our workforce could decline, causing our customer service to suffer. Any increase in the cost of our labor could have an adverse effect on our operating costs, financial condition and results of operations.
If we are unable to continue to successfully develop and maintain our omni-channel platform, we may not be able to compete effectively and our sales and profitability may be adversely affected.
E-commerce continues to be a rapidly growing sales channel for our business and an increasing source of competition in our industry. If we are unable to continue to successfully develop and maintain our omni-channel platform, we may not be able to compete effectively and our sales and profitability may be adversely affected.
Any such delays, any material increases in employee turnover rates at existing stores or any increases in labor costs could have a material adverse effect on our business, financial condition or operating results. ​ Increases in the minimum wage have recently adversely affected our financial results. ​ Recently, several states in which we operate have enacted minimum wage increases and it is possible that other states or the federal government could also enact minimum wage increases.
Increases in the minimum wage have recently adversely affected our financial results. Recently, several states in which we operate have enacted minimum wage increases and it is possible that other states or the federal government could also enact minimum wage increases.
While we maintain business interruption insurance, as well as general property insurance, the amount of insurance coverage may not be sufficient to cover our losses in such an event.
While we maintain business interruption insurance, as well as general property insurance, the amount of insurance coverage may not be sufficient to cover our losses in such an event. Any of these occurrences could impair our ability to adequately stock our stores or fulfill customer orders and harm our operating results.
The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock.
The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby potentially reducing the likelihood that our stockholders could receive a premium for their common stock in an acquisition.
Acquisitions may also result in the diversion of our capital and our management’s attention from other business issues and opportunities. 29 Table of Contents ​ Risks Related to Liquidity and Capital Resources ​ Our ability to operate and expand our business and to respond to changing business and economic conditions will depend on the availability of adequate capital. ​ The operation of our business, the rate of our expansion and our ability to respond to changing business and economic conditions depend on the availability of adequate capital, which in turn depends on cash flow generated by our business and, if necessary, the availability of equity or debt capital.
The operation of our business, the rate of our expansion and our ability to respond to changing business and economic conditions depend on the availability of adequate capital, which in turn depends on cash flow generated by our business and, if necessary, the availability of equity or debt capital.
In addition, hiring additional personnel and implementing changes and enhancements to our systems will require capital expenditures and other increased costs that could also have a material adverse impact on our operating results. ​ Our expansion in new markets may also create new distribution and merchandising challenges, including strain on our distribution facility, an increase in information to be processed by our management information systems and diversion of management attention from existing operations towards the opening of new stores and markets.
Our expansion in new markets may also create new distribution and merchandising challenges, including strain on our distribution facility, an increase in information to be processed by our management information systems and diversion of management attention from existing operations towards the opening of new stores and markets.
Furthermore, the substantial management time and resources which our retail store expansion strategy requires may result in disruption to our existing business operations, which may decrease our profitability. ​ As a result of the above factors, we cannot assure you that we will be successful in operating our stores in new markets on a profitable basis. ​ If we are unable to successfully develop and maintain our omni-channel strategy, we may not be able to compete effectively and our sales and profitability may be adversely affected. ​ Our e-commerce business is an important element of our brand and relationship with our customers, and we expect it to continue to grow.
As a result of the above factors, we cannot assure you that we will be successful in operating our stores in new markets on a profitable basis. If we are unable to successfully develop and maintain our omni-channel strategy, we may not be able to compete effectively and our sales and profitability may be adversely affected.
If we are unable to meet our obligations as they become due or to comply with various financial covenants contained in the instruments governing our current or future indebtedness, this could constitute an event of default under the instruments governing our indebtedness. ​ If there were an event of default under the instruments governing our indebtedness, the holders of the affected indebtedness could declare all of that indebtedness immediately due and payable, which, in turn, could cause the acceleration of the maturity of all of our other indebtedness.
If there were an event of default under the instruments governing our indebtedness, the holders of the affected indebtedness could declare all of that indebtedness immediately due and payable, which, in turn, could cause the acceleration of the maturity of all of our other indebtedness.
Freight rates on our products are affected by a myriad of factors, including COVID-19 related impacts on the global economy, petroleum prices, congestion at U.S. ports and ocean freight carrier capacity. We have experienced significant increases in freight charges over the past year.
While moderating in the second half of 2022, we believe dynamic conditions will continue into fiscal year 2023 and beyond. Freight rates on our products are affected by a myriad of factors, including COVID-19 related impacts on the global economy, petroleum prices, carrier labor relations, congestion at U.S. ports and ocean freight carrier capacity.
This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and agents, which may discourage such lawsuits against us and our directors, officers, employees and agents. ​ Together, these charter and statutory provisions could make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock.
This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and agents, which may discourage such lawsuits against us and our directors, officers, employees and agents.
Our future success could also be adversely affected if we are unable to identify and capitalize on retail trends, including technology, e-commerce and other process efficiencies to gain market share and better service our customers. ​ In addition, many of our competitors already have e-commerce businesses that are substantially larger and more developed than ours, which places us at a competitive disadvantage.
Our future success could also be adversely affected if we are unable to identify and capitalize on retail trends, including technology, e-commerce and other process efficiencies to gain market share and better service our customers.
Even unsuccessful claims could result in the expenditure of funds and management time and could have a negative impact on our profitability and on future premiums we would be required to pay on our insurance policies. ​ Our net sales and profitability could be impacted if the strength of our brand is not maintained, and our sales of firearm-related products could present reputational risks and negative publicity. ​ Our success depends on the value and strength of the Sportsman’s Warehouse brand.
Even unsuccessful claims could result in the expenditure of funds and management time and could have a negative impact on our profitability and on future premiums we would be required to pay on our insurance policies.
Due to our seasonality, the possible adverse impact from other risks associated with our business, including atypical weather, consumer spending levels and general economic and business conditions, is potentially greater if any such risks occur during our peak sales seasons. ​ We currently rely on a single distribution center for our business, and if there is a natural disaster or other serious disruption at such facility, we may be unable to deliver merchandise effectively to our stores or customers. ​ We currently rely on a single distribution center in Salt Lake City, Utah for our business.
We currently rely on a single distribution center for our business, and if there is a natural disaster or other serious disruption at such facility, we may be unable to deliver merchandise effectively to our stores or customers. We currently rely on a single distribution center in Salt Lake City, Utah for our business.
Some of the federal, state or local laws and regulations that affect our business and demand for our products include: ​ ● federal, state or local laws and regulations or executive orders that prohibit or limit the sale of certain items we offer, such as firearms, black powder firearms, ammunition, bows, knives and similar products; ​ ● the ATF, regulations, audit and regulatory policies that impact the process by which we sell firearms and ammunition and similar policies of state agencies that have concurrent jurisdiction, such as the CA DOJ; ​ ● laws and regulations governing hunting and fishing; ​ ● laws and regulations relating to the collecting and sharing of non-public customer information; ​ ● laws and regulations relating to consumer products, product liability or consumer protection, including regulation by the Consumer Product Safety Commission and similar state regulatory agencies; ​ ● laws and regulations relating to the manner in which we advertise, market or sell our products; ​ ● labor and employment laws, including wage and hour laws; ​ ● U.S. customs laws and regulations pertaining to proper item classification, quotas and the payment of duties and tariffs; and ​ ● FTC regulations governing the manner in which orders may be solicited and prescribing other obligations in fulfilling orders and consummating sales. ​ 21 Table of Contents Over the past several years, bills have been introduced in the United States Congress that would restrict or prohibit the manufacture, transfer, importation or sale of certain calibers of handgun ammunition, impose a tax and import controls on bullets designed to penetrate bullet-proof vests, impose a special occupational tax and registration requirements on manufacturers of handgun ammunition and increase the tax on handgun ammunition in certain calibers.
Some of the federal, state or local laws and regulations that affect our business and demand for our products include: • federal, state or local laws and regulations or executive orders that prohibit or limit the sale of certain items we offer, such as firearms, black powder firearms, ammunition, bows, knives and similar products; • the ATF, regulations, audit and regulatory policies that impact the process by which we sell firearms and ammunition and similar policies of state agencies that have concurrent jurisdiction, such as the CA DOJ; • laws and regulations governing hunting and fishing; • laws and regulations relating to the collecting and sharing of non-public customer information; • laws and regulations relating to consumer products, product liability or consumer protection, including regulation by the Consumer Product Safety Commission and similar state regulatory agencies; • laws and regulations relating to the manner in which we advertise, market or sell our products; • labor and employment laws, including wage and hour laws; • U.S.
Although we may be able to partially offset these increases through strategic purchasing, efficiency gains and pursuing various supply chain alternatives, such increases have adversely affected, and could continue to adversely affect our business, financial condition and results of operations. ​ We have been experiencing supply chain disruptions and delays of the supply of products from our vendors, which have had an adverse impact on our net sales and profitability. ​ Due to the effects of the COVID-19 pandemic, the global supply chain has experienced delays, including delays in the outdoor sporting goods industry.
We have been experiencing supply chain disruptions and delays of the supply of products from our vendors, which have had an adverse impact on our net sales and profitability. Due to the lingering effects of the COVID-19 pandemic, the global supply chain has experienced delays, including delays in the outdoor sporting goods industry.
The unauthorized reproduction or other misappropriation of our intellectual property could diminish the value of our brands or goodwill and cause a decline in our net sales.
Our trademarks, service marks, copyrights, patents, trade secrets, domain names and other intellectual property are valuable assets that are critical to our success. The unauthorized reproduction or other misappropriation of our intellectual property could diminish the value of our brands or goodwill and cause a decline in our net sales.
In addition, new retail stores typically generate lower operating margins because pre-opening expenses are expensed as they are incurred and because fixed costs, as a percentage of net sales, are higher.
In addition, new retail stores typically generate lower operating margins because pre-opening expenses are expensed as they are incurred and because fixed costs, as a percentage of net sales, are higher. Furthermore, the substantial management time and resources which our retail store expansion strategy requires may result in disruption to our existing business operations, which may decrease our profitability.
As we grow, we will face the risk that our existing resources and systems, including management resources, accounting and finance personnel and operating systems, may be inadequate to support our growth. We cannot assure you that we will be able to retain the personnel or make the changes in our systems that may be required to support our growth.
Over time, we expect to expand the size of our retail store network in new and existing markets. As we grow, we will face the risk that our existing resources and systems, including management resources, accounting and finance personnel and operating systems, may be inadequate to support our growth.
However, if these competitors were to begin offering a broader array of competing products, or if any of the other factors listed above occurred, our net sales could be reduced or our costs could be increased, resulting in reduced profitability. ​ If we fail to anticipate changes in consumer demands, including regional preferences, in a timely manner, our operating results could suffer. ​ Our products appeal to consumers who regularly hunt, camp, fish and participate in various shooting sports.
If we fail to anticipate changes in consumer demands, including regional preferences, in a timely manner, our operating results could suffer. Our products appeal to consumers who regularly hunt, camp, fish and participate in various shooting sports. The preferences of these consumers cannot be predicted with certainty and are subject to change.
As a result, any such claim could have a material adverse effect on our operating results. ​ Our computer hardware and software systems are vulnerable to damage that could harm our business. Our success, in particular our ability to successfully manage inventory levels, largely depends upon the efficient operation of our computer hardware and software systems.
Our computer hardware and software systems are vulnerable to damage from natural disasters, power loss or other events outside of our control that could harm our business. Our success, in particular our ability to successfully manage inventory levels, largely depends upon the efficient operation of our computer hardware and software systems.
Our failure to successfully respond to these risks and uncertainties could reduce our e-commerce same store sales, increase our costs, diminish our growth prospects and damage our brand, which could negatively impact our results of operations and stock price. ​ 28 Table of Contents Our planned growth may strain our business infrastructure, which could adversely affect our operations and financial condition. ​ Over time, we expect to expand the size of our retail store network in new and existing markets.
Our failure to successfully respond to these risks and uncertainties could reduce our e-commerce same store sales, increase our costs, diminish our growth prospects and damage our brand, which could negatively impact our results of operations and stock price.
Any event of default under the instruments governing our indebtedness could have a material adverse effect on our business, financial condition and results of operations. ​ An increase in market interest rates, including from any impact of the discontinuation of LIBOR, could increase our interest costs on existing and future debt and could adversely affect our stock price. ​ Our existing debt obligations are variable rate obligations with interest and related payments that vary with the movement of certain indices, and in the future, we may incur additional indebtedness in connection with the entry into new credit facilities or the financing of any acquisition.
Any event of default under the instruments governing our indebtedness could have a material adverse effect on our business, financial condition and results of operations. An increase in market interest rates could increase our interest costs on existing and future debt and could adversely affect our stock price.
Other state or local governmental entities may also explore similar legislative or regulatory initiatives that may further restrict the manufacture, sale, purchase, possession or use of firearms, ammunition and shooting-related products. ​ The regulation of firearms, ammunition and shooting-related products may become more restrictive in the future.
Other state or local governmental entities may also explore similar legislative or regulatory initiatives that may further restrict the manufacture, sale, purchase, acquisition, possession or use of firearms, ammunition and shooting-related products. State, local and federal laws and regulations relating to products that we sell may change, sometimes significantly, as a result of political, economic or social events.
We continually expand 26 Table of Contents our employee base to manage our anticipated growth. Competition for non-entry level personnel, particularly for employees with retail experience, is highly competitive. Additionally, our ability to maintain consistency in the quality of customer service in our stores is critical to our success.
Competition for non-entry level personnel, particularly for employees with retail experience, is highly competitive. Additionally, our ability to maintain consistency in the quality of customer service in our stores is critical to our success. Many of our store employees are in entry-level or part-time positions that historically have high rates of turnover.
In 2021, we migrated our website to a new cloud platform with autoscaling capability, significantly increasing capacity and efficiency. E-commerce continues to be a rapidly growing sales channel for our business and an increasing source of competition in our industry.
Our e-commerce business is an important element of our brand and relationship with our customers, and we expect it to continue to grow. In 2021, we migrated our website to a new cloud platform with autoscaling capability, significantly increasing capacity and efficiency.
It is possible that an event or disaster at our corporate office could materially and adversely affect the performance of our company and the ability of each of our stores to operate efficiently. ​ Corporate responsibility, specifically related to environmental, social and governance (“ESG”) matters, may impose additional costs and expose us to new risks.
It is possible that an event or disaster at our corporate office could materially and adversely affect the performance of our company and the ability of each of our stores to operate efficiently. Our planned growth may strain our business infrastructure, which could adversely affect our operations and financial condition.
We have no contractual arrangements providing for continued supply from our key vendors, and our vendors may discontinue selling to us at any 25 Table of Contents time. Changes in commercial practices of our key vendors or manufacturers, such as changes in vendor support and incentives or changes in credit or payment terms, could also negatively impact our results.
Changes in commercial practices of our key vendors or manufacturers, such as changes in vendor support and incentives or changes in credit or payment terms, could also negatively impact our results.
Many of our store employees are in entry-level or part-time positions that historically have high rates of turnover. We are also dependent on the employees who staff our distribution center, many of whom are skilled.
We are also dependent on the employees who staff our distribution center, many of whom are skilled.
There are also regulatory restrictions on the online sale of a portion of our product offerings, such as ammunition, certain cutlery, firearms, propane and reloading powder.
In addition, many of our competitors already have e-commerce businesses that are substantially larger and more developed than ours, which places us at a competitive disadvantage. There are also regulatory restrictions on the online sale of a portion of our product offerings, such as ammunition, certain cutlery, firearms, propane and reloading powder.
We use management information systems to track inventory information at the store level, communicate customer information and aggregate daily sales, margin and promotional information.
We use management information systems to track inventory information at the store level, communicate customer information and aggregate daily sales, margin and promotional information. These systems are vulnerable to damage or interruption from natural disasters, power loss, computer system failures, telecommunications failures, misappropriation and similar events.
Other events that we do not currently anticipate or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations. ​ Risks Related to the Firearms Business ​ Current and future government regulations, in particular regulations relating to the sale of firearms and ammunition, may negatively impact the demand for our products and our ability to conduct our business. ​ We operate in a complex regulatory and legal environment that could negatively impact the demand for our products and expose us to compliance and litigation risks, which could materially affect our operations and financial results.
We operate in a complex regulatory and legal environment that could negatively impact the demand for our products and expose us to compliance and litigation risks, which could materially affect our operations and financial results. These laws may, and do, change, sometimes significantly, as a result of political, economic or social events.
We have invested in our development and procurement resources and marketing efforts relating to these private brand offerings.
We expect to continue to grow our exclusive private label brand offerings through a combination of brands that we own and brands that we license from third parties. We have invested in our development and procurement resources and marketing efforts relating to these private brand offerings.
Failure to secure these resources and implement these systems on a timely basis could have a material adverse effect on our operating results.
We cannot assure you that we will be able to retain the personnel or make the changes in our systems that may be required to support our growth. Failure to secure these resources and implement these systems on a timely basis could have a material adverse effect on our operating results.
Any event causing a disruption or delay of imports from foreign locations would likely increase the cost or reduce the supply of merchandise available to us and would adversely affect our operating results. ​ Finally, potential changes in federal restrictions on the importation of firearms and ammunition products could affect our ability to acquire certain popular brands of firearms and ammunition products from importers and wholesalers, which could negatively impact our net sales until replacements in the United States can be obtained, if at all. ​ Unauthorized disclosure of sensitive or confidential customer information could harm our business and standing with our customers. ​ The protection of our customer, employee and company data is critical to us.
Finally, potential changes in federal restrictions on the importation of firearms and ammunition products could affect our ability to acquire certain popular brands of firearms and ammunition products from importers and wholesalers, which could negatively impact our net sales until replacements in the United States can be obtained, if at all.
In addition, Florida has also raised the minimum age for firearms purchases to 21 with some exceptions.
In addition, Florida has also raised the minimum age for firearms purchases to 21 with some exceptions, and in November 2022, the State of Oregon passed legislation that will, among other things, impose complex permitting and training requirements for the purchases of firearms.
The preferences of these consumers cannot be predicted with certainty and are subject to change. In addition, due to different game and fishing species and varied weather conditions found in different markets, it is critical that our stores stock products appropriate for their markets.
In addition, due to different game and fishing species and varied weather conditions found in different markets, it is critical that our stores stock products appropriate for their markets. Our success depends on our ability to identify product trends in a variety of markets as well as to anticipate, gauge and quickly react to changing consumer demands in these markets.
With respect to our supply chain, we continue to see some interruption with various vendors as a result of restrictions or limitations on their operations due to the pandemic.
The COVID-19 pandemic severely impacted the global economy, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets. We experienced some interruption with various vendors as a result of restrictions or limitations on their operations due to the pandemic.
An inability to recruit and retain a sufficient number of qualified individuals in the future may delay the planned openings of new stores.
An inability to recruit and retain a sufficient number of qualified individuals in the future may delay the planned openings of new stores. Any such delays, any material increases in employee turnover rates at existing stores or any increases in labor costs could have a material adverse effect on our business, financial condition or operating results.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our distribution center is of sufficient scale to support a network of 135 or more stores. ​ We currently operate 122 retail stores in 29 states. See above under “Business – Our Stores” for a breakdown of our stores by state. In total we have approximately 4.7 million gross square feet across all of our stores.
Biggest changeWe currently operate 131 retail stores in 30 states. See “Part I, Item 1, Business – Our Stores” for a breakdown of our retail stores by state. In total we have approximately 5.0 million gross square feet across all of our stores.
The building is leased under an agreement expiring on March 31, 2035. ​ Our distribution center is located in a 507,000 square foot facility in Salt Lake City, Utah. The building is leased under an agreement expiring on December 31, 2023, with three options that each allow us to extend for an additional five years.
The building is leased under an agreement expiring on March 31, 2035. 37 Our distribution center is located in a 507,000 square foot facility in Salt Lake City, Utah. The building is leased under an agreement expiring on December 31, 2028, with three options that each allow us to extend for an additional five years.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS ​ See the “Legal Matters” section of Note 16, “Commitments and Contingencies” to the Consolidated Financial Statements for information regarding our material legal proceedings, which information is incorporated by reference in this Item 3. ​ ITEM 4. MINE SAFETY DISCLOSURE S ​ Not Applicable. ​ PART II ​ ​
Biggest changeITEM 3. LEGAL PROCEEDINGS See “Part II, Item 8, Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements Note 16, Commitments and Contingencies—Legal Matters” for information regarding our material legal proceedings, which information is incorporated by reference into this Item 3. ITEM 4. MINE SAFETY DISCLOSURE S Not Applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny future determination to pay dividends will be at the discretion of our board of directors, subject to compliance with applicable law and any applicable contractual provisions. ​ Stock Performance Graph ​ The stock price performance graph below shall not be deemed soliciting material or to be filed with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, nor shall it be incorporated by reference into any past or future filing under the Securities Act of 1933, as amended, or the Securities Act or the Exchange Act, except to the extent we specifically request that it be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act. ​ The following graph shows the cumulative total stockholder return of an investment of $100 in cash at market close on January 28, 2017 through January 29, 2022 for (i) our Common Stock (“SPWH”), (ii) the S&P 500 Retailing 34 Table of Contents Industry Group Index (“S&P Retail”) and (iii) the Russell 2000 Index (“Russell 2000”).
Biggest changeThe following graph shows the cumulative total stockholder return of an investment of $100 in cash at market close on February 1, 2018 through January 28, 2023 for (i) our common stock (“SPWH”), (ii) the S&P 500 Retailing Industry Group Index (“S&P Retail”) and (iii) the Russell 2000 Index (“Russell 2000”).
This number does not include persons who hold our common stock in nominee or “street name” accounts through brokers or banks. ​ Dividend Policy ​ We did not pay any dividends in fiscal year 2021 or fiscal year 2020. We do not anticipate paying any cash dividends in the foreseeable future.
This number does not include persons who hold our common stock in nominee or “street name” accounts through brokers, banks or other institutions on behalf of stockholders. Dividend Policy We did not pay any dividends in fiscal year 2022 or fiscal year 2021. We do not anticipate paying any cash dividends in the foreseeable future.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ​ Market for Registrant’s Common Equity ​ Our common stock is listed on the Nasdaq under the symbol “SPWH.” As of March 8, 2022, there were 165 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the Nasdaq Global Select Market under the symbol “SPWH.” Holders As of March 31, 2023, there were 211 holders of record of our common stock.
Pursuant to applicable SEC rules, all values assume reinvestment of the full amount of all dividends.
Pursuant to applicable SEC rules, all values assume reinvestment of the full amount of all dividends. The stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns.
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The stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Years Ended ​ January 28, 2017 ​ February 3, 2018 ​ February 2, 2019 ​ February 1, 2020 ​ January 30, 2021 ​ January 29, 2022 SPWH $ 100.00 ​ $ 62.23 ​ $ 64.89 ​ $ 82.13 ​ $ 222.05 ​ $ 134.85 S&P Retail 100.00 ​ 139.89 ​ 150.18 ​ 179.48 ​ 252.16 ​ 265.45 Russell 2000 100.00 ​ 112.88 ​ 109.58 ​ 117.75 ​ 151.28 ​ 143.61 ​ ​ ​ ​ ITEM 6.
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Any future determination to pay dividends will be at the discretion of our board of directors, subject to compliance with applicable law and any applicable contractual provisions.
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers On March 24, 2022 we announced that our board of directors authorized a share repurchase program (the “Repurchase Program”) to allow for our repurchase of up to $75.0 million of outstanding shares of our common stock during the period from March 31, 2022 to March 31, 2023.
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On March 15, 2023 our board of directors extended the term of the Repurchase Program through March 31, 2024. During the 13 weeks ended January 28, 2023, we repurchased a total of 256,349 shares of our common stock for $2.3 million, utilizing cash on hand and the Revolving Line of Credit (as defined below).
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The following table sets forth certain information relating to the purchases of our common stock by us and any affiliated purchasers within the meaning of Rule 10b-18(a)(3) under the Exchange Act during the 13 weeks ended January 28, 2023 (in thousands, except share and per share data): 38 Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 30, 2022 to November 28, 2022 — N/A — $ 12,589 November 29, 2022 to December 28, 2022 216,349 $ 9.07 216,349 $ 10,627 December 29, 2022 to January 28, 2023 40,000 $ 9.38 40,000 $ 10,252 Total 256,349 $ 9.12 256,349 $ 10,252 Stock Performance Graph The stock price performance graph below shall not be deemed soliciting material or to be filed with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, nor shall it be incorporated by reference into any past or future filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except to the extent we specifically request that it be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
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Fiscal Years Ended February 1, 2018 January 31, 2019 January 30, 2020 January 29, 2021 January 28, 2022 January 27, 2023 SPWH $ 100.00 $ 104.28 $ 131.98 $ 356.82 $ 216.70 $ 191.04 S&P Retail 100.00 107.35 128.30 180.26 189.76 155.80 Russell 2000 100.00 97.08 104.32 134.02 127.22 124.06 39 ITEM 6. [RESERVED ] 40

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSome of these limitations include, but are not limited to: ​ ● Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; ​ ● Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; ​ ● Adjusted EBITDA may be defined differently by other companies, and, therefore, it may not be directly comparable to the results of other companies in our industry; ​ 48 Table of Contents ● Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; and ​ ● Adjusted EBITDA does not reflect income taxes or the cash requirements for any tax payments. ​ A reconciliation of net income to Adjusted EBITDA is set forth below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fifty-Two Weeks Ended ​ ​ ​ January 29, ​ January 30, ​ February 1, ​ ​ 2022 ​ 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 108,470 ​ $ 91,380 ​ $ 20,215 ​ Interest expense ​ ​ 1,379 ​ ​ 3,506 ​ ​ 7,995 ​ Income tax expense (benefit) ​ ​ 35,769 ​ ​ 30,080 ​ ​ 5,254 ​ Depreciation and amortization ​ ​ 26,226 ​ ​ 21,830 ​ ​ 19,321 ​ Stock-based compensation expense (1) ​ ​ 3,328 ​ ​ 3,302 ​ ​ 2,104 ​ Pre-opening expenses (2) ​ ​ 4,098 ​ ​ 1,942 ​ ​ 2,695 ​ Hazard pay (3) ​ ​ — ​ ​ 6,526 ​ ​ — ​ Acquisition costs (4) ​ ​ 9,733 ​ ​ 3,710 ​ ​ 662 ​ Bargain purchase (5) ​ ​ — ​ ​ (2,218) ​ ​ — ​ Legal accrual (6) ​ ​ — ​ ​ 2,125 ​ ​ — ​ Store closing write-off (7) ​ ​ — ​ ​ 1,039 ​ ​ — ​ Executive transition costs (8) ​ ​ — ​ ​ — ​ ​ 770 ​ Retention pay (9) ​ ​ 2,549 ​ ​ — ​ ​ — ​ Merger termination payment (10) ​ ​ (55,000) ​ ​ — ​ ​ — ​ Adjusted EBITDA ​ $ 136,552 ​ $ 163,222 ​ $ 59,016 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ ​ 1,506,072 ​ ​ 1,451,767 ​ ​ 886,401 ​ Net income margin (11) ​ ​ 7.2% ​ ​ 6.3% ​ ​ 2.3% ​ Adjusted EBITDA margin (11) ​ ​ 9.1% ​ ​ 11.2% ​ ​ 6.7% ​ ​ (1) Stock-based compensation expense represents non-cash expenses related to equity instruments granted to employees under our 2019 Performance Incentive Plan and Employee Stock Purchase Plan.
Biggest changeFiscal Year Ended January 28, January 29, January 30, 2023 2022 2021 Net income $ 40,518 $ 108,470 $ 91,380 Interest expense 4,195 1,379 3,506 Income tax expense 13,350 35,769 30,080 Depreciation and amortization 31,776 26,226 21,830 Stock-based compensation expense (1) 4,673 3,328 3,302 Pre-opening expenses (2) 3,654 4,098 1,942 Hazard pay (3) — — 6,526 Acquisition costs (4) — 9,733 3,710 Bargain purchase (5) — — (2,218 ) Legal accrual (6) 2,088 — 2,125 Store closing write-off (7) — — 1,039 Executive transition costs (8) 1,329 — — Retention pay (9) — 2,549 — Merger termination payment (10) — (55,000 ) — Adjusted EBITDA $ 101,583 $ 136,552 $ 163,222 Net sales 1,399,515 1,506,072 1,451,767 Net income margin (11) 2.9 % 7.2 % 6.3 % Adjusted EBITDA margin (11) 7.3 % 9.1 % 11.2 % 54 (1) Stock-based compensation expense represents non-cash expenses related to equity instruments granted to employees under the Sportsman's Warehouse Holdings, Inc. 2019 Performance Incentive Plan and the Sportsman's Warehouse Holdings, Inc.
Management believes Adjusted EBITDA and Adjusted EBITDA margin allow investors to evaluate our operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of our core operating performance. ​ Adjusted EBITDA is not defined under GAAP and is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP.
Management believes Adjusted EBITDA and Adjusted EBITDA margin allow investors to evaluate our operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of our core operating performance. 53 Adjusted EBITDA is not defined under GAAP and is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP.
The decrease in our hunting and shooting department was driven by a decline in demand for firearms compared to fiscal year 2020 as we anniversaried the increased demafnd due to the COVID-19 pandemic, social unrest and pending presidential election of the prior year and supply chain constraints in ammunition.
The decrease in our hunting and shooting department was driven by a decline in demand for firearms compared to fiscal year 2020 as we anniversaried the increased demand due to the COVID-19 pandemic, social unrest and pending presidential election of the prior year and supply chain constraints in ammunition.
We include net sales from a store in same store sales on the first day of the 13th full fiscal month following the store’s opening or acquisition by us. We exclude sales from stores that were closed during the period from our same store sales calculation. We include net sales from e-commerce in our calculation of same store sales.
We include net sales from a store in same store sales on the first day of the 13th full fiscal month following the store’s grand opening or acquisition by us. We exclude sales from stores that were closed during the period from our same store sales calculation. We include net sales from e-commerce in our calculation of same store sales.
All obligations under the revolving credit facility are secured by a lien on substantially all of Holdings’ tangible and intangible assets and the tangible and intangible assets of all of Holdings’ subsidiaries, including a pledge of all capital stock of each of the Holdings’ subsidiaries.
All of the obligations under the revolving credit facility are secured by a lien on substantially all of Holdings’ tangible and intangible working capital assets and the tangible and intangible working capital assets of all of Holdings’ subsidiaries, including a pledge of all capital stock of each of Holdings’ subsidiaries.
Additionally, acquisitions costs increased to $9.7 million with respect to the terminated Merger Agreement with the Great Outdoors Group, which was terminated on December 2, 2021.
Additionally, acquisitions costs increased to $9.7 million with respect to the terminated Merger 47 Agreement with the Great Outdoors Group, which was terminated on December 2, 2021.
(8) Costs incurred for the recruitment and hiring of various key members of our senior management team. (9) Expense relating to retention bonuses paid to certain senior employees in response to the terminated merger with Great Outdoors Group. (10) Represents a one-time $55 million termination payment received in connection with the terminated merger with Great Outdoors Group.
(8) Costs incurred for the recruitment and hiring of various key members of our senior management team. (9) Expense relating to retention bonuses paid to certain senior employees in connection with the termination of the merger agreement with Great Outdoors Group. (10) Represents a one-time $55 million termination payment received in connection with the terminated merger with Great Outdoors Group.
We believe that our cash on hand, cash generated by operating activities and funds available under our revolving credit facility will be sufficient to finance our operating activities for at least the next twelve months and beyond.
We believe that our cash on hand, cash generated by operating activities and funds available under our revolving credit facility will be sufficient to finance our operating activities and meet our cash requirements for at least the next twelve months and beyond.
Interest expense decreased primarily as a result of our lower debt balances during fiscal year 2021 compared to fiscal year 2020, including our repayment of our term loan and borrowings outstanding under our revolving credit facility in fiscal year 2020. ​ 41 Table of Contents Other Income.
Interest expense decreased primarily as a result of our lower debt balances during fiscal year 2021 compared to fiscal year 2020, including our repayment of our term loan and borrowings outstanding under our revolving credit facility in fiscal year 2020. Other Income.
We recorded an income tax expense of $35.8 million for fiscal year 2021 compared to income tax expense of $30.1 million for fiscal year 2020. Our effective tax rate remained flat from fiscal year 2020 at 24.8% in 2021. ​ Fiscal Year 2020 Compared to Fiscal Year 2019 ​ Net Sales .
We recorded an income tax expense of $35.8 million for fiscal year 2021 compared to income tax expense of $30.1 million for fiscal year 2020. Our effective tax rate remained flat from fiscal year 2020 at 24.8% in 2021.
We use an estimate of the future undiscounted net cash flows of the related asset or group of assets over their remaining useful lives in measuring whether the assets are 47 Table of Contents recoverable.
We use an estimate of the future undiscounted net cash flows of the related asset or group of assets over their remaining useful lives in measuring whether the assets are recoverable.
In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as an additional measurement tool for purposes of business decision-making, including evaluating store performance, developing budgets and managing expenditures.
In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as additional measurement tools for purposes of business decision-making, including evaluating store performance, developing budgets and managing expenditures.
The amount and timing of pre-opening expenses are dependent on, among other things, the size of new stores opened and the number of new stores opened during any given period. Adjusted EBITDA margin means, for any period, the Adjusted EBITDA for that period divided by the net sales for that period.
The amount and timing of pre-opening expenses are dependent on, among other things, the size of new stores opened and the number of new stores opened during any given period. We define Adjusted EBITDA margin as, for any period, the Adjusted EBITDA for that period divided by the net sales for that period.
Gross Margin ​ Gross profit is our net sales less cost of goods sold. Gross margin measures our gross profit as a percentage of net sales.
Gross Margin Gross profit consists of our net sales less cost of goods sold. Gross margin measures our gross profit as a percentage of net sales.
Fifty-three of our current stores were impacted by minimum wage increases in fiscal year 2021 that have and will continue to increase our selling, general and administrative expenses during fiscal year 2022. ​ Income from Operations ​ Income from operations is gross profit less selling, general and administrative expenses.
Fifty-five of our current stores were impacted by minimum wage increases in fiscal year 2022 that have and will continue to increase our selling, general and administrative expenses during fiscal year 2023. 43 Income from Operations Income from operations is gross profit less selling, general and administrative expenses.
Assets to be disposed of are reported at the lower of the carrying amount or fair value, less the estimated costs to sell. No impairment charge to long-lived assets was recorded during the fiscal year ended January 29, 2022.
Assets to be disposed of are reported at the lower of the carrying amount or fair value, less the estimated costs to sell. No impairment charge to long-lived assets was recorded during the fiscal years ended January 28, 2023 and January 29, 2022.
We record such profit share as revenue over time using the most likely amount method, which reflects the amount earned each month when it is determined that the likelihood of a significant revenue reversal is not probable, which is typically monthly.
We record such profit share as revenue over time using the most likely amount method, which reflects the amount earned each month when it is determined that the likelihood of a significant revenue reversal is not probable, which is typically monthly. Profit-share payments occur monthly, shortly after the end of each program month.
The credit agreement also contains customary events of default. As of January 29, 2022, we were in compliance with all covenants under the revolving credit facility. ​ Critical Accounting Policies and Estimates ​ Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The credit agreement also contains customary events of default. As of January 28, 2023, we were in compliance with all covenants under the credit agreement governing our revolving credit facility. Critical Accounting Estimates Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
See “Non-GAAP Measures.” ​ 39 Table of Contents Results of Operations ​ The following table summarizes key components of our results of operations as a percentage of net sales for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended ​ ​ ​ January 29, ​ January 30, ​ February 1, ​ ​ 2022 2021 2020 Percentage of net sales: ​ ​ ​ ​ ​ ​ ​ Net sales ​ ​ 100.0% ​ 100.0% ​ 100.0% Cost of goods sold ​ ​ 67.4 ​ 67.2 ​ 66.5 Gross profit ​ ​ 32.6 ​ 32.8 ​ 33.5 Selling, general, and administrative expenses ​ ​ 26.6 ​ 24.3 ​ 29.7 Income from operations ​ ​ 6.0 ​ 8.5 ​ 3.8 Gain on bargain purchase ​ ​ - ​ (0.2) ​ - Merger termination payment ​ ​ (3.7) ​ - ​ - Interest expense ​ ​ 0.1 ​ 0.3 ​ 0.9 Income before income taxes ​ ​ 9.6 ​ 8.4 ​ 2.9 Income tax expense ​ ​ 2.4 ​ 2.1 ​ 0.6 Net income ​ ​ 7.2% ​ 6.3% ​ 2.3% Adjusted EBITDA ​ ​ 9.1% ​ 11.3% ​ 6.7% ​ The following table shows our sales during the periods presented by department: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal year Ended ​ ​ ​ January 29, January 30, ​ ​ February 1, Department Product Offerings 2022 2021 ​ ​ 2020 Camping ​ Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools ​ 13.1% ​ 12.7% ​ ​ 14.4% Apparel ​ Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear ​ 8.4% ​ 7.5% ​ ​ 9.3% Fishing ​ Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats ​ 10.0% ​ 9.9% ​ ​ 11.1% Footwear ​ Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots ​ 6.8% ​ 5.6% ​ ​ 7.5% Hunting and Shooting ​ Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment and shooting gear ​ 54.2% ​ 57.6% ​ ​ 49.1% Optics, Electronics, Accessories, and Other ​ Gift items, GPS devices, knives, lighting, optics, two-way radios, and other license revenue, net of revenue discounts ​ 7.5% ​ 6.7% ​ ​ 8.6% Total ​ ​ ​ 100.0% ​ 100.0% ​ ​ 100.0% ​ ​ 40 Table of Contents Fiscal Year 2021 Compared to Fiscal Year 2020 ​ Net Sales .
Nancy Walsh as Chair of the Audit Committee of the Board, effective April 30, 2023. 44 Results of Operations The following table summarizes key components of our results of operations as a percentage of net sales during the periods presented: Fiscal Year Ended January 28, January 29, January 30, 2023 2022 2021 Percentage of net sales: Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 67.1 67.4 67.2 Gross profit 32.9 32.6 32.8 Selling, general and administrative expenses 28.7 26.6 24.3 Income from operations 4.2 6.0 8.5 Gain on bargain purchase - - (0.2 ) Merger termination payment - (3.7 ) - Interest expense 0.3 0.1 0.3 Income before income taxes 3.9 9.6 8.4 Income tax expense 1.0 2.4 2.1 Net income 2.9 % 7.2 % 6.3 % Adjusted EBITDA 7.3 % 9.1 % 11.3 % The following table shows our net sales during the periods presented by department: Fiscal year Ended January 28, January 29, January 30, Department Product Offerings 2023 2022 2021 Camping Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools 12.5 % 13.1 % 12.7 % Apparel Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear 9.3 % 8.4 % 7.5 % Fishing Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats 8.9 % 10.0 % 9.9 % Footwear Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots 7.3 % 6.8 % 5.6 % Hunting and Shooting Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment and shooting gear 54.9 % 54.2 % 57.6 % Optics, Electronics, Accessories, and Other Gift items, GPS devices, knives, lighting, optics, two-way radios, and other license revenue, net of revenue discounts 7.1 % 7.5 % 6.7 % Total 100.0 % 100.0 % 100.0 % 45 Fiscal Year 2022 Compared to Fiscal Year 2021 Net Sales and Same Store Sales .
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those which are discussed in the “Risk Factors” section in Part I, Item 1A of this 10-K.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those which are discussed in the “Risk Factors” section in Part I, Item 1A of this 10-K. Also see “Special Note Regarding Forward-Looking Statements” preceding Part I.
As of January 29, 2022, we had $146.1 million available for borrowing, subject to certain borrowing base restrictions, and $2.0 million in stand-by commercial letters of credit. ​ Borrowings under our revolving credit facility bear interest based on either, at our option, the base rate or LIBOR, in each case plus an applicable margin.
As of January 28, 2023, we had $159.1 million available for borrowing, subject to certain borrowing base restrictions, and $2.0 million in stand-by commercial letters of credit. Borrowings under the revolving credit facility bear interest based on either the base rate or Term SOFR, at our option, in each case plus an applicable margin.
When measuring revenue generated from our stores, we review our same store sales as well as the performance of our stores that have not operated for a sufficient amount of time to be included in same store sales.
When measuring revenue generated from our stores, we review our same store sales as well as the performance of our stores that have not operated for a sufficient amount of time and include each in same store sales.
See Note 3 to the financial statements for additional information. (6) Accrual relating to pending labor litigation in the state of California. (7) Costs and impairments recorded relating to the closure of one store during the first quarter of 2020. These costs were recorded as a component of selling, general, and administration expenses on the condensed consolidated statement of operations.
For fiscal year 2020 an accrual relating to pending labor litigation in the state of California. (7) Costs and impairments recorded relating to the closure of one store during the first quarter of 2020. These costs were recorded as a component of selling, general, and administration expenses on the condensed consolidated statement of operations.
As of January 29, 2022, $77.0 million was outstanding under the revolving credit facility. Borrowings under our revolving credit facility are subject to a borrowing base calculation. Our revolving credit facility is governed by an amended and restated credit agreement with a consortium of banks led by Wells Fargo Bank, National Association (“Wells Fargo”).
Borrowings under our revolving credit facility are subject to a borrowing base calculation. Our revolving credit facility is governed by an amended and restated credit agreement with a consortium of banks led by Wells Fargo Bank, National Association (“Wells Fargo”).
The implicit point-of-sale contract with the customer, as reflected in the transaction receipt, states the final terms of the sale, including the description, quantity, and price of each product purchased. Payment for our contracts is due in full upon delivery.
The implicit point-of-sale contract with the customer, as reflected in the transaction receipt, states the final terms of the sale, including the 51 description, quantity, and price of each product purchased. Payment for our contracts is due in full upon delivery. The customer agrees to a stated price implicit in the contract that does not vary over the contract.
(11) We calculate net income margin as net income divided by net sales and we define adjusted EBITDA margin as adjusted EBITDA divided by net sales ​ 49 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(11) We calculate net income margin as net income divided by net sales and we define Adjusted EBITDA margin as Adjusted EBITDA divided by net sales. 55
We define Adjusted EBITDA as net income plus interest expense, income tax expense, depreciation and amortization, stock-based compensation expense, pre-opening expenses, and other gains/losses, and expenses that we do not believe are indicative of our ongoing expenses. Adjusted EBITDA excludes pre-opening expenses because we do not believe these expenses are indicative of the underlying operating performance of our stores.
Adjusted EBITDA We define Adjusted EBITDA as net income plus interest expense, income tax expense, depreciation and amortization, stock-based compensation expense, pre-opening expenses, and other gains, losses, and expenses that we do not believe are indicative of our ongoing expenses. We define Adjusted EBITDA margin as Adjusted EBITDA divided by net sales.
We also have experienced increased payroll expenses due to increased minimum wages and generally increasing salaries and wages due to a competitive labor market over the last year, including payments of retention and increased merit bonuses, and we expect for payroll expense to increase in fiscal year 2022.
We also have experienced increased payroll expenses due to increased minimum wages and generally increasing salaries and wages due to a competitive labor market. We expect for payroll expense to increase in fiscal year 2023.
For fiscal years consisting of 53 weeks, we exclude net sales during the 53rd week from our calculation of same store sales. Some of our competitors and other retailers may calculate same store sales differently than we do.
For fiscal years consisting of 53 weeks, we exclude net sales during the 53rd week from our calculation of same store sales. Some of our competitors and other retailers may calculate same store sales differently than we do. As a result, data regarding our same store sales may not be comparable to similar data made available by other retailers.
Accordingly, we recognize revenue for only one performance obligation, the sale of the product, at the shipping point (when the customer gains control). Revenue associated with shipping and handling is not material.
As it relates to e-commerce sales, we account for shipping and handling as fulfillment activities, and not a separate performance obligation. Accordingly, we recognize revenue for only one performance obligation, the sale of the product, at the shipping point (when the customer gains control). Revenue associated with shipping and handling is not material.
Within hunting, our firearm and ammunition categories saw decreases of $20.5 million, or 5.6%, and $18.6 million, or 7.3%, respectively, for fiscal year 2021 compared to fiscal year 2020, which decreases resulted from the drivers of decreased demand and supply chain constraints discussed above. ​ With respect to same store sales, our footwear, apparel, optics, electronics and accessories, and camping departments saw increased same store sales of 21.2%, 12.7%, 7.0%, and 2.6%, respectively.
Within hunting, our firearm and ammunition categories saw decreases of $20.5 million, or 5.6%, and $18.6 million, or 7.3%, respectively, for fiscal year 2021 compared to fiscal year 2020, which decreases resulted from the drivers of decreased demand and supply chain constraints discussed above.
The base rate is the higher of (1) Wells Fargo’s prime rate, (2) the federal funds rate (as defined in the credit agreement) plus 0.50% and (3) the one-month LIBOR (as defined in the credit agreement) plus 1.00%.
The base rate is the greatest of (1) the floor rate (as defined in the credit agreement as a rate of interest equal to 0.0%) (2) Wells Fargo’s prime rate, (3) the federal funds rate (as defined in the credit agreement) plus 0.50% or (4) the one-month Term SOFR (as defined in the credit agreement) plus 1.00%.
Sales returns We estimate a reserve for sales returns and record the respective reserve amounts, including a right to return asset when a product is expected to be returned and resold.
Sales returns We estimate a reserve for sales returns and record the respective reserve amounts, including a right to return asset when a product is expected to be returned and resold. Historical experience of actual returns, and customer return rights are the key factors used in determining the estimated sales returns.
Selling, general and administrative expenses increased by $46.0 million, or 13.0%, to $399.7 million for fiscal year 2021 from $353.7 million for fiscal year 2020.
We expect higher transportation costs to continue to impact our business during fiscal 2022 and beyond. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $46.0 million, or 13.0%, to $399.7 million for fiscal year 2021 from $353.7 million for fiscal year 2020.
(2) Pre-opening expenses include expenses incurred in the preparation and opening of a new store location, such as payroll, travel and supplies, but do not include the cost of the initial inventory or capital expenditures required to open a location. (3) Expense relating to bonuses and increased wages paid to front-line and back office associates due to the COVID-19 pandemic.
Pre-opening expenses include expenses incurred in the preparation and opening of a new store location, such as payroll, travel and supplies, but do not include the cost of the initial inventory or capital expenditures required to open a location.
We believe that the overall growth of our business can also help improve our gross margins, because increased merchandise volumes will enable us to maintain our strong relationships with our vendors. We have, however, experienced increased transportation and logistics costs over the last two years.
We believe that the overall growth of our business can also help improve our gross margins, because increased merchandise volumes will enable us to maintain our strong relationships with our vendors. Selling, General and Administrative Expenses We closely manage our selling, general and administrative expenses.
Profit-share payments occur monthly, shortly after the end of each program month. ​ Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue.
Assuming no additional repayments or borrowings on our revolving credit facility after January 29, 2022 our interest payments would be approximately $1.1 million for fiscal year 2022 based on the interest rate at January 29, 2022.
As of January 28, 2023, $96.9 million was outstanding under the revolving credit facility. Assuming no additional repayments or borrowings on our revolving credit facility after January 28, 2023, our interest payments would be approximately $5.7 million for fiscal year 2023 based on the interest rate as of January 28, 2023.
(4) Includes $237 of expenses incurred relating to the acquisition of cash, inventory, furniture, fixtures, and equipment, and certain other assets related to Field & Stream stores operated by DICK’S in fiscal year 2020.
(3) Expense relating to bonuses and increased wages paid to front-line and back office associates due to the ongoing COVID-19 pandemic. (4) Includes $237 of expenses incurred relating to the acquisition of cash, inventory, furniture, fixtures, and equipment, and certain other assets related to Field & Stream stores operated by Dick's Sporting Goods in fiscal year 2020.
Various factors affect same store sales, including: ​ ● the impact of the COVID-19 pandemic; ​ ● changes or anticipated changes to regulations related to some of the products we sell; ​ ● consumer preferences, buying trends and overall political and economic trends; ​ ● our ability to identify and respond effectively to local and regional trends and customer preferences; ​ ● our ability to provide quality customer service that will increase our conversion of shoppers into paying customers; ​ ● the success of our omni-channel strategy and our e-commerce platform; ​ ● competition in the regional market of a store; ​ ● atypical weather; ​ ● new product introductions and changes in our product mix; and ​ ● changes in pricing and average ticket sales. ​ Opening new stores and acquiring store locations is also an important part of our growth strategy.
Various factors affect same store sales, including: • macroeconomic factors, such as the ongoing impact of the COVID-19 pandemic, political trends, social unrest, inflationary pressures, recessionary trends, labor shortages, monetary supply shifts, rising interest rates, tightening of credit markets, and potential disruptions from the ongoing Russia-Ukraine conflict; • consumer preferences, buying trends and overall economic trends; • changes or anticipated changes to laws and government regulations related to some of the products we sell, in particular regulations relating to the sale of firearms and ammunition; • our ability to identify and respond effectively to local and regional trends and customer preferences; • our ability to provide quality customer service that will increase our conversion of shoppers into paying customers; • the success of our omni-channel strategy and our e-commerce platform; • competition in the regional market of a store; • atypical weather; • new product introductions and changes in our product mix; and • changes in pricing and average ticket sales.
We use income from operations as an indicator of the productivity of our business and our ability to manage selling, general and administrative expenses. 38 Table of Contents ​ Adjusted EBITDA ​ We define Adjusted EBITDA as net income plus interest expense, income tax expense, depreciation and amortization, stock-based compensation expense, pre-opening expenses, and other gains, losses, and expenses that we do not believe are indicative of our ongoing expenses.
The key measures for determining how our business is performing are net sales, same store sales, gross margin, selling, general and administrative expenses, income from operations and Adjusted EBITDA, which we define as net 41 income plus interest expense, income tax expense, depreciation and amortization, stock-based compensation expense, pre-opening expenses, and other gains, losses, and expenses that we do not believe are indicative of our ongoing expenses.
Stores that were opened in fiscal year 2020 and stores that have been open for less than 12 months and were, therefore, not included in our same store sales, contributed $155.3 million to net sales.
These headwinds were partially offset by our opening of nine new stores since January 29, 2022. Stores that were opened in fiscal year 2022 and stores that have been open for less than 12 months and were, therefore, not included in our same store sales, contributed $86.5 million to net sales.
Other investment opportunities, such as potential strategic acquisitions or store expansion rates in excess of those presently planned, may require additional funding. ​ Principal and Interest Payments. We maintain a $250.0 million revolving credit facility. As of January 29, 2022, $77.0 million was outstanding under the revolving credit facility.
We intend to fund these capital expenditures with our operating cash flows, existing cash and cash equivalents and funds available under our revolving credit facility. Other investment opportunities, such as potential strategic acquisitions or store expansion rates in excess of those presently planned, may require additional funding. Principal and Interest Payments. We maintain a $350.0 million revolving credit facility.
Our cost of goods sold primarily consists of merchandise acquisition costs, including freight-in costs, shipping costs, payment term discounts received from the vendor and vendor allowances and rebates associated directly with merchandise and shipping costs related to e-commerce sales. ​ We believe the key drivers to improving our gross margin are increasing the product mix to higher margin products, particularly apparel and footwear, increasing foot traffic within our stores and traffic to our website, improving buying opportunities with our vendor partners and coordinating pricing strategies among our stores and our merchandise group.
We believe the key drivers to improving our gross margin are increasing the product mix to higher margin products, particularly apparel and footwear, increasing foot traffic within our stores and traffic to our website, improving buying opportunities with our vendor partners and coordinating pricing strategies among our stores and our merchandise group.
The IBR is determined by using our credit rating to develop a yield curve that approximates our market risk profile. ​ Recent Accounting Pronouncements ​ For a description of recent accounting pronouncements, see Note 2 to our Consolidated Financial Statements included elsewhere in this report. ​ Non-GAAP Measures ​ In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as supplemental measures of our operating performance.
The IBR is determined by using our credit rating to develop a yield curve that approximates our market risk profile. Off Balance Sheet Arrangements We are not party to any off balance sheet arrangements. Recent Accounting Pronouncements For a description of recent accounting pronouncements, see Note 2 to our Consolidated Financial Statements included elsewhere in this 10-K.
While our target is to grow square footage at a rate of 5% to 10% annually, we may deviate from this target if attractive opportunities are presented to open stores or acquire new store locations outside of our target growth rate. ​ We also have been scaling our e-commerce platform and increasing sales through our website, www.sportsmans.com . 37 Table of Contents ​ We believe the key drivers to increasing our total net sales include: ​ ● increasing our total gross square footage by opening new stores and through strategic acquisitions; ​ ● continuing to increase and improve same store sales in our existing markets; ​ ● increasing customer visits to our stores and improving our conversion rate through focused marketing efforts and continually high standards of customer service; ​ ● growing our loyalty and credit card programs; and ​ ● expanding our omni channel capabilities through larger assortment and inventory, expanded content and expertise and better user experience.
We believe the key drivers to increasing our total net sales include: • increasing our total gross square footage by opening new stores and through strategic acquisitions; • increasing and improving same store sales in our existing markets; • increasing customer visits to our stores and improving our conversion rate through focused marketing efforts and continually high standards of customer service; • growing our loyalty and credit card programs; and • expanding our omni-channel capabilities through larger assortment and inventory, expanded content and expertise and better user experience.
During the year ended January 30, 2021, the Company recorded an impairment charge of $1.0 million relating to the closure of one store. ​ Leases ​ We have operating leases for the Company’s retail stores facilities, distribution center, and corporate office.
During the fiscal year ended January 30, 2021, we recorded an impairment charge of $1.0 million relating to the closure of one store. Leases We have operating leases for our retail stores facilities, distribution center, and corporate office. In accordance with ASC 842, which we adopted on February 3, 2019, we determine if an arrangement is a lease at inception.
The customer agrees to a stated price implicit in the contract that does not vary over the contract. 46 Table of Contents The transaction price relative to sales subject to a right of return reflects the amount of estimated consideration to which we expect to be entitled.
The transaction price relative to sales subject to a right of return reflects the amount of estimated consideration to which we expect to be entitled.
As our leases generally do not provide an implicit rate, we used an estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments.
Operating lease liabilities are calculated using the present value of future payments and recognized at the commencement date based on the present value of lease payments over the reasonably certain lease term. As our leases generally do not provide an implicit rate, we used an estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments.
For fiscal year 2021, we incurred capital expenditures related to the construction of new stores and the refurbishment of existing stores.
For fiscal year 2022, we incurred capital expenditures related to the construction of new stores and the refurbishment of existing stores. Our cash flows used in investing activities in fiscal year 2021 primarily related to costs incurred in connection with opening new stores and the refurbishment of existing stores.
We estimate a provision for inventory shrinkage based on our historical inventory accuracy rates as determined by periodic cycle counts. The allowance for damaged goods from returns is based upon our historical experience. We also adjust inventory for obsolete or slow-moving inventory based on inventory productivity reports and by specific identification of obsolete or slow-moving inventory.
Inventory Valuation Inventory is measured at the lower of cost or net realizable value. Cost is determined using the weighted average cost method. We estimate a provision for inventory shrinkage based on our historical inventory accuracy rates as determined by periodic cycle counts. The allowance for damaged goods from returns is based upon our historical experience.
Had our estimated inventory reserves been lower or higher by 10% as of January 29, 2022, our cost of sales would have been correspondingly lower or higher by approximately $0.5 million. ​ Valuation of Long-Lived Assets ​ We review our long-lived assets with definite lives for impairment whenever events or changes in circumstances may indicate that the carrying value of an asset may not be recoverable.
Valuation of Long-Lived Assets We review our long-lived assets with definite lives for impairment whenever events or changes in circumstances may indicate that the carrying value of an asset may not be recoverable.
Also includes $3,473 and $9,733 of expenses incurred relating to the proposed merger with Great Outdoors Group on December 21, 2020, respectively, for fiscal year 2020 and fiscal year 2021. (5) Excess of the fair value over the purchase price of tangible assets acquired in connection with the Field & Stream stores acquired during fiscal year 2020.
Also includes $3,473 and $9,733 of expenses incurred relating to the proposed merger with Great Outdoors Group, respectively, for fiscal year 2020 and fiscal year 2021. The merger agreement was terminated in December 2021.
For both the short term and the long term, our sources of liquidity to meet these needs have primarily been borrowings under our revolving credit facility, operating cash flows and short and long-term debt financings from banks and financial institutions.
Our primary cash requirements are for seasonal working capital needs and capital expenditures related to opening and acquiring new store locations. For both the short-term and the long-term, our primary sources of cash are borrowings under our revolving credit facility, operating cash flows and short and long-term debt financings from other banks and financial institutions.
As a result, data regarding our same store sales may not be comparable to similar data made available by other retailers. ​ Measuring the change in year-over-year same store sales allows us to evaluate how our retail store base is performing.
Measuring the change in year-over-year same store sales allows us to evaluate how our retail store base is performing.
Gross profit increased by $13.8 million, or 2.9%, to $490.3 million for fiscal year 2021 from $476.5 million for fiscal year 2020. As a percentage of net sales, gross profit decreased to 32.6% for fiscal year 2021 compared to 32.8% for fiscal year 2020 due to higher freight costs.
Firearms same store sales decreased by 12.5% and ammunition same store sales decreased by 13.7% during fiscal year 2021 compared to fiscal year 2020. Gross Profit. Gross profit increased by $13.8 million, or 2.9%, to $490.3 million for fiscal year 2021 from $476.5 million for fiscal year 2020.
We or the vendor can generally terminate the purchase orders at any time. These purchase orders do not contain any termination payments or other penalties if cancelled. ​ Share Repurchase Authorization .
We or the vendor can generally terminate the purchase orders at any time. These purchase orders do not contain any termination payments or other penalties if cancelled. During fiscal 2021, we used cash to increase our inventory levels after the increased demand during the pandemic reduced our inventory.
The applicable margin for loans under the revolving credit facility, which varies based on the average daily availability, ranges from 0.25% to 0.75% per year for base rate loans and from 1.25% to 1.75% per year for LIBOR loans. ​ Interest on base rate loans is payable monthly in arrears and interest on LIBOR loans is payable based on the LIBOR interest period selected by us, which can be 7, 30, 60 or 90 days.
The applicable margin for loans under the revolving credit facility, which varies based on the average daily availability, ranges from 0.25% to 0.50% per year for base rate loans and from 1.35% to 1.60% per year for Term SOFR loans.
Pre-opening expenses include expenses incurred in the preparation and opening of a new store location, such as payroll, travel and supplies, but do not include the cost of the initial inventory or capital expenditures required to open a location. ​ Our selling, general and administrative expenses are primarily influenced by the volume of net sales of our locations, except for our corporate payroll, rent and occupancy and depreciation and amortization, which are generally fixed in nature.
Our selling, general and administrative expenses are primarily influenced by the volume of net sales of our locations, except for our corporate payroll, rent and occupancy and depreciation and amortization, which are generally fixed in nature.
We also incur additional expenses in the third and fourth fiscal quarters due to higher sales volume and increased staffing in our stores. We anticipate our net sales will continue to reflect this seasonal pattern. ​ The timing of our new retail store openings also may have an impact on our quarterly results.
We anticipate our net sales will continue to reflect this seasonal pattern. The timing of our new retail store openings also may have an impact on our quarterly results. First, we incur certain non-recurring expenses related to opening each new retail store, which are expensed as they are incurred.
For fiscal year 2021, we incurred approximately $53.5 million in capital expenditures primarily related to the construction of new stores and the refurbishment of existing stores during the period.
For fiscal 2023, our expected operating lease payments will be $68.2 million and our total committed lease payments are $434.7 million as of January 28, 2023. Capital Expenditures. For fiscal year 2022, we incurred approximately $63.5 million in capital expenditures primarily related to the construction of new stores and the refurbishment of existing stores during the period.
We have no obligation to repurchase any shares of our common stock under the share repurchase program and we may modify, suspend or discontinue it at any time. ​ ​ ​ ​ ​ 44 Table of Contents Cash Flows ​ Cash flows from operating, investing and financing activities are shown in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fifty-Two Weeks Ended ​ ​ ​ January 29, ​ January 30, ​ ​ 2022 2021 ​ ​ (in thousands) Cash flows (used in) provided by operating activities ​ $ (21,626) $ 238,816 ​ Cash flows used in investing activities ​ ​ (53,452) ​ ​ (26,227) ​ Cash provided by (used in) financing activities ​ ​ 66,571 ​ ​ (148,749) ​ Cash and cash equivalents at end of period ​ ​ 57,018 ​ ​ 65,525 ​ ​ Net cash used in operating activities was $21.6 million for fiscal year 2021, compared to cash provided by operating activities of $238.8 million for fiscal year 2020, a change of approximately $260.4 million.
Cash Flows Cash flows provided by (used in) operating, investing and financing activities are shown in the following table: Fiscal Year Ended January 28, January 29, 2023 2022 (in thousands) Cash flows provided by (used in) operating activities $ 46,794 $ (21,626 ) Cash flows used in investing activities (60,588 ) (53,452 ) Cash (used in) provided by financing activities (40,835 ) 66,571 Cash and cash equivalents at end of period 2,389 57,018 Net cash provided by operating activities was $46.8 million for fiscal year 2022, compared to net cash used in operating activities of $21.6 million for fiscal year 2021, a change of approximately $68.4 million.
These fixed costs typically result in lower store profitability during the initial period after a new retail store opens.
Second, most store expenses generally vary proportionately with net sales, but there is also a fixed cost component, which includes occupancy costs. These fixed costs typically result in lower store profitability during the initial period after a new retail store opens.
In addition, on December 2, 2021, we received a $55.0 million cash payment from Great Outdoors Group in connection with the termination of the Merger Agreement.
Other income decreased by $55.0 million in fiscal year 2022 from $55.0 million for fiscal year 2021 due to the receipt of a $55.0 million payment in connection with the termination of the Merger Agreement with Great Outdoors Group in fiscal year 2021. Income Taxes.
During fiscal year 2021, we increased our gross square footage by 6.5% through the opening of 10 store locations. ​ 35 Table of Contents Our stores and our e-commerce platform are aggregated into one operating and reportable segment. ​ On December 2, 2021, Sportsman’s Warehouse, Great Outdoors Group, LLC and Phoenix Merger Sub I, Inc.
Today, we operate 131 stores in 30 states, totaling approximately 5.0 million gross square feet. During fiscal year 2022, we increased our gross square footage by 6.4% through the opening of nine store locations. Our stores and our e-commerce platform are aggregated into one operating and reportable segment.
See below under “Indebtedness” for additional information regarding our revolving credit facility, including the interest rate applicable to any borrowing under such facility. ​ Operating Lease Obligations. Lease commitments consist principally of leases for our retail stores, corporate office and distribution center. Our leases often include options which allow us to extend the terms beyond the initial lease term.
We returned to more historical levels of inventory purchases during fiscal 2022, and expect our inventory purchases will continue to stabilize in fiscal 2023. Operating Lease Obligations. Operating lease commitments consist principally of leases for our retail stores, corporate office and distribution center. Our leases often include options which allow us to extend the terms beyond the initial lease term.
We may repurchase shares of our common stock at any time or from time to time, without prior notice, subject to market conditions and other considerations. Our repurchases may be made through Rule 10b5-1 plans, accelerated share repurchase transactions, open market purchases, privately negotiated transactions, tender offers, block purchases or other transactions.
Our repurchases may be made through Rule 10b5-1 plans, accelerated share repurchase transactions, open market purchases, privately negotiated transactions, tender offers, block purchases or other transactions. We intend to fund repurchases under the Repurchase Program using cash on hand or available borrowings under our revolving credit facility.
Fiscal years 2021, 2020 and 2019 ended on January 29, 2022, January 30, 2021 and February 1, 2020, respectively. Each of fiscal year 2021, 2020, and 2019 contained 52 weeks of operations. ​ How We Assess the Performance of Our Business ​ In assessing the performance of our business, we consider a variety of performance and financial measures.
Fiscal Year We operate using a 52/53-week fiscal year ending on the Saturday closest to January 31. Fiscal years 2022, 2021 and 2020 ended on January 28, 2023, January 29, 2022 and January 30, 2021, respectively. Each of fiscal year 2022, 2021 , and 2020 contained 52 weeks of operations.
In addition, our credit agreement contains provisions that enable Wells Fargo to require us to maintain a lock-box, or similar arrangement, for the collection of all receipts. 45 Table of Contents We may be required to make mandatory prepayments under the revolving credit facility in the event of a disposition of certain property or assets, in the event of receipt of certain insurance or condemnation proceeds, upon the issuance of certain debt or equity securities, upon the incurrence of certain indebtedness for borrowed money or upon the receipt of certain payments not received in the ordinary course of business. ​ Our revolving credit facility requires us to maintain a minimum availability at all times of not less than 10% of the gross borrowing base.
The lien securing the obligations under the revolving credit facility is a first priority lien as to certain liquid assets, including cash, accounts receivable, deposit accounts and inventory. 50 We may be required to make mandatory prepayments under the revolving credit facility in the event of a disposition of certain property or assets, in the event of receipt of certain insurance or condemnation proceeds, upon the issuance of certain debt or equity securities, upon the incurrence of certain indebtedness for borrowed money or upon the receipt of certain payments not received in the ordinary course of business.
Our effective tax rate changed from fiscal year 2019 of 20.6% to 24.8% in 2020 primarily due to discrete items recognized in 2019 relating to prior year tax credits and changes in our estimated deferred state tax rate which did not repeat in 2020. ​ Seasonality ​ Due to the openings of hunting season across the country and consumer holiday buying patterns, net sales are typically higher in the third and fourth fiscal quarters than in the first and second fiscal quarters.
Seasonality Due to the openings of hunting season across the country and consumer holiday buying patterns, net sales are typically higher in the third and fourth fiscal quarters than in the first and second fiscal quarters. We also incur additional expenses in the third and fourth fiscal quarters due to higher sales volume and increased staffing in our stores.
We also had increases in other selling, general, and administration expenses, rent, and depreciation of $24.8 million, $8.2 million, and $3.3 million, respectively, each primarily related to the opening or acquiring of 10 new store locations during fiscal year 2020. The increase in other selling, general and administrative expenses was primarily due to increased credit card fees.
We also had increases in depreciation, rent, legal accruals and management recruiting expenses of $5.6 million, $3.6 million, $2.1 million and $1.3 million respectively, primarily related to the opening of nine new store locations during fiscal year 2022 and the recruiting and hiring of key senior managers.
The key measures for determining how our business is performing are net sales, same store sales, gross margin, selling, general and administrative expenses, income from operations and adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). ​ Net Sales and Same Store Sales ​ Our net sales are primarily received from revenue generated in our stores and also include sales generated through our e-commerce platform.
Net Sales and Same Store Sales Our net sales are primarily received from revenue generated in our stores and also include sales generated through our e-commerce platform.
Our hunting and shooting and fishing departments incurred decreases in same store sales of 8.7% and 0.6% respectively. Firearms same store sales decreased by 12.5% and ammunition same store sales decreased by 13.7% during fiscal year 2021 compared to fiscal year 2020. ​ Gross Profit.
With respect to same store sales, our footwear, apparel, optics, electronics and accessories, and camping departments saw increased same store sales of 21.2%, 12.7%, 7.0%, and 2.6%, respectively. Our hunting and shooting and fishing departments incurred decreases in same store sales of 8.7% and 0.6% respectively.
Our mission is to provide outstanding gear and exceptional service to inspire outdoor memories. ​ Our business was founded in 1986 as a single retail store in Midvale, Utah. Today, we operate 122 stores in 29 states, totaling approximately 4.7 million gross square feet.
Overview We are an outdoor sporting goods retailer focused on meeting the everyday needs of the seasoned outdoor veteran, the first-time participant and everyone in between. Our mission is to provide outstanding gear and exceptional service to inspire outdoor memories. Our business was founded in 1986 as a single retail store in Midvale, Utah.
In addition, our board recently authorized a share repurchase program to allow for the repurchase of up to $75.0 million of outstanding shares of our common stock for the period from March 31, 2022 to March 31, 2023.
See “—Indebtedness” below for additional information regarding our revolving credit facility, including the interest rate applicable to any borrowing under such facility. Share Repurchase Authorization. Our Repurchase Program initially, provided for our repurchase of up to $75.0 million of outstanding shares of our common stock during the period from March 31, 2022 to March 31, 2023.
As a percentage of net sales, gross profit decreased to 32.8% for fiscal year 2020 compared to 33.5% for fiscal year 2019 due to the change in product mix as a result of the majority of revenue being generated from lower margin categories such as firearms and ammunition and a channel mix shift to higher e-commerce driven sales causing increased freight costs.
As a percentage of net sales, gross profit decreased to 32.6% for fiscal year 2021 compared to 32.8% for fiscal year 2020 due to higher freight costs. The higher freight costs were partially offset by higher product margins and increased vendor incentives, which positively impacted gross margin.
See above under “Overview” for additional information. ​ Material Cash Requirements ​ Our material cash requirements are primarily for opening and acquiring new store locations, along with our general operating expenses and other expenses discussed below. ​ Capital Expenditures.
Material Cash Requirements Our material cash requirements from known contractual and other obligations are primarily for opening and acquiring new store locations, along with our general operating expenses and other expenses discussed below. Purchase Obligations. In the ordinary course of business, we enter into arrangements with vendors to purchase merchandise in advance of expected delivery.
We recognized revenue for the breakage of loyalty reward points as revenue in proportion to the pattern of customer redemption of the points by applying a historical breakage rate of 54%. ​ As it relates to e-commerce sales, we account for shipping and handling as fulfillment activities, and not a separate performance obligation.
We do not sell or provide gift cards that carry expiration dates. We recognized revenue for the breakage of loyalty reward points as revenue in proportion to the pattern of customer redemption of the points by applying an estimated breakage rate of 25% using historical rates and future expectations.
We focused on rebuilding our inventory during fiscal year 2021 and consider our inventory position to be a strength heading into 2022. ​ Net cash used in investing activities was $53.5 million for fiscal year 2021 compared to $26.2 million for fiscal year 2020.
The increase in our cash flows provided by operating activities was primarily the result of a normalization of our inventory levels in fiscal year 2022 compared to a focus on building up inventory in 2021. Net cash used in investing activities was $60.6 million for fiscal year 2022 compared to $53.5 million for fiscal year 2021.
Our cash flows used in investing activities in fiscal year 2020 primarily related to costs incurred in connection with opening and acquiring new stores. ​ Net cash provided in financing activities was $66.6 million for fiscal year 2021 compared to net cash used in financing activities of $148.7 million for fiscal year 2020.
Net cash used in financing activities was $40.8 million for fiscal year 2022 compared to net cash provided by financing activities of $66.6 million for fiscal year 2021, a change of approximately $107.4 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeHowever, this does not preclude our adoption of specific hedging strategies in the future. ​ 50 Table of Contents
Biggest changeHowever, this does not preclude our adoption of specific hedging strategies in the future. 56
Our revolving credit facility and term loan carry floating interest rates that are tied to LIBOR, the federal funds rate and the prime rate, and, therefore, our income and cash flows will be exposed to changes in interest rates to the extent that we do not have effective hedging arrangements in place.
Our revolving credit facility and term loan carry floating interest rates that are tied to SOFR, the federal funds rate and the prime rate, and, therefore, our income and cash flows will be exposed to changes in interest rates to the extent that we do not have effective hedging arrangements in place.
Based on a sensitivity analysis at January 29, 2022, assuming the amount outstanding under our revolving credit facility would be outstanding for a full year, a 100 basis point increase in interest rates would have increased our interest expense by $0.8 million. We do not use derivative financial instruments for speculative or trading purposes.
Based on a sensitivity analysis at January 28, 2023, assuming the amount outstanding under our revolving credit facility would be outstanding for a full year, a 100 basis point increase in interest rates would have increased our interest expense by $1.0 million. We do not use derivative financial instruments for speculative or trading purposes.

Other SPWH 10-K year-over-year comparisons