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What changed in SPORTSMAN'S WAREHOUSE HOLDINGS, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of SPORTSMAN'S WAREHOUSE HOLDINGS, INC.'s 2024 and 2025 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 2025 report.

+385 added−372 removedSource: 10-K (2025-04-02) vs 10-K (2024-04-04)

Top changes in SPORTSMAN'S WAREHOUSE HOLDINGS, INC.'s 2025 10-K

385 paragraphs added · 372 removed · 301 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

119 edited+19 added−17 removed101 unchanged
Biggest changeWe 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.
Biggest changeWe are committed to leveraging our omni-channel retail presence and increasing same store sales through a number of ongoing and new initiatives, including (i) improving the customer 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) building depth and focus in our product assortment in stores, including locally curated brands and leveraging our e-commerce platform to increase the SKU count online (with the assistance of our vendor partners through drop ship and our Federal Firearms License (“FFL”) dealer partners), (iv) enhancing our brand awareness to be the local destination for hunting and fishing by leveraging our marketing platforms, creating unique online content using our outfitters and local influencers and providing exclusive online informational and education content, including news, buyer’s guide and how to’s, accessory finders, and wild game recipes, and (v) establishing Sportsman's Warehouse as the go-to authority in personal protection.
We believe this low-cost, capital-efficient approach also allows us to successfully serve markets that are not well-suited for the more capital-intensive store models of our key competitors. Approximately 63% of our markets currently lack another nationally recognized outdoor specialty retailer, which we believe is a result of these dynamics. Significant New Store Growth Opportunity within Existing and New Markets .
We believe this low-cost, capital-efficient approach also allows us to successfully serve markets that are not well-suited for the more capital-intensive store models of our key competitors. Approximately 63% of our markets currently lack another nationally recognized outdoor specialty retailer, which we believe is a result of these dynamics. New Store Growth Opportunity within Existing and New Markets .
Our stores average approximately 37,000 gross square feet. 9 The following table lists the location by state of our 146 stores open as of February 3, 2024: Number of Stores Number of Stores California 17 New Mexico 3 Washington 14 North Carolina 3 Utah 12 South Carolina 3 Arizona 10 Kentucky 2 Colorado 9 New York 2 Oregon 8 Tennessee 2 Pennsylvania 7 West Virginia 2 Wyoming 7 Wisconsin 2 Florida 6 Arkansas 1 Idaho 6 Iowa 1 Alaska 5 Louisiana 1 Michigan 4 Minnesota 1 Nevada 4 Mississippi 1 Virginia 4 Nebraska 1 Indiana 3 North Dakota 1 Montana 3 Ohio 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.
Our stores average approximately 37,000 gross square feet. 9 The following table lists the location by state of our 146 stores open as of February 1, 2025: Number of Stores Number of Stores California 17 New Mexico 3 Washington 14 North Carolina 3 Utah 12 South Carolina 3 Arizona 10 Kentucky 2 Colorado 9 New York 2 Oregon 8 Tennessee 2 Pennsylvania 7 West Virginia 2 Wyoming 7 Wisconsin 2 Florida 6 Arkansas 1 Idaho 6 Iowa 1 Alaska 5 Louisiana 1 Michigan 4 Minnesota 1 Nevada 4 Mississippi 1 Virginia 4 Nebraska 1 Indiana 3 North Dakota 1 Montana 3 Ohio 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 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.
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 7 database and availability of attractive lease terms.
If a statute similar to the AWB were to be enacted or re-enacted at the federal level, it would impact our ability to sell certain products. 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.
If a statute similar to the AWB were to be enacted or re-enacted at the federal level, it would impact our ability to sell certain products. Additionally, state and local governments have enacted laws and regulations that place additional restrictions on the manufacture, transfer, sale, purchase, possession and use of firearms, ammunition and shooting-related products.
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 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, applicable to the Firearms and Ammunition Excise Tax, all of which have been amended from time to time.
The following table shows our sales during the past three fiscal years presented by department: Fiscal year Ended February 3, January 28, January 29, Department Product Offerings 2024 2023 2022 Camping Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools 11.2 % 12.5 % 13.1 % Apparel Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear 8.8 % 9.3 % 8.4 % Fishing Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats 8.9 % 8.9 % 10.0 % Footwear Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots 7.2 % 7.3 % 6.8 % Hunting and Shooting Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment and shooting gear 57.4 % 54.9 % 54.2 % Optics, Electronics, Accessories, and Other Gift items, GPS devices, knives, lighting, optics, two-way radios, and other license revenue, net of revenue discounts 6.5 % 7.1 % 7.5 % Total 100.0 % 100.0 % 100.0 % 13 Camping .
The following table shows our sales during the past three fiscal years presented by department: Fiscal year Ended February 1, February 3, January 28, Department Product Offerings 2025 2024 2023 Camping Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools 11.7 % 11.2 % 12.5 % Apparel Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear 7.5 % 8.8 % 9.3 % Fishing Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats 10.3 % 8.9 % 8.9 % Footwear Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots 6.3 % 7.2 % 7.3 % Hunting and Shooting Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment and shooting gear 57.4 % 57.4 % 54.9 % Optics, Electronics, Accessories, and Other Gift items, GPS devices, knives, lighting, optics, two-way radios, and other license revenue, net of revenue discounts 6.8 % 6.5 % 7.1 % Total 100.0 % 100.0 % 100.0 % 13 Camping .
Our store model is adaptable to markets of multiple sizes, from MSAs with populations of less than 75,000 to major metropolitan areas with populations in excess of 1,000,000. We have been successful both in remodeling existing buildings and in constructing new build-to-suit locations.
Our store model is adaptable to markets of multiple sizes, from MSAs with populations of less than 75,000 to major 10 metropolitan areas with populations in excess of 1,000,000. We have been successful both in remodeling existing buildings and in constructing new build-to-suit locations.
To reinforce our convenient shopping experience, we offer our products at everyday low prices. We believe our competitive pricing strategy supports our strong value proposition, instills price confidence in both our customers and our sales associates, and is a critical element of our competitive position.
To reinforce our convenient shopping experience, we offer our products at everyday value prices. We believe our competitive pricing strategy supports our strong value proposition, instills price confidence in both our customers and our sales associates, and is a critical element of our competitive position.
Products such as ammunition, firearms cleaning supplies, firearms, firearms safety and storage and reloading products are typically key drivers of traffic in our stores. Our hunting and shooting merchandise assortment provides equipment, accessories and consumable supplies for virtually every type of hunting and shooting sport.
Products such as firearms, ammunition, firearm cleaning supplies, firearm safety and storage, and reloading products are typically key drivers of traffic in our stores. Our hunting and shooting merchandise assortment provides equipment, accessories and consumable supplies for virtually every type of hunting and shooting sport.
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).
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 thereafter).
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 2023, private label offerings accounted for approximately 4.5% of our total sales with special make-up offerings accounting for an additional 2.2% 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 2024, private label offerings accounted for approximately 4.4% of our total sales with special make-up offerings accounting for an additional 2.5% of our total sales.
We place great emphasis on creating an inviting and engaging store experience for customers of all experience levels. For the seasoned outdoor veteran, we offer a one-stop, convenient store layout that promotes “easy-in, easy-out” access to replenish supplies, learn about local conditions and test products.
We place great emphasis on providing an inviting and engaging store experience for customers of all experience levels. For the seasoned outdoor veteran, we offer a one-stop, convenient store layout that promotes “easy-in, easy-out” access to replenish supplies, learn about local conditions and test products.
We believe these benefits are key in helping us obtain and retain new customers. We plan to continue to invest in the marketing of these programs, in particular at the point-of-sale. Expanding Our Store Base . Over the last three fiscal years, we have opened an average of 11 stores per year.
We believe these benefits are key in helping us obtain and retain new customers. We plan to continue to invest in the marketing of these programs, in particular at the point-of-sale. Expanding Our Store Base . Over the last three fiscal years, we have opened an average of eight stores per year.
The table below summarizes the key product lines by department: Department Product Offerings Camping Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools Apparel Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear Fishing Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats Footwear Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots Hunting and Shooting Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, firearms safety and storage, reloading equipment, and shooting gear Optics, Electronics, Accessories, and Other Gift items, GPS devices, knives, lighting, optics (e.g. binoculars), two-way radios, and other license revenue, net of revenue discounts Each department has buying and planning teams that are responsible for monitoring product availability from vendors and sales volume within the department and across all stores.
The table below summarizes the key product lines by department: Department Product Offerings Camping Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools Apparel Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear Fishing Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats Footwear Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots Hunting and Shooting Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment, and shooting gear Optics, Electronics, Accessories, and Other Gift items, GPS devices, knives, lighting, optics, two-way radios, and other license revenue, net of revenue discounts Each department has buying and planning teams that are responsible for monitoring product availability from vendors and sales volume within the department and across all stores.
During fiscal year 2023, we purchased merchandise from approximately 1,100 vendors with no vendor accounting for more than 10% of total merchandise purchased. We have established long-standing, continuous relationships with our largest vendors. Our sourcing organization is currently managed by our merchant team in our corporate headquarters.
During fiscal year 2024, we purchased merchandise from approximately 1,100 vendors with no vendor accounting for more than 10% of total merchandise purchased. We have established long-standing, continuous relationships with our largest vendors. Our sourcing organization is currently managed by our merchant team in our corporate headquarters.
We share the benefits of these strategic vendor relationships with our customers through everyday low prices, enhanced access to certain products that are limited in production and special make-up products sold exclusively at Sportsman’s Warehouse. Flexible and Adaptable Real Estate Strategy .
We share the benefits of these strategic vendor relationships with our customers through everyday value prices, enhanced access to certain products that are limited in production and special make-up products sold exclusively at Sportsman’s Warehouse. Flexible and Adaptable Real Estate Strategy .
In order to maintain compliance with the applicable federal, state and local laws and regulations, we have implemented company-wide standard operating procedures that apply to the sale of firearms and ammunition. All relevant employee are trained in accordance with the policies and procedures regarding the sale of ATF regulated items.
In order to maintain compliance with the applicable federal, state and local laws and regulations, we have implemented company-wide standard operating procedures that apply to the sale of firearms and ammunition. All relevant outfitters are trained in accordance with the policies and procedures regarding the sale of ATF regulated items.
This combined total of 6.7% compares to more than 20% for many of our sporting goods retail peers. We believe our private label and special make-up products are an important opportunity to drive sales and increase margins alongside our branded merchandise.
This combined total of 6.9% compares to more than 20% for many of our sporting goods retail peers. We believe our private label and special make-up products are an important opportunity to drive sales and increase margins alongside our branded merchandise.
The distribution center has dynamic systems and processes that we believe can accommodate continued new store growth. We use Warehouse Management System (“WMS”) technology from Korber, to manage all activities. The system is highly adaptable and can be easily changed to accommodate new business requirements.
The distribution center has dynamic systems and processes that we believe can accommodate continued new store growth. We use Warehouse Management System (“WMS”) technology from Korber, to manage all activities. The system is highly adaptable and can be easily enhanced to accommodate new business requirements.
Because we sell firearms at all of our retail stores, we are subject to regulation by the Bureau of Alcohol, Tobacco, Firearms and Explosives (the “ATF”). Each store has its own FFL that permits the sale of firearms, and our distribution center has obtained an FFL to store and distribute firearms.
Because we sell firearms at all of our retail stores, we are subject to regulation by the Bureau of Alcohol, Tobacco, Firearms and Explosives (the “ATF”). Each store has its own Federal Firearms License ("FFL") that permits the sale of firearms, and our distribution center has obtained an FFL to store and distribute firearms.
Accordingly, we may be subject to numerous data privacy and security obligations, including federal, state, and local laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements and other obligations related to data privacy and security. These frameworks are evolving and may impose potentially conflicting obligations.
Accordingly, we are subject to numerous data privacy and security obligations, including federal, state, and local laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements and other obligations related to data privacy and security. 21 These frameworks are evolving and may impose potentially conflicting obligations.
We believe we offer a wider selection of hard goods than many of our key competitors. We employ a good, better, best merchandise strategy, with an emphasis on “better” products that meet the needs of customers of all experience levels.
We believe we offer a wider selection of outdoor hard goods than many of our competitors. We employ a good, better, best merchandise strategy, with an emphasis on “better” products that meet the needs of customers of all experience levels.
Our sophisticated systems are a key factor in our shrink rates of less than 1.5% and an important component of our comprehensive compliance program. 10 Expansion Opportunities and Site Selection We have developed a rigorous and flexible process for site selection.
Our systems are a key factor in our shrink rates of less than 1.5% 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.
Our footwear department includes brands such as Crispi, Danner, Keen, Merrell, and Hey Dude. Hunting and Shooting . Hunting and shooting is our largest merchandise department, representing approximately 57.4% of our net sales during fiscal year 2023.
Our footwear department includes brands such as Crispi, Danner, Keen, Merrell, and Hey Dude. Hunting and Shooting . Hunting and shooting is our largest merchandise department, representing approximately 57.4% of our net sales during fiscal year 2024.
We also frequently gather feedback and new product reviews from our store management and employees, as well as from reviews submitted by our customers. We believe this feedback is valuable to our vendor-partners and improves our access to new models and technologies.
We also frequently gather feedback and new product reviews from our store management and outfitters, as well as from reviews submitted by our customers. We believe this feedback is valuable to our vendor-partners and improves our access to new models and technologies.
Our highly trained employees, who often are local outdoor enthusiasts and users of the products we sell, engage and interact with our customers in order to educate them and equip them with the right gear. Our sales associates draw upon formal vendor sales training as well as first-hand experiences from using our products in local conditions.
Our highly trained outfitters, who often are local outdoor enthusiasts and users of the products we sell, engage and interact with our customers in order to educate them and equip them with the right gear. Our outfitters draw upon formal vendor sales training as well as first-hand experiences from using our products in local conditions.
For example, in our hunting department, all employees receive an additional nine hours of training on ATF and company policies initially upon hire, with continuing education throughout the year.
For example, in our hunting department, all outfitters receive an additional nine hours of training on ATF and company policies initially upon hire, with continuing education throughout the year.
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. 22
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. 23
We believe our broad array of in-stock consumable goods appeals to a broad range of customers and drives repeat traffic as well as increased average ticket value.
We believe our specially curated array of in-stock consumable goods appeals to a broad range of customers and drives repeat traffic as well as increased average ticket value.
We are also subject to numerous other federal, state and local laws and regulations regarding firearm sale procedures, record keeping, inspection and reporting, including adhering to minimum age restrictions regarding the acquisition, purchase or possession of firearms or ammunition, residency requirements, applicable waiting periods, importation regulations and regulations pertaining to the shipment and transportation of firearms. 19 In September 2004, Congress declined to renew the Assault Weapons Ban of 1994 (the “AWB”), which prohibited the manufacture of certain firearms defined as “assault weapons,” restricted the sale or possession of “assault weapons,” except those that were manufactured prior to the law’s enactment, and placed restrictions on the sale of new high-capacity ammunition feeding devices.
We are also subject to numerous other federal, state and local laws and regulations regarding firearm sale procedures, record keeping, inspection and reporting, including adhering to minimum age restrictions regarding the acquisition, purchase or possession of firearms or ammunition, residency requirements, applicable waiting periods, importation regulations and regulations pertaining to the shipment and transportation of firearms. 19 On September 13, 1994, the Federal Assault Weapons Ban (the “AWB”), which prohibited the manufacture of certain firearms defined as “assault weapons,” restricted the sale or possession of “assault weapons,” except those that were manufactured prior to the law’s enactment, and placed restrictions on the sale of new high-capacity ammunition feeding devices.
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).
After the first 24 month period after opening a new store, we target 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).
Various states and local jurisdictions, including California, Colorado, New York and Washington (states in which we operate), have adopted their own versions of the AWB or high capacity ammunition feeding device restrictions, some of which restrictions apply to the products we sell in other states.
In the years following the expiration of the AWB, various states and local jurisdictions, including California, Colorado, New York and Washington (states in which we operate), have adopted their own versions of the AWB or high capacity ammunition feeding device restrictions, some of which apply to the products we sell in other states.
Our optics, electronics, accessories and other department represented approximately 6.5% of our net sales during fiscal year 2023. 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.
Our optics, electronics, accessories and other department represented approximately 6.8% of our net sales during fiscal year 2024. 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.
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 .
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 will continue to drive omni-channel traffic, improved conversion and increased average ticket value. 8 Continuing to Enhance Our Operating Margins .
The majority of our direct-to-consumer e-commerce orders are fulfilled by our 146 retail stores with additional orders fulfilled by our distribution center. We ship merchandise to our e-commerce customers via small parcel delivery. Our experienced distribution management team leads a staff of approximately 500 employees at peak inventory levels heading into the fourth quarter.
The majority of our direct-to-consumer e-commerce orders are fulfilled by our 146 retail stores with additional orders fulfilled by our distribution center. We ship merchandise to our e-commerce customers via small parcel delivery. Our experienced distribution management team leads a staff of approximately 400 outfitters at peak inventory levels heading into the fourth quarter.
Data Privacy In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, “process”) personal data, such as employee and consumer information.
Data Privacy In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, “process”) personal data, such as our outfitters and consumer information.
There are almost 50,000 Type 01 FFLs in the United States today, of which only approximately 5,200 are currently held by national or regional specialty stores. Since FFLs are issued at the store level, these statistics imply that almost 90% of the market is fragmented among small independent retailers.
There are approximately 47,000 Type 01 FFLs in the United States today, of which only approximately 5,100 are currently held by national or regional specialty stores. Since FFLs are issued at the store level, these statistics imply that almost 90% of the market is fragmented among small independent retailers.
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).
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 6 seminars (such as turkey frying, outdoor cooking, and firearm operation and safety).
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.
We believe the support services provided by our highly trained outfitters differentiate us from our competitors, increase customer loyalty and drive repeat traffic to our stores. 12 Products Our stores are organized into six departments.
In-store, we offer a wide range of outdoor-themed activities and seminars, from turkey frying to firearm operation and safety. In addition, we sponsor community outreach and charity programs to more broadly connect with our local communities with the aim of promoting our brand and educating consumers.
In-store, we offer a wide range of outdoor-themed activities and seminars, from turkey frying to firearm operation and safety. In addition, we sponsor community outreach and charity programs to more broadly connect with our local communities with the aim of promoting our brand and educating consumers. Growing our Loyalty and Credit Card Programs.
For example, our WMS enabled us to support full omni-channel distribution under one roof by allowing us to comingle inventory to 15 optimize space requirements and labor. Additionally, we have developed customized radio frequency and voice-directed processes to handle the specific requirements of our operations.
For example, our WMS enabled us to support full omni-channel distribution under one roof by allowing us to comingle inventory 15 to optimize space requirements and labor. Additionally, we have adopted customized radio frequency and voice-directed technology to handle the specific requirements of our operations.
Apparel represented approximately 8.8% of our net sales during fiscal year 2023 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 7.5% of our net sales during fiscal year 2024 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 .
Camping represented approximately 11.2% of our net sales during fiscal year 2023. 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 11.7% of our net sales during fiscal year 2024. 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 carry a large array of consumable goods, which includes ammunition, bait, cleaning supplies, food, certain lures, propane and reloading supplies. During fiscal year 2023, sales of consumable goods accounted for approximately 44.0% of our unit sales and 20.0% of our dollar sales.
We carry a large array of consumable goods, which includes ammunition, bait, cleaning supplies, food, certain lures, propane and reloading supplies. During fiscal year 2024, sales of consumable goods accounted for approximately 46.0% of our unit sales and 20.0% of our dollar sales.
Footwear represented approximately 7.2% of our net sales during fiscal year 2023 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 6.3% of our net sales during fiscal year 2024 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.
The program is free to join and accepted both online and in-stores for purchases and the use of redemption cards. As of February 3, 2024, we had more than 4.4 million participants in our loyalty program and approximately 53% of our revenue is generated from our loyalty customers.
The program is free to join and accepted both online and in-stores for purchases and the use of redemption cards. As of February 1, 2025, we had more than 4.9 million participants in our loyalty program and approximately 53% of our revenue is generated from our loyalty customers.
Our principal competitors include the following: • independent, local specialty stores with locally relevant, but often limited, product offerings; • other specialty retailers that compete with us across a significant portion of our merchandising categories through retail store, catalog or e-commerce businesses; • large-format sporting goods stores and chains; • mass merchandisers, warehouse clubs, discount stores and department stores; and • online retailers with deep offerings in the product categories in which we compete.
Our principal competitors include: • Independent, local specialty stores with locally relevant but often limited product offerings • Other specialty retailers that compete with us across a significant portion of our merchandising categories through retail stores, catalogs, or e-commerce businesses • Large-format sporting goods stores and chains • Mass merchandisers, warehouse clubs, discount stores, and department stores • Online retailers with deep offerings in our product categories Independent, Local Specialty Stores.
We pride ourselves on carrying an extensive selection of branded good, better and best hard goods at everyday low prices. Approximately 44% of our unit sales and 20% of our dollar sales during fiscal year 2023 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 value prices. Approximately 46% of our unit sales and 20% of our dollar sales during fiscal year 2024 were consumables, such as ammunition, bait, cleaning supplies, food, certain lures, propane and reloading supplies.
The U.S. outdoor activities and sporting goods sector is comprised of three primary categories—equipment, apparel and footwear—with each category containing distinct product sets to support a variety of activities, including hunting, fishing, camping and shooting, as well as other sporting goods activities.
The U.S. outdoor activities and sporting goods sector consists of three primary categories—equipment, apparel, and footwear—each containing distinct product sets to support a variety of activities, including hunting, fishing, camping, and shooting, as well as other sporting goods activities.
We believe that our store model, combined with our rigorous site selection process, is a competitive advantage that enables us to better address the needs of markets of varying sizes and geographies. Our stores vary in size from approximately 7,500 to 75,000 gross square feet.
We believe that our store model is a competitive advantage that enables us to better address the needs of markets of varying sizes and geographies. Our stores vary in size from approximately 7,500 to 75,000 gross square feet.
As of the end of fiscal year 2023, 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 9.9%.
As of the end of fiscal year 2024, 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 10.0%.
We believe growth in the U.S. outdoor activities and sporting goods market is driven by key trends, centered around enhancing performance and enjoyment while participating in sporting and outdoor activities. This includes new product introductions, participation levels, and the resilience of consumer demand for product purchases in these categories versus other discretionary categories.
We believe growth in the U.S. outdoor activities and sporting goods market is driven by key trends focused on enhancing performance and enjoyment while participating in these activities. This includes new product introductions, participation levels, and the resilience of consumer demand for purchases in these categories compared to other discretionary categories.
In fiscal year 2023, our website received more than 119 million visits with e-commerce driven sales in excess of 18% of total sales, which we believe demonstrates our position as a leading resource for outdoor products and product education.
In fiscal year 2024, our website received more than 112 million visits with e-commerce driven sales in excess of 20% of total sales, which we believe demonstrates our position as a leading resource for outdoor products and product education.
Fishing represented approximately 8.9% of our net sales during fiscal year 2023 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 10.3% of our net sales during fiscal year 2024 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.
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 formerly were less available. 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.
Furthermore, we believe specialty retailers have generated incremental sales volume by expanding their presence, particularly in smaller underserved communities, increasing customers’ access to products that were previously less available. The nature of the outdoor activities we cater to often requires recurring purchases throughout the year, resulting in high conversion rates among customers.
We do not plan to open any new stores in fiscal year 2024 as we re-evaluate our short-term growth strategy. Our current longer-term plans will continue to include expanding our store base to serve the outdoor needs of enthusiasts in markets across the United States.
We plan to open one new store in fiscal year 2025 as we continue to re-evaluate our short-term growth strategy. Our current longer-term plans will continue to include expanding our store base to serve the outdoor needs of enthusiasts in markets across the United States.
Hunting with firearms typically is accompanied by recurring purchases of ammunition and cleaning supplies throughout the year and multiple firearm styles for different hunted game. 17 Competition We believe that the principal competitive factors in our industry are product selection, including locally relevant offerings, value pricing, convenient locations, technical services and customer service.
Hunting with firearms is often accompanied by recurring purchases of ammunition and cleaning supplies, as well as multiple firearm styles for different types of game. 17 Competition We believe the principal competitive factors in our industry are product selection, including locally relevant offerings, value pricing, convenient locations, technical services, and customer service.
Such obligations may include, without limitation, the Federal Trade Commission Act, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (“CPRA”) (collectively, “CCPA”), industry standards, such as the Payment Card Industry Data Security Standard (“PCI DSS”), and wiretapping laws.
Such obligations may include, without limitation, the Federal Trade Commission Act, the California Consumer Privacy Act of 2018, (“CCPA”), industry standards, such as the Payment Card Industry Data Security Standard (“PCI DSS”), and wiretapping laws.
Other specialty retailers are smaller chains that typically focus on offering a broad selection of merchandise in one or more of the following product categories—hunting, fishing, camping or other outdoor product categories. We believe we can offer a broader and deeper selection of merchandise or specialized services than these other outdoor-focused retail chains. Large-Format Sporting Goods Stores and Chains .
Other specialty retailers are smaller chains that typically offer a broad selection of merchandise in one or more of the following categories—hunting, fishing, camping, or other outdoor activities. We believe we offer a broader and deeper selection of merchandise and specialized services than these retailers. Large-Format Sporting Goods Stores and Chains.
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. We believe that participation in these activities remains high and continues to grow.
We expect these factors to continue fostering growth in the outdoor activities and sporting goods market in the future. Within the retail sporting goods sector, we primarily operate in the outdoor equipment, apparel, and footwear segment, which includes hunting and shooting, fishing, camping, hiking, and boating. Participation in these activities remains strong and continues to grow.
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.
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. Low Cost Operating Structure with Attractive and Replicable Store Economics .
As of February 3, 2024, we operated 146 stores across 32 states, primarily in the Western United States and Alaska.
As of February 1, 2025, we operated 146 stores across 32 states, primarily in the Western United States and Alaska.
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). We do not currently plan to open new stores in fiscal year 2024 and we are currently evaluating our short-term strategy related to opening new stores.
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). We currently plan to open one new store in fiscal year 2025 and we continue to evaluate our short-term strategy related to opening new stores.
With respect to retailers in this category with physical locations, these stores generally range in size from approximately 50,000 to over 200,000 square feet and are primarily located in shopping centers, free-standing sites or regional malls. Hunting, fishing and camping merchandise and apparel represent a small portion of the stores’ assortment and their total sales. 18 Online Retailers.
Mass Merchandisers, Warehouse Clubs, Discount Stores, and Department Stores. Retailers in this category with physical locations generally range from approximately 50,000 to over 200,000 square feet and are primarily located in shopping centers, free-standing sites, or regional malls. Hunting, fishing, and camping merchandise and apparel represent a small portion of these stores’ assortments and total sales. 18 Online Retailers.
We believe our leadership position in the Western United States and our continued expansion in other geographical regions of the United States, combined with our existing scalable infrastructure, provides a strong foundation for continued expansion within our core markets as well as expanding into new geographies.
We believe our leadership position in the Western United States and our expansion in other geographical regions of the United States, combined with our existing scalable infrastructure, provides a strong foundation for further expansion within our core markets as well as expanding into new geographies. Passionate and Experienced Management Team with Proven Track Record .
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.
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.
This system increases vendors’ product knowledge reach and provides more effective training to our employees. 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.
Training room sessions are especially important for technical products that have 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.
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.
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 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 outfitter 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. Our Stores We operate 146 stores across 32 states as of February 1, 2025.
Growing the Sportsman’s Warehouse Brands . We are committed to supporting our stores, product offerings and brand through a variety of marketing programs, private label offerings and corporate partnerships. Our marketing and promotional strategy includes coordinated print, digital and social media platforms.
We are committed to supporting our stores, product offerings and brand through a variety of marketing programs, private label offerings and corporate partnerships. Our marketing and promotional strategy includes coordinated digital and social media platforms, print, as well as our internal data base of loyalty customers.
In addition, certain barriers, including legal restrictions, exist on the sale of our product offerings that comprise a portion of our revenue, such as firearms, ammunition, certain cutlery, propane and reloading powder, and create a structural barrier to competition from many online retailers.
Additionally, certain legal restrictions exist on the sale of some of our product offerings, such as firearms, ammunition, certain cutlery, propane, and reloading powder, which create structural barriers to competition from many online retailers.
If that were to occur, it could result in a substantial decline in our sales of firearms and related products and reduce traffic to our stores in Oregon, which could have a substantial impact on our sales and gross margin. On December 6, 2022, a state court judge in Oregon temporarily blocked the enforcement of such legislation.
If that were to occur, it could result in a substantial decline in our sales of firearms and related products and reduce traffic to our stores in Oregon, which could have a substantial impact on our sales and gross margin.
On average, over the last three fiscal years, we have generated approximately 26.3% and 27.8% 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 26.4% and 28.0% 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 anticipate our net sales will continue to reflect this seasonal pattern.
California, Connecticut and New York impose mandatory screening of ammunition purchases; Washington recently passed legislation that, among other things, raises the minimum age to purchase certain firearms to 21 from 18 and imposes a multi-day waiting period on all gun purchases.
California, Connecticut and New York impose mandatory screening of ammunition purchases, some other states require the presentation of a firearms ownership identification card or permit in order to acquire ammunition products; Florida, Washington, and most recently, Colorado have passed legislation that, among other things, raises the minimum age to purchase certain firearms to 21 from 18 and imposes a multi-day waiting period on all gun purchases.
We do not currently have any store refurbishments planned for fiscal year 2024. The retail stores and the distribution center have loss prevention employees who monitor approximately 50 cameras at each store and 250 cameras at the distribution center. These cameras are observed locally and centrally at our headquarters in our dedicated surveillance room.
The retail stores and the distribution center have loss prevention teams who monitor approximately 50 cameras at each store and 250 cameras at the distribution center. These cameras are observed locally and centrally at our headquarters in our dedicated surveillance room.
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 believe we offer competitive compensation and benefits packages. We strive to ensure pay equity between our female and male employees performing equal or substantially similar work.
None of our outfitters are represented by a labor union or are party to a collective bargaining agreement and we have had no labor-related work stoppages. We believe we offer competitive compensation and benefits packages.
E-commerce is a growing sales channel. We face competition from a diverse set of online retailers that sell a wide range of products in categories in which we participate. Online retailers include competitors with e-commerce only sales channels, in addition to many of the retailers mentioned above that also have an online presence.
E-commerce is a growing sales channel, and we face competition from various online retailers offering a wide range of products in our categories. These competitors include e-commerce-only retailers as well as many of the retailers mentioned above that also have an online presence.
Of our total employees, approximately 200 were based at our corporate headquarters in West Jordan, Utah, approximately 370 employees were located at our distribution center and approximately 4,830 were store employees. As of February 3, 2024, we had approximately 2,100 full-time employees and approximately 3,300 part-time employees, who are primarily store employees.
Of our total outfitters, approximately 200 were based at our corporate headquarters in West Jordan, Utah, approximately 400 outfitters were based at our distribution center and approximately 4,500 outfitters worked in our stores. As of February 1, 2025, we had approximately 2,050 full-time outfitters and approximately 3,050 part-time outfitters, who are primarily based in our stores.
Our Stores We operate 146 stores across 32 states as of February 3, 2024. Most of our stores are located in power, neighborhood and lifestyle centers. Power centers are large, unenclosed shopping centers that are usually anchored by three or more national supercenters, such as Target, Walmart and Costco.
Most of our stores are located in power, neighborhood and lifestyle centers. Power centers are large, unenclosed shopping centers that are usually anchored by three or more national supercenters, such as Target, Walmart and Costco. Neighborhood centers are shopping centers anchored by a supermarket or drugstore that provide convenience goods and services to a neighborhood.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWhile moderating in fiscal year 2023, we believe dynamic conditions may continue in future fiscal years. Freight rates on our products are affected by a myriad of factors, including the global economy, petroleum prices, carrier labor relations, congestion at U.S. ports and ocean freight carrier capacity.
Biggest changeFreight rates on our products are affected by a myriad of factors, including the global economy, tariffs, petroleum prices, carrier labor relations, congestion at U.S. ports and ocean freight carrier capacity. 28 We have experienced in the past, and may experience in the future, supply chain disruptions and delays of the supply of products from our vendors, which may have an adverse impact on our net sales and profitability.
As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services.
As applicable, such rights include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services.
Our inability or failure to do so could result in adverse consequences, such as threats of class-action litigation alleging violations of wiretapping laws. In addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups, such as the PCI DSS, and may become subject to such obligations in the future.
Our inability or failure to do so could result in adverse consequences, such as threats of class-action litigation alleging violations of wiretapping laws. In addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups, such as the PCI DSS, and we are, and may become in the future subject to such obligations.
If interest rates increase, so could our interest costs for any new debt and our variable rate debt obligations under our revolving credit facility and term loan. This increased cost could make the financing of any acquisition more costly, as well as lower our current period earnings.
If interest rates increase, so could our interest costs for any new debt and our variable rate debt obligations under our revolving credit facility and term loan facility. This increased cost could make the financing of any acquisition more costly, as well as lower our current period earnings.
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); 33 • 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.
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.
These provisions include: • establishing a classified board of directors (which will be phased out by 2026); • providing that directors may be removed only for cause (which will be phased out in 2026 and allow for directors to be removed with or without 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 act by written consent in lieu of a meeting; 35 • 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; and • authorizing the issuance of “blank check” preferred stock without any need for action by stockholders.
These provisions include: • establishing a classified board of directors (which will be phased out by 2026); • providing that directors may be removed only for cause (which will be phased out in 2026 and allow for directors to be removed with or without 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 act by written consent in lieu of a meeting; • 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; and • authorizing the issuance of “blank check” preferred stock without any need for action by stockholders.
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 30 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.
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 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.
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. 32 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.
Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state supported actors.
Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, computer programmers, personnel (such as through theft or misuse), sophisticated nation states, and nation-state supported actors.
If we are unable to hire and retain sales associates capable of consistently providing a high level of customer service, as demonstrated by their enthusiasm for our culture and knowledge of our merchandise, our business could be materially adversely affected.
If we are unable to hire, train and retain sales associates capable of consistently providing a high level of customer service, as demonstrated by their enthusiasm for our culture and knowledge of our merchandise, our business could be materially adversely affected.
We may also rely on vendors to process payment card data, and those vendors may be subject to PCI DSS, and our business may be negatively affected if our vendors are fined or suffer other consequences as a result of PCI DSS noncompliance.
We rely on vendors to process payment card data, and those vendors are subject to PCI DSS, and our business may be negatively affected if our vendors are fined or suffer other consequences as a result of PCI DSS noncompliance.
Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits. If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.
Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and 30 lawsuits. If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.
If we or the third parties on whom we rely are unsuccessful, or are perceived to have been unsuccessful, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims); additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data.
If we or the third parties with whom we work are unsuccessful, or are perceived to have been unsuccessful, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims); additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data.
These processing activities may subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.
These processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.
Extortion payments may alleviate the negative impact of a ransomware 31 attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.
Security incidents and attendant consequences may prevent or cause customers to stop using our services, deter new customers from using our services, and negatively impact our ability to grow and operate our business.
Security incidents and material attendant consequences may prevent or cause customers to stop using our services, deter new customers from using our services, and negatively impact our ability to grow and operate our business.
Additionally, sensitive data of the Company or our customers could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ use of generative AI technologies. 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.
Additionally, sensitive data of the Company or our customers could be leaked, disclosed, or revealed as a result of or in connection with our outfitters’, personnel’s, or vendors’ use of generative AI technologies. 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.
For example, in response to mass shootings and other incidents in the United States, several states, such as California, Colorado, Connecticut, Florida, Illinois, Maryland, Minnesota, New 23 Jersey, New York, Oregon, Virginia and Washington 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 California, Colorado, Connecticut, Florida, Illinois, Maryland, Minnesota, New 24 Jersey, New York, Oregon, Virginia and Washington have enacted laws and regulations that limit access to and sale of certain firearms in ways more restrictive than federal laws.
If a region with a concentration of our stores were to suffer an economic downturn or other adverse event, our operating results could suffer. 25 Competition in the outdoor activities and sporting goods market could reduce our net sales and profitability. The outdoor activities and sporting goods market is highly fragmented and competitive.
If 26 a region with a concentration of our stores were to suffer an economic downturn or other adverse event, our operating results could suffer. Competition in the outdoor activities and sporting goods market could reduce our net sales and profitability. The outdoor activities and sporting goods market is highly fragmented and competitive.
Although none of our employees are currently covered by collective bargaining agreements, our employees may elect to be represented by labor unions in the future, which could increase our labor costs. Additionally, competition for qualified employees could require us to pay higher wages to attract a sufficient number of employees.
Although none of our outfitters are currently covered by collective bargaining agreements, our outfitters may elect to be represented by labor unions in the future, which could increase our labor costs. Additionally, competition for qualified outfitters could require us to pay higher wages to attract a sufficient number of outfitters.
Our employees and personnel use generative artificial intelligence (“AI”) technologies to perform their work, and the disclosure and use of personal data in generative AI technologies is subject to various privacy laws and other privacy obligations. Governments have passed and are likely to pass additional laws regulating generative AI.
Our outfitters and personnel use generative artificial intelligence (“AI”) technologies to perform their work, and the disclosure and use of personal data in generative AI technologies is subject to various privacy laws and other privacy obligations. Governments have passed and are likely to pass additional laws regulating generative AI.
We are subject to risks and uncertainties associated with changing economic, political, market and other conditions in foreign countries where our vendors are located, such as, increased import duties, tariffs, border-adjusted taxes, trade restrictions and quotas, adverse fluctuations of foreign currencies and geopolitical turmoil, such as the conflict between Russia and Ukraine and any resulting disruption, instability or volatility in the global markets and industries resulting from such conflict.
We are subject to risks and uncertainties associated with changing economic, political, market and other conditions in foreign countries where our vendors are located, such as, increased import duties, tariffs, border-adjusted taxes, trade restrictions and quotas, adverse fluctuations of foreign currencies and geopolitical turmoil, and any resulting disruption, instability or volatility in the global markets and industries resulting from such conflict.
Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.
Some of our contracts do not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.
These exclusive forum provisions 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.
These exclusive forum provisions 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 outfitters and agents, which may discourage such lawsuits against us and our directors, officers, outfitters and agents.
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 future 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.
If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive data (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations (including availability of data); financial loss; and other similar harms.
If we (or a third party with whom we work) experience a security incident or are perceived to have experienced a security incident, we may experience material adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive data (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations (including availability of data); financial loss; and other similar harms.
Risks Related to Our Retail Operations Our retail-based business model is impacted by general economic and market conditions, such as rising interest rates and inflationary pressures, and ongoing economic, market and financial uncertainties that may cause a decline in consumer spending that may adversely affect our business, operations, liquidity, financial results and stock price.
Risks Related to Our Retail Operations Our retail-based business model is impacted by general economic and market conditions, such as elevated interest rates and inflationary pressures, economic, market and financial uncertainties that may cause a decline in consumer spending, that may adversely affect our business, operations, liquidity, financial results and stock price.
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, public health events (such as pandemics), 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 may at times be unsuccessful (or be perceived to have been unsuccessful) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third parties on whom we rely may be unsuccessful in complying with such obligations, which could negatively impact our business operations.
We may at times be unsuccessful (or be perceived to have been unsuccessful) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third parties with whom we work may be unsuccessful in complying with such obligations, which could negatively impact our business operations.
If we are unable to expand our e-commerce business, our growth plans will suffer and the price of our common stock could decline.
If we are unable to expand our e-commerce business, our growth plans may suffer and the price of our common stock could decline.
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive data or our information technology systems, or those of the third parties upon whom we rely.
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive data or our information technology systems, or those of the third parties with whom we work.
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 and our term loan facility contain 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.
Any natural disaster or other serious disruption at such facility due to fire, tornado, earthquake, flood or any other cause could damage our on-site inventory or impair our ability to use such distribution center.
Any malfeasance or natural disaster or other serious disruption at such facility due to fire, tornado, earthquake, flood or any other weather-related cause could damage our on-site inventory or impair our ability to use such distribution center.
We are also bound by other contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. 28 We publish privacy policies, marketing materials, and other statements regarding data privacy and security.
We are also bound by other contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. We publish privacy policies, marketing materials, and other statements concerning data privacy and security.
These systems are vulnerable to damage or interruption from natural disasters, power loss, computer system failures, telecommunications failures, misappropriation and similar events, including those addressed in “Risks Related to Our Business Strategy—If our information technology systems, or those of third parties upon which we rely, or our data are or were compromised, we could experience adverse consequences.” Any failure that causes an interruption in our systems processing could disrupt our operations and result in reduced sales.
These systems are vulnerable to damage or interruption from natural disasters, power loss, computer system failures, telecommunications failures, misappropriation and similar events, including those addressed in “Risks Related to Our Business Strategy—If our information technology systems, or those of third parties with whom we work, or our data are or were compromised, we could experience adverse consequences.” Any failure that causes an interruption in our systems processing could disrupt our operations and result in reduced sales.
These threats include but are not limited to social-engineering attacks (including through deep fakes, which may increasingly difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, attacks enhanced or facilitated by AI, telecommunications failures, earthquakes, fires, floods, and other similar threats.
These threats include but are not limited to social-engineering attacks (including through deep fakes, which may increasingly difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, attacks enhanced or facilitated by AI (such as using AI to develop malicious code or launch sophisticated phishing attempts), telecommunications failures, and other similar threats.
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.
However, if these competitors were to begin offering a broader array of competing products or partner with our competitors to offer such 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.
Remote work has become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit and in public locations.
Remote work has increased risks to our information technology systems and data, as more of our outfitters utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit and in public locations.
Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If the third parties upon whom we rely experience a security incident or other interruption, we could experience adverse consequences.
Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If the third parties with whom we work experience a security incident, threat, or other interruption, we could experience adverse consequences.
In fiscal year 2023, approximately 2.3% of our merchandise was imported directly from vendors located in foreign countries, with a substantial portion of the imported merchandise being obtained directly from vendors in China and El Salvador.
In fiscal year 2024, approximately 3.6% of our merchandise was imported directly from vendors located in foreign countries, with a substantial portion of the imported merchandise being obtained directly from vendors in China and El Salvador.
Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities, which could be exploited and result in a security incident.
Further, we have experienced (and may in the future experience) delays in developing and deploying remedial measures designed to address any such identified vulnerabilities, which could be exploited and result in a security incident.
We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all. 34 Our revolving credit facility contains restrictive covenants that may impair our ability to access sufficient capital and operate our business.
We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all. Our revolving credit facility and our term loan facility contain restrictive covenants that may impair our ability to access sufficient capital and operate our business.
During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our products.
During times of war and other major conflicts, we and the third parties with whom we work may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our products.
During fiscal year 2023 we saw decreased revenue and operated at a net loss as a result of inflationary pressures on our consumers discretionary spending, as well as, increased interest rates and higher energy costs and fuel prices.
During fiscal years 2024 and 2023 we saw decreased revenue and operated at a net loss as a result of elevated inflationary pressures on our consumers discretionary spending, as well as, elevated interest rates and higher energy costs and fuel prices.
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.
For instance, Colorado and Washington passed legislation that, among other things, raises the minimum age to purchase certain firearms from 18 to 21 and imposes multi-day waiting period on gun purchases.
Our business depends on our ability to meet our labor needs. Our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified employees, including district managers, store managers, department managers and sales associates, who understand and appreciate our outdoor culture and are able to adequately represent this culture to our customers.
Our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified outfitters, including district managers, store managers, department managers and sales associates, who understand and appreciate our outdoor culture and are able to adequately represent this culture to our customers.
We are subject to stringent and evolving U.S. obligations related to data privacy and security, and our actual or perceived failure to comply with such obligations could lead to adverse business consequences.
We and the third parties with whom we work are subject to stringent and evolving U.S. obligations related to data privacy and security, and our actual or perceived failure to comply with such obligations (or such failure by the third parties with whom we work) could lead to adverse business consequences.
If these are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.
Regulators in the United States are increasingly scrutinizing these statements, and if these are found to be deficient, lacking in transparency, deceptive, unfair, misleading, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.
In the past few years, numerous U.S. states—including California, Colorado, Connecticut, Utah and Virginia—have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data.
Numerous U.S. states have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data.
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.
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 a ballot measure that will ban firearms and magazines with a capacity of over ten rounds, and that will, among other things, impose complex permitting and training requirements for the purchases of firearms.
In the ordinary course of business, we process personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, sensitive third-party data, business plans, transactions, and financial information (collectively, sensitive data).
In the ordinary course of business, we process personal data (including, in the case of certain customers, social security numbers and payment information) and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, sensitive third-party data, business plans, transactions, and 29 financial information (collectively, sensitive data).
As a result, we may have less familiarity with local customer preferences and encounter difficulties in attracting customers due to a reduced level of customer familiarity with our brand.
For instance, in new markets, we will have less familiarity with local customer preferences and may encounter difficulties in attracting customers due to a reduced level of customer familiarity with our brand.
Base wage rates for some of our employees are at or slightly above the minimum wage. As more state minimum wage rates increase or if the federal government enacts a minimum wage increase, we may need to increase not only the wage rates of our minimum wage employees, but also the wages paid to our other hourly employees as well.
As more state minimum wage rates increase or if the federal government enacts a minimum wage increase, we may need to increase not only the wage rates of our minimum wage outfitters, but also the wages paid to our other hourly outfitters as well.
We experience moderate seasonal fluctuations in our net sales and operating results. On average over the last three fiscal years, we have generated 26.3% and 27.8% 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 26.4% and 28% 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.
We anticipate that interest rates will remain elevated during fiscal year 2024. Risks Related to Our Common Stock Our bylaws, our certificate of incorporation and Delaware law contain provisions that could discourage another company from acquiring us and may prevent attempts by our stockholders to replace or remove our current management.
Risks Related to Our Common Stock Our bylaws, our certificate of incorporation and Delaware law contain provisions that could discourage another company from acquiring us and may prevent attempts by our stockholders to replace or remove our current management.
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, as well as may result in delays in shipment from our supply chain and to consumers.
We continually expand 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 outfitters 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.
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 pressures, recessionary trends, labor shortages, monetary supply shifts, rising interest rates, tightening of credit markets, potential disruptions from the ongoing Russia-Ukraine conflict and Israel-Hamas war and pandemics; • 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. 26 Our operating results are subject to seasonal fluctuations.
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 pressures, slow growth or recessionary trends, decreased consumer confidence and availability of credit, increased consumer debt levels, new or increased tariffs, labor shortages and unemployment trends, monetary supply shifts, elevated interest rates, tightening of credit markets, potential disruptions from international hostilities and pandemics or other public health threats; • 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; 27 • the success of our omni-channel strategy and our e-commerce platform; • competition in the regional market of a store; • atypical weather, natural disasters, and climate change; • new product introductions and changes in our product mix; and •changes in pricing and average ticket sales.
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.
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.
If that were to occur, it could result in a substantial decline in our sales of firearms and related products and reduce traffic to our stores in Oregon, which could have a substantial impact on our sales and gross margin. On December 6, 2022, a state court judge in Oregon temporarily blocked the enforcement of such legislation.
If that were to occur, it could result in a substantial decline in our sales of firearms and related products and reduce traffic to our stores in Oregon, which could have a substantial impact on our sales and gross margin.
We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties upon which we rely). We may not, however, detect and remediate all such vulnerabilities or on a timely basis.
We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties with whom we work). We have not been, and may not in the future, be able to detect and remediate all such vulnerabilities or on a timely basis.
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.
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.
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.
Many of our store outfitters are in entry-level or part-time positions that historically have high rates of turnover, which can lead to increased training and retention costs and operational disruptions. We are also dependent on the outfitters who staff our distribution center, many of whom are skilled.
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.
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. If we are unable to protect against inventory shrink, our results of operations and financial condition could 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. In 2021, we migrated our website to a new cloud platform with autoscaling capability, significantly increasing capacity and efficiency.
Our e-commerce business is an important element of our brand and relationship with our customers, and we expect it to continue to grow. Our website operates on a 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.
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.
Acquisitions may also result in the diversion of our capital and our management’s attention from other business issues and opportunities. 36 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.
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. 24 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.
Even 25 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.
We may expend significant resources or modify our business activities to try to protect against security incidents. Additionally, certain data privacy and security obligations may require us to implement and maintain specific security measures to protect our information technology systems and sensitive data.
Additionally, certain data privacy and security obligations require us to implement and maintain specific security measures to protect our information technology systems and sensitive data.
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.
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.
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.
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.
Some of our mass merchandising competitors, such as Walmart, do not currently compete in many of the product lines we offer.
As a result of this competition, we may need to spend more on advertising and promotion. Some of our mass merchandising competitors, such as Walmart, do not currently compete in many of the product lines we offer.
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.
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.
Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance.
Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance. For example, the CCPA imposes obligations on covered businesses regarding their processing of personal data and provides for fines and a private right of action for certain data breaches.
If our information technology systems, or those of third parties upon which we rely, or our data are or were compromised, we could experience adverse consequences. We and the third parties upon which we rely face a variety of evolving threats, which could cause security incidents, such as cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities.
We and the third parties with whom we work face a variety of evolving threats, which could cause security incidents, such as cyber-attacks, system disruptions, malicious internet-based activity, online and offline fraud, and other similar activities.
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.
Any trading conflict and related escalating governmental actions that result in additional tariffs, duties and trade restrictions could cause a disruption or delay of imports from foreign locations and likely increase the cost or reduce the supply of merchandise available to us which would adversely affect our operating results.
All of our debt outstanding under our credit agreement as of February 3, 2024 bears interest at a floating rate that uses the Secured Overnight Financing Rate ("SOFR") as the applicable reference rate to calculate the interest. Due to increased federal reserve rates we experienced higher interest rates in fiscal years 2022 and 2023.
All of our debt outstanding under our credit agreement as of February 1, 2025 bears 37 interest at a floating rate that uses the Secured Overnight Financing Rate ("SOFR") as the applicable reference rate to calculate the interest.
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.
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 to experiencing a security incident, third parties may gather, collect, or infer sensitive data about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.
We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims. 34 In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive data about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.
We have no contractual arrangements providing for continued supply from our key vendors, and our vendors may discontinue selling to us at any 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.
Any delay or failure in offering products to our customers could have a material adverse impact on our net sales and profitability. 27 Political and economic uncertainty and unrest in foreign countries where our merchandise vendors are located and trade restrictions upon imports from these foreign countries could adversely affect our ability to source merchandise and operating results.
Political and economic uncertainty and unrest in foreign countries where our merchandise vendors are located and trade restrictions, including new tariffs and duties upon imports from these foreign countries could adversely affect our ability to source merchandise and operating results.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur CIO is responsible for hiring appropriate personnel, helping to integrate cybersecurity risk considerations into the Company’s overall risk management strategy, and communicating key priorities to relevant personnel. Our CIO, Director of Information Security and Compliance and the CFO are responsible for approving budgets, helping prepare for cybersecurity incidents, approving cybersecurity processes, and reviewing security assessments and other security-related reports.
Biggest changeOur CIO is responsible for hiring appropriate personnel, helping to integrate cybersecurity risk considerations into the Company’s overall risk management strategy, and communicating key priorities to relevant personnel.
The Security Team identifies and assesses risks from cybersecurity threats by monitoring and evaluating our threat environment using various methods including, for example: manual and automated tools in certain environments and systems, internal and external audits of certain environments and systems, conducting scans of certain threat environments, evaluating our and our industry’s risk profile, analyzing certain reports of threats and actors, conducting threat assessments for 37 internal and external threats (including third party threat assessments) in certain environments, coordinating with law enforcement concerning select threats, subscribing to reports and services that identify cybersecurity threats, use of external intelligence feeds, conducting tabletop incident response exercises, evaluating certain threats reported to us, and conducting vulnerability assessments of certain environments and systems..
The Security Team identifies and assesses risks from cybersecurity threats by monitoring and evaluating our threat environment using various methods including, for example: manual and automated tools in certain environments and systems, internal and external audits of certain environments and systems, conducting scans of certain threat environments, evaluating our and our industry’s risk profile, analyzing certain reports of threats and actors, conducting threat assessments for internal and external threats (including third party threat assessments) in certain environments, coordinating with law enforcement concerning select threats, subscribing to reports and services that identify cybersecurity threats, use of external intelligence feeds, conducting tabletop incident response exercises, evaluating certain threats reported to us, and conducting vulnerability assessments of certain environments and systems.
CYBERSECURITY Risk management and strategy We have implemented and maintain various information security processes designed to identify, assess and manage material risks from cybersecurity threats to our critical computer networks, third party hosted services, communications systems, hardware and software, and our critical data, including intellectual property, confidential information that is proprietary, strategic or competitive in nature, and information related to our customers and employees.
CYBERSECURITY Risk management and strategy We implemented and maintain various information security processes designed to identify, assess and manage material risks from cybersecurity threats to our critical computer networks, third party hosted services, communications systems, hardware and software, and our critical data, including intellectual property, confidential information that is proprietary, strategic or competitive in nature, and information related to our customers and outfitters.
These individuals work with the Company’s incident response team, pursuant to a documented incident response plan, to help the Company mitigate and remediate cybersecurity incidents of which they are notified. In addition, the Company’s incident response and 38 vulnerability management policies include reporting to the audit committee of the board of directors for certain cybersecurity incidents.
These individuals work with the Company’s incident response team, pursuant to a documented incident response policy, to help the Company mitigate and remediate cybersecurity incidents of which they are notified. In addition, the Company’s incident response and vulnerability management policies include reporting to the audit committee of the board of directors for certain cybersecurity incidents.
Depending on the environment and system, we implement and maintain various technical, physical, and organizational measures, processes, standards and policies designed to manage and mitigate material risks from cybersecurity threats to our information systems and data, including, for example: incident response policy, vulnerability management policy, risk assessments, encryption of certain data, network security controls and data segregation for certain environments and systems, access controls for certain environments and systems (such as identity controls and quarterly user access reviews), physical security, systems monitoring for certain systems, vendor risk management program, system configuration standards, employee security awareness training, asset management, managed detection and response tools, penetration testing, cybersecurity insurance and dedicated cybersecurity staff.
Depending on the environment and system, we implement and maintain various technical, physical, and organizational measures, processes, standards and policies designed to manage and mitigate material risks from cybersecurity threats to our information systems and data, including, for example: incident response policy, vulnerability management policy, risk assessments, encryption of certain data, network security controls and data segregation for certain environments and systems, access controls for certain environments and systems (such as identity controls and quarterly user access reviews), physical security, systems monitoring for certain systems, vendor risk management program, system configuration standards, outfitter security awareness training, asset management, managed detection and response tools, penetration testing, cybersecurity insurance and dedicated cybersecurity staff. 39 Our assessment and management of material risks from cybersecurity threats are integrated into the Company’s overall risk management processes.
Our assessment and management of material risks from cybersecurity threats are integrated into the Company’s overall risk management processes. For example, the Security Team works with management to prioritize our risk management processes and mitigate cybersecurity threats that are more likely to lead to a material impact to our business.
For example, the Security Team works with management to prioritize our risk management processes and mitigate cybersecurity threats that are more likely to lead to a material impact to our business.
The program includes a risk assessment and security questionnaire for certain providers, review of security assessments for certain providers, and System and Organization Controls report reviews when determined necessary.
The program includes a risk assessment and security questionnaire for certain providers, review of security assessments for certain providers, and review of System and Organization Controls reports for certain providers.
For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our risk factors under Part 1. Item 1A. Risk Factors in this Annual Report on Form 10-K. Governance Our board of directors addresses the Company’s cybersecurity risk management as part of its general oversight function.
For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our risk factors under Part 1. Item 1A.
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Risk Factors, "If our information technology systems, or those of third parties with whom we work, or our data are or were compromised, we could experience adverse consequences", in this Annual Report on Form 10-K. Governance Our board of directors addresses the Company’s cybersecurity risk management as part of its general oversight function.
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Our CIO, Director of Information Security and Compliance and the CFO are responsible for approving budgets, helping prepare for cybersecurity incidents, approving cybersecurity processes, and reviewing security assessments and other security-related reports .

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeDepending upon where we are in the process of completing the sale-leaseback transaction, we may legally own real property at any particular balance sheet date. Our corporate headquarters is located in an approximately 70,000 square foot building in West Jordan, Utah. The building is leased under an agreement expiring on March 31, 2035.
Biggest changeDepending upon where we are in the process of 40 completing the sale-leaseback transaction, we may legally own real property at any particular balance sheet date. Our corporate headquarters is located in an approximately 70,000 square foot building in West Jordan, Utah. The building is leased under an agreement expiring on March 31, 2035.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS See “Part II, Item 8, Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements Note 14, 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
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.
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The pending lawsuit described in Note 16 of our consolidated financial statements is subject to inherent uncertainties, and the actual defense and disposition costs will depend upon unknown factors. The outcomes of the pending lawsuit are necessarily uncertain. We also could be forced to expend significant resources in the defense of the pending lawsuit, including substantial legal fees and costs.
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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 changeOn March 15, 2023, our board of directors extended the term of the share repurchase program through March 31, 2024. 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.
Biggest changeOn March 15, 2023, our board of directors extended the term of the share repurchase program through March 41 31, 2024. On March 31, 2024 the repurchase program expired and was not renewed by our board of directors. During fiscal year 2024, we did not repurchase any shares of our common stock.
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. 39 Dividend Policy We did not pay any dividends in fiscal year 2023 or fiscal year 2022. 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 2024 or fiscal year 2023. 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 Information Our common stock is listed on the Nasdaq Global Select Market under the symbol “SPWH.” Holders As of March 25, 2024, there were 202 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 26, 2024, there were 741 holders of record of our common stock.
As of February 3, 2024, we had repurchased 7,326,507 shares of our common stock for $67.5 million, utilizing cash on hand and available borrowings under our revolving credit facility. As of February 3, 2024, $7.5 million remained available to us for repurchases of outstanding shares of our common stock pursuant to the share repurchase program.
As of February 1, 2025, we had repurchased 7,326,507 shares of our common stock for $67.5 million, utilizing cash on hand and available borrowings under our revolving credit facility. Stock Performance Graph As a smaller reporting company, we are not required to provide the performance graph required by Item 201(e) of Regulation S-K. ITEM 6. [RESERVED ] 42
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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.
Removed
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. During the fourteen weeks ended February 3, 2024, we did not repurchase any shares of our common stock.
Removed
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 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.
Removed
The following graph shows the cumulative total stockholder return of an investment of $100 in cash at market close on February 2, 2019 through February 3, 2024 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”).
Removed
Pursuant to applicable SEC rules, all values assume reinvestment of the full amount of all dividends.
Removed
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. 40 Fiscal Years Ended February 2, 2019 February 1, 2020 January 30, 2021 January 29, 2022 January 28, 2023 February 3, 2024 SPWH $ 100.00 $ 126.56 $ 342.19 $ 207.81 $ 183.20 $ 72.27 S&P Retail 100.00 119.51 167.91 176.76 145.13 202.14 Russell 2000 100.00 107.46 138.05 131.05 127.79 130.67 ITEM 6. [RESERVED ] 41

Item 7. Management's Discussion & Analysis

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

74 edited+30 added−34 removed63 unchanged
Biggest changeFiscal Year Ended February 3, January 28, January 29, 2024 2023 2022 Net (loss) income (1) $ (28,997 ) $ 40,518 $ 108,470 Interest expense 12,869 4,195 1,379 Income tax (benefit) expense (9,209 ) 13,350 35,769 Depreciation and amortization 39,009 31,776 26,226 Stock-based compensation expense (2) 4,237 4,673 3,328 Acquisition costs (3) — — 9,733 Legal expense (4) 687 2,088 — Cost reduction plan (5) 1,216 — — Executive transition costs (6) 4,763 1,329 — Retention pay (7) — — 2,549 Merger termination payment (8) — — (55,000 ) Adjusted EBITDA $ 24,575 $ 97,929 $ 132,454 Net sales 1,287,987 1,399,515 1,506,072 Net (loss) income margin (9) (2.2 )% 2.9 % 7.2 % Adjusted EBITDA margin (9) 1.9 % 7.0 % 8.8 % 55 (1) Beginning with the three months ended October 28, 2023, we no longer add back new store pre-opening expenses to our net (loss) income to determine Adjusted EBITDA.
Biggest changeFiscal Year Ended February 1, February 3, January 28, 2025 2024 2023 Net (loss) income (1) $ (33,059 ) $ (28,997 ) $ 40,518 Interest expense 12,278 12,869 4,195 Income tax expense (benefit) (2) 1,930 (9,209 ) 13,350 Depreciation and amortization 40,498 39,009 31,776 Stock-based compensation expense (3) 4,229 4,237 4,673 Executive transition costs (4) 1,081 4,763 1,329 Cancelled contract (5) 911 — — Cost reduction plan (6) — 1,216 — Legal expense (7) 1,750 687 2,088 Adjusted EBITDA $ 29,618 $ 24,575 $ 97,929 Net sales 1,197,633 1,287,987 1,399,515 Net (loss) income margin (8) (2.9 )% (2.2 )% 2.9 % Adjusted EBITDA margin (8) 2.5 % 1.9 % 7.0 % (1) Beginning with the three months ended October 28, 2023, we no longer add back new store pre-opening expenses to our net (loss) income to determine Adjusted EBITDA.
These increases were partially offset by a decreases of $12.8 million and $4.8 million in payroll and other operating expenses, respectively, driven by our ongoing cost cutting measures and increased operational efficiencies across our retail stores. 47 On a per store basis, our payroll and other operating expenses were down approximately 16% and 14%, respectively, compared to fiscal year 2022.
These increases were partially offset by a decreases of $12.8 million and $4.8 million in payroll and other operating expenses, respectively, driven by our ongoing cost cutting measures and increased operational efficiencies across our retail stores. On a per store basis, our payroll and other operating expenses were down approximately 16% and 14%, respectively, compared to fiscal year 2022.
Selling, general and administrative expenses increased by $6.6 million, or 1.6%, to $408.8 million for fiscal year 2023 from $402.2 million for fiscal year 2022. This increase was primarily due to increases in rent and depreciation expenses of $11.5 million and $7.2 million, driven by the opening of 15 new store locations during fiscal year 2023.
Selling, general and administrative expenses increased by $6.6 million, or 1.6%, to $408.8 million for fiscal year 2023 from $402.2 million for fiscal year 2022. This increase was 49 primarily due to increases in rent and depreciation expenses of $11.5 million and $7.2 million, driven by the opening of 15 new store locations during fiscal year 2023.
We define Adjusted EBITDA margin as, for any period, the Adjusted EBITDA for that period divided by the net sales for that period. We consider Adjusted EBITDA and Adjusted EBITDA margin important supplemental measures of our operating performance and believe they are frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry.
We define Adjusted EBITDA margin as, for any period, the Adjusted EBITDA for that period divided by the net sales for that period. 55 We consider Adjusted EBITDA and Adjusted EBITDA margin important supplemental measures of our operating performance and believe they are frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry.
Other companies in our industry, however, may calculate Adjusted EBITDA and Adjusted EBITDA margin differently than we do. Management also uses Adjusted EBITDA and Adjusted EBITDA margin as additional measurement tools for purposes of business 54 decision-making, including evaluating store performance, developing budgets and managing expenditures.
Other companies in our industry, however, may calculate Adjusted EBITDA and Adjusted EBITDA margin differently than we do. Management also uses 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 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%.
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 applicable credit agreement) plus 0.50% or (4) the one-month Term SOFR (as defined in the applicable credit agreement) plus 1.00%.
Historical experience of actual returns, and customer return rights are the key factors used in determining the estimated sales returns. 53 Inventory Valuation Inventory is measured at the lower of cost or net realizable value. Cost is determined using the weighted average cost method.
Historical experience of actual returns, and customer return rights are the key factors used in determining the estimated sales returns. Inventory Valuation Inventory is measured at the lower of cost or net realizable value. Cost is determined using the weighted average cost method.
The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, and the impact on our customers, partners and employees, all of which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.
The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, and the impact on our customers, partners and outfitters, all of which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.
Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by reference to, the consolidated financial statements and the notes thereto included in this 10-K.
Additionally, our historical results are not necessarily indicative of the results that may be expected or achieved for any future period. The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by reference to, the consolidated financial statements and the notes thereto included in this 10-K.
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 20% using historical rates and future expectations.
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 35% using historical rates and future expectations.
We expect capital expenditures net of tenant allowances, between $20 million and $25 million for fiscal year 2024 primarily related to strategic technological investments, such as planogramming, merchandising and replenishment and store scheduling tools, and general store fleet maintenance.
We expect capital expenditures net of tenant allowances, between $20 million and $25 million for fiscal year 2025 primarily related to strategic technological investments, such as planogramming, merchandising and replenishment and store scheduling tools, and general store fleet maintenance.
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.
We may be required to make mandatory prepayments under the revolving credit facility and the term loan 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.
Various factors affect same store sales, including: • macroeconomic factors, 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 and Israel-Hamas war and pandemics; • 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.
Various factors affect same store sales, including: • macroeconomic factors, political trends, social unrest, inflationary pressures, recessionary trends, labor shortages, monetary supply shifts, elevated interest rates, tightening of credit markets, and potential disruptions from the ongoing Russia-Ukraine conflict and rising global political tensions; • 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.
See “—Non-GAAP Financial Measures." 45 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 February 3, January 28, January 29, 2024 2023 2022 Percentage of net sales: Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 70.2 67.1 67.4 Gross profit 29.8 32.9 32.6 Selling, general and administrative expenses 31.7 28.7 26.6 (Loss) income from operations (1.9 ) 4.2 6.0 Merger termination payment - - (3.7 ) Interest expense 1.0 0.3 0.1 (Loss) income before income taxes (2.9 ) 3.9 9.6 Income tax (benefit) expense (0.7 ) 1.0 2.4 Net (loss) income (2.2 )% 2.9 % 7.2 % Adjusted EBITDA 1.9 % 7.0 % 8.8 % The following table shows our percentage of net sales by department during the periods presented: Fiscal year Ended February 3, January 28, January 29, Department Product Offerings 2024 2023 2022 Camping Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools 11.2 % 12.5 % 13.1 % Apparel Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear 8.8 % 9.3 % 8.4 % Fishing Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats 8.9 % 8.9 % 10.0 % Footwear Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots 7.2 % 7.3 % 6.8 % Hunting and Shooting Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment and shooting gear 57.4 % 54.9 % 54.2 % Optics, Electronics, Accessories, and Other Gift items, GPS devices, knives, lighting, optics, two-way radios, and other license revenue, net of revenue discounts 6.5 % 7.1 % 7.5 % Total 100.0 % 100.0 % 100.0 % 46 Fiscal Year 2023 Compared to Fiscal Year 2022 Net Sales and Same Store Sales .
See “—Non-GAAP Financial Measures." 46 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 February 1, February 3, January 28, 2025 2024 2023 Percentage of net sales: Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 69.1 70.2 67.1 Gross profit 30.9 29.8 32.9 Selling, general and administrative expenses 32.5 31.7 28.7 (Loss) income from operations (1.6 ) (1.9 ) 4.2 Other losses 0.1 - - Interest expense 1.0 1.0 0.3 (Loss) income before income taxes (2.7 ) (2.9 ) 3.9 Income tax (benefit) expense 0.2 (0.7 ) 1.0 Net (loss) income (2.9 )% (2.2 )% 2.9 % Adjusted EBITDA 2.5 % 1.9 % 7.0 % The following table shows our percentage of net sales by department during the periods presented: Fiscal year Ended February 1, February 3, January 28, Department Product Offerings 2025 2024 2023 Camping Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools 11.7 % 11.2 % 12.5 % Apparel Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear 7.5 % 8.8 % 9.3 % Fishing Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats 10.3 % 8.9 % 8.9 % Footwear Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots 6.3 % 7.2 % 7.3 % Hunting and Shooting Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment and shooting gear 57.4 % 57.4 % 54.9 % Optics, Electronics, Accessories, and Other Gift items, GPS devices, knives, lighting, optics, two-way radios, and other license revenue, net of revenue discounts 6.8 % 6.5 % 7.1 % Total 100.0 % 100.0 % 100.0 % 47 Fiscal Year 2024 Compared to Fiscal Year 2023 Net Sales and Same Store Sales .
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 February 3, 2024, January 28, 2023 and 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 February 1, 2025, February 3, 2024 and January 28, 2023.
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.
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 believe the key drivers to increasing our total net sales include: • increasing and improving same store sales in our existing markets; • increasing our total gross square footage by opening new stores and through strategic acquisitions; • increasing customer visits to our stores and improving our conversion rate through focused marketing efforts and continually high standards of customer service; • expanding our omni-channel capabilities through larger assortment and inventory, expanded content and expertise and better user experience; and • growing our loyalty and credit card programs.
We believe the key drivers to increasing our total net sales include: • 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; • expanding our omni-channel capabilities through refined product assortment, expanded content and expertise and better user experience; • increasing our total gross square footage by opening new stores; and • growing our loyalty and credit card programs.
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.
We include net sales from a store in same store sales on the first day of the 13 th 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.
Had our estimated inventory reserves been lower or higher by 10% as of February 3, 2024, our cost of sales would have been correspondingly lower or higher by approximately $0.5 million.
Had our estimated inventory reserves been lower or higher by 10% as of February 1, 2025, our cost of sales would have been correspondingly lower or higher by approximately $0.5 million.
In addition, the credit agreement governing our revolving credit facility contains customary affirmative and negative covenants, including covenants that limit our ability to incur, create or assume certain indebtedness, to create, incur or assume certain liens, to make certain investments, to make sales, transfers and dispositions of certain property and to undergo certain fundamental changes, including certain mergers, liquidations and consolidations.
In addition, the credit agreements governing each of our revolving credit facility and our term loan facility contain customary affirmative and negative covenants, including covenants that limit our ability to incur, create or assume certain indebtedness, to create, incur or assume certain liens, to make certain investments, to make sales, transfers and dispositions of certain property and to undergo certain fundamental changes, including certain mergers, liquidations and consolidations.
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.
All of the obligations under the revolving credit facility and the term loan are secured by a lien on substantially all of Holdings’ assets and assets of all of Holdings’ subsidiaries, including a pledge of all capital stock of each of Holdings’ subsidiaries.
Starting in the second half of fiscal year 2022 and continuing through fiscal year 2023, our business was impacted by consumer inflationary pressures and recession concerns. As a result of our recent performance, we have taken steps to reduce our total inventory, implement cost reduction measures to reflect current sales trends and reduce investments in future new store openings.
Beginning in fiscal year 2023 and continuing throughout fiscal year 2024 our business was impacted by consumer inflationary pressures and recession concerns. As a result of our recent performance, we have taken steps to reduce our total inventory, implement cost reduction measures to reflect current sales trends and reduce investments in future new store openings.
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 (loss) income plus interest expense, income tax (benefit) expense, depreciation and amortization, stock-based compensation expense, director and officer transition costs, expenses related to the implementation of our cost reduction plan and a one-time legal settlement and related fees 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 (loss) 43 income plus interest expense, income tax (benefit) expense, depreciation and amortization, stock-based compensation expense, transition and severance costs related to director and officer transitions, and expenses that we do not believe are indicative of our ongoing expenses.
The presentation of past periods has been conformed to the current presentation. For fiscal years ended February 3, 2024, January 28, 2023 and January 29, 2022 we incurred $5.8 million, $3.7 million and $4.1 million, respectively, in new store pre-opening expenses.
The presentation of past periods has been conformed to the current presentation. For the fiscal year ended February 1, 2025 we did not incur any new store pre-opening expenses. For fiscal years ended February 3, 2024 and January 28, 2023 we incurred $5.8 million and $3.7 million, respectively, in new store pre-opening expenses.
We currently do not plan to open any new stores during fiscal year 2024. We continue to actively monitor the impact of these macroeconomic factors on our financial condition, liquidity, operations, suppliers, industry and workforce.
We did not open any new stores in fiscal year 2024 and we plan to open one new store in fiscal year 2025. We continue to actively monitor the impact of these macroeconomic factors on our financial condition, liquidity, operations, suppliers, industry and workforce.
We control our selling, general and administrative expenses through a budgeting and reporting process that allows our personnel to adjust our expenses as trends in net sales activity are identified.
We control our selling, general, and administrative expenses through a budgeting and reporting process that allows our personnel to adjust our expenses as trends in net sales activity are identified. Income from Operations Income from operations is gross profit less selling, general and administrative expenses.
Our revolving credit facility requires us to maintain a minimum availability at all times of not less than 10% of the gross borrowing base.
Our revolving credit facility and term loan facility each require us to maintain a minimum availability at all times of not less than 10% of the gross borrowing base.
Some 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; • 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.
Some 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; • 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. 56 A reconciliation of net (loss) income to Adjusted EBITDA and a calculation of Adjusted EBITDA margin is set forth below for the periods presented (amounts in thousands).
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.
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. The lien securing the obligations under the term loan facility is a first priority lien as to equipment, fixtures, intellectual property and equity interests.
Substantially all of our revenue is for single performance obligations for the following distinct items: • Retail store sales • e-commerce sales • Gift cards and loyalty reward program For performance obligations related to retail store and e-commerce sales contracts, we typically transfer control, for retail stores, upon consummation of the sale when the product is paid for and taken by the customer and, for e-commerce sales, when the products are tendered for delivery to the common carrier. 52 The transaction price for each contract is the stated price on the product, reduced by any stated discounts at that point in time.
Substantially all of our revenue is for single performance obligations for the following distinct items: • Retail store sales • e-commerce sales • Gift cards and loyalty reward program 53 For performance obligations related to retail store and e-commerce sales contracts, we typically transfer control, for retail stores, upon consummation of the sale when the product is paid for and taken by the customer and, for e-commerce sales, when the products are tendered for delivery to the common carrier.
Fiscal Year We operate using a 52/53-week fiscal year ending on the Saturday closest to January 31. Fiscal years 2023, 2022 and 2021 ended on February 3, 2024, January 28, 2023 and January 29, 2022, respectively.
Fiscal Year We operate using a 52/53-week fiscal year ending on the Saturday closest to January 31. Fiscal years 2024, 2023 and 2022 ended on February 1, 2025, February 3, 2024 and January 28, 2023, respectively. Each of fiscal years 2024 and 2022 contained 52 weeks of operation and fiscal year 2023 contained 53 weeks of operations.
In connection with the preparation of the financial statements, we are required to make assumptions, make estimates and apply judgment that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures.
Critical Accounting Estimates Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In connection with the preparation of the financial statements, we are required to make assumptions, make estimates and apply judgment that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures.
Adjusted EBITDA We define Adjusted EBITDA as net (loss) income plus interest expense, income tax (benefit) expense, depreciation and amortization, stock-based compensation expense, director and officer transition costs, expenses related to the implementation of our cost reduction plan and a one-time legal settlement and related fees and expenses that we do not believe are indicative of our ongoing expenses.
Adjusted EBITDA We define Adjusted EBITDA as net (loss) income plus interest expense (benefit), income tax expense(benefit), depreciation and amortization, stock-based compensation expense, transition and severance costs related to director and officer transitions, and other gains, losses and expenses that we do not believe are indicative of our ongoing expenses.
If that were to occur, it could result in a substantial decline in our sales of firearms and related products and reduce traffic to our stores in Oregon, which could have a substantial impact on our sales and gross margin. On December 6, 2022, a state court judge in Oregon temporarily blocked the enforcement of such legislation pending trial.
If that were to occur, it could result in a substantial decline in our sales of firearms and related products and reduce traffic to our stores in Oregon, which could have a substantial impact on our sales and gross margin.
We do not engage in sales of products that attach a future material right which could result in a separate performance obligation for the purchase of goods in the future at a material discount.
The transaction price for each contract is the stated price on the product, reduced by any stated discounts at that point in time. We do not engage in sales of products that attach a future material right which could result in a separate performance obligation for the purchase of goods in the future at a material discount.
With respect to same store sales, our fishing, optics, electronics and accessories, camping, hunting, footwear and apparel departments saw decreased same store sales of 23.0%, 19.3%, 15.6%, 11.4%, 5.4% and 1.4%, respectively. Firearms and ammunition same store sales, included within our Hunting and Shooting department, decreased by 18.2% and 5.1%, respectively, for fiscal year 2022 compared to fiscal year 2021.
Our Apparel, Footwear, Hunting and Shooting, Camping, and Optics, Electronics Accessories and Other departments saw decreased same store sales of 21.3%, 19.7%, 7.8%, 3.4%, and 2.4%, respectively. Firearms and ammunition same store sales, included within our Hunting and Shooting department, decreased by 7.3% and 12.6%, respectively, for fiscal year 2024 compared to fiscal year 2023.
As of February 3, 2024, we had $88.3 million available for borrowing, calculated based upon certain borrowing base restrictions, and $2.0 million in stand-by commercial letters of credit.
As of February 1, 2025, we had an aggregate amount of $128.3 million available for borrowing under our revolving credit facility and our term loan facility, calculated based upon certain borrowing base restrictions, and $2.0 million in stand-by commercial letters of credit.
During fiscal year 2023, we commenced an effort to reduce our inventory and initiated various strategic promotional efforts as part of this plan. While these efforts decreased our gross margins during fiscal year 2023, the inventory reduction plan progressed as planned.
During fiscal year 2023, we commenced an effort to reduce our inventory and initiated various strategic promotional efforts as part of this plan, which impacted our gross margins during fiscal year 2023. At the end of fiscal year 2023, we completed our inventory reduction plan. During fiscal year 2024, elevated inflation continued to adversely impact our gross margins.
As of February 3, 2024, $135.3 million was outstanding under the revolving credit facility. Assuming no additional repayments or borrowings on our revolving credit facility after February 3, 2024, our interest payments would be approximately $9.4 million for fiscal year 2024 based on the interest rate as of February 3, 2024.
Assuming no additional repayments or borrowings on our revolving credit facility and our term loan facility after February 1, 2025, our interest payments would be approximately $7.7 million for fiscal year 2025, in each case, based on the interest rate as of February 1, 2025.
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.
These headwinds were partially offset by same store sales growth in our Fishing department. Stores that have been open for less than 12 months and were, therefore, not included in our same store sales, contributed $30.8 million to net sales. E-commerce driven sales comprised more than 20% of total sales in fiscal year 2024.
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. 44 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.
Pre-opening expenses 45 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.
The increase in our cash flows provided by operating activities was primarily the result of our inventory reduction plan implemented during 2023, which resulted in reduced inventory levels at the end of fiscal year 2023 compared to the end of fiscal year 2022.
The decrease in our cash flows provided by operating activities was primarily the result of our inventory reduction plan implemented during fiscal year 2023. Net cash used in investing activities was $14.5 million for fiscal year 2024 compared to $79.9 million for fiscal year 2023.
Material Cash Requirements Our material cash requirements from known contractual and other obligations are primarily for 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 or the vendor can generally terminate the purchase orders at any time.
In the ordinary course of business, we enter into arrangements with vendors to purchase merchandise in advance of expected delivery. 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. Operating Lease Obligations.
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”).
Indebtedness We maintain a $350.0 million revolving credit facility, with $88.3 million outstanding as of February 1, 2025. 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”).
We define Adjusted EBITDA as net (loss) income plus interest expense, income tax (benefit) expense, depreciation and amortization, stock-based compensation expense, director and officer transition costs, expenses related to the implementation of our cost reduction plan and a one-time legal settlement and related fees and expenses.
We define Adjusted EBITDA as net (loss) income plus interest expense, income tax expense (benefit) , depreciation and amortization, stock-based compensation expense, transition and severance costs related to director and officer transitions, and expenses that we do not believe are indicative of our ongoing expenses. Net loss is the most comparable GAAP financial measure to Adjusted EBITDA.
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.
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. Measuring the change in year-over-year same store sales allows us to evaluate how our retail store base is performing.
Fiscal year 2023 contained 53 weeks of operation and each of fiscal years 2022 and 2021 contained 52 weeks of operations. 42 How We Assess the Performance of Our Business In assessing the performance of our business, we consider a variety of performance and financial measures.
How We Assess the Performance of Our Business In assessing the performance of our business, we consider a variety of performance and financial measures.
Our cash flows used in investing activities in fiscal year 2022 primarily related to costs incurred in connection with opening new stores and the refurbishment of existing stores.
For fiscal year 2024, we incurred capital expenditures related to strategic technological investments, such as planogramming, merchandising and replenishment and store scheduling tools, and general store fleet maintenance. Our cash flows used in investing activities in fiscal year 2023 primarily related to costs incurred in connection with opening new stores and the refurbishment of existing stores.
Global economic and business activities continue to face widespread macroeconomic uncertainties, including labor shortages, inflation and monetary supply shifts, rising interest rates, recession risks and potential disruptions from the Russia-Ukraine conflict and the Israel-Hamas war.
Global economic and business activities continue to face widespread macroeconomic uncertainties, including inflation, elevated interest rates, recession risks and potential disruptions from the Russia-Ukraine conflict and rising global political tensions. Our results may also be impacted by the change in the presidential administration.
Seasonality Due to the openings of hunting season across the country and consumer holiday buying patterns, net sales are typically higher in our third and fourth fiscal quarters than in our first and second fiscal quarters. We also incur additional expenses in our third and fourth fiscal quarters due to higher sales volume and increased staffing in our stores.
We also incur additional expenses in our third and fourth fiscal quarters due to higher sales volume and increased staffing in our stores.
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.
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. 54 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.
Cash Flows Cash flows provided by (used in) operating, investing and financing activities are shown in the following table: Fiscal Year Ended February 3, January 28, 2024 2023 (in thousands) Cash flows provided by operating activities $ 52,266 $ 46,794 Cash flows used in investing activities (79,895 ) (60,588 ) Cash provided by (used in) financing activities 28,381 (40,835 ) Cash and cash equivalents at end of period 3,141 2,389 Net cash provided by operating activities was $52.3 million for fiscal year 2023, compared to net cash provided by operating activities of $46.8 million for fiscal year 2022, a change of approximately $5.5 million.
See “—Indebtedness” below for additional information regarding our revolving credit facility and term loan facility, including the interest rate applicable to any borrowing under such facilities. 51 Cash Flows Cash flows provided by (used in) operating, investing and financing activities are shown in the following table: Fiscal Year Ended February 1, February 3, 2025 2024 (in thousands) Cash flows provided by operating activities $ 34,149 $ 52,266 Cash flows used in investing activities (14,480 ) (79,895 ) Cash (used in) provided by financing activities (19,978 ) 28,381 Cash and cash equivalents at end of period 2,832 3,141 Net cash provided by operating activities was $34.1 million for fiscal year 2024, compared to net cash provided by operating activities of $52.3 million for fiscal year 2023, a change of approximately $18.2 million.
Our primary cash requirements are for seasonal working capital needs, capital expenditures related to ongoing operational needs and new system investments. For both the short-term and the long-term, our primary sources of cash are borrowings under our $350.0 million senior secured revolving credit facility, operating cash flows and short and long-term debt financings from other banks and financial institutions.
For both the short-term and the long-term, our primary sources of cash are borrowings under our senior secured revolving credit facility and operating cash flows.
Net cash provided by financing activities was $28.4 million for fiscal year 2023 compared to net cash used in financing activities of $40.8 million for fiscal year 2022, a change of approximately $69.2 million.
Net cash used in financing activities was $20.0 million for fiscal year 2024 compared to net cash provided by financing activities of $28.4 million for fiscal year 2023, a change of approximately $48.4 million. The increase in cash used in financing activities was primarily driven by our reduction of borrowings under our revolving credit and term loan facilities.
We recorded an income tax expense of $13.4 million for fiscal year 2022 compared to income tax expense of $35.8 million for fiscal year 2021. Our effective tax rate remained flat from fiscal year 2021 at 24.8% in 2022.
We recorded an income tax expense of $1.9 million for fiscal year 2024 compared to income tax benefit of $9.2 million for fiscal year 2023. Our effective tax rate was -6.2% during fiscal year 2024 compared to 24.1% in fiscal year 2023.
(2) 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. Employee Stock Purchase Plan. (3) Expenses incurred related to the proposed merger with Great Outdoors Group, LLC. The merger agreement was terminated in December 2021.
(2) A non-cash valuation allowance of $10.1 million was created during fiscal year 2024 related to our deferred tax assets during fiscal year 2024. (3) Stock-based compensation expense represents non-cash expenses related to equity instruments granted to outfitters under the Sportsman's Warehouse Holdings, Inc. 2019 Performance Incentive Plan and the Sportsman's Warehouse Holdings, Inc. Employee Stock Purchase Plan.
Selling, general and administrative expenses increased to 28.7% of net sales in fiscal year 2022 compared to 26.5% of net sales in fiscal year 2021, due to lower net sales for fiscal year 2022 compared to fiscal year 2021 and the additional items noted above. Interest Expense.
As a percentage of net sales, selling, general, and administrative expenses increased to 32.5% of net sales during fiscal year 2024 compared to 31.7% of net sales in fiscal year 2023, as a result of the factors discussed above. 48 Interest Expense.
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 .
During fiscal year 2023, we opened 15 new stores. We did not open any new stores in fiscal year 2024 and we plan to open one new store in fiscal year 2025. 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.
For instance, 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. As a result, sales of firearms in Oregon may be halted or substantially diminished until such permitting and training programs are developed by the state, which may take a significant amount of time.
As a result, sales of firearms in Oregon may be halted or substantially diminished until all permitting and training programs are fully developed by 44 the state and/or law enforcement agencies.
Interest expense increased by $2.8 million, or 204.0%, to $4.2 million in fiscal year 2022 from $1.4 million for fiscal year 2021. Interest expense increased primarily as a result of increased borrowing on our revolving credit facility and higher interest rates for fiscal year 2022 compared to fiscal year 2021. Other Income.
Interest expense decreased by $0.6 million, or 4.6%, to $12.3 million in fiscal year 2024 from $12.9 million for fiscal year 2023. Interest expense decreased primarily as a result decreased borrowings under our revolving credit and term loan facilities for fiscal year 2024 compared to fiscal year 2023. Income Taxes.
Today, we operate 146 stores in 32 states, totaling approximately 5.4 million gross square feet. During fiscal year 2023, we increased our gross square footage by 10.1% through the opening of 15 store locations. We also operate an e-commerce platform at www.sportsmans.com. Our stores and our e-commerce platform are aggregated into one operating and reportable segment.
Today, we operate 146 stores in 32 states, totaling approximately 5.4 million gross square feet. We also operate an e-commerce platform at www.sportsmans.com. We do not incorporate the information on or accessible through our website into this 10-K, and you should not consider any information on, or that can be accessed through, our website as part of this 10-K.
Our leases often include options which allow us to extend the terms beyond the initial lease term. For fiscal year 2024, our expected operating lease payments will be $73.8 million and our total committed lease payments are $468.9 million as of February 3, 2024. Capital Expenditures.
For fiscal year 2025, our expected operating lease payments will be $73.4 million and our total committed operating lease payments are $460.8 million as of February 1, 2025. Other operating lease obligations consist of distribution center equipment. Capital Expenditures.
The measure is also being challenged in a 43 related case in federal court and is currently on appeal in the U.S. Court of Appeals for the Ninth Circuit. We currently operate eight stores in the State of Oregon. Opening new stores and acquiring store locations is also an important part of our long-term growth strategy.
A pending bill in the Oregon House (HB 3075) seeks to delay the implementation of the permitting requirement until July 2026 and provides for certain exemptions (notably for law enforcement and military members). We currently operate eight stores in the State of Oregon. Opening new stores and acquiring store locations is also an important part of our long-term growth strategy.
The credit agreement also contains customary events of default. As of February 3, 2024, 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”).
The revolving credit facility and term loan facility also contain customary events of default, including defaults triggered by defaults under the other facility. As of February 1, 2025, we were in compliance with all covenants under the credit agreements governing each of our revolving credit facility and our term loan facility.
A combination of unusually high amounts of rain and snow influenced the timing of the spring fishing and camping seasons, pushing them to later than normal. 49 Liquidity and Capital Resources Overview; Uses and Sources of Cash As of February 3, 2024, we had cash and cash equivalents of $3.1 million and working capital, consisting of current assets less current liabilities, of $65.4 million.
However, Spring hunting, Father's Day and the availability of hunting and fishing throughout the year in many of our markets counterbalance this seasonality to a certain degree. 50 Liquidity and Capital Resources Overview; Uses and Sources of Cash As of February 1, 2025, we had cash and cash equivalents of $2.8 million and working capital, consisting of current assets less current liabilities, of $82.0 million.
(4) For fiscal year 2023 represents a one-time legal settlement and related fees and expenses. For fiscal year 2022 an accrued settlement in relation to the closure of one of our stores in 2019. (5) Severance expenses paid as part of our cost reduction plan implemented during fiscal year 2023.
(6) Severance expenses paid as part of our cost reduction plan implemented during fiscal year 2023 (7) Represents costs related to legal settlements and related fees and expenses. (8) 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. 57
For fiscal year 2023, we incurred approximately $60.3 million in capital expenditures, net of $19.6 million in tenant allowances, primarily related to the construction of new stores and the refurbishment of existing stores during the period.
For fiscal year 2024, we incurred approximately $14.6 million in capital expenditures primarily related to strategic technological investments and general store maintenance.
Our effective tax rate decreased to 24.1% during fiscal year 2023 compared to 24.8% in fiscal year 2022. Fiscal Year 2022 Compared to Fiscal Year 2021 Net Sales and Same Store Sales. Net sales decreased by $106.6 million, or 7.1%, to $1,399.5 million in fiscal year 2022 compared to $1,506.1 million in fiscal year 2021.
The change in our effective tax rate was primarily driven by the creation of a non-cash valuation allowance related to our deferred tax assets during fiscal year 2024. Fiscal Year 2023 Compared to Fiscal Year 2022 Net Sales and Same Store Sales .
The weighted average interest rate on the amounts outstanding under the revolving credit facility as of February 3, 2024 and January 28, 2023 was 7.01% and 5.86%, respectively. 51 Each of the subsidiaries of Holdings is a borrower under the revolving credit facility, and all obligations under the revolving credit facility are guaranteed by Holdings.
As of February 1, 2025, our weighted average interest rate on the amounts outstanding under our revolving credit facility and our term loan facility was 6.78%.
Our net sales decreased primarily due to lower demand across most product categories as we anniversaried the increased demand during the first half of fiscal year 2021 driven by the COVID-19 economic stimulus package (the American Rescue Plan) and social unrest and were impacted by current year consumer inflationary pressures and recessionary concerns.
Our net sales decreased primarily due to the continued impact of consumer inflationary pressures and recessionary concerns on discretionary spending, resulting in a decline in store traffic and lower demand across most product categories and fiscal year 2023 containing 53 weeks of operations as compared to 52 weeks of operations in fiscal year 2024.
Impact of Macroeconomic Conditions Our financial results and operations have been, and will continue to be, impacted by events outside of our control. During the COVID-19 pandemic, we experienced increases in net sales compared to pre-pandemic levels, primarily driven by historically high sales in certain product categories, particularly firearms and ammunition.
Our stores and our e-commerce platform are aggregated into one operating and reportable segment. Impact of Macroeconomic Conditions Our financial results and operations have been, and will continue to be, impacted by events outside of our control.
As of January 28, 2023, we had 122 stores included in our same store calculation. Our Apparel department saw an increase of $3.9 million in net sales during fiscal year 2022 compared to fiscal year 2021 primarily due to the opening of nine new stores since January 29, 2022.
As fiscal year 2023 contained 53 weeks of operations, we have excluded net sales during the first week of fiscal year 2023 from our calculation of same store sales. Our Fishing department saw a net sales increase of $8.6 million during fiscal year 2024 compared to fiscal year 2023, primarily driven by our reset of fishing inventory.
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.
These decreases were partially offset by an increase of $3.3 million and $1.5 million in rent and depreciation expenses, respectively, primarily driven by a full year of expenses related to the 15 new locations opened over the course of fiscal year 2023.
Our Hunting and Shooting, Fishing, Camping, Optics, Electronics, Accessories and other, and Footwear departments saw decreases in net sales of $47.0 million, $27.0 million, $22.1 million, $17.5 million and $1.1 million, respectively, for fiscal year 2022 compared to fiscal year 2021 primarily due to lower demand across most product categories as we anniversaried the increased demand during the first half of fiscal year 2021 driven by the American Rescue Plan and social unrest and were impacted by current year consumer inflationary pressures and recessionary concerns.
Our Hunting and Shooting, Apparel, Footwear, Camping and Optics, Electronics, Accessories and Other departments saw decreases in net sales of $51.5 million, $23.6 million, $18.2 million, $4.1 million and $1.4 million, respectively, for fiscal year 2024 compared to fiscal year 2023.
Removed
However, while our net sales and same store sales for fiscal year 2023 remained elevated as compared to pre-COVID periods, we experienced decreases in net sales and same store sales during fiscal year 2023 from the COVID-driven peak levels in fiscal year 2021.
Added
We include net sales from e-commerce in our calculation of same store sales. For fiscal years consisting of 53 weeks, we exclude net sales during the identified non-comparable week from our calculation of same store sales.
Removed
Measuring the change in year-over-year same store sales allows us to evaluate how our retail store base is performing.
Added
For the fiscal year 2024 same store sales comparison to fiscal year 2023, we have excluded sales from the first week of fiscal year 2023. For the fiscal year 2023 same store sales comparison to fiscal year 2022, we have excluded the 53rd week from fiscal year 2023.
Removed
During fiscal year 2022, we opened 9 new stores, and, during fiscal year 2023, we opened 15 new stores in fiscal year 2023. We currently do not plan to open any new stores during fiscal year 2024.
Added
For instance, in November 2022, Oregon passed a ballot measure that bans firearms and magazines with a capacity of over ten rounds, and that, among other things, imposes complex permitting and training requirements for the purchases of firearms.

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Other SPWH 10-K year-over-year comparisons