10q10k10q10k.net

What changed in SPORTSMAN'S WAREHOUSE HOLDINGS, INC.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of SPORTSMAN'S WAREHOUSE HOLDINGS, INC.'s 2023 and 2024 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 2024 report.

+311 added−320 removedSource: 10-K (2024-04-04) vs 10-K (2023-04-13)

Top changes in SPORTSMAN'S WAREHOUSE HOLDINGS, INC.'s 2024 10-K

311 paragraphs added · 320 removed · 254 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

90 edited+6 added−15 removed141 unchanged
Biggest changeIn 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.
Biggest changeWe 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.
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, create a structural barrier to competition from many online retailers.
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.
The legislation does not preclude traditional product liability actions. Several states have immunity statues in place similar to the PLCAA. However, New Jersey, New York and California recently enacted state legislation that could allow firearm dealers, manufacturers, or importers to be held liable for improper marketing or sales as defined in the legislation.
The legislation does not preclude traditional product liability actions. Several states have immunity statues in place similar to the PLCAA. However, California, New Jersey and New York recently enacted state legislation that could allow firearm dealers, manufacturers, or importers to be held liable for improper marketing or sales as defined in the legislation.
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. Online Retailers.
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.
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. 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 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.
Our optics, electronics and accessories department includes 14 brands such as Garmin, Leupold, Leica, Swarovski Optik and Vortex Optics. Our other department includes miscellaneous products and services. Loyalty and Co-Branded Credit Card Programs We have a loyalty program through which our customers are able to earn “points” towards Sportsman’s Warehouse gift cards on most of their purchases.
Our optics, electronics and accessories department includes 14 brands such as Garmin, Leupold, Swarovski Optik and Vortex Optics. Our other department includes miscellaneous products and services. Loyalty and Co-Branded Credit Card Programs We have a loyalty program through which our customers are able to earn “points” towards Sportsman’s Warehouse gift cards on most of their purchases.
We select sites for new store openings or store acquisitions based on criteria such as local demographics, traffic patterns, density of hunting and fishing license 10 holders in the area, abundance of hunting and fishing game and outdoor recreation activities, store visibility and accessibility, purchase data from our existing customer database and availability of attractive lease terms.
We select sites for new store openings or store acquisitions based on criteria such as local demographics, traffic patterns, density of hunting and fishing license holders in the area, abundance of hunting and fishing game and outdoor recreation activities, store visibility and accessibility, purchase data from our existing customer database and availability of attractive lease terms.
We are required to record the transaction number on an ATF Form 4473 and retain this form in our records for auditing purposes for the entire duration we are in business. 19 The federal categories of prohibited purchasers are the prevailing minimum for all states.
We are required to record the transaction number on an ATF Form 4473 and retain this form in our records for auditing purposes for the entire duration we are in business. The federal categories of prohibited purchasers are the prevailing minimum for all states.
Data Privacy and Security 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 employee and consumer information.
However, we believe that the amount of space at these stores devoted to our outdoor product categories limits the extent of their offerings in these areas. 18 Mass Merchandisers, Warehouse Clubs, Discount Stores and Department Stores .
However, we believe that the amount of space at these stores devoted to our outdoor product categories limits the extent of their offerings in these areas. Mass Merchandisers, Warehouse Clubs, Discount Stores and Department Stores .
The CCPA is an example of the 21 increasingly stringent and evolving regulatory frameworks related to personal data processing that may increase our compliance obligations and exposure for any noncompliance.
The CCPA is an example of the increasingly stringent and evolving regulatory frameworks related to personal data processing that may increase our compliance obligations and exposure for any noncompliance.
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.
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 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 64% 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. Significant New Store Growth Opportunity within Existing and New Markets .
The following table shows our sales during the past three fiscal years presented by department: Fiscal year Ended January 28, January 29, January 30, Department Product Offerings 2023 2022 2021 Camping Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools 12.5 % 13.1 % 12.7 % Apparel Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear 9.3 % 8.4 % 7.5 % Fishing Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats 8.9 % 10.0 % 9.9 % Footwear Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots 7.3 % 6.8 % 5.6 % Hunting and Shooting Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment and shooting gear 54.9 % 54.2 % 57.6 % Optics, Electronics, Accessories, and Other Gift items, GPS devices, knives, lighting, optics, two-way radios, and other license revenue, net of revenue discounts 7.1 % 7.5 % 6.7 % Total 100.0 % 100.0 % 100.0 % 13 Camping .
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 .
As a result of these programs, our employees are highly trained to provide friendly and non-intimidating education, guidance and support to address our customers’ needs. One of our unique assets is a designated training room located at our headquarters. Our training room is used frequently for firm-wide training programs and by vendors to stage training demonstrations for new products.
As a result of these programs, our employees are highly trained to provide friendly and non-intimidating education, guidance and support to address our customers’ needs. One of our unique assets is a designated training room located at our headquarters. Our training room is used frequently for company-wide training programs and by vendors to stage training demonstrations for new products.
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 65,000 gross square feet.
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.
For a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated in accordance with GAAP, see " Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures." Our Competitive Strengths We believe the following competitive strengths allow us to capitalize on the growth opportunity within the outdoor activities and sporting goods market: Differentiated Shopping Experience for the Seasoned Outdoor Veteran, the First-Time Participant and Everyone in Between.
For a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated in accordance with GAAP, see “Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.” Our Competitive Strengths We believe the following competitive strengths allow us to capitalize on the growth opportunity within the outdoor activities and sporting goods market: Differentiated Shopping Experience for the Seasoned Outdoor Veteran, the First-Time Participant and Everyone in Between.
Strategic Acquisitions. While our primary strategy for expansion is through organic store opening, we believe we can use strategic acquisitions as an additional source of growth, as we did with the 12 stores we acquired from Dick’s Sporting Goods in fiscal 2019 and 2020.
While our primary long-term strategy for expansion is through organic store opening, we believe we can use strategic acquisitions as an additional source of growth, as we did with the 12 stores we acquired from Dick’s Sporting Goods in fiscal 2019 and 2020.
This combined total of 5.6% 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 6.7% 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.
For example, several states, such as California, Colorado, Connecticut, Florida, Maryland, Minnesota, New Jersey, New York, Virginia and Washington have enacted laws and regulations that are more restrictive than federal laws and regulations that limit access to and sale of certain firearms and ammunition.
For example, several states, such as California, Colorado, Connecticut, Florida, Illinois, Maryland, Minnesota, New Jersey, New York, Oregon, Virginia and Washington have enacted laws and regulations that are more restrictive than federal laws and regulations that limit access to and sale of certain firearms and ammunition.
Our goal in these refreshes is to keep the stores fresh with updated lifestyle type graphics, improving the flow of our merchandise and store to our customer, enhance our technological capabilities within the stores to ensure we are meeting the needs of every customer, and make the stores more energy efficient.
Our goal is to keep these stores fresh with updated lifestyle type graphics, improving the flow of our merchandise and store to our customer, enhance our technological capabilities within the stores to ensure we are meeting the needs of every customer, and make the stores more energy efficient.
Fishing represented approximately 8.9% of our net sales during fiscal year 2022 and includes products for fresh-water fishing, salt-water fishing, fly-fishing, ice-fishing and boating. Our broad assortment appeals to the beginning and weekend angler, as well as avid and tournament anglers.
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.
We offer our customers an extensive and carefully selected assortment of branded, high-quality outdoor products at competitive prices. We accomplish this primarily in three ways: • Locally Relevant Merchandise : We carry over 24,000 stock-keeping units (“SKUs”) on average in a single store, out of Sportsman’s Warehouse’s total current offering of over 250,000 SKUs.
We offer our customers an extensive and carefully selected assortment of branded, high-quality outdoor products at competitive prices. We accomplish this primarily in three ways: • Locally Relevant Merchandise : We carry over 22,000 stock-keeping units (“SKUs”) on average in a single store, out of Sportsman’s Warehouse’s total current offering of over 160,000 SKUs.
On average, over the last three fiscal years, we have generated approximately 26.3% and 28.3% of our net sales in the third and fourth fiscal quarters, respectively, which includes the holiday selling season as well as the opening of the Fall hunting season.
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.
Footwear represented approximately 7.3% of our net sales during fiscal year 2022 and includes work boots, technical footwear, hiking boots, trail shoes, socks, sport sandals and waders. As with apparel, our footwear selection offers a variety of technical performance features, such as different levels of support and types of tread, waterproofing, temperature control and visual attributes.
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.
We pride ourselves on carrying an extensive selection of branded good, better and best hard goods at everyday low prices. Approximately 42% of our unit sales and 20% of our dollar sales during fiscal year 2022 were consumables, such as ammunition, bait, cleaning supplies, food, certain lures, propane and reloading supplies.
We 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.
Apparel represented approximately 9.3% of our net sales during fiscal year 2022 and includes camouflage, outerwear, sportswear, technical gear, work-wear, jackets and hats. We primarily offer well-known brands in our apparel department, such as Carhartt, Columbia and Sitka. We also intend to grow our private label apparel lines, including Rustic Ridge TM and Killik TM .
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 .
We carry a large array of consumable goods, which includes ammunition, bait, cleaning supplies, food, certain lures, propane and reloading supplies. During fiscal year 2022, sales of consumable goods accounted for approximately 42.0% 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 2023, sales of consumable goods accounted for approximately 44.0% of our unit sales and 20.0% of our dollar sales.
Our optics, electronics, accessories and other department represented approximately 7.1% of our net sales during fiscal year 2022. This department supplements our other equipment departments with complementary products, such as optics (including binoculars, spotting scopes and rangefinders), GPS devices and other navigation gear, two-way radios, specialized and basic cutlery and tools, including hunting knives, lighting, bear spray and other accessories.
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.
These products are designed and priced to complement our branded assortment, by rounding out the offering and ensuring customer choices for good, better and best within key product categories. During fiscal year 2022, private label offerings accounted for approximately 3.6% of our total sales with special make-up offerings accounting for an additional 2.0% of our total sales.
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.
We proactively modify the timing and content of our message to match local and regional preferences, changing seasons, weather patterns and topography of a given region. Additionally, we sponsor several regional television and radio programs. Our total marketing expense for fiscal year 2022 was approximately $23.8 million.
We proactively modify the timing and content of our message to match local and regional preferences, changing seasons, weather patterns and topography of a given region. Additionally, we sponsor several regional television and radio programs. Our total marketing expense for fiscal year 2023 was approximately $20.9 million.
Our sophisticated systems are a key factor in our shrink rates of approximately 1% and an important component of our comprehensive compliance program. Expansion Opportunities and Site Selection We have developed a rigorous and flexible process for site selection.
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.
Key operating systems include Oracle Applications for enterprise resource planning (“ERP”), system application processing (“SAP”) Commerce for our e-commerce channel, Retail.net and Java point of sale (“JPOS”) for in-store functionality, and HighJump for WMS. Our physical infrastructure is also built on products from premier vendors Cisco, Dell, Oracle Sun and VMWare.
Key operating systems include enterprise resource planning (“ERP”), system application processing (“SAP”) Commerce for our e-commerce channel, and Java point of sale (“JPOS”) for in-store functionality, and WMS. Our physical infrastructure is also built on products from vendors such as Cisco, Dell, Oracle Sun and VMWare.
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 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.
As of the end of fiscal year 2022, the majority of our stores that had been open for more than twelve months were profitable and those stores had an average four-wall Adjusted EBITDA margin of 14.6%.
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%.
Sportsman’s Warehouse was founded in 1986 as a single retail store in Midvale, Utah and has grown to 131 stores across 30 states. Today, we have the largest outdoor specialty store base in the Western United States and Alaska. Our stores range from 7,500 to 65,000 gross square feet, with an average size of approximately 38,000 gross square feet.
Sportsman’s Warehouse was founded in 1986 as a single retail store in Midvale, Utah and has grown to 146 stores across 32 states. Today, we have the largest outdoor specialty store base in the Western United States and Alaska. Our stores range from 7,500 to 75,000 gross square feet, with an average size of approximately 37,000 gross square feet.
Our stores average approximately 38,000 gross square feet. 9 The following table lists the location by state of our 131 stores open as of January 28, 2023: Number of Stores Number of Stores California 16 Florida 3 Washington 13 North Carolina 3 Utah 12 Kentucky 2 Arizona 9 Tennessee 2 Oregon 8 New York 2 Colorado 8 Indiana 2 Pennsylvania 7 Minnesota 1 Wyoming 7 Virginia 1 Idaho 6 Ohio 1 Alaska 5 West Virginia 1 Nevada 4 Louisiana 1 Michigan 4 Mississippi 1 New Mexico 3 Iowa 1 Montana 3 North Dakota 1 South Carolina 3 Nebraska 1 Store Design and Layout We present our broad and deep array of products in a convenient and engaging atmosphere to meet the everyday needs of all outdoor enthusiasts, from the seasoned veteran to the first-time participant.
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.
Camping represented approximately 12.5% of our net sales during fiscal year 2022. Our camping assortment addresses both the technical requirements of the heavy-use camper, including gear for long-duration or deep-woods excursions, as well as the needs of the casual camper.
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.
Hunting and Shooting department products are generally sold at significantly higher price points than other merchandise, but often have lower margin percentages. Camping is our second largest department, and family-oriented camping equipment in particular continues to be a high growth product category.
Hunting and Shooting department products are generally sold at significantly higher price points than other merchandise, but often have lower margin percentages. Camping is our second largest department, and we believe family-oriented camping equipment in particular is a product category with high growth opportunity.
In fiscal year 2022, our website received more than 111.8 million visits with e-commerce driven sales in excess of 15% of total sales, which we believe demonstrates our position as a leading resource for outdoor products and product education.
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.
Our typical new store requires an average net investment of approximately $2.6 million, consisting of pre-opening expenses and capital investments, net of tenant allowances. In addition, we stock each new store with initial inventory at an average cost of approximately $2.1 million.
Our typical new store requires an average net investment of approximately $2.9 million, consisting of capital investments, net of tenant allowances. In addition, we stock each new store with initial inventory at an average cost of approximately $1.8 million.
The CA DOJ communicates with us for policy discussion, recognizing the strength of our compliance infrastructure. Compliance with government regulations, including environmental regulations, has not had, and based upon current information and the applicable laws and regulation currently in effect, is not expected to have a material effect on our capital expenditures, results of operations or competitive position.
Compliance with government regulations, including environmental regulations, has not had, and based upon current information and the applicable laws and regulation currently in effect, is not expected to have a material effect on our capital expenditures, results of operations or competitive position.
The program is free to join and accepted both online and in-stores for purchases and the use of redemption cards. As of January 28, 2023, we had more than 3.8 million participants in our loyalty program and approximately 51% 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 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.
Our footwear department includes brands such as Crispi, Danner, Keen, Merrell, Red Wing and Hey Dude. Hunting and Shooting . Hunting and shooting is our largest merchandise department, representing approximately 54.9% of our net sales during fiscal year 2022.
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 Stores We operate 131 stores across 30 states as of January 28, 2023. 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.
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.
The system is highly adaptable and can be easily changed to accommodate new business requirements. For example, our WMS enabled us to support full omni-channel distribution under one roof by allowing us to comingle inventory to 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 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.
After the first 24 month period after opening a new store, we typically have a four-wall Adjusted EBITDA margin of more than 10% and a pre-tax return on invested capital of over 40% excluding initial inventory cost (or over 20% including initial inventory cost). Omni-Channel Strategy We believe our website is an extension of our brand and our retail stores.
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).
We believe our existing infrastructure, including distribution, omni-channel capabilities, information technology, loss prevention and employee training, is capable of sustaining our current growth plans without significant additional capital investment, although we may determine to invest in our existing infrastructure to prepare for future growth. We currently anticipate the need to open a second distribution center in fiscal year 2024.
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.
California, Connecticut and New York impose mandatory screening of ammunition purchases; California has requirements for microstamping (that is, engraving the handgun’s serial number on each cartridge) of new handguns; 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 gun purchases.
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.
Our Market and Competition Our Market We compete in the large, growing and fragmented outdoor activities and sporting goods market, which we believe is currently underserved by full-line multi-activity retailers. We believe, based on 2022 National Sporting Goods Association data, that U.S. outdoor activities and sporting goods retail sales total over $70 billion annually.
Our Market and Competition Our Market We compete in the large, growing and fragmented outdoor activities and sporting goods market, which we believe is currently underserved by full-line multi-activity retailers. We believe, based on the 2022 U.S.
We also pride ourselves on the long tenure of our almost 400 store managers and corporate employees. Our Growth Strategy We are pursuing a number of strategies designed to continue our growth and strong financial performance, including the following: Leveraging Our Omni-Channel Presence and Increasing Our Same Store Sales Growth .
Our Growth Strategy We are pursuing a number of strategies designed to continue our growth and strong financial performance, including the following: Leveraging Our Omni-Channel Presence and Increasing Our Same Store Sales Growth .
We strive to ensure pay equity between our female and male employees performing equal or substantially similar work. We are also focused on understanding our diversity and inclusion strengths and opportunities and executing on a strategy to support further progress. As our employees are often outdoor enthusiasts, we offer an industry best in-class discount program to our employees.
We are also focused on understanding our diversity and inclusion strengths and opportunities and executing on a strategy to support further progress. As our employees are often outdoor enthusiasts, we offer an industry best in-class discount program to our employees.
We 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 .
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.
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 monitored locally and centrally at our headquarters in our dedicated surveillance room.
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.
In addition, our enhanced reporting tools generate custom-created reports that provide our team with on-demand access to the data relevant to their area of responsibility.
Real-time sales data is available to district, store and departments managers. In addition, our reporting tools generate custom-created reports that provide our team with on-demand access to the data relevant to their area of responsibility.
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.
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.
Our IT infrastructure is designed to be able to access real-time data from any store or channel. The network infrastructure allows us to quickly and cost effectively add new stores to the wide area network (“WAN”). The private WAN is built on a CenturyLink backbone. Additionally, we have implemented a redundant wireless WAN on Verizon’s infrastructure.
Our IT infrastructure is designed to be able to access real-time data from any store or channel. The network infrastructure is designed to allow us to quickly and cost effectively add new stores to the wide area network (“WAN”).
Training room sessions are especially important for technical products, with numerous design features and a high unit price, because they enable our sales associates to better educate customers and provide additional assurance that a given product fits the customer’s needs. 22 Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available on our website at www.sportsmans.com , free of charge, as soon as reasonably practicable after the electronic filing of these reports with, or furnishing of these reports to, the SEC.
Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available on our website at www.sportsmans.com , free of charge, as soon as reasonably practicable after the electronic filing of these reports with, or furnishing of these reports to, the SEC.
Apparel sales have grown as we have introduced new brands and styles, including increasing selections for women and children. We view Apparel sales as an important opportunity, given its high gross margins and appeal to a broad, growing demographic.
We view Apparel sales as an important opportunity, given its high gross margins and appeal to a broad, growing demographic.
Of our total employees, approximately 240 were based at our corporate headquarters in West Jordan, Utah, approximately 490 employees were located at our distribution center and approximately 5,900 were store employees. As of January 28, 2023, we had approximately 3,000 full-time employees and approximately 3,700 part-time employees, who are primarily store employees.
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.
We currently operate eight stores in the State of Oregon. Our e-commerce business is subject to the Mail or Telephone Order Merchandise Rule and related regulations promulgated by the Federal Trade Commission (the “FTC”), which affect our catalog mail order operations.
Our e-commerce business is subject to the Mail or Telephone Order Merchandise Rule and related regulations promulgated by the Federal Trade Commission (the “FTC”), which affect our catalog mail order operations. FTC regulations, in general, govern the solicitation of orders, the information provided to prospective customers and the timeliness of shipments and refunds.
Other state or local governmental entities may also explore similar legislative or regulatory initiatives that may further restrict the manufacture, sale, purchase, possession or use of firearms, ammunition and shooting-related products.
Several states and the United States Congress have introduced microstamping legislation (that is, engraving the handgun’s serial number on the firing pin of new handguns) for certain firearms. Other state or local governmental entities may also explore similar legislative or regulatory initiatives that may further restrict the manufacture, sale, purchase, possession or use of firearms, ammunition and shooting-related products.
For example, the CCPA applies to personal data of consumers, business representative, and employees who are California residents, imposes specific obligations on covered businesses, provides for administrative fines of up to $7,500 per violation, and allows private litigants affected by certain data breaches to recover significant statutory damages.
For example, the CCPA applies to personal data of consumers, business representative, and employees who are California residents, imposes specific obligations on covered businesses, provides for fines of up to $7,500 per intentional violation, and allows private litigants affected by certain data breaches to recover significant statutory damages. 21 In addition, numerous other U.S. states, such as Virginia, Colorado, Connecticut, and Utah, have enacted comprehensive data privacy laws, and similar laws are being considered at the federal, state, and local levels.
As of January 28, 2023, we operated 131 stores across 30 states, primarily in the Western United States and Alaska.
As of February 3, 2024, we operated 146 stores across 32 states, primarily in the Western United States and Alaska.
None of our employees are represented by a labor union or are party to a collective bargaining agreement and we have had no labor-related work stoppages. We pride ourselves on the long tenure of our almost 400 store managers and corporate employees. We believe we offer competitive compensation and benefits packages.
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.
In addition, we stock each new store with initial inventory at an average cost of approximately $2.1 million.
Our net investment to open a new store is approximately $2.9 million, consisting of capital investments, net of tenant allowances. In addition, we stock each new store with initial inventory at an average cost of approximately $1.8 million.
We believe the accelerating expansion of our store base and growth in net sales will result in improved Adjusted EBITDA margins over time, as we take advantage of economies of scale in product sourcing and leverage our existing infrastructure, supply chain, corporate overhead and other fixed costs.
We believe our store base allows us to take advantage of economies of scale in product sourcing and leverage our existing infrastructure, supply chain, corporate overhead and other fixed costs.
Our Real Estate Committee, which is comprised of members of our senior management, including our Chief Executive Officer, Chief Financial Officer, Vice President of Real Estate, and Senior Vice President of Stores, approves all prospective locations before a lease is signed.
Our Real Estate Committee, which is comprised of members of our senior management, including our Chief Executive Officer, Chief Financial Officer, and Chief Retail Officer, approves all prospective locations before a lease is signed. Our typical store location ranges in size from 7,500 to 75,000 gross square feet.
We strive to provide competitive compensation and benefits packages, opportunities for advancement, and extensive training programs and learning opportunities for our employees. As of January 28, 2023, we had approximately 6,700 total employees.
Human Capital We appreciate the importance of retention, growth and development of our employees. We strive to provide competitive compensation and benefits packages, opportunities for advancement, and extensive training programs and learning opportunities for our employees. As of February 3, 2024, we had approximately 5,400 total employees.
With the IT infrastructure systems we have in place, certain components of inspections can be done remotely. 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.
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.
The Explorewards Visa Card allows customers to earn points whenever and wherever they use their card while the Explorewards Credit Card can be used only in Sportsman’s Warehouse stores and at Sportsman.com. Customers may redeem earned points for products and services just as they would redeem loyalty card points.
Comenity Bank extends credit directly to cardholders and provides all servicing for the credit card accounts, funds the rewards and bears all credit and fraud losses. The Explorewards Visa Card allows customers to earn points whenever and wherever they use their card while the Explorewards Credit Card can be used only in Sportsman’s Warehouse stores and at Sportsman.com.
Compliance We are routinely inspected by the ATF and various state agencies to ensure compliance with federal, state and local laws and regulations. While we view such inspections as a starting point, we employ more comprehensive internal compliance inspections to help ensure we follow and are compliant with all applicable laws and regulations.
While we view such inspections as a starting point, we employ more comprehensive internal compliance inspections to help ensure we follow and are compliant with all applicable laws and regulations. With the IT infrastructure systems we have in place, certain components of inspections can be done remotely.
We believe this diversification of participant provides us with opportunity to engage a broader group of customers. Furthermore, we believe that specialty retailers have generated incremental sales volume by expanding their presence, especially in smaller underserved communities, which has increased customers’ access to products that 17 formerly were less available.
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.
All relevant employee are trained in accordance with the policies and procedures regarding the sale of ATF regulated items. We dedicate significant resources to ensure compliance with applicable federal, state and local laws and regulations. Since we began operations in 1986, we have never had an FFL revoked.
We dedicate significant resources to ensure compliance with applicable federal, state and local laws and regulations. Since we began operations in 1986, we have never had an FFL revoked. We are also subject to a variety of state laws and regulations relating to, among other things, advertising and product restrictions.
Furthermore, we have incorporated enhanced reporting tools that enable our management to more effectively monitor our financial and operational performance to drive financial results by leveraging a range of data insights that is both more granular and more comprehensive than our previous tools. Real-time sales data is available to district, store and departments managers.
Originally designed with the goal of being able to run a significantly larger retail business, our IT systems are designed to be scalable to support our growth. 16 Furthermore, we have incorporated reporting tools that are designed to enable our management to more effectively monitor our financial and operational performance to drive financial results by leveraging a range of data insights that is both more granular and more comprehensive than our previous tools.
Our compliance department administers various restriction codes and other software tools to prevent the sale of such jurisdictionally-restricted items. We have particular expertise in the California market and have passed several California Department of Justice (“CA DOJ”) firearm audits with zero or only minor violations.
We have particular expertise in the California market and have passed several California Department of Justice (“CA DOJ”) firearm audits with zero or only minor violations. The CA DOJ communicates with us for policy discussion, recognizing the strength of our compliance infrastructure.
We use preferred carriers for replenishment to our retail stores. The majority of our direct-to-consumer e-commerce orders are fulfilled by our 131 retail stores with additional orders fulfilled by our distribution center. We ship merchandise to our e-commerce customers via small parcel delivery company.
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.
We are also subject to a variety of state laws and regulations relating to, among other things, advertising and product restrictions. Some of these laws prohibit or limit the sale, in certain states and locations, of certain items, such as black powder firearms, ammunition, bows, knives and similar products.
Some of these laws prohibit or limit the sale, in certain states and locations, of certain items, such as black powder firearms, ammunition, bows, knives and similar products. Our compliance department administers various restriction codes and other software tools to prevent the sale of such jurisdictionally-restricted items.
We target a pre-tax return on invested capital after the first 24 month period after opening of over 40% excluding initial inventory cost (or over 20% including initial inventory cost), although our historical returns have often exceeded these thresholds.
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.
Our longer-term plans include expanding our store base to serve the outdoor needs of enthusiasts in markets across the United States.
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.

… 31 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

75 edited+15 added−17 removed115 unchanged
Biggest changeOur computer hardware and software systems are vulnerable to damage from natural disasters, power loss or other events outside of our control that could harm our business. Our success, in particular our ability to successfully manage inventory levels, largely depends upon the efficient operation of our computer hardware and software systems.
Biggest changeAdditionally, 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.
Other factors that may impact our ability to open or acquire stores in new markets and operate them profitably, many of which are beyond our control, include: • our ability to identify suitable locations, including our ability to gather and assess demographic and marketing data to determine consumer demand for our products in the locations we select; • our ability to obtain financing on favorable terms or negotiate favorable lease agreements; • our ability to properly assess the profitability of potential new retail store locations; • our ability to successfully rebrand any new stores we acquire and integrate such stores into our existing operations; • our ability to secure required governmental permits and approvals; • our ability to attract, hire and train skilled store operating personnel, especially management personnel; • the availability of construction materials and labor and the absence of significant construction delays or cost overruns; 30 • our ability to provide a satisfactory mix of merchandise that is responsive to the needs of our customers living in the areas where new retail stores are built; • our ability to supply new retail stores with inventory in a timely manner; • our competitors building or leasing stores near our retail stores or in locations we have identified as targets for a new retail store; • consumer demand for our products, particularly firearms and ammunition, which drives traffic to our retail stores; • regional economic and other factors in the geographies in which we expand; and • general economic, political, and business conditions affecting consumer confidence and spending and the overall strength of our business.
Other factors that may impact our ability to open or acquire stores in new markets and operate them profitably, many of which are beyond our control, include: • our ability to identify suitable locations, including our ability to gather and assess demographic and marketing data to determine consumer demand for our products in the locations we select; • our ability to obtain financing on favorable terms or negotiate favorable lease agreements; • our ability to properly assess the profitability of potential new retail store locations; • our ability to successfully rebrand any new stores we acquire and integrate such stores into our existing operations; • our ability to secure required governmental permits and approvals; • our ability to attract, hire and train skilled store operating personnel, especially management personnel; • the availability of construction materials and labor and the absence of significant construction delays or cost overruns; • our ability to provide a satisfactory mix of merchandise that is responsive to the needs of our customers living in the areas where new retail stores are built; • our ability to supply new retail stores with inventory in a timely manner; • our competitors building or leasing stores near our retail stores or in locations we have identified as targets for a new retail store; • consumer demand for our products, particularly firearms and ammunition, which drives traffic to our retail stores; • regional economic and other factors in the geographies in which we expand; and • general economic, political, and business conditions affecting consumer confidence and spending and the overall strength of our business.
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.
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.
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.
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.
Other state or local governmental entities may continue to explore similar legislative or regulatory restrictions that could prohibit the manufacture, sale, purchase, possession or use of firearms and ammunition. In New York and Connecticut, mandatory screening of ammunition purchases is now required, as well as electronic recordkeeping that will be audited by the state.
Other state or local governmental entities may continue to explore similar legislative or regulatory restrictions that could prohibit the manufacture, sale, purchase, possession or use of firearms and ammunition. In California, Connecticut and New York, mandatory screening of ammunition purchases is now required, as well as electronic recordkeeping that will be audited by the state.
If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and distract our management. General Risks Our inability or failure to protect our intellectual property could have a negative impact on our operating results.
If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and distract our management. 36 General Risks Our inability or failure to protect our intellectual property could have a negative impact on our operating results.
In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information 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.
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.
If 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.
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.
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.
We cannot be sure that our insurance coverage will be adequate or sufficient 32 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.
The market price for our common stock could fluctuate significantly for various reasons, including, among other things, our operating and financial performance; conditions that impact demand for our products; the public’s reaction to our press releases or other public announcements; changes in earnings estimates or recommendations by securities analysts; market and industry perception of our success, or lack thereof, in pursuing our growth strategy; strategic actions by us or our competitors, such as acquisitions, store closures, or restructurings; actual or anticipated changes in federal and state government regulation, including regulations related to the sale of firearms and ammunition; sales of common stock by us or members of our management team; and changes in general market, economic and political conditions in the United 36 States, including those resulting from natural disasters, health crises or pandemics (including COVID-19), terrorist attacks, acts of war and responses to such events.
The market price for our common stock could fluctuate significantly for various reasons, including, among other things, our operating and financial performance; conditions that impact demand for our products; the public’s reaction to our press releases or other public announcements; changes in earnings estimates or recommendations by securities analysts; market and industry perception of our success, or lack thereof, in pursuing our growth strategy; strategic actions by us or our competitors, such as acquisitions, store closures, or restructurings; actual or anticipated changes in federal and state government regulation, including regulations related to the sale of firearms and ammunition; sales of common stock by us or members of our management team; and changes in general market, economic and political conditions in the United States, including those resulting from natural disasters, health crises or pandemics, terrorist attacks, acts of war and responses to such events.
In addition, claims or lawsuits 24 related to products that we sell, or the unavailability of insurance for product liability claims, could result in the elimination of these products from our product line, thereby reducing net sales.
In addition, claims or lawsuits related to products that we sell, or the unavailability of insurance for product liability claims, could result in the elimination of these products from our product line, thereby reducing net sales.
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 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. 28 We publish privacy policies, marketing materials, and other statements regarding data privacy and security.
If we or the third parties on which 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 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.
To the extent that we are not able to meet these additional challenges, our sales could decrease and our operating expenses could increase. 33 Our private label brand offerings expose us to various risks.
To the extent that we are not able to meet these additional challenges, our sales could decrease and our operating expenses could increase. Our private label brand offerings expose us to various risks.
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.
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.
In addition, these provisions may frustrate or prevent any 35 attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our board of directors.
In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our board of directors.
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; interruptions in our operations (including availability of data); financial loss; and other similar harms.
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.
Dynamic freight costs could adversely affect our business, financial condition, results of operations and our ability to accurately predict financial results. Freight costs represent a significant portion of the cost of our products. We have experienced highly variable transportation and logistics costs over the last three years.
Dynamic freight costs could adversely affect our business, financial condition, results of operations and our ability to accurately predict financial results. Freight costs represent a significant portion of the cost of our products. We have experienced highly variable transportation and logistics costs over the last four years.
In fiscal year 2022, 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 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.
If we are required to close a large portion of our stores or we experience an acceleration of reduced store traffic, whether as a result of the COVID-19 pandemic, evolving macroeconomic conditions or geopolitical events, or otherwise, we may need additional liquidity to maintain our operations depending on how long these events impact our operations.
If we are required to close a large portion of our stores or we experience an acceleration of reduced store traffic, whether as a result of a pandemic, evolving macroeconomic conditions or geopolitical events, or otherwise, we may need additional liquidity to maintain our operations depending on how long these events impact our operations.
While we may be entitled to damages if these providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
While we may be entitled to damages if these parties fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise. 31 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.
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.
Security incidents and attendant consequences may 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 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.
As a retail business that depends on consumer discretionary spending, we may continue to be adversely affected if our customers reduce, delay or forego their purchases of our products as a result of job losses, bankruptcies, higher consumer debt and interest rates, increases in inflation, higher energy and fuel costs, reduced access to credit, fluctuations in home prices and other adverse conditions in the mortgage and housing markets, lower consumer confidence, uncertainty or changes in tax policies and tax rates, uncertainty due to potential national or international security concerns, adverse or unseasonal weather conditions and uncertainty related to the ongoing COVID-19 pandemic.
As a retail business that depends on consumer discretionary spending, we may continue to be adversely affected if our customers reduce, delay or forego their purchases of our products as a result of job losses, bankruptcies, higher consumer debt and interest rates, increases in inflation, higher energy and fuel costs, reduced access to credit, fluctuations in home prices and other adverse conditions in the mortgage and housing markets, lower consumer confidence, uncertainty or changes in tax policies and tax rates, uncertainty due to potential national or international security concerns, adverse or unseasonal weather conditions and uncertainty related to any health crisis.
This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and agents, which may discourage such lawsuits against us and our directors, officers, employees and agents.
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.
For example, in response to mass shootings and other incidents in the United States, several states, such as Colorado, Connecticut, Florida, Maryland, Minnesota, New Jersey, New York, and Washington have enacted laws and regulations that limit access to and sale of certain firearms in ways more restrictive than federal laws.
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.
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, including uncertainties surrounding the impact of COVID-19, may cause a decline in consumer spending that may adversely affect our business, operations, liquidity, financial results and stock price.
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.
In addition, we rely on third-party service providers and technologies to operate critical business systems to process sensitive data in a variety of contexts and to provide other products, services, parts, or otherwise to operate our business.
In addition, we rely on third parties and their technologies to operate critical business systems to process sensitive data in a variety of contexts and to provide other products, services, parts, or otherwise to operate our business.
All of our debt outstanding under our credit agreement as of January 28, 2023 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 2022.
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.
In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, loss of sensitive data and income, reputational harm, and diversion of funds.
In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, ability to provide our products or services, loss of sensitive data and income, reputational harm, and diversion of funds.
These threats include but are not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as 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, 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, telecommunications failures, earthquakes, fires, floods, and other similar threats.
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 our third-party service providers 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 upon whom we rely experience a security incident or other interruption, we could experience adverse consequences.
We also experienced an increase in sales in fiscal 2020 and fiscal 2021 due to the pandemic and related events, although this increase in sales did not continue into fiscal 2022.
We experienced an increase in sales in fiscal year 2021 due to the pandemic and related events, although this increase in sales did not continue into fiscal year 2022 or fiscal year 2023.
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.
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.
During fiscal 2022 we saw decreased revenue 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 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.
These provisions include: • establishing a classified board of directors; • providing that directors may be removed only for cause; • not providing for cumulative voting in the election of directors; • requiring at least a supermajority vote of our stockholders to amend our bylaws or certain provisions of our certificate of incorporation; • eliminating the ability of stockholders to call special meetings of stockholders; • establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings; • authorizing the issuance of “blank check” preferred stock without any need for action by stockholders.
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.
On average over the last three fiscal years, we have generated 26.3% and 28.3% of our annual net sales in the third and fourth fiscal quarters, respectively, which includes the holiday selling season as well as the opening of the fall hunting season.
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.
In addition, hiring additional personnel and implementing changes and enhancements to our systems will require capital expenditures and other increased costs that could also have a material adverse impact on our operating results.
Failure to secure these resources and implement these systems on a timely basis could have a material adverse effect on our operating results. In addition, hiring additional personnel and implementing changes and enhancements to our systems will require capital expenditures and other increased costs that could also have a material adverse impact on our operating results.
In addition, adverse weather conditions and the impacts of climate change in any concentrated region may temporarily reduce the demand for some of our products and could have a negative effect on our sales, earnings or cash flows.
Environmental changes and disease epidemics affecting fish or game populations in any concentrated region may also affect our sales. In addition, adverse weather conditions and the impacts of climate change in any concentrated region may temporarily reduce the demand for some of our products and could have a negative effect on our sales, earnings or cash flows.
We anticipate that these increases will continue into fiscal 2023. 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 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.
While moderating in the second half of 2022, we believe dynamic conditions will continue into fiscal year 2023 and beyond. Freight rates on our products are affected by a myriad of factors, including COVID-19 related impacts on the global economy, petroleum prices, carrier labor relations, congestion at U.S. ports and ocean freight carrier capacity.
While 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.
A number of factors have historically affected, and will continue to affect, our same store sales results, including: • macroeconomic factors, such as political trends, social unrest, inflationary and recessionary trends; • consumer preferences, buying trends and overall economic trends; • changes or anticipated changes to laws and government regulations related to some of the products we sell, in particular regulations relating to the sale of firearms and ammunition; • the impact of the COVID-19 pandemic; 26 • our ability to identify and respond effectively to local and regional trends and customer preferences; • our ability to provide quality customer service that will increase our conversion of shoppers into paying customers; • the success of our omni-channel strategy and our e-commerce platform; • competition in the regional market of a store; • atypical weather; • new product introductions and changes in our product mix; and • changes in pricing and average ticket sales.
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.
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. We continually 29 expand our employee base to manage our anticipated growth.
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.
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.
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.
As a result, our ability to borrow is subject to certain risks and uncertainties, such as a deterioration in the quality of our inventory (which is the largest asset in our borrowing base), a decline in sales activity and the collection of our receivables, which could reduce the funds available to us under our revolving credit facility. 34 We cannot assure you that our cash flow from operations or cash available under our revolving credit facility will be sufficient to meet our needs.
As a result, our ability to borrow is subject to certain risks and uncertainties, such as a deterioration in the quality of our inventory (which is the largest asset in our borrowing base), a decline in sales activity and the collection of our receivables, which could reduce the funds available to us under our revolving credit facility.
In addition, California has adopted requirements for micro-stamping (that is, engraving the handgun’s serial number on the firing pin of new handguns), and at least seven other states and the United States Congress have introduced microstamping legislation for certain firearms.
In addition, several states and the United States Congress have introduced microstamping legislation (that is, engraving the handgun’s serial number on the firing pin of new handguns) for certain firearms.
We expect that the price of our common stock will fluctuate. The price of our common stock is volatile and may fluctuate significantly. During our fiscal year ended January 28, 2023, the closing price of our stock ranged from a high of $12.16 per share to a low of $7.91 per share.
We expect that the price of our common stock will fluctuate. The price of our common stock is volatile and may fluctuate significantly. During our fiscal year ended February 3, 2024, the closing price of our stock ranged from a high of $9.98 per share to a low of $3.33 per share.
See Note 15 to our Consolidated Financial Statements for additional information on the resolution of this litigation. Our insurance coverage, as well as the insurance provided by our vendors for certain products they sell to us may be inadequate to cover claims and liabilities related to products that we sell.
Our insurance coverage, as well as the insurance provided by our vendors for certain products they sell to us may be inadequate to cover claims and liabilities related to products that we sell.
Customs laws and regulations pertaining to proper item classification, quotas and the payment of duties and tariffs; and • FTC regulations governing the manner in which orders may be solicited and prescribing other obligations in fulfilling orders and consummating sales. 23 Over the past several years, bills have been introduced in the United States Congress that would restrict or prohibit the manufacture, transfer, importation or sale of certain calibers of handgun ammunition, impose a tax and import controls on bullets designed to penetrate bullet-proof vests, impose a special occupational tax and registration requirements on manufacturers of handgun ammunition and increase the tax on handgun ammunition in certain calibers.
Over the past several years, bills have been introduced in the United States Congress that would restrict or prohibit the manufacture, transfer, importation or sale of certain calibers of handgun ammunition, impose a tax and import controls on bullets designed to penetrate bullet-proof vests, impose a special occupational tax and registration requirements on manufacturers of handgun ammunition and increase the tax on handgun ammunition in certain calibers.
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, processing) 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 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).
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.
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.
We may not be able to develop relationships with new vendors, and products from alternative sources, if any, may be of a lesser quality and more expensive than those we currently purchase. Any delay or failure in offering products to our customers could have a material adverse impact on our net sales and profitability.
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.
If we are unable to generate sufficient cash flows from operations in the future, and if availability under our revolving credit facility is not sufficient, we may have to obtain additional financing. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted.
We cannot assure you that our cash flow from operations or cash available under our revolving credit facility will be sufficient to meet our needs. If we are unable to generate sufficient cash flows from operations in the future, and if availability under our revolving credit facility is not sufficient, we may have to obtain additional financing.
Due to fluctuations in the U.S. economy, our sales, operating and financial results for a particular period are difficult to predict, making it difficult to forecast results to be expected in future periods.
Due to fluctuations in the U.S. economy, our sales, operating and financial results for a particular period are difficult to predict, making it difficult to forecast results to be expected in future periods. Any of the foregoing factors could have a material adverse effect on our business, results of operations and financial condition and could adversely affect our stock price.
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.
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.
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. Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, creating regulatory uncertainty, and may be subject to differing applications and interpretations.
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.
The majority of our stores are currently located in the Western United States, comprising Alaska, Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming. As a result, our operations are more susceptible to regional factors than the operations of more geographically diversified competitors.
Our concentration of stores in the Western United States makes us susceptible to adverse conditions in this region. The majority of our stores are currently located in the Western United States, comprising Alaska, Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming.
It is possible that an event or disaster at our corporate office could materially and adversely affect the performance of our company and the ability of each of our stores to operate efficiently. Our planned growth may strain our business infrastructure, which could adversely affect our operations and financial condition.
We have centralized the majority of our computer systems in our corporate office. It is possible that an event or disaster at our corporate office could materially and adversely affect the performance of our company and the ability of each of our stores to operate efficiently.
In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised.
In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.
Competition for non-entry level personnel, particularly for employees with retail experience, is highly competitive. Additionally, our ability to maintain consistency in the quality of customer service in our stores is critical to our success. Many of our store employees are in entry-level or part-time positions that historically have high rates of turnover.
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.
We currently operate eight stores in the State of Oregon. The regulation of firearms, ammunition and shooting-related products may even become more restrictive in the future.
The measure is also being challenged in a 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. The regulation of firearms, ammunition and shooting-related products may even become more restrictive in the future.
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.
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.
Over time, we expect to expand the size of our retail store network in new and existing markets. As we grow, we will face the risk that our existing resources and systems, including management resources, accounting and finance personnel and operating systems, may be inadequate to support our growth.
As we grow, we will face the risk that our existing resources and systems, including management resources, accounting and finance personnel and operating systems, may be inadequate to support our growth. We cannot assure you that we will be able to retain the personnel or make the changes in our systems that may be required to support our growth.
Other states, such as 28 Virginia and Colorado, have also passed comprehensive privacy laws, and similar laws are being considered in several other U.S. jurisdictions. Additionally, under various privacy laws and other obligations, we may be required to obtain certain consents to process personal data.
Similar laws are being considered in several other states, as well as at the federal and local levels, and we expect more states to pass similar laws in the future. Additionally, under various privacy laws and other obligations, we may be required to obtain certain consents to process personal data.
Risks Related to Our Business Strategy Our expansion into new, unfamiliar markets presents increased risks that may prevent us from being profitable in these new markets. We intend to continue to expand by opening or acquiring stores in new markets, which may include small- to medium-sized markets and which may not have existing national outdoor sports retailers.
Over the long term, we intend to continue to expand by opening or acquiring stores in new markets, which may include small- to medium-sized markets and which may not have existing national outdoor sports retailers.
If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations, and our ability to fund expansion or take advantage of future opportunities. We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all.
If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations, and our ability to fund expansion or take advantage of future opportunities.
Increases in the minimum wage have recently adversely affected our financial results. Recently, several states in which we operate have enacted minimum wage increases and it is possible that other states or the federal government could also enact minimum wage increases.
Recently, several states in which we operate have enacted minimum wage increases and it is possible that other states or the federal government could also enact minimum wage increases. In fiscal year 2022 and 2023, 55 and 56 of our stores, respectively, were impacted by minimum wage increases, which increased our selling, general and administrative expenses.
An inability to recruit and retain a sufficient number of qualified individuals in the future may delay the planned openings of new stores. Any such delays, any material increases in employee turnover rates at existing stores or any increases in labor costs could have a material adverse effect on our business, financial condition or operating results.
Any such delays, any material increases in employee turnover rates at existing stores or any increases in labor costs could have a material adverse effect on our business, financial condition or operating results. 29 Increases in the minimum wage have recently adversely affected our financial results.
We are also dependent on the employees who staff our distribution center, many of whom are skilled.
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.
For example, the CCPA imposes obligations on covered businesses regarding their processing of personal data and provides for administrative fines and a private right of action for certain data breaches. In addition, the CPRA’s recent amendments broadened the CCPA, including by establishing a new regulatory agency to implement and enforce the law.
For example, the CCPA imposes obligations on covered businesses regarding their processing of personal data and provides for fines of up to $7,500 per intentional violation and a private right of action for certain data breaches.
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. 34 Our revolving credit facility contains restrictive covenants that may impair our ability to access sufficient capital and operate our business.
We have been experiencing supply chain disruptions and delays of the supply of products from our vendors, which have had an adverse impact on our net sales and profitability. Due to the lingering effects of the COVID-19 pandemic, the global supply chain has experienced delays, including delays in the outdoor sporting goods industry.
We have experienced supply chain disruptions and delays of the supply of products from our vendors, which have had an adverse impact on our net sales and profitability. We depend on merchandise purchased from our vendors to obtain products for our stores.
These factors include regional economic and weather conditions, natural disasters, demographic and population changes and governmental regulations in the states in which we operate. Environmental changes and disease epidemics affecting fish or game populations in any concentrated region may also affect our sales.
As a result, our operations are more susceptible to regional factors than the operations of more geographically diversified competitors. These factors include regional economic and weather conditions, natural disasters, demographic and population changes and governmental regulations in the states in which we operate.
These vulnerabilities pose material risks to our business. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. 32 Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents, which can be costly and lead to adverse consequences.
Applicable data privacy and security obligations may require us to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents, which can be costly and lead to adverse consequences.
We use management information systems to track inventory information at the store level, communicate customer information and aggregate daily sales, margin and promotional information. These systems are vulnerable to damage or interruption from natural disasters, power loss, computer system failures, telecommunications failures, misappropriation and similar events.
Our success, in particular our ability to successfully manage inventory levels, largely depends upon the efficient operation of our computer hardware and software systems. We use management information systems to track inventory information at the store level, communicate customer information and aggregate daily sales, margin and promotional information.
Removed
Our net sales and profitability could be impacted if the strength of our brand is not maintained, and our sales of firearm-related products could present reputational risks and negative publicity. Our success depends on the value and strength of the Sportsman’s Warehouse brand.
Added
Customs laws and regulations pertaining to proper item classification, quotas and the payment of duties and tariffs; and • FTC regulations governing the manner in which orders may be solicited and prescribing other obligations in fulfilling orders and consummating sales.
Removed
The COVID-19 pandemic severely impacted the global economy, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets. We experienced some interruption with various vendors as a result of restrictions or limitations on their operations due to the pandemic.
Added
Our success depends on the value and strength of the Sportsman’s Warehouse brand. The Sportsman’s Warehouse name is integral to our business as well as to the implementation of our strategies for expanding our business.
Removed
Any of the foregoing factors could have a material adverse effect on our business, results of operations and financial condition and could adversely affect our stock price. 25 Our concentration of stores in the Western United States makes us susceptible to adverse conditions in this region.

… 27 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed3 unchanged
Biggest changeThe building is leased under an agreement expiring on March 31, 2035. 37 Our distribution center is located in a 507,000 square foot facility in Salt Lake City, Utah. The building is leased under an agreement expiring on December 31, 2028, with three options that each allow us to extend for an additional five years.
Biggest changeOur distribution center is located in a 507,000 square foot facility in Salt Lake City, Utah. The building is leased under an agreement expiring on December 31, 2028, with three options that each allow us to extend for an additional five years. We currently operate 146 retail stores in 32 states.
Depending 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.
Depending 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.
We currently operate 131 retail stores in 30 states. See “Part I, Item 1, Business – Our Stores” for a breakdown of our retail stores by state. In total we have approximately 5.0 million gross square feet across all of our stores.
See “Part I, Item 1, Business – Our Stores” for a breakdown of our retail stores by state. In total we have approximately 5.4 million gross square feet across all of our stores.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS See “Part II, Item 8, Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements Note 16, Commitments and Contingencies—Legal Matters” for information regarding our material legal proceedings, which information is incorporated by reference into this Item 3. ITEM 4. MINE SAFETY DISCLOSURE S Not Applicable. PART II
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

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+5 added−2 removed1 unchanged
Biggest changeThe following table sets forth certain information relating to the purchases of our common stock by us and any affiliated purchasers within the meaning of Rule 10b-18(a)(3) under the Exchange Act during the 13 weeks ended January 28, 2023 (in thousands, except share and per share data): 38 Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 30, 2022 to November 28, 2022 — N/A — $ 12,589 November 29, 2022 to December 28, 2022 216,349 $ 9.07 216,349 $ 10,627 December 29, 2022 to January 28, 2023 40,000 $ 9.38 40,000 $ 10,252 Total 256,349 $ 9.12 256,349 $ 10,252 Stock Performance Graph The stock price performance graph below shall not be deemed soliciting material or to be filed with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, nor shall it be incorporated by reference into any past or future filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except to the extent we specifically request that it be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
Biggest changeStock 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.
This number does not include persons who hold our common stock in nominee or “street name” accounts through brokers, banks or other institutions on behalf of stockholders. Dividend Policy We did not pay any dividends in fiscal year 2022 or fiscal year 2021. We do not anticipate paying any cash dividends in the foreseeable future.
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.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the Nasdaq Global Select Market under the symbol “SPWH.” Holders As of March 31, 2023, there were 211 holders of record of our common stock.
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.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers On March 24, 2022 we announced that our board of directors authorized a share repurchase program (the “Repurchase Program”) to allow for our repurchase of up to $75.0 million of outstanding shares of our common stock during the period from March 31, 2022 to March 31, 2023.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers On March 24, 2022, our board of directors authorized a share repurchase program to provide for the repurchase of up to $75.0 million of outstanding shares of our common stock during the period from March 31, 2022 to March 31, 2023.
The following graph shows the cumulative total stockholder return of an investment of $100 in cash at market close on February 1, 2018 through January 28, 2023 for (i) our common stock (“SPWH”), (ii) the S&P 500 Retailing Industry Group Index (“S&P Retail”) and (iii) the Russell 2000 Index (“Russell 2000”).
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”).
Pursuant to applicable SEC rules, all values assume reinvestment of the full amount of all dividends. The stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns.
Pursuant to applicable SEC rules, all values assume reinvestment of the full amount of all dividends.
Removed
On March 15, 2023 our board of directors extended the term of the Repurchase Program through March 31, 2024. During the 13 weeks ended January 28, 2023, we repurchased a total of 256,349 shares of our common stock for $2.3 million, utilizing cash on hand and the Revolving Line of Credit (as defined below).
Added
On 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.
Removed
Fiscal Years Ended February 1, 2018 January 31, 2019 January 30, 2020 January 29, 2021 January 28, 2022 January 27, 2023 SPWH $ 100.00 $ 104.28 $ 131.98 $ 356.82 $ 216.70 $ 191.04 S&P Retail 100.00 107.35 128.30 180.26 189.76 155.80 Russell 2000 100.00 97.08 104.32 134.02 127.22 124.06 39 ITEM 6. [RESERVED ] 40
Added
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.
Added
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.
Added
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.
Added
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

76 edited+31 added−32 removed64 unchanged
Biggest changeFiscal Year Ended January 28, January 29, January 30, 2023 2022 2021 Net income $ 40,518 $ 108,470 $ 91,380 Interest expense 4,195 1,379 3,506 Income tax expense 13,350 35,769 30,080 Depreciation and amortization 31,776 26,226 21,830 Stock-based compensation expense (1) 4,673 3,328 3,302 Pre-opening expenses (2) 3,654 4,098 1,942 Hazard pay (3) — — 6,526 Acquisition costs (4) — 9,733 3,710 Bargain purchase (5) — — (2,218 ) Legal accrual (6) 2,088 — 2,125 Store closing write-off (7) — — 1,039 Executive transition costs (8) 1,329 — — Retention pay (9) — 2,549 — Merger termination payment (10) — (55,000 ) — Adjusted EBITDA $ 101,583 $ 136,552 $ 163,222 Net sales 1,399,515 1,506,072 1,451,767 Net income margin (11) 2.9 % 7.2 % 6.3 % Adjusted EBITDA margin (11) 7.3 % 9.1 % 11.2 % 54 (1) Stock-based compensation expense represents non-cash expenses related to equity instruments granted to employees under the Sportsman's Warehouse Holdings, Inc. 2019 Performance Incentive Plan and the Sportsman's Warehouse Holdings, Inc.
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.
We believe the key drivers to increasing our total net sales include: • increasing our total gross square footage by opening new stores and through strategic acquisitions; • increasing and improving same store sales in our existing markets; • increasing customer visits to our stores and improving our conversion rate through focused marketing efforts and continually high standards of customer service; • growing our loyalty and credit card programs; and • expanding our omni-channel capabilities through larger assortment and inventory, expanded content and expertise and better user experience.
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.
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 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 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 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 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, 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.
Seasonality Due to the openings of hunting season across the country and consumer holiday buying patterns, net sales are typically higher in the third and fourth fiscal quarters than in the first and second fiscal quarters. We also incur additional expenses in the third and fourth fiscal quarters due to higher sales volume and increased staffing in our stores.
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.
Selling, general and administrative expenses increased by $2.5 million, or 0.6%, to $402.2 million for fiscal year 2022 from $399.7 million for fiscal year 2021. This increase was primarily due to an increase in other general and administrative expenses of $10.2 million, which was largely driven by a return to pre-pandemic levels of marketing and travel activities.
Selling, general and administrative expenses increased by $2.5 million, or 0.6%, to $402.2 million for fiscal year 2022 from $399.7 million for fiscal year 2021. This increase was 48 primarily due to an increase in other general and administrative expenses of $10.2 million, which was largely driven by a return to pre-pandemic levels of marketing and travel activities.
The implicit point-of-sale contract with the customer, as reflected in the transaction receipt, states the final terms of the sale, including the 51 description, quantity, and price of each product purchased. Payment for our contracts is due in full upon delivery. The customer agrees to a stated price implicit in the contract that does not vary over the contract.
The implicit point-of-sale contract with the customer, as reflected in the transaction receipt, states the final terms of the sale, including the description, quantity, and price of each product purchased. Payment for our contracts is due in full upon delivery. The customer agrees to a stated price implicit in the contract that does not vary over the contract.
Other income decreased by $55.0 million in fiscal year 2022 from $55.0 million for fiscal year 2021 due to the receipt of a $55.0 million payment in connection with the termination of the Merger Agreement with Great Outdoors Group in fiscal year 2021. Income Taxes.
Other income decreased by $55.0 million in fiscal year 2022 from $55.0 million for fiscal year 2021 due to the receipt of a $55.0 million payment in connection with the termination of the Merger Agreement with Great Outdoors Group, LLC in fiscal year 2021. Income Taxes.
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 December 6, 2022, a state court judge in Oregon temporarily blocked the enforcement of such legislation pending trial.
We do not sell or provide gift cards that carry expiration dates. We recognized revenue for the breakage of loyalty reward points as revenue in proportion to the pattern of customer redemption of the points by applying an estimated breakage rate of 25% using historical rates and future expectations.
We 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.
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 increased borrowing on our revolving credit facility and higher interest rates for fiscal year 2022 compared to fiscal year 2021. 46 Other Income.
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.
Within Hunting and Shooting, our firearms category saw a decrease of $41.7 million, or 12.2%, for fiscal year 2022 compared to fiscal year 2021, which resulted from the drivers of decreased demand and inflationary pressures discussed above.
Within Hunting and Shooting, our firearms category saw a decrease of $41.7 million, or 12.2%, for fiscal year 2022 compared to fiscal year 2021, which resulted from decreased demand and inflationary pressures discussed above.
Assets to be disposed of are reported at the lower of the carrying amount or fair value, less the estimated costs to sell. No impairment charge to long-lived assets was recorded during the fiscal years ended January 28, 2023 and January 29, 2022.
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.
Adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, you should not consider Adjusted EBITDA in isolation or as a substitute for net income or other consolidated income statement data prepared in accordance with GAAP.
Adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, you should not consider Adjusted EBITDA in isolation or as a substitute for net income or other condensed consolidated statement of operations data prepared in accordance with GAAP.
Various factors affect same store sales, including: • macroeconomic factors, such as the ongoing impact of the COVID-19 pandemic, political trends, social unrest, inflationary pressures, recessionary trends, labor shortages, monetary supply shifts, rising interest rates, tightening of credit markets, and potential disruptions from the ongoing Russia-Ukraine conflict; • consumer preferences, buying trends and overall economic trends; • changes or anticipated changes to laws and government regulations related to some of the products we sell, in particular regulations relating to the sale of firearms and ammunition; • our ability to identify and respond effectively to local and regional trends and customer preferences; • our ability to provide quality customer service that will increase our conversion of shoppers into paying customers; • the success of our omni-channel strategy and our e-commerce platform; • competition in the regional market of a store; • atypical weather; • new product introductions and changes in our product mix; and • changes in pricing and average ticket sales.
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.
The credit agreement also contains customary events of default. As of January 28, 2023, we were in compliance with all covenants under the credit agreement governing our revolving credit facility. Critical Accounting Estimates Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
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”).
Nancy Walsh as Chair of the Audit Committee of the Board, effective April 30, 2023. 44 Results of Operations The following table summarizes key components of our results of operations as a percentage of net sales during the periods presented: Fiscal Year Ended January 28, January 29, January 30, 2023 2022 2021 Percentage of net sales: Net sales 100.0 % 100.0 % 100.0 % Cost of goods sold 67.1 67.4 67.2 Gross profit 32.9 32.6 32.8 Selling, general and administrative expenses 28.7 26.6 24.3 Income from operations 4.2 6.0 8.5 Gain on bargain purchase - - (0.2 ) Merger termination payment - (3.7 ) - Interest expense 0.3 0.1 0.3 Income before income taxes 3.9 9.6 8.4 Income tax expense 1.0 2.4 2.1 Net income 2.9 % 7.2 % 6.3 % Adjusted EBITDA 7.3 % 9.1 % 11.3 % The following table shows our net sales during the periods presented by department: Fiscal year Ended January 28, January 29, January 30, Department Product Offerings 2023 2022 2021 Camping Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools 12.5 % 13.1 % 12.7 % Apparel Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear 9.3 % 8.4 % 7.5 % Fishing Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats 8.9 % 10.0 % 9.9 % Footwear Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots 7.3 % 6.8 % 5.6 % Hunting and Shooting Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment and shooting gear 54.9 % 54.2 % 57.6 % Optics, Electronics, Accessories, and Other Gift items, GPS devices, knives, lighting, optics, two-way radios, and other license revenue, net of revenue discounts 7.1 % 7.5 % 6.7 % Total 100.0 % 100.0 % 100.0 % 45 Fiscal Year 2022 Compared to Fiscal Year 2021 Net Sales and Same Store Sales .
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 .
In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as additional measurement tools for purposes of business decision-making, including evaluating store performance, developing budgets and managing expenditures.
We define Adjusted EBITDA margin as Adjusted EBITDA divided by net sales. In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as additional measurement tools for purposes of business decision-making, including evaluating store performance, developing budgets and managing expenditures.
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. Fiscal Year 2021 Compared to Fiscal Year 2020 Net Sales and Same Store Sales.
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.
Customers’ demand for our products, and, therefore, our net sales, can be significantly impacted by weather patterns on a local, regional and national basis. For example, weather conditions have been a significant headwind for us in the first half of fiscal 2023, especially in the western half of the U.S.
Customers’ demand for our products, and, therefore, our net sales, can be significantly impacted by weather patterns on a local, regional and national basis. For example, weather conditions were a significant headwind for us in the first half of fiscal year 2023, especially in the western half of the United States.
For fiscal year 2022, we incurred capital expenditures related to the construction of new stores and the refurbishment of existing stores. Our cash flows used in investing activities in fiscal year 2021 primarily related to costs incurred in connection with opening new stores and the refurbishment of existing stores.
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.
We believe that the overall growth of our business can also help improve our gross margins, because increased merchandise volumes will enable us to maintain our strong relationships with our vendors. Selling, General and Administrative Expenses We closely manage our selling, general and administrative expenses.
We believe that the overall growth of our business can also help improve our gross margins, because increased merchandise volumes will enable us to maintain our strong relationships with our vendors.
We 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 expect that our selling, general and administrative expenses will increase in future periods due to our continuing growth.
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.
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.
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.
Net cash used in financing activities was $40.8 million for fiscal year 2022 compared to net cash provided by financing activities of $66.6 million for fiscal year 2021, a change of approximately $107.4 million.
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.
Our primary cash requirements are for seasonal working capital needs and capital expenditures related to opening and acquiring new store locations. For both the short-term and the long-term, our primary sources of cash are borrowings under our revolving credit facility, operating cash flows and short and long-term debt financings from other banks and financial institutions.
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.
As of January 28, 2023, $96.9 million was outstanding under the revolving credit facility. Assuming no additional repayments or borrowings on our revolving credit facility after January 28, 2023, our interest payments would be approximately $5.7 million for fiscal year 2023 based on the interest rate as of January 28, 2023.
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.
The lien securing the obligations under the revolving credit facility is a first priority lien as to certain liquid assets, including cash, accounts receivable, deposit accounts and inventory. 50 We may be required to make mandatory prepayments under the revolving credit facility in the event of a disposition of certain property or assets, in the event of receipt of certain insurance or condemnation proceeds, upon the issuance of certain debt or equity securities, upon the incurrence of certain indebtedness for borrowed money or upon the receipt of certain payments not received in the ordinary course of business.
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.
Fiscal Year We operate using a 52/53-week fiscal year ending on the Saturday closest to January 31. Fiscal years 2022, 2021 and 2020 ended on January 28, 2023, January 29, 2022 and January 30, 2021, respectively. Each of fiscal year 2022, 2021 , and 2020 contained 52 weeks of operations.
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.
Management believes Adjusted EBITDA and Adjusted EBITDA margin allow investors to evaluate our operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of our core operating performance. 53 Adjusted EBITDA is not defined under GAAP and is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP.
Management believes Adjusted EBITDA and Adjusted EBITDA margin allow investors to evaluate our operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of our core operating performance.
Material Cash Requirements Our material cash requirements from known contractual and other obligations are primarily for opening and acquiring new store locations, along with our general operating expenses and other expenses discussed below. Purchase Obligations. In the ordinary course of business, we enter into arrangements with vendors to purchase merchandise in advance of expected delivery.
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.
A combination of unusually high amounts of rain and snow is influencing the timing of the spring fishing and camping seasons, likely pushing these to later than normal. 48 Liquidity and Capital Resources Overview; Uses and Sources of Cash As of January 28, 2023, we had cash and cash equivalents of $2.4 million and working capital, consisting of current assets less current liabilities, of $130.1 million.
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.
Today, we operate 131 stores in 30 states, totaling approximately 5.0 million gross square feet. During fiscal year 2022, we increased our gross square footage by 6.4% through the opening of nine store locations. Our stores and our e-commerce platform are aggregated into one operating and reportable segment.
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.
Cash Flows Cash flows provided by (used in) operating, investing and financing activities are shown in the following table: Fiscal Year Ended January 28, January 29, 2023 2022 (in thousands) Cash flows provided by (used in) operating activities $ 46,794 $ (21,626 ) Cash flows used in investing activities (60,588 ) (53,452 ) Cash (used in) provided by financing activities (40,835 ) 66,571 Cash and cash equivalents at end of period 2,389 57,018 Net cash provided by operating activities was $46.8 million for fiscal year 2022, compared to net cash used in operating activities of $21.6 million for fiscal year 2021, a change of approximately $68.4 million.
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.
The key measures for determining how our business is performing are net sales, same store sales, gross margin, selling, general and administrative expenses, income from operations and Adjusted EBITDA, which we define as net 41 income plus interest expense, income tax expense, depreciation and amortization, stock-based compensation expense, pre-opening expenses, and other gains, losses, and expenses that we do not believe are indicative of our ongoing expenses.
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.
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.
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.
Stores that were opened in fiscal year 2021 and stores that have been open for less than 12 months and were, therefore, not included in our same store sales, contributed $92.6 million to net sales.
Stores that were opened in fiscal year 2023 and stores that have been open for less than 12 months and were, therefore, not included in our same store sales, contributed $85.3 million to net sales. E-commerce driven sales comprised more than 18% of total sales in fiscal year 2023.
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.
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.
With respect to same store sales, our footwear, apparel, optics, electronics and accessories, and camping departments saw increased same store sales of 21.2%, 12.7%, 7.0%, and 2.6%, respectively. Our hunting and shooting and fishing departments incurred decreases in same store sales of 8.7% and 0.6% respectively.
With respect to same store sales, our Camping, Apparel, Optics, Electronics and Accessories, Fishing, Footwear and Hunting and Shooting departments saw decreased same store sales of 22.7%, 18.6%, 16.8%, 15.1%, 14.0% and 11.2%, respectively.
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.
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.
Sales returns We estimate a reserve for sales returns and record the respective reserve amounts, including a right to return asset when a product is expected to be returned and resold. Historical experience of actual returns, and customer return rights are the key factors used in determining the estimated sales returns.
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.
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.
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.
We continue to actively monitor the impact of these macroeconomic factors on our financial condition, liquidity, operations, suppliers, industry and workforce.
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.
During the fiscal year ended January 30, 2021, we recorded an impairment charge of $1.0 million relating to the closure of one store. Leases We have operating leases for our retail stores facilities, distribution center, and corporate office. In accordance with ASC 842, which we adopted on February 3, 2019, we determine if an arrangement is a lease at inception.
Leases We have operating leases for our retail stores facilities, distribution center, and corporate office. In accordance with ASC 842, which we adopted on February 3, 2019, we determine if an arrangement is a lease at inception.
(8) Costs incurred for the recruitment and hiring of various key members of our senior management team. (9) Expense relating to retention bonuses paid to certain senior employees in connection with the termination of the merger agreement with Great Outdoors Group. (10) Represents a one-time $55 million termination payment received in connection with the terminated merger with Great Outdoors Group.
For fiscal year 2022, costs incurred for the recruitment and hiring of various key members of other senior management team members. (7) Expense relating to retention bonuses paid to certain senior employees in connection with the termination of the merger agreement with Great Outdoors Group, LLC.
Inventory Valuation Inventory is measured at the lower of cost or net realizable value. Cost is determined using the weighted average cost method. We estimate a provision for inventory shrinkage based on our historical inventory accuracy rates as determined by periodic cycle counts. The allowance for damaged goods from returns is based upon our historical experience.
We estimate a provision for inventory shrinkage based on our historical inventory accuracy rates as determined by periodic cycle counts. The allowance for damaged goods from returns is based upon our historical experience. We also adjust inventory for obsolete or slow-moving inventory based on inventory productivity reports and by specific identification of obsolete or slow-moving inventory.
See “—Indebtedness” below for additional information regarding our revolving credit facility, including the interest rate applicable to any borrowing under such facility. Share Repurchase Authorization. Our Repurchase Program initially, provided for our repurchase of up to $75.0 million of outstanding shares of our common stock during the period from March 31, 2022 to March 31, 2023.
See “—Indebtedness” below for additional information regarding our revolving credit facility, including the interest rate applicable to any borrowing under such facility. Share Repurchase Authorization.
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.
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.
We have no obligation to repurchase any shares of our common stock under the Repurchase Program and our board of directors modify, suspend or discontinue the program at any 49 time. As of January 28, 2023, we had repurchased 6,797,707 shares of our common stock for $64.7 million, utilizing cash on hand and available borrowings under our revolving credit facility.
We intend to fund repurchases under the repurchase program using cash on hand or available borrowings under our revolving credit facility. We have no obligation to repurchase 50 any shares of our common stock under the share repurchase program and we may modify, suspend or discontinue it at any time.
How We Assess the Performance of Our Business In assessing the performance of our business, we consider a variety of performance and financial measures.
Fiscal year 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.
As of January 28, 2023, we had $159.1 million available for borrowing, subject to certain borrowing base restrictions, and $2.0 million in stand-by commercial letters of credit. Borrowings under the revolving credit facility bear interest based on either the base rate or Term SOFR, at our option, in each case plus an applicable margin.
Borrowings under the revolving credit facility bear interest based on either the base rate or Term SOFR (as defined by the credit agreement governing the revolving credit facility), at our option, in each case plus an applicable margin.
Our footwear, apparel, camping, optics, electronics, and accessories, and fishing departments saw increases in net sales of $21.8 million, $18.6 million, $13.2 million, $11.6 million and $7.7 million, respectively, for fiscal year 2021 compared to fiscal year 2020 due to increased demand and higher online sales.
Our Camping, Hunting and Shooting, Apparel, Optics, Electronics and Accessories, Fishing and Footwear departments saw decreases in net sales of $31.6 million, $30.1 million, $17.0 million, $11.5 million, $9.5 million and $8.7 million, respectively, for fiscal year 2023 compared to fiscal year 2022.
Impact of Macroeconomic Conditions Our financial results and operations have been, and will continue to be, impacted by events outside of our control. Since the beginning of the COVID-19 pandemic in mid-March 2020 and continuing into the fourth quarter of 2022, we experienced a significant increase in sales from pre-pandemic sales.
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.
In addition to continued market disruptions caused by the ongoing COVID-19 pandemic, global economic and business activities continue to face widespread macroeconomic uncertainties, including labor shortages, inflation and monetary supply shifts, recession risks and potential disruptions from the Russia-Ukraine conflict. During the second half of 2022, our business was impacted by consumer inflationary pressures and recession concerns.
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.
Adjusted EBITDA We define Adjusted EBITDA as net income plus interest expense, income tax expense, depreciation and amortization, stock-based compensation expense, pre-opening expenses, and other gains, losses, and expenses that we do not believe are indicative of our ongoing expenses. We define Adjusted EBITDA margin as Adjusted EBITDA divided by net sales.
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.
Our target is to grow 42 store locations to between 190 and 210 by the end of 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.
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 .
We also adjust inventory for obsolete or slow-moving inventory based on inventory productivity reports and by specific identification of obsolete or slow-moving inventory. Had our estimated inventory reserves been 52 lower or higher by 10% as of January 28, 2023, our cost of sales would have been correspondingly lower or higher by approximately $0.6 million.
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.
We also had increases in rent, other selling, general, and administration expenses, depreciation and preopening expenses of $6.9 million, $4.5 million, $3.6 million and $2.2 million respectively, each primarily related to the opening of 10 new store locations during fiscal year 2021. The increase in other selling, general and administrative expenses was primarily due to increased efforts in marketing.
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.
The decrease in cash flows from financing activities was primarily the result of our use of $64.6 million to repurchase shares of our common stock pursuant to our share repurchase program. Indebtedness We maintain a $350.0 million revolving credit facility, with $96.9 million outstanding as of January 28, 2023.
The increase in cash provided by financing activities was primarily driven by our share repurchase of $64.7 million of in fiscal year 2022 compared to only $2.7 million in fiscal year 2023. Indebtedness We maintain a $350.0 million revolving credit facility, with $135.3 million outstanding as of February 3, 2024.
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.
We may repurchase shares of our common stock at any time or from time to time, without prior notice, subject to market conditions and other considerations. Our repurchases may be made through Rule 10b5-1 plans, accelerated share repurchase transactions, open market purchases, privately negotiated transactions, tender offers, block purchases or other transactions.
We currently operate eight stores in the State of Oregon. Opening new stores and acquiring store locations is also an important part of our growth strategy. For fiscal year 2022 we opened nine stores and we currently plan to open 15 new stores in fiscal year 2023.
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.
For fiscal 2023, our expected operating lease payments will be $68.2 million and our total committed lease payments are $434.7 million as of January 28, 2023. Capital Expenditures. For fiscal year 2022, we incurred approximately $63.5 million in capital expenditures primarily related to the construction of new stores and the refurbishment of existing stores during the period.
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.
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.
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.
The increase in our cash flows provided by operating activities was primarily the result of a normalization of our inventory levels in fiscal year 2022 compared to a focus on building up inventory in 2021. Net cash used in investing activities was $60.6 million for fiscal year 2022 compared to $53.5 million for fiscal year 2021.
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.
Interest expense decreased by $2.1 million, or 60.6%, to $1.4 million in fiscal year 2021 from $3.5 million for fiscal year 2020.
New store pre-opening expenses increased by $2.1 million to $5.8 million during fiscal year 2023 compared to $3.7 million in fiscal year 2022. Interest Expense. Interest expense increased by $8.7 million, or 206.8%, to $12.9 million in fiscal year 2023 from $4.2 million for fiscal year 2022.
Non-GAAP Financial Measures In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as supplemental measures of our operating performance. We define Adjusted EBITDA as net income plus interest expense, income tax expense, depreciation and amortization, stock-based compensation expense, pre-opening expenses, and other gains/losses, and expenses that we do not believe are indicative of our ongoing expenses.
Non-GAAP Financial Measures In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as supplemental measures of our operating performance.
On March 15, 2023 our board of directors extended the term of the 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.
Our board of directors authorized a share repurchase program to provide for the repurchase of up to $75.0 million of outstanding shares of our common stock during the period from March 31, 2022 to March 31, 2023. On March 15, 2023, our board of directors extended the term of the share repurchase program through March 31, 2024.
A larger than normal portion of those sales came from certain product categories, particularly firearms and ammunition. While our net sales and same store sales remain elevated as compared to pre-COVID periods, we are experiencing a decrease in net sales and same store sales when compared with COVID-driven peak levels in 2021.
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.
Within hunting, our firearm and ammunition categories saw decreases of $20.5 million, or 5.6%, and $18.6 million, or 7.3%, respectively, for fiscal year 2021 compared to fiscal year 2020, which decreases resulted from the drivers of decreased demand and supply chain constraints discussed above.
Within Hunting and Shooting, our ammunition category saw a decrease of $33.5 million, or 14.1%, for fiscal year 2023 compared to fiscal year 2022, which resulted from the drivers of decreased demand and inflationary pressures discussed above partially offset by our opening of new stores and fiscal year 2023 containing 53 weeks as compared to 52 weeks for fiscal year 2022.
We or the vendor can generally terminate the purchase orders at any time. These purchase orders do not contain any termination payments or other penalties if cancelled. During fiscal 2021, we used cash to increase our inventory levels after the increased demand during the pandemic reduced our inventory.
These purchase orders do not contain any termination payments or other penalties if cancelled. During 2023, we executed our inventory reduction plan, which resulted in less cash expenditures for merchandise inventory in 2023.
As of January 29, 2022, we had 112 stores included in our same store calculation. All of our departments had increases in net sales for fiscal year 2021 compared to fiscal year 2020, with the exception of our hunting and shooting department.
Same store sales decreased by 14.4% for fiscal year 2023 compared to fiscal year 2022, primarily as a result of the factors discussed above that impacted net sales. As of February 3, 2024, we had 131 stores included in our same store calculation.
In addition, as of January 28, 2023, $10.3 million remained available to us for repurchase of outstanding shares of our common stock pursuant to the Repurchase Program.
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.
(11) We calculate net income margin as net income divided by net sales and we define Adjusted EBITDA margin as Adjusted EBITDA divided by net sales. 55
(8) Represents a one-time $55 million termination payment received in connection with the terminated merger with Great Outdoors Group, LLC. (9) 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. 56
Firearms same store sales decreased by 12.5% and ammunition same store sales decreased by 13.7% during fiscal year 2021 compared to fiscal year 2020. Gross Profit. Gross profit increased by $13.8 million, or 2.9%, to $490.3 million for fiscal year 2021 from $476.5 million for fiscal year 2020.
Gross profit decreased by $76.8 million, or 16.7%, to $383.4 million for fiscal year 2023 from $460.2 million for fiscal year 2022. As a percentage of net sales, gross profit decreased to 29.8% for fiscal year 2023 compared to 32.9% for fiscal year 2022.
Interest expense decreased primarily as a result of our lower debt balances during fiscal year 2021 compared to fiscal year 2020, including our repayment of our term loan and borrowings outstanding under our revolving credit facility in fiscal year 2020. Other Income.
Interest expense increased primarily as a result increased borrowings on our revolving credit facility and higher interest rates for fiscal year 2023 compared to fiscal year 2022. Income Taxes. We recorded an income tax benefit of $9.2 million for fiscal year 2023 compared to income tax expense of $13.4 million for fiscal year 2022.
Fifty-five of our current stores were impacted by minimum wage increases in fiscal year 2022 that have and will continue to increase our selling, general and administrative expenses during fiscal year 2023. 43 Income from Operations Income from operations is gross profit less selling, general and administrative expenses.
This plan continues as expected and is anticipated to result in a minimum of $25 million in annualized cost savings during fiscal year 2024 when compared to expenses prior to the implementation of our cost reduction plan. Income from Operations Income from operations is gross profit less selling, general and administrative expenses.
Removed
We also have been scaling our e-commerce platform and increasing sales through our website, www.sportsmans.com .
Added
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.
Removed
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.
Added
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.

… 59 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed2 unchanged
Biggest changeOur revolving credit facility and term loan carry floating interest rates that are tied to SOFR, the federal funds rate and the prime rate, and, therefore, our income and cash flows will be exposed to changes in interest rates to the extent that we do not have effective hedging arrangements in place.
Biggest changeBorrowings under our revolving credit facility carry floating interest rates that are tied to SOFR, the federal funds rate and the prime rate, and, therefore, our income and cash flows will be exposed to changes in interest rates to the extent that we do not have effective hedging arrangements in place.
However, this does not preclude our adoption of specific hedging strategies in the future. 56
However, this does not preclude our adoption of specific hedging strategies in the future. 57
Based on a sensitivity analysis at January 28, 2023, assuming the amount outstanding under our revolving credit facility would be outstanding for a full year, a 100 basis point increase in interest rates would have increased our interest expense by $1.0 million. We do not use derivative financial instruments for speculative or trading purposes.
Based on a sensitivity analysis at February 3, 2024, assuming the amount outstanding under our revolving credit facility would be outstanding for a full year, a 100 basis point increase in interest rates would have increased our interest expense by $1.4 million. We do not use derivative financial instruments for speculative or trading purposes.

Other SPWH 10-K year-over-year comparisons