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Summary

  • Highly leveraged sporting goods retailer.
  • Negative price-to-book value and negative price-to-tangible book value.
  • Accumulated deficit of -$122 million.

Based in Midvale, UT, Sportsman's Warehouse Holdings (NASDAQ:SPWH) scheduled a $150 million IPO on the Nasdaq with a market capitalization of $495 million at a price range midpoint of $12 for Thursday, April 17, 2014.

The full IPO calendar is available at IPOpremium.

SEC Documents
Manager, Joint managers: Credit Suisse, Goldman Sachs

Co-Managers: Baird, William Blair, Piper Jaffray, Wells Fargo Securities, D.A. Davidson

End of lockup (180 days): Tuesday, October 14, 2014

End of 25-day quiet period: Monday, May 12, 2014

Summary
SPWH is a highly leveraged sporting goods retailer.

Compared to the segment, SPWH's negative price-to-book value and negative price-to-tangible book value suggests that SPWH may have a higher cost of capital, which is a negative.

Valuation

Glossary

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

Sportsman's Warehouse

$497

0.8

22.8

-15.8

-12.8

30%

Cabela's (NYSE:CAB)

$4,780

1.3

21.3

3.0

3.0

Dick's Sporting Goods (NYSE:DKS)

$6,650

1.1

19.7

3.9

4.8

Hibbett Sports (NASDAQ:HIBB)

$1,400

1.6

19.7

4.6

4.6

Not a direct competitor

Big 5 Sporting Goods (NASDAQ:BGFV)

$362

0.4

12.9

1.9

2.0

Conclusion
SPWH is a very highly leveraged retailer, and 35% of the IPO proceeds are going to a selling shareholder, not a good sign for new IPO buyers. SPWH has an accumulated deficit of -$122 million.

Most of the recent revenue growth is from acquisitions.

SPWH wants to IPO at the highest P/E of the sector. In the last month the sector has not performed well, see chart above.

The SPWH rating is neutral plus ('plus' because some institutions may believe SPWH's growth plan, see below).

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business

SPWH is a high-growth outdoor sporting goods retailer focused on meeting the everyday needs of the seasoned outdoor veteran, the first-time participant and every enthusiast in between.

SPWH's mission is to provide a one-stop shopping experience that equips its customers with the right hunting, shooting, fishing and camping gear to maximize their enjoyment of the outdoors. SPWH strives to accomplish this goal by tailoring its broad and deep merchandise assortment to meet local conditions and demand, offering everyday low prices, providing friendly support from its knowledgeable, highly-trained staff and offering extensive in-store events and educational programming.

Growth by acquisition

SPWH operates 49 stores in 18 states totaling approximately 2.3 million gross square feet.

During fiscal year 2013, SPWH increased gross square footage by 37.1% through the opening of four new locations and the acquisition of ten previously operated stores.

Four new store openings in fiscal year 2013 were in Farmington, New Mexico; Lewiston, Idaho; Cheyenne, Wyoming; and Logan, Utah.

Subsequent to February 1, 2014, SPWH opened a new store in Hillsboro, Oregon. In March 2013, SPWH re-acquired ten stores previously operated under the Sportsman's Warehouse banner that are located in Montana, Oregon and Washington.

These core strategies help position Sportsman's Warehouse as the "local outdoor experts" and the preferred place to both shop and share outdoor-based experiences in the communities SPWH serves.

As a result, SPWH is expanding its loyal customer base in existing markets and increasing its store footprint in new markets, which SPWH believes will further drive its growth and profitability.

Largest in the Western US & Alaska

Today, SPWH has the largest outdoor specialty store base in the Western United States and Alaska. Stores range from 30,000 to 65,000 gross square feet, with an average size of approximately 48,000 gross square feet.

SPWH's store layout is adaptable to both standalone locations and strip centers.

Based on publicly-available information, SPWH believes it is less capital-intensive for it to open new stores compared to its principal competitors because SPWH's "no frills" store layout requires less initial cash investment to build out and its stores generally require less square footage than the stores of its competitors.

Together, these features enable SPWH to effectively serve markets of multiple sizes, from Metropolitan Statistical Areas with populations of less than 75,000 to major metropolitan areas with populations in excess of 1,000,000, while generating consistent four-wall Adjusted EBITDA margins and returns on invested capital across a range of store sales volumes.

Growth Plan
Over the last three fiscal years, SPWH opened an average of four stores per year.

SPWH opened two new stores to date in fiscal year 2014 and currently plans to open an additional six new stores in the remainder of fiscal year 2014.

For the next several years thereafter, SPWH intends to grow its store base at a rate of eight to thirteen stores annually and expects that most of the near-term growth will occur within the Western United States.

Longer-term plans include expanding the store base to serve the outdoor needs of enthusiasts in markets across the United States.

SPWH believes that the existing infrastructure, including distribution, information technology, loss prevention and employee training, is capable of sustaining 100 or more stores without significant additional capital investment.

Dividend Policy

No dividends are planned.

Intellectual Property

Sportsman's Warehouse® and Sportsman's Warehouse America's Premier Outfitter® are among SPWH's service marks or trademarks registered with the United States Patent and Trademark Office.

SPWH also has several pending applications for trademarks, including Rustic RidgeTM. In addition, SPWH owns several other registered and unregistered trademarks and service marks involving advertising slogans and other names and phrases used in its business.

SPWH also owns numerous domain names, including sportsmanswarehouse.com, among others.

Competition

SPWH's principal competitors include the following:

independent, local specialty stores, often referred to as "mom & pops";

other specialty retailers that compete with SPWH across a significant portion of its merchandising categories through retail store, catalog or e-commerce businesses, such as Bass Pro Shops, Cabela's and Gander Mountain;

large-format sporting goods stores and chains, such as Academy Sports + Outdoors and Dick's Sporting Goods; and

mass merchandisers, warehouse clubs, discount stores, department stores and online retailers, such as Amazon, Target and Wal-Mart.

5% stockholders

SEP SWH Holdings GP, LLC 82.8%

John V. Schaefer 7.8%

Use of proceeds

SPWH expects to net $90 million from its IPO. Proceeds are allocated as follows:

Repay debt.

Disclaimer: This SPWH IPO report is based on a reading and analysis of SPWH's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: Sportsman's Warehouse Holdings