Sportsman's Warehouse Holdings, Inc. (NASDAQ:SPWH) has seen a strong stock recovery in the past couple of months. The outdoor sporting goods retailer finally returned to positive same-store sales growth in the most recent report after severe weakness in the past couple of years - a turnaround is progressing well. SPWH still remains on the edge with thin earnings and a good amount of debt, highlighting the importance of a good continuation.
I remained at a Buy rating in my previous June 2024 article on the stock a year ago, titled “Sportsman's Warehouse: Cheap But Risky After Weak Q1 And Strategic Shift”. The stock has now lost -1% of its value after a rollercoaster, still underperforming the S&P 500’s return of 12%.
Sportsman’s Warehouse Is Finally Turning Around, Maybe
SPWH has had a turbulent ride in the past couple of years. The company’s previous aggressive new store investments during heightened industry-wide firearm sales amidst the Covid pandemic backfired - same-store sales turned to a sharp decline, causing operating earnings to plummet. SPWH’s growth investments raised the company’s debt to an unsustainable level, pressuring the company further to shift its strategy to a more sustainable foundation.
Since, after significant issues, SPWH’s recently published fiscal Q1 report finally showed very encouraging turnaround signals. SPWH returned to positive 2% same-store sales growth after nearly four years of significant same-store sales declines – the sales performance is finally stabilizing. The quarter’s $249.1 million in total revenues beat Wall Street’s consensus by $10.9 million.
Making the sales stabilization in Q1 especially impressive, the consumer sentiment was pressured especially in the latter parts of the quarter, whereas SPWH still maintained healthy traffic. SPWH notes to have gained a very significant market share in firearm sales according to adjusted NICS data – SPWH’s firearm unit sales grew by 7%, while
