Sportsman’s Warehouse: ‘Not surprised’ about tough retail environment

Top executives for Sportman’s Warehouse said this week the difficult retail environment for guns and ammunition isn’t surprising. (Photo: Sportman's Warehouse/Facebook)

Sportman’s Warehouse operates more than 80 locations in 22 states, with an ultimate goal of opening 300 natiowide. (Photo: Sportman’s Warehouse/Facebook)

Top executives for Sportman’s Warehouse said this week the difficult retail environment for guns and ammunition isn’t surprising.

CEO John Schaefer told investors Thursday the company expected softened firearms demand throughout 2017 as it reported second quarter net sales increased less than 1 percent over last year.

“We saw this coming with the Orlando tragedy and the run up to the election, so we knew this would be a tough year,” he said. “But I think … firearms are doing exactly what we thought. We’re somewhat lucky in that. We’re in a high-use part of the country as opposed to a use/protection part of the country. So we have a little more stabilization.”

Estimated gun sales plummeted 26 percent in July compared to last year as manufacturers and retailers predict a return to the industry’s “seasonal trends” in the non-election year.

The Federal Bureau of Investigation processed just north of 1.7 million applications through the National Instant Criminal Background Check System last month — the third busiest July on record.

June gun sales likewise dipped 12 percent over 2016 to just over 947,000 estimated transfers, according to the FBI. The gun industry uses the system as a proxy measure for sales.

Firearms promotions took the brunt of blame from retailers and gun makers alike who said the rock bottom prices ate into quarterly earnings. Some suggest the overstock — left behind after the election — could hang around until 2018, artificially propping up gun sales and keeping prices low.

This won’t be the case at Sportsman’s Warehouse, however, Schaefer told investors Thursday.

“We are in the use category strongly, not in the protection category,” he said. “And to cut prices on firearms to try to stimulate artificial growth in a period of time that both is not a high-purchase time of year — and is just before a high-purchase time of year in the September, October timeframe with hunting — simply doesn’t make sense. People don’t want to buy, they’re not going to buy.”

Schaefer said the company’s 9 percent decline in same store sales resulted from weakness in their hunting and shooting category, but long-term “underlying demand remains strong compared to historical levels.”

“For the remainder of the year, we continue to expect softness in firearm demand until we anniversary the pre-election run up that caused increased demand in our firearm and ammunition categories in the prior year and are maintaining a conservative approach for the third quarter,” he said.

Sportsman’s Warehouse filed for Chapter 11 bankruptcy protection in March 2009, calling itself a “retailer victim of the worldwide global recession.” In the eight years since, the company reorganized and grew from just under two dozen locations to more than 80 stores in 22 states — mostly in the western and southeastern regions of the country. Schaefer said 12 locations will open by year’s end and another five to nine are slated for 2018.