Sportsman’s Warehouse blames guns, ammo for weakened third quarter sales

Sportsman's Warehouse said demand for guns and ammo declined by double digits in its third quarter, ending Sept.30.(Photo: Sportsman's Warehouse)

Sportsman’s Warehouse said demand for guns and ammo declined by double digits in its third quarter, ending Oct. 28, 2017. (Photo: Sportsman’s Warehouse)

Top executives for Sportsman’s Warehouse blamed guns and ammunition for the retailer’s sales loss in its third quarter.

Chief Executive Officer John Schaeffer told investors Thursday same store overall sales for the chain declined 7 percent for the quarter ending Oct. 28 — driven by a 12.4 percent dip in demand for firearms and a 19.4 percent loss in ammunition.

“Our third quarter results were largely in line with our expectations and reflected continued softness in firearms and ammunition as well as a shift in the timing of a planned third quarter new store opening into the fourth quarter,” he said in a press release Thursday. “We again navigated a difficult operating environment but were pleased to deliver gross margin expansion … and make continued progress against our key strategic priorities as we focus on driving further market share gains.”

Strength in the retailer’s sales for modern sporting rifles and shotguns helped offset persistent weak demand post-election, Schaeffer said, citing a 6.6 percent spike in both categories over 2016 — the industry’s biggest year on record.

“We believe this reflects the more consistent trends within this area of firearms,” he said. “In terms of ammunition, the 19.4 percent decline we experienced in quarter three we believe, in large part, reflects customers’ reluctance to purchase ammunition at full price, which has risen rather dramatically over the past seven years.”

Overall, net sales for the company’s third quarter increased less than 1 percent, according to financial regulatory filings.

“As we’ve consistently said in the past, despite the short term volatility in firearm demand, the long term underlying demand trend in the hunting and shooting category remained strong compared to historical levels,” Schaeffer said. “Fueled by increased participation rates in outdoor shooting sports from more women and children and also increased firearm sales in the use category versus protection purchases.”

The retailer’s third quarter earnings follow a predictable pattern mirrored across the gun industry as excess inventory, aggressive promotions and weakened consumer demand stifle profits.

Schaeffer told investors in August the company wouldn’t join its competitors in “chasing prices to the bottom,” but did suggest ammo promotions instead. The experiment delivered “good results,” despite a double digit decrease in product sales, he said Thursday.

“We believe this is a structural pricing issue and we have been working with our vendor partners to determine the most appropriate long term course of action to bring ammunition sales back into historical alignment with firearm demand,” he said. “We’ve seen movement in this area from our vendors in quarter three, which we believe will translate into better pricing for the consumer beginning in early 2018.”

Chief Financial Officer Kevan Talbot forecasted a same store sales loss of up to 6 percent in the fourth quarter and told investor’s the retailer’s 2017 sales wouldn’t exceed $812 million.

“While the difficult firearm comparisons that we anniversaried through the first three quarters of fiscal year 2017 will be behind us, we expect a heightened promotional environment, which we are reflecting in our sales and margin outlook,” Schaeffer said. “Our differentiating attributes of everyday low pricing, unparalleled breadth of product offering and knowledgeable customer service position us well as we continue to navigate these headwinds and remain focused on delivering sustainable long-term growth.”