Sportsman's Warehouse stock surges; retailer has no plans to restrict gun sales

Share prices for the retailer surged double digits this week after unimpressive annual earnings and a commitment from new CEO Jon Barker to leave firearm sales policies alone. (Photo: Sportsman’s Warehouse)

Stock prices for Sportman’s Warehouse surged 12 percent this week despite the retailer’s recent report of decreased earnings.

Chief Executive Officer Jon Barker told investors Wednesday the company’s annual net income last year fell nearly $13 million short of 2016, representing a 41 percent decline overall. Net sales, however, climbed 3.8 percent — a rarity in the current outdoor retail environment.

“The industry backdrop remains challenging in 2017 as we lap some difficult comparisons from 2016 and navigated a heightened promotional environment in fiscal year 2017,” Barker said during a conference call last week. “Despite this difficult backdrop and increased promotional activity in the second half, we increased gross margins by 10 basis points for the year.”

He described the year as “productive,” noting the company met its goal of opening 12 stores and eliminated $2.3 million in debt. The retailer also expects some growth in firearm sales and an increase in ammunition prices.

“We expect the promotional headwinds to lessen as the disruption from industry consolidation dissipates and inventory positions normalize in the back half of the year,” said Kevan Talbot, chief financial officer. “In 2018, we will anniversary more stable performance in firearms as we believe the industry is establishing a baseline after a few years of volatility. Given raw material cost pressures, we expect to see a 2 percent to 3 percent price increase on ammunition in the back half of fiscal year 2018, which will put continued pressure on the category.”

Talbot told investors “firearms are leading the way” when it comes to Sportman’s Warehouse’s increased sales traffic as of late, but didn’t comment directly on whether the growing corporate backlash against gun sales were driving more customers through their doors.

Barker clarified there’s no plans to follow in the footsteps of other retailers — namely Dick’s Sporting Goods — by imposing restrictions on gun sales over and above federal law.

“As far as a Sportsman’s Warehouse changing their policies around regulated materials, we are continuing to monitor the situation and have ongoing conversations to make sure we understand what’s happening in the political arena and regulation,” he said Wednesday. “But we continue to support the lawful sale of firearms under the Second Amendment rights of our customer and at this point we have no intent or plan to change the way that we approach that.”

Barker also noted Sportsman’s Warehouse touts the “very best compliance record” of any retailer in the industry — which includes respecting state laws where applicable.

“If a customer from Florida goes to one of our stores in South Carolina, we will abide by the 21 age limit for residents of the state of Florida,” Talbot said. “Compliance with the laws and regulations whether that be state or federal or local jurisdictions is very important and critical to our company and so we watch what the law changes are and we make sure that we comply with the with the laws.”