Welcome to Sportsman's Warehouse second quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Riley Timmer, Vice President of Investor Relations. Thank you. You may begin. Thank you, operator. Participating with me on the call today is Joe Schneider, our interim CEO and Chair of the Board, and Jeff White, our Chief Financial Officer. I will now remind everyone of the company's safe harbor language. The statements we make today contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which includes statements regarding expectations about our future results of operations, demand for our products, and growth of our industry. Actual results may differ materially from those suggested in such statements due to a number of risks and uncertainties, including those described in the company's most recent Form 10-K and the company's other filings made with the SEC. We also disclose non-GAAP financial measures during today's call. Definitions of such non-GAAP measures, as well as reconciliations to the most directly comparable GAAP financial measures, are provided as supplemental financial information in our press release, included as Exhibit 99.1 to the Form 8-K we furnished to the SEC today, which is also available on the Investor Relations section of our website at sportsmans.com. I'll now turn the call over to Joe. Thank you, Riley, and good afternoon, everyone. I'll begin my prepared remarks by first providing an update on our CEO search. Next, I'll talk through the key areas where the leadership team and I have been focused. Then review our second quarter results, followed by the actions we are taking. The search for Sportsman's Warehouse's next CEO is the board's number one priority. This search is progressing well, and we are very pleased with the quality and experience we are seeing in candidates. The search committee continues to filter candidates, and the board is expecting to fill the position soon. We'll keep you posted. Frankly, the second quarter was a disappointment from a net sales, gross margin, and profitability perspective. Sales in the quarter were down nearly 12% versus last year, with comp sales down 16%, both lower than we expected. Gross margins were 32.6, which is 90 basis points lower than the second quarter last year. In addition, Adjusted EBITDA was 4.2%, which is down from 8.7% versus last year. In the quarter, we saw a deterioration in revenue as we did not see store traffic improve from the first quarter like we had anticipated. This resulted in year-over-year declines in each of our departments. While we did experience a late start to our spring selling season and later in the quarter, unseasonable warm weather, we believe that the difficult macroeconomic environment is leaving fewer dollars available for discretionary spending. We did, however, see a bright spot in our omni-channel business, when e-commerce continued to outpace the performance of our stores. Since I stepped in as interim CEO, I've been working with our strong management team, looking at all aspects of our business. Specifically, we've been focusing on the following areas: supply chain and inventory, real estate, omni-channel and e-commerce, and operating expense CapEx. We quickly reviewed these four key areas and, as a result of the performance, took immediate action to address the following: steps to reduce our total inventory and have identified the areas of inventory that need to be accelerated for short-term promotions and markdowns. Adjusted the company's expense structure to right size to the current sales trends and significantly reduce investments in future new stores, openings, and other capital spend. These aggressive actions we are taking to reduce inventory, combined with increasing store traffic through short-term focused promotions and markdowns, will further reduce gross margins during the back half of this year. In addition, we will continue to streamline our expense structure and focus our debt paydown, so we are well poised to start fiscal 2024 in a strong position to return Sportsman's Warehouse to profitable growth. Over the last several months, we have added additional talent in both our merchandising group and our distribution center.... Bryn Westfall, our Chief Merchant, brings nearly 30 years of specialty outdoor retail experience to the team, having worked in senior roles for both Cabela's and Academy Sports. Brian is driving our inventory and merchandising realignment efforts, and I'm confident in his ability to execute at a very high level. While I'm not happy with our Q2 performance, we are taking swift and aggressive action to get the business back on track to return to profitability. I'm very confident in the team, the adjustments we have made, and our ability to execute with a sense of urgency. We are confident that we will successfully navigate through challenging business environment. With that, I'll turn the call over to Jeff. Thank you, Joe. I'll begin my remarks today with a review of our second quarter fiscal 2023 financial results, then cover our outlook for the third quarter of 2023. Net sales for the second quarter of fiscal 2023 were $309.5 million, compared to $351 million in the second quarter of 2022. Same-store sales decreased 16.1% compared to the second quarter of 2022. In looking at comparable sales by department, first, our hunting department same-store sales were down 17.5% versus last year. Breaking it down further, ammunition comp sales were down 30%, accounting for the majority of the departmental decrease in the quarter. In last year's second quarter, there was a significant pull forward of demand as we started to return to normal in-stocks on key ammo calibers. These calibers have been very challenging to procure over the prior two years, making for a difficult year-over-year comparison. Our firearm sales on a comparable basis were down 10.9%. In reviewing our performance for the quarter versus the adjusted NICS data, a key indicator of firearm sales, we continue to outperform this industry measure, which is down 12.7% in the same period. We believe this demonstrates that although sales were down year over year, we are gaining market share in this key category to our business. Looking now at other departments within our business. Our fishing department was down 11.1% versus last year on a comparable store basis. Continuing the same trend as Q1, we experienced soft trends in fishing as we entered the second quarter. However, we saw month-over-month improvements in comparable store sales through the end of the quarter and into the beginning of the third quarter. During the second quarter, we also experienced softness in our apparel, camping, and footwear departments, as pressures on consumer discretionary spend continues to weigh heavily on these categories. These categories were down 20.7%, 19.4%, and 13.8%, respectively, on a comparable basis. Second quarter gross margin was 32.6% for the quarter, versus 33.5% in the prior year comparable period. This decrease as a percentage of sales, was due to increased promotional activities and reduced product margins on ammunition. SG&A expense as a percentage of net sales was 33.1%, compared with 27.6% in the second quarter of last year. This increase was primarily driven by increases in total rent, depreciation, and new store opening expenses. This was partially offset by a decrease in our total payroll expense, as we quickly adapted our store labor to changes in product demand. On a per store basis, payroll was down about 11% versus last year, and other operating expenses were down approximately 8%. Net loss for the second quarter was $3.3 million, or -9 cents per diluted share, compared to net income of $14.6 million, or 35 cents per diluted share in the prior year period. Adjusted net loss in the second quarter of 2023 was $1.6 million, or -$0.04 per diluted share, compared to adjusted net income of $15.1 million, or $0.36 per diluted share in the second quarter of the prior year. Adjusted EBITDA for the second quarter was $13.1 million, or 4.2% of net sales, compared to $30.6 million, or 8.7% of net sales in the prior year period. Turning to our balance sheet and liquidity. Second quarter ending inventory was $457.2 million, compared to $437.4 million at the end of the second quarter of 2022. On a per store basis, inventory was down nearly 6% versus last year's Q2, and just over 5% compared with Q1 2023. As Joe discussed, we will move swiftly with a greater velocity of promotions and markdowns to lower our total inventory levels and drive more traffic to our stores. Looking at cash flow for the first half of 2023: Cash used in operating activities was $58.3 million, versus cash provided by operating activities of $8 million for the first six months of 2022. The increase in our cash outflows was primarily due to the additional inventory for our 14 new stores and a net loss in the first half of this year, compared to net income during the prior year's six-month period. Regarding liquidity, we ended the second quarter with $203.1 million outstanding on our line of credit and $2.9 million of cash on hand. We have approximately $96 million available under our credit facility. We expect the outstanding balance on our line of credit to substantially decrease during the second half of the year as we lower our inventory levels, complete construction on our final two new stores, and reduce our operating costs, freeing up excess cash for debt paydown. During the second quarter, we bought back about 430,000 shares under our current buyback program for an investment of $2.1 million. At the end of the quarter, we have approximately $7.5 million remaining under the authorized share repurchase program and will continue to opportunistically execute in the open market. As you've heard from Joe, the impact on our business from the challenging macroeconomic conditions has been greater than expected. We did not see the improvement to in-store traffic during Q2 that we had anticipated, causing sales and demand for our products in each of our departments to decline significantly. As Joe mentioned, during the quarter, we successfully executed certain cost reductions and continue to find ways to streamline our overall cost structure to be more leaner and more efficient. We anticipate these ongoing efforts will yield up to $25 million in annual savings and will align our business for the current demand trends we are seeing. Regarding our 2024 new store funnel, this is another area of our business impacted by the challenging macroeconomic environment. Availability is at an all-time low, making it more difficult for us to find real estate and markets where we have the right to win and ensure achievement of our new store financial hurdles. As such, we expect the number of new stores we will open in 2024 to be significantly fewer than 2023, given the pressure on our sales, availability of real estate, and capital allocation priority now directed to paying down debt. Turning now to our guidance. Given the difficult retail environment that we are operating in, we expect to see continued pressure on our top-line sales. In an effort to reduce inventory and drive traffic, we will be more promotional in the back half of 2023 than we have historically been. We will also continue to look at ways to reduce our operating expenses and better leverage the assets of the business. Executing these items will position Sportsman's Warehouse to be much healthier as we move into 2024. Now focusing in on our third quarter guidance. We expect net, net sales to be in the range of $310 million-$330 million. We expect that our promotional activity during the quarter will impact gross margins between 250 and 350 basis points versus prior year. Same-store sales in the third quarter are anticipated to be in the range of down 19% to down 14%, and adjusted EPS for the third quarter is expected to be in the range of -$0.20 to -$0.05 per diluted share, driven primarily by the reduction in gross margins. This reduction in gross margins will be partially offset as we continue to implement our cost savings initiatives highlighted earlier in my remarks. That concludes our prepared remarks today. I will now turn the call back over to the operator to facilitate any questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Ryan Sigdahl with Craig-Hallum Capital Group. Please proceed. Good afternoon, guys. I want to start with kind of guidance or the current Q3 quarter to date. Are you seeing any specific categories that you're planning to increase promotions and discounts, or is that generally across the entire business and company? Hey, Ryan, it's Jeff. Great question. As we look into the Q3 guidance, the main areas you're gonna see is the more promotional end than we have historically been, is gonna be in the apparel and footwear category. I think it's something that you're seeing across all sorts of industries, that those are kind of the areas where additional promotions are necessary. So that's gonna be some of the key drivers of the promotional activity you see during Q3. Anything across the other ones where maybe it's less severe but increased promotions, or is hunting, camping, kind of the other categories, generally similar year over year? There's gonna be normal promotions throughout other categories. Within hunting, you're gonna see us a little more promotional in the bow category, but that's a very small portion of the overall hunting business. But everything else, you should see a normal cadence throughout the back half of the year in terms of promotional activity. Great. Then as you think about kind of the pressure on margins in the near term, you guys put out some medium-term margin targets for 8%-10% EBITDA margins. I guess, how comfortable are you still achieving that when things normalize, versus is there anything structurally changed in the business or the industry today? Yeah, as we look at the margin headwinds that we're going through right now, I do view them as short term. This is something where we need to work through the back half of the year and through the consumer headwinds. As we move on into a healthier position in 2024 and beyond, and the consumer returns to normal behavior, I see gross margins and our margin profile returning back to a more normal cadence. But it is something that we have to work through right now in the short term. Great. Thanks, guys. Our next question is from Eric Wold with B. Riley Securities. Please proceed. Thank you. Good afternoon, guys. A couple questions. I just follow up on the last one around inventory and margins. Do you expect the margin impact to be localized completely the back half of this year, or there's some categories, some products that seasonally you'll have to carry into next year before you can really start promoting those, and so there might be some margin impact next year as well? Our anticipation is that we move through all of these additional promotional items we have to do in the back half of the year and are able to go into 2024 in a healthier position, where we then transition more to just seasonal cadences of flowing goods in and out of the stores. And Eric, this is Joe. As we mentioned, we brought in a seasoned veteran, Bryn Westfall, who is helping us navigate this and address the, you know, core inventory items and get back to a normal, normal cadence on our inventory, which then impacts our margins, which should improve in 2024. So we're addressing it, taking the corrective action, and getting back on track. Okay. And then on the store growth plan changes, I mean, you threw out a lot of things between, you know, kind of the current economic climate, what you're seeing with your customer base, the inability to maybe find real estate that fits your goals, your return goals, also a desire to pay down debt and focus cash flow there. Maybe help us understand, how much of the change in store growth plans for 2024 is really kind of a short-term focus on balance sheet, short-term focus on preserving cash flow, getting back to normalized positions? Versus has anything changed, in your view, longer term, around the strength of certain categories? You know, are you seeing something with recent store openings that hasn't been working, that makes you rethink, you know, just kind of, you know, even longer term plans? Or is it really more all kind of short-term, economic, balance-sheet-related versus a long-term strategy shift? Yeah, Eric, that's a great question. This is Jeff. Long-term strategy for Sportsman's, we still see immense amount of white space and expansion opportunities for Sportsman's to continue to take market share. We continue to see retraction from our competition in our core categories. So as we look at the 2024 real estate plan, I would frame it up that this is a short-term pause on what we're doing in terms of making sure our balance sheet is healthy, as we then start to focus more on long-term growth objectives. Got it. Thank you. Appreciate it. Our next question is from Mark Smith with Lake Street Capital Markets. Please proceed. Hi, guys. First off, for me, just want to clarify and ask, stores open during the quarter, maybe what's opened since the quarter ended, and kind of where the store count is, and I think, Jeff, you said you've got 2 more to go, but any additional numbers you can give us on that? Yeah, Mark, great question. So as we sit here today, we have opened 13 of the 15 that we had planned for the year. So we have two more stores remaining to open. One of them will open in mid-September, the other one will open more towards mid-November. Perfect. And then, you know, I want to dig in just to the ammo space a little bit. I think you said it was down 30% on a comp basis. You know, what are your thoughts around that segment? I know in the past you guys have talked about, you know, ammo being kind of like the milk at the grocery store. You know, is there things you can do to drive additional sales there, as we've seen inventory come back up? Or is there a hesitancy to get... You know, you don't want to get overly promotional. Maybe walk through your thoughts on that segment. Yeah, Mark, that's a great question. I think it's a fine balance. We have to make sure we stay competitive in the market and look at the pricing, you know, that we're seeing across our competitive landscape. And to your point, we also need to use it to drive traffic into our stores. So as we think about the go forward, I expect that we're going to continue to see pressures similar to what we saw during Q2. We highlighted that that was the number one cause of margin degradation in Q2, as we looked at the comp sales on a year-over-year basis. So I don't think that that's going to stop, especially in the consumer environment we're in today, where people are, you know, really stretching every single dollar that they have. Okay. And then as we think about the larger hunt, shoot, kind of, category, you know, we're still early into kind of fall and some early hunting seasons, but any additional thoughts around demand, what you're seeing from these consumers? You know, even license data, kind of anything you can give us for outlook as you guys think about this, you know, really important fall hunting seasons and then moving into the holidays. Yeah, you know, as we looked at the Q3 guidance, I'll tell you one thing we considered is the while there are still people participating in hunting and buying hunting licenses, where we're seeing hesitation is the upgrading of their equipment or purchasing new equipment. So the individual that's going out to hunt is making their rifle last another year. They're extending the life of their hunting boots. They're not buying a new backpack to go in the backcountry. So while the consumer's pressured, I think that trend continues. Once the consumer gets healthier, I think we start seeing the refresh or the upgrade cycle start again, but when that happens, I think is anyone's best guess. Okay. And then maybe last question for me is we think about getting more promotional here over the next quarter or two, and a lot of this being focused within apparel and footwear. Can you talk about, you know, using, being promotional around your private label brands versus kind of national brands? Yeah. Our promotions will be more focused on the national brands. Our private label brands, we're able to manage very closely and make sure that we're still hitting the sales through and margin targets on those. So you'll see the promotional activities more centered towards national brands. Great. Thank you. Our next question is from Justin Kleber with Robert W. Baird. Please proceed. Yeah, good afternoon, everyone. Thanks for taking the question. So first, just a clarification on the store traffic comment. Did store traffic get worse on a same-store basis relative to 1Q, or did it just not improve as you had anticipated? Yeah. Great question, Justin. It did not improve as we anticipated. So, traffic stayed very flat to what we saw in terms of trends in Q1, and we just did not see the increase that we were expecting in Q2 to see. Got it. Okay. And, Jeff, on the $25 million in annualized cost savings that you cited, how much of that do you anticipate realizing this year? And can you talk about the buckets, the bigger buckets where you're sourcing these savings from? Yeah. The biggest bucket that we have in there, Justin, is going to be in the labor pool. So that's going to be an immediate savings that you recognize as you reduce your labor pool. We will start to see that flow through in the back half. In terms of other expense cuts, we're looking at contracts, we're looking at any discretionary spend. Those types of things are gonna take a little longer to make sure that they come to fruition as we exit contracts or reevaluate contracts and do those renegotiations. But I would say, to frame that up, the biggest portion of the expense cuts are gonna be in the labor pool. Okay. And then, Jeff, you mentioned the payroll, I think, per store was down 11%. How much room do you have still to cut before you reach, what I assume is, you know, some, some level of minimum staffing in stores? Yeah, this is Joe. One thing we don't want to do, and we're very driven, is we've got to continue to delight the customer, and that customer experience and having an emotional attachment with Sportsman's Warehouse. It's a little bit fluid on how much more we can do. We believe what we have done has been taken the corrective action, where the difference between a need and a want. Again, the part that we do not want to cut is where we're disappointing our customer. Yep, that makes sense. Last question for me, guys. Just on CapEx, you've spent $52 million year to date. I think your original guidance was $48 million-$56 million if I go back to the fourth quarter. So you're already within that range. I guess, is that still the right range for CapEx? It's really gonna slow down materially over the back half of the year, or should we be thinking about a higher number relative to that initial plan? Thank you. Yeah, Justin, great question. One little nuance on that. So on the cash flow, in that section, it's showing 52. We have landlord payments that we've received for TI dollars that actually show up in operations. So the guidance that we're giving is on a net basis, net of those landlord allowances. So the guidance that we gave in our CapEx guidance would take that into consideration. That's gonna be the difference that you have. So I am still comfortable with the range that we've given. Got it. Thanks for that clarification, Jeff. Best of luck in the next quarter. Thanks, Justin. Thanks. We now have a follow-up question from Eric Wold with B. Riley Securities. Please proceed. Thanks. Just kind of a follow-up question. I know it's always difficult to compare, you know, Sportsman's to other outdoor or kind of like, you know, activity retailers, given the, you know, the product mix, merchandise mix differences, especially around hunting and ammo. But given kind of the comp trends and traffic trends you're seeing, anything you can read into, you know, the demographic profile that you're reaching that's different from others or something that you're seeing different in your regions that may be different to others? Or, you know, maybe something you kind of pointed that may be why the trends you're seeing are maybe, you know, on the worst side comparatively? Eric, great question. I think a big contributor there is the average income portfolio of our customer versus some of the other public companies that you've seen go out. I would say that our average customer tends to be at a lower average income versus some of the public company comparables. That's significantly going to impact their ability for discretionary spend, which is really what Sportsman's is heavily penetrated in when you look at what we sell inside our store versus some of those other comparable public companies that have similar products, but it makes up a much smaller portion of their business. Helpful. Thank you. Yeah, and Eric, to that end, we're really working very hard, getting more bodies through the door, and then being productive with those, consumers that come through the doors. In some of the stores, we've done, seasonal pads of, assortment. We have more, refined regional assortment. So we're really, working hard on, delighting the customer once they're in the door and capitalizing once we have them within the four walls. Perfect. Thank you both. We have reached the end of our question and answer session. I would like to turn the conference back over to Joe for closing remarks. Thank you for joining the call today, and thank you to all our dedicated employees around the country for their commitment to Sportsman's Warehouse. Together, we look forward to providing our customers with the best experience and customer service in the outdoor industry. Again, thank you. Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.