On Wednesday, Lake Street Capital Markets adjusted its outlook on Sportsman's Warehouse (NASDAQ:SPWH) shares, reducing the price target to $5 from the previous $6, while continuing to advocate a Buy rating for the stock. The firm's decision follows the company's first-quarter fiscal year 2024 earnings report, which did not meet analyst expectations.
Sportsman's Warehouse reported a notable decline in same-store sales of 13.5%, which was more severe than the anticipated 7.5% drop. The retailer's revenue came in at $244.2 million, falling short of the expected $263.9 million.
Despite the lower-than-expected sales, Sportsman's Warehouse's gross margins remained relatively resilient at 30.2%, which was close to the analyst's projection of 30.7% and only slightly below the consensus of 31.3%.
However, the company's adjusted loss per share was ($0.47), missing both the analyst's estimate of ($0.35) and the general consensus. Adjusted EBITDA also disappointed at ($8.7 million), compared to the analyst's estimate of ($2.5 million) and the consensus figure of ($4.8 million).
The analyst from Lake Street Capital Markets noted that the challenging macro environment and weak performance in apparel and footwear sales, which typically have higher margins, were key factors in the underwhelming results.
Despite these challenges, the analyst found a silver lining in the fishing segment, which showed some positive developments and was a focus for the company's management.
The new $5 price target is based on applying a 6.5x EV/EBITDA multiple to the firm's revised fiscal year 2025 EBITDA estimate. This adjustment reflects the current economic headwinds and the impact on consumer spending, particularly in the segments where Sportsman's Warehouse has historically seen stronger sales.
The continued Buy rating indicates the analyst's belief in the potential recovery and growth prospects for the company despite the present difficulties.
In other recent news, Sportsman's Warehouse reported a drop in net sales to $244 million in Q1 of 2024, down from $267 million in the previous year, as well as a 13.5% decrease in same-store sales.
Despite these figures, the company maintains its full-year net sales forecast between $1.15 billion and $1.23 billion, with an adjusted EBITDA expected to range from $45 million to $65 million. Additionally, it reported a net loss of $18.1 million for the first quarter.
In response to these developments, the company is focusing on promotional activities to drive customer traffic and identifying additional cost savings of between $5 million to $7 million to bolster its performance for the remainder of the fiscal year.
According to an analyst from Roth/MKM, the company's fundamental investment thesis remains solid despite the softer-than-expected results.
Sportsman's Warehouse is also undertaking a strategic reset, focusing on improving store layouts and assortments. The company plans to reduce inventory in apparel and footwear by 40% to increase flexibility with suppliers and expand private label offerings.
The Roth/MKM analyst reiterated a Buy rating for the company, signaling confidence in its ability to execute these strategic initiatives.
InvestingPro Insights
In light of the recent fiscal report from Sportsman's Warehouse (NASDAQ:SPWH), it's essential to consider additional insights that can provide a more comprehensive view of the company's financial health and future prospects. According to real-time data from InvestingPro, Sportsman's Warehouse has a market capitalization of $143.73 million, reflecting its current valuation in the market. The P/E ratio stands at -5.1, suggesting that investors are facing losses relative to the company's earnings.
InvestingPro Tips indicate that Sportsman's Warehouse is operating with a significant debt burden and is quickly burning through cash, which may raise concerns about its financial sustainability. Additionally, the company's valuation implies a poor free cash flow yield, and it is trading at a high EBITDA valuation multiple. Despite these challenges, there have been strong returns over the last month, with a 19.0% increase in the stock price. However, analysts do not anticipate the company will be profitable this year, and it has not been profitable over the last twelve months.
For those interested in a deeper dive into Sportsman's Warehouse's financials, InvestingPro offers additional tips, with the opportunity to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 8 more InvestingPro Tips available that could provide further guidance for investors considering this stock.
The InvestingPro Fair Value estimate for Sportsman's Warehouse is currently at $3.67, which is below the analyst's target but may provide a conservative perspective on the stock's potential. As investors contemplate the company's future, these insights could be crucial in making informed decisions.
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