Shares of outdoor specialty retailer Sportsman's Warehouse (NASDAQ:SPWH) fell 14.5% in the morning session after the company reported third quarter results with EPS guidance for the next quarter well below expectations. It blamed "more aggressive promotional activities" and said that gross margins will contract meaningfully because of this. On the other hand, same-store sales and revenue beat expectations, with both metrics declining in absolute terms. While the topline results were encouraging, management noted that "the difficult microenvironment continues to pressure consumer discretionary spending, creating a continued headwind for the business." Zooming out, the results could be better, with weak guidance likely raising concerns among investors.
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What is the market telling us:
Sportsman's Warehouse's shares are a little volatile and over the last year have had 35 moves greater than 5%. Moves this big are very rare for Sportsman's Warehouse and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 13.7% on the news that the company reported second quarter revenue and EPS below Wall Street's estimates. Its full-year revenue guidance also came in significantly below analysts' expectations. Given the decrease in demand, Sportsman's Warehouse said it would be more aggressive in its promotional activity to drive foot traffic to its stores, putting pressure on its profit margins in future quarters. Overall, this was a bad quarter.
Sportsman's Warehouse is down 56.1% since the beginning of the year, and at $4.07 per share it is trading 60.6% below its 52-week high of $10.31 from December 2022. Investors who bought $1,000 worth of Sportsman's Warehouse's shares 5 years ago would now be looking at an investment worth $913.51.
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