Sportsman's Warehouse (SPWH)

Outdoor specialty retailer Sportsman's Warehouse (NASDAQ:SPWH) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 1.8% year on year to $293.9 million. Its non-GAAP loss of $0.12 per share was in line with analysts’ consensus estimates.

Company Overview

A go-to destination for individuals passionate about hunting, fishing, camping, hiking, shooting sports, and more, Sportsman's Warehouse (NASDAQ:SPWH) is an American specialty retailer offering a diverse range of active gear, equipment, and apparel.

Some of us spend our leisure time vegging out, but many others take to the courts, fields, beaches, and campsites; sports equipment retailers cater to the avid sportsman as well as the weekend warrior. Shoppers can find everything from tents to lawn games to baseball bats to satisfy their athletic and leisure needs along with competitive prices and helpful store associates that can talk through brands, sizing, and product quality. This is a category that has moved rapidly online over the last few decades, so these sports and outdoor equipment retailers have needed to be nimble and aggressive with their e-commerce and omnichannel presences.

Retailers offering sporting and outdoor goods include Academy Sports and Outdoor (NASDAQ:ASO), Camping World (NYSE:CWH), Dick’s Sporting Goods (NYSE:DKS), and Hibbett (NASDAQ:HIBB).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $1.21 billion in revenue over the past 12 months, Sportsman's Warehouse is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers.

As you can see below, Sportsman's Warehouse grew its sales at a tepid 6% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts). This shows it failed to generate demand in any major way and is a rough starting point for our analysis.

This quarter, Sportsman's Warehouse reported modest year-on-year revenue growth of 1.8% but beat Wall Street’s estimates by 0.8%.

Looking ahead, sell-side analysts expect revenue to grow 1% over the next 12 months, a deceleration versus the last six years. This projection doesn't excite us and indicates its products will see some demand headwinds.

Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.

Sportsman's Warehouse’s demand has been shrinking over the last two years as its same-store sales have averaged 6.2% annual declines.

In the latest quarter, Sportsman's Warehouse’s same-store sales rose 2.1% year on year. This growth was a well-appreciated turnaround from its historical levels, showing the business is regaining momentum.

Sportsman's Warehouse has bad unit economics for a retailer, giving it less room to reinvest and grow its presence. As you can see below, it averaged a 30.3% gross margin over the last two years. That means Sportsman's Warehouse paid its suppliers a lot of money ($69.71 for every $100 in revenue) to run its business.

In Q2, Sportsman's Warehouse produced a 32% gross profit margin, in line with the same quarter last year and exceeding analysts’ estimates by 0.6%. Zooming out, Sportsman's Warehouse’s full-year margin has been trending up over the past 12 months, increasing by 1.7 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Sportsman's Warehouse’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging negative 1.6% over the last two years. Unprofitable consumer retail companies that fail to improve their losses or grow sales rapidly deserve extra scrutiny. For the time being, it’s unclear if Sportsman's Warehouse’s business model is sustainable.

Looking at the trend in its profitability, Sportsman's Warehouse’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Sportsman's Warehouse generated a negative 1.1% operating margin. The company's consistent lack of profits raise a flag.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Sportsman's Warehouse, its EPS declined by 17.3% annually over the last six years while its revenue grew by 6%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

In Q2, Sportsman's Warehouse reported adjusted EPS of negative $0.12, up from negative $0.14 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects Sportsman's Warehouse to improve its earnings losses. Analysts forecast its full-year EPS of negative $0.45 will advance to negative $0.35.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Sportsman's Warehouse broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.

Taking a step back, we can see that Sportsman's Warehouse’s margin dropped by 9.2 percentage points over the last year. This decrease warrants extra caution because Sportsman's Warehouse failed to grow its same-store sales. Its cash profitability could decay further if it tries to reignite growth by opening new stores.

Sportsman's Warehouse burned through $33.93 million of cash in Q2, equivalent to a negative 11.5% margin. The company’s cash flow turned negative after being positive in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Sportsman's Warehouse historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.5%, somewhat low compared to the best consumer retail companies that consistently pump out 25%+.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Sportsman's Warehouse burned through $54.57 million of cash over the last year, and its $550.6 million of debt exceeds the $1.80 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Sportsman's Warehouse’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Sportsman's Warehouse until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We were impressed by how significantly Sportsman's Warehouse blew past analysts’ EBITDA expectations this quarter. We were also glad its full-year EBITDA guidance trumped Wall Street’s estimates. On the other hand, its EPS was in line. Zooming out, we think this quarter featured some important positives. The market seemed to be hoping for more, and the stock traded down 5.7% to $2.82 immediately after reporting.

Updated: November 11, 2025 at 9:51 PM EST

Are you wondering whether to buy Sportsman's Warehouse or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

We see the value of companies helping consumers, but in the case of Sportsman's Warehouse, we’re out. First off, its revenue growth was a little slower over the last six years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its operating margins reveal poor profitability compared to other retailers. On top of that, its shrinking same-store sales tell us it will need to change its strategy to succeed.

Sportsman's Warehouse’s EV-to-EBITDA ratio based on the next 12 months is 2.2x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $3.85 on the company (compared to the current share price of $2.14).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.