Sportsman's Warehouse Holdings, Inc. Aktie

Thank you for standing by, and welcome to Sportsman's Warehouse First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Riley Timmer, Vice President of Strategic Programs and IR. Please go ahead.

Thank you, operator. Participating on our Q1 2026 call today is Paul Stone, our Chief Executive Officer; and Jennifer Fall Jung, our Chief Financial Officer. I will now take a moment and 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 will 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 Paul.

Thank you, Riley, and good afternoon, everyone. Before we begin, I want to recognize our dedicated outfitters across the country. Every day, they deliver on our promise of great gear and great service, strengthening our connection with customers and supporting the progress to transform Sportsman's Warehouse. I'm pleased that the same-store sales in the first quarter were up just over 2% compared to last year despite ongoing consumer macroeconomic pressure and higher fuel prices. This increase is on top of the 2% growth we achieved in Q1 of last year.

We continue to refine our assortment to meet the current needs of the customer with regionally specific products and brands that strategically align to our core pursuits. First quarter sales in our Hunting and Shooting Sports department increased over 7% versus last year. During Q1, we executed a successful spring range days event, showcasing pursuit-led solutions for the Shooting Sports customer through curated products and accessories.

While event-driven demand further supported sales of firearms and ammunition during the quarter, we will continue to strategically build on our authority as a leader in both shooting sports and personal protection. Sales in our fishing department increased nearly 6% in Q1 and is up about 17% on a 2-year comp stack.

Although a softer-than-expected ice fishing season put pressure on the category in Q1, we are confident in our assortment and position in the market to continue to capture share during the late spring and summer seasons. As we discussed on prior calls, last year, we strategically reduced inventory and the assortment in our camping and softline departments.

This decision was intentional to eliminate slow-moving and low gross margin return on investment products from our assortment that didn't align with our core pursuits, causing a short-term softening of sales.

However, this allowed us to free up working capital dollars to buy into the product and brands these 2 departments that now align to our core pursuits of hunting, fishing, shooting and personal protection. Newness for the summer season is now landing in our stores with a focus on quality and value with name brands that customers recognize.

We will continue to build out these 2 complementary categories to provide a full solution for our passionate outdoor customers. Our e-commerce business outperformed again with e-com-driven sales up over 6% in the quarter.

This underscores the strength of our omnichannel model and the growth potential in our core pursuits because firearms and in certain states, ammunition require in-store pickup, our e-com business naturally drives traffic into our stores. We continue to strategically leverage this advantage to support growth across both digital and store sales.

We once again saw improvements in both units per transaction and average order value, driven by our merchandising strategy, better in-stocks and our strategic shift to solution selling. Close management of inventory remains a key priority in our transformation strategy.

I'm pleased with how the team is timing our flow of merchandise to ensure we are regionally and seasonally relevant to meet shopper demand. This will continue to be a focus as we expect to improve turns and inventory efficiency in 2026. On our call last quarter, we outlined the next phase of our business transformation, centering on strengthening our leadership position in our core pursuits of hunting, fishing and shooting and personal protection.

These are the core pursuits that make up the DNA of Sportsman's Warehouse. During the first quarter, we made meaningful improvements to our website to enhance the online fishing experience. Early results have been encouraging, contributing to strong e-commerce sales growth in the quarter. We will continue to integrate content with commerce to help anglers more easily build their fishing solution. With participation rates continuing to grow each year, we believe this category represents significant growth upside for the business. Additionally, during the first quarter, we entered into a partnership with one of the top fishing and hunting lifestyle brands, Field & Stream. Together, we are working with leading fishing influencers to create shareable content that enhances our brand exposure, showcases trending new products and drives traffic to Sportsman's Warehouse.

While we are in the early stages of this partnership, we are encouraged by the early results. Turning now to our firearm solution bundling strategy. We made solid progress in Q1 on this initiative with a full solution offering now available online for top-selling products. Many of our customers are first-time firearm owners, so offering carefully selected pairings like gunsafe, hearing and eye protection and our firearm service plan, helping first-time buyers feel confident in their initial purchase decisions.

That experience then carries into our stores, where customers can build on those pairings with support from our experienced outfitters, tailored to local needs and pursuits. This experience supports responsible ownership while increasing the attachment and basket size.

By combining curated e-commerce pairings with in-store experience, we believe we can expand gross margins in the hunting and shooting sports category while reinforcing our leadership in these key pursuits.

Reinventing our loyalty program is a key step in Sportsman's Warehouse effort to build a more durable, higher-value customer model and our partnership with Epsilon, a leading loyalty and personalization consultancy, marks an important move forward in that transformation. The initiative is designed to improve retention, increase customer lifetime value and drive more efficient marketing while supporting stronger repeat purchase behavior and a more disciplined promotional strategy.

Looking ahead, the U.S. consumer remains under pressure with high fuel costs adding additional weight to discretionary spending. We feel optimistic about our position in the market, our curated assortment of iconic American brands and our summer readiness, where we will celebrate and showcase red white and blue for America's 250th anniversary. Our focus remains on driving profitable growth, disciplined management of inventory, generating positive free cash flow to pay down debt and executing against our strategic priorities.

With that, I'll turn the call over to Jennifer.

Thank you, Paul, and good afternoon, everyone. Net sales for the first quarter were $256.1 million, a 2.8% increase from $249.1 million in the same period last year. Our same-store sales in Q1 increased 2.1% versus last year. This represents a solid start to the year and reflects continued progress against our strategic and operational priorities.

Our performance was driven by 6.3% same-store sales growth in our hunting, shooting sports department led by firearms, ammunition and less lethal personal protection. Fishing also continues to perform, growing 6% in Q1. This is a key category where we see significant growth upside for the business.

Our other categories declined in Q1, partially offset by overall growth. Gross margin for the quarter was 29.6% compared to 30.4% in Q1 last year. The decline was primarily driven by category mix with a higher penetration of firearms and ammunition and lower sales in our higher-margin categories.

SG&A expenses were $93.9 million or 36.7% of net sales versus $95.3 million or 38.2% in Q1 last year. The decrease in SG&A expense was driven by disciplined cost management, overall lower payroll expense and decreased depreciation. Net loss for the first quarter was $21.8 million or negative $0.56 per diluted share compared with a net loss of $21.3 million or negative $0.56 per diluted share in the first quarter of the prior year.

Adjusted net loss in the first quarter was $15.1 million or negative $0.39 per diluted share compared with adjusted net loss of $15.6 million or negative $0.41 per diluted share in the first quarter of last year. Adjusted EBITDA for the first quarter was negative $8.1 million compared with adjusted EBITDA of negative $9 million in the first quarter of 2025, an improvement of $900,000. Turning now to the balance sheet. Total inventory at the end of Q1 was $387.1 million, down $25.1 million or 6.1% versus Q1 of last year.

The decrease in year-over-year inventory is part of our ongoing inventory efficiency strategy, including the refinement of receipt timing to match seasonal demand. We expect average inventory to be lower throughout the year as we improve seasonal inventory timing and eliminate slow-moving inventory, resulting in better overall turns. We continue to expect to end the year with less total inventory than 2025.

In regards to liquidity, we ended the first quarter with a net debt balance of $148.4 million and a total liquidity of $116.7 million. Our liquidity position remains strong, and we continue to actively manage working capital to ensure flexibility as we navigate through the year. Tight manage of variable expenses and inventory efficiency remain a key focus. We remain committed to generating positive free cash flow and using excess cash to reduce debt and strengthen the balance sheet with debt reduction as our top capital allocation priority.

Finally, let me speak to our full year guidance. Despite the continued pressure on the U.S. consumer, which is weighing on our camping and softline departments and elevated fuel prices, we are reiterating our guidance for the full year. We continue to expect fiscal 2026 net sales to range between down 1% to up 2% compared to last year.

Adjusted EBITDA to be between $30 million and $36 million, driven by better gross margin performance, ongoing expense management and improved inventory discipline and capital expenditures between $20 million and $25 million, primarily relating to technology investments to improve store service and merchandising productivity as well as normal store maintenance.

To reiterate our priorities for 2026 are driving profitable comp store sales growth through the execution of our strategic initiatives, managing our inventory efficiently and using excess free cash flow to pay down our debt and strengthen our balance sheet. That concludes our prepared remarks for today.

I will now turn the call back to the operator to facilitate questions.

[Operator Instructions] Our first question comes from the line of Anna Glaessgen of B. Riley Securities.

I'd love to dig a little deeper into the trends you're seeing in and shoot. Obviously, you called out there is some event-driven demand that's helping the category. But with the data you have in front of you, could you maybe share to what extent is underlying strengthening of the category, maybe you guys gaining share versus maybe the event-driven benefit?

Yes. Thanks, Anna. This is Jennifer. So what we saw in Q1, as we talked about a little bit on our previous call about February, we did see strength across the quarter in this category. February in and of itself, we actually walked away from one of our events to really focus on strategic profitable growth.

So February wasn't as strong as March and April combined. And for March and April, we do look at them combined simply because of the Easter shift. So they did outperform prior year in April and March combined. As we're looking towards May, what we're seeing is a little bit more of a stabilization. I think as we've talked about before, sometimes you see the event-driven or external-driven demand that we do see a little bit of a stabilization post that, and we're experiencing that right now, but feel really good about where the category is, how it performed in Q1 and what it will do in Q2.

Got it. That makes sense. I guess that leads into the next question. Can you share -- put a little bit more of a finer point on the trends you're seeing overall in May?

Yes. We're seeing -- we still have a very healthy business. Hunt and Shoot are really driving our Q1 business. We have a big month of June ahead of us. If you look at our quarters, that's one of our largest months of the quarter. So with Father's Day playing into that, that's who our customer is, and that's where we have a lot of advertising and promotional events to really make sure we deliver on June as well.

Our next question comes from the line of Mark Smith of Lake Street.

I wanted to dig into gross profit margin a little bit more here, down 80 bps. Can you just talk about maybe how much of that was driven by mix and then any other pressures that you're seeing?

Yes. The majority of it was driven by mix. There is a little bit of pressure in some of the other categories as we look across the board, we're starting to take our marks a lot sooner than we have historically. So across the other category, you saw a little bit of pressure, but really, it was mix having so much penetrated in hunt and shoot.

Okay. And then I also wanted to ask about e-commerce. Trends there look really solid. Just curious if you can give us maybe any more insight about how that's continuing to trend, how you feel about that progression and maybe where you think it can go over time?

Yes. So we've been really putting our elbow against our e-commerce business. We feel it's really well positioned. The team did a lot of work from an experiential perspective on the fish business, and we're seeing great results from that. We're also focused on our search engine.

We think there's work to do there, but we have some great plans in place to continue to drive that. I'll let Paul speak a little bit more to it, but we do have a lot of confidence in our e-com business, but we do think that some of the initiatives that we've put into place are what's helping drive that business.

Yes. I think overall, Mark, we know that we need to invest in it and really in a couple of different areas. One is fish, and we know that we have a lot of upside there from a penetration and what it looks like and the ease of shop for the consumer.

We made some significant changes over the last quarter and then even really digging into the fly component, which is extremely -- or a big part of our business due to our location and where we have the majority of our stores. And the team over the last 3 weeks really went back and refined what that shopping experience can look like for the consumer. So we continue to lean into it. We've underinvested in the past in our e-com business.

We're both, I think, looking at it from a fish and then from a solution standpoint on how we attach. And as we get into the hunt season this year, we expect to have a much better product on our e-commerce platform to allow us to have solution-based selling for the first time to really take pressure off of our outfitters in the stores as consumers flow to the stores and will allow for a solution-based selling online versus transactional selling that we've done in the past.

So we'll continue to lean into it. We think the beauty of our business is that 70%, 75% of that consumer flows to the store to create traffic, and it starts online. And the work has been done in the stores and putting them in a better position and allowing our outfitters to be able to serve the customers better.

We've got to do a better job on the initial experience. And I think what we've seen already from overall fish and then in particular, fly with the adjustments we've made and then on schedule by the time we get into hunt season to have a solution base for our firearm and our hunt business as well.

Perfect. And the last category I wanted to ask about was just camping. Curious if you can kind of rank or talk about kind of the moving parts there from weather, pressure on the consumer, maybe your planned drawdown on the inventory and competition. Kind of what's happening there and any focus or work that you think you can do to drive camping?

Yes. Inventory is in a good position. I think I mentioned it last quarter, the way the team has bought. I think we're positioned well. It's been soft for weather, and it's been cold to start the summer as well as wet in comparison to last year and the historical data that you see there.

So it's been a little soft to start. And I think as we went and moved out of some of our low [indiscernible] subcategories, in particular, in camp to where we could reinvest those back into our pursuits around hunting fishing and personal protection shooting.

We've invested those dollars into the categories that resonate with the customers. So as you're getting out of some of the sub cats, it just didn't work, but we tied up. If you're coming against that, you're comping that. But we feel really good with what the inventory position looks like for summer and with little to no risk as we get out of that product like we've had in the last 2 to 3 years in the past or we just continue to work to try to get out of these categories.

I feel really good with what the team has done to position ourselves well for the future.

Our next question comes from the line of Matt Koranda of ROTH Capital Partners.

It's Joseph on for Matt. I just want to see if you guys could talk about just SG&A here. It's nice to see the continued leverage on this line. Just want to see how the team is thinking about further savings on this line item. And it sounds like payroll efficiency was a driver and wanted to know if there's any other labor efficiencies we should be thinking about.

Thanks for the question. Yes, we are continuing always focused on leveraging our SG&A. What you saw in this quarter was really the favorability in the payroll as we've gotten more efficient with our inventory as well as we continue to focus on our store labor, we saw a nice benefit there. That was partially offset by the bonus accruals that we did this quarter that we didn't have last quarter.

And that will be the one headwind as we move through the year from an SG&A perspective will be the bonus accrual just year-over-year, assuming we continue to perform. That was really -- payroll is the biggest component of the savings there. It's not in SG&A, but I'll just go ahead and speak to it. It's more in the margin component.

We did see -- we're seeing some headwinds in fuel, but we're able to offset those with some of our inventory efficiencies. So just to kind of keep it straight, that is in margin, not in SG&A, but expense management is all one bucket. So I just thought I'd kind of key on that one, too.

And I think, the thing I would add to it is the efficiency of the flow of inventory and whether it's through a distribution center, whether it be in the stores and kind of the ups and downs that we've had or front-loading or backloading as we come into different seasons, the smoothing of that has allowed us to look at labor a lot differently than we have in the past.

And really, the operations team in the field did a great job as far as being able to align sales per labor hour to what they were seeing in the business. So feel good. And I think the core of that is how we're managing inventory and efficiency we're getting from inventory.

Got it. And then if we could just hop on to inventory then. In your prepared remarks, you mentioned that you're expecting a year-over-year decline on the full year in inventory. Just wanted to see where is that coming from? Should we be thinking about it as a quicker seasonal clearance as a factor? Or is there anything else driving that tighter inventory management?

Yes. I wouldn't say it's one silver bullet. It's multiple things that are really helping us here. It's getting the right inventory into the right stores to the right place that really helps our turns. It is a benefit of us making sure that we are taking our seasonal marks when we should be taking our seasonal marks, which I don't think historically we've been as great at doing so.

And then it's also just looking at our SKUs, which SKUs aren't moving quickly and how do we look at the tails and not actually go deep into those but go deep into the quicker turning categories. So all those things kind of add up to really where we're getting efficiency. So again, it's not one thing. It's just we're constantly looking at it, and we just -- we know that takes up working capital. So we want to be as efficient with it as possible.

I would now like to turn the conference back to Paul Stone for closing remarks. Sir?

Thank you for joining the call today, and thank you to all the passionate outfitters around the country for their commitment to Sportsman's Warehouse. Together, we look forward to providing our customers with great care and exceptional service. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, everyone, and welcome to Sportsman's Warehouse Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. Now it's my pleasure to turn the call over to the Vice President of Strategic Programs and Investor Relations, Riley Timmer. Please proceed.

Thank you, operator. Participating on our Q4 and full year 2025 call today is Paul Stone, our Chief Executive Officer; and Jennifer Fall Jung, our Chief Financial Officer. I will now take a moment and 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 will 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 will now turn the call over to Paul.

Thank you, Riley, and good afternoon, everyone. Before we begin, I want to recognize our dedicated outfitters across the country. Every day, they deliver on our promise of great gear and great service, strengthening our connection with customers and supporting the progress to transform Sportsman's Warehouse. I'm pleased with our fourth quarter and full year results, which exceeded our revised expectations. While the first half of Q4 reflected a more pressured promotional environment, we turned our sales trends positive in the back half of the quarter, which contributed to our better-than-expected results.

We also delivered positive same-store sales growth in each of the first 3 quarters of 2025, resulting in a 1% growth for the year. This is our first year of positive comps since 2020 and a meaningful milestone in our turnaround. This progress reflects disciplined execution of the 3-year strategy we launched in late 2024. While there's more work ahead, we are encouraged by the traction across many areas of the business.

For several weeks prior and through the first week of December, sales softened, driven by external factors, including the government shutdown and weaker-than-expected Black Friday and Cyber Week performance. We moved quickly to adjust our holiday strategy with a more promotional cadence to meet a value-driven consumer. These actions helped reverse trends with sales turning positive in December with strength coming into January, February and March. While we are encouraged by these improving trends, we remain measured as the U.S. consumer remains under pressure.

Within the quarter, performance across our core pursuits was strong. Hunting and shooting sports grew more than 5% with firearm units again outperforming adjusted NICS checks, indicating continued market share gains. We also believe January demand benefited from external event-driven factors accelerating our personal protection category. Throughout 2025, we strengthened our position in personal protection by building a more focused assortment aligned with growing customer demand for safety solutions. This work is supported by the expertise of our outfitters, many with law enforcement or military backgrounds who provide trusted service and credibility that we believe is difficult for competitors to replicate. By leaning into this category with expertise, service and a more disciplined assortment, we are attracting new customers and gaining share, which is accelerated given current external factors.

Fishing delivered quarterly results of 3.2%. Warm weather in the West drove a double-digit decline in ice fishing, masking underlying strength. Excluding ice fishing, the department grew over 11%, highlighting the strength of our business and the share growth opportunities ahead. We are encouraged with our early start to the spring season with sales up double digits so far this quarter. While our key pursuits performed well, camping and softlines remain challenged, reflecting their discretionary nature. We continue to sharpen assortments, eliminate lower productivity SKUs and align these categories more tightly to our core pursuits. Inventory in these categories declined in line with sales, demonstrating improved discipline, efficiency and healthy inventory.

Our e-commerce business outperformed again with sales up 8.3% in the quarter and 6.6% for the year. This underscores the strength of our omnichannel model and the growth potential in our core pursuits. We also saw improvements in both units per transaction and average order value, driven by regionally and seasonally relevant merchandise, better in-stocks and stronger attachment across categories.

In 2025, we made meaningful progress across 4 strategic priorities. First, through stronger planning and merchandising discipline, along with strategic technology investments, we significantly improved in-stock levels in the core 20% of products that drive 80% of our business. This delivered faster turns, SKU reduction and improved seasonal alignment. Second, we re-anchored the business to our local market advantage by strengthening the roles of our outfitters as trusted local experts and expanding locally relevant brands and products. Our position remains clear, out local the big box players and offer more depth in merchandising authority than smaller competitors.

Third, we strengthened our authority in personal protection by optimizing our assortment, increasing depth in key handgun brands and introducing a broader non-lethal offering, including an exclusive collaborative partnership with Byrna that brought in-store theater, innovation and a new customer in the Sportsman's. This reinforced our leadership and drove growth. Finally, we strengthened brand awareness and advanced our digital-first go-to-market strategy. We optimized our performance marketing approach, driving efficient traffic across our channels through targeting and a more powerful customer experience. Leveraging data-driven insights and personalization, we are reaching customers with greater precision to support profitable omnichannel growth.

Now I'll walk you through the next phase of our 3-year transformation. In 2026, we are strengthening our leadership position in our core pursuits, Fishing, Hunting and Shooting Sports and Personal Protection. These pursuits define our brand and attract our most engaged, highest value customers. Building on the foundation we set last year, our focus centers on 3 initiatives to support our core pursuits. First, we are upgrading our loyalty rewards program. We are partnering with a leading strategy and platform design firm to build a more powerful program that directly connects loyalty and our credit card ecosystem.

Our goals are clear: increase retention, expand lifetime value and drive higher AOV and frequency through compelling rewards and personalized engagement. This work is early, but grounded in new data capabilities and best-in-class design. We expect later this year to begin testing and plan to launch the enhanced program in early Q1 of next year. Second, we are developing firearm solution bundling, building on our strength in Hunting and Shooting Sports and Personal Protection. With over 75% of firearm purchase beginning online and significant firearm traffic already coming to our site, we see meaningful opportunity to convert more of that demand through an improved digital experience. This tool will help customers build a complete firearm solution tailored to the pursuit while improving our overall margins.

Given our natural store moat, which requires the customer to pick up their firearms in-store, we are leveraging our e-commerce experience to improve attachment to these items relevant to a single firearms purchase. Third, we are reinventing the omnichannel Fishing experience. Fishing represents meaningful growth upside. We believe we have about 1% share of a large and growing category, and we have an ambitious omnichannel plan to double that share over the next 3 to 4 years.

This strategy includes two pathways. First, we are elevating the in-store experience through locally assorted merchandise built around species, seasons and innovation. Second, we are strengthening our digital fishing experience with the new species and region-focused platform that integrates content and commerce. This will help anglers build their total solution more easily and quickly. While this work began in mid-2025, we are accelerating our pace given the category's appeal to new high-value customers and its margin accretive profile.

Looking to the year ahead. The U.S. consumer remains under pressure. Rising fuel costs and broader macro dynamics are adding weight to discretionary spending. At the same time, however, we've seen bright spots. Since January, demand in Personal Protection and ammo has strengthened, driven by external factors. We are capturing that demand while remaining realistic about duration. We also see potential tailwinds ahead, such as America's 250th anniversary, which aligns well with our customer and categories. While early, we are seeing a strong start to the fishing season and believe we are well positioned to capture demand due to our strategic initiatives in place for this category.

Given all of this, we feel optimistic about our positioning. Our strategy is working, our initiatives are gaining traction and the turnaround is firmly underway. The team is energized and disciplined, and our focus remains on driving profitable growth, disciplined management of inventory while executing against the priorities we've laid out.

With that, I'll turn the call over to Jennifer.

Thank you, Paul, and good afternoon, everyone. For the full year 2025, we delivered net sales and comparable store sales growth of 1%. We are encouraged by how the year finished with results exceeding our revised guidance following Q3. Importantly, this marks our first year of positive comparable store sales growth since 2020. Adjusted EBITDA for the year was $27.5 million. While modestly below prior year, this result exceeded our revised expectations, driven by stronger-than-expected sales in the fourth quarter.

A key focus throughout the year was disciplined inventory management. We ended 2025 with inventory down $29.1 million or 8.5% year-over-year. We are pleased with the quality and composition of our inventory and believe we are well positioned to support growth in our key categories while continuing to improve productivity and turns. We ended the year with net debt of $90 million, a reduction of 6.1% versus the prior year and total liquidity of $107.8 million. We also generated positive free cash flow, reflecting improved operating discipline and improved working capital efficiency.

Turning to full year department performance. Fishing remained our strongest growth driver in 2025, increasing 10.3% for the year and nearly 18% on a 2-year stack basis. This performance reflects more precise inventory timing, improved locally relevant assortments and continued strength in participation trends. We see this as a category with ongoing opportunity for both growth and share gains.

Hunting and Shooting Sports increased 4.4% for the year, driven by improved in-stock levels in core firearms and ammunition, better alignment of inventory with key hunting seasons and continued traction in personal protection, including less-lethal alternatives. Our other categories declined for the year, reflecting pressure on discretionary spending. Importantly, we maintained inventory discipline in these areas with inventory reductions exceeding sales declines, supporting improved efficiency and margin structure over time.

Turning now to fourth quarter results. Net sales were $334.9 million, down 1.6% versus prior year, with comparable store sales declining 1.8% Performance was led by Hunting and Shooting Sports, which increased 6.2%, driven by strength in firearms, ammunition and less-lethal personal protection, partially influenced by event-driven demand. Fishing increased 3.2% in the quarter, though performance was impacted by unseasonably warm weather in the Western U.S., which pressured ice fishing sales. Excluding ice fishing, sales in this category were up over 11%, reflecting its underlying strength.

Our other categories declined, reflecting a more promotional environment, the impact of the government shutdown and continued pressure on the U.S. consumer. Gross margin for the fourth quarter was 28.4% compared to 30.4% last year. The decline was primarily driven by category mix with a higher penetration of firearms and ammunition, increased promotional activity and lower sales in higher-margin categories. SG&A expense improved to 28.7% of net sales compared to 29.4% last year, driven by disciplined cost control, particularly in payroll. We remain focused on managing expenses while continuing to support the business. Net loss for the quarter was $21.7 million or $0.56 per diluted share compared to a net loss of $8.7 million or $0.23 per diluted share in the prior year. Adjusted net loss for the quarter was $3.9 million or negative $0.10 per diluted share compared with adjusted net income of $1.6 million or $0.04 per diluted share in Q4 of the prior year. Adjusted EBITDA was $9.6 million compared with adjusted EBITDA of $14.6 million in Q4 of last year.

Now I'll provide more details regarding the balance sheet and liquidity. We ended the year with inventory of $312.9 million, down $29.1 million from the prior year and better than our expectations exiting Q3. We exited the year in a healthier inventory position having worked through the majority of our seasonal product. As part of our ongoing inventory efficiency efforts, we are further refining the timing of receipts. As an example, for the upcoming spring season, inventory is planned to arrive later, which we expect will support improved turns and overall productivity. We expect to operate with lower average inventory levels throughout 2026 compared to last year, while still having sufficient levels of inventory to hit the top end of our plan.

Capital expenditures for the full year were approximately $19.5 million, primarily focused on general store maintenance and strategic technology investments to support our operational and digital capabilities. We ended the year with net debt of $90 million and total liquidity of $107.8 million. We generated $8.9 million of free cash flow and used that cash to reduce debt. Debt reduction remains our top capital allocation priority as we continue to improve our leverage ratio. As we conducted a thorough review of our fleet of stores, we estimated we will be closing approximately 5 stores in the next 12 months. We expect these closures to happen after the holidays. Therefore, we do not anticipate a material impact to this year's results.

Turning now to our guidance for 2026. Starting with our net sales outlook. We estimate same-store sales to be in the range of down 1% to up 2% over last year. This outlook reflects a balanced view of the current environment and the health of the U.S. consumer, which continues to be pressured. We expect adjusted EBITDA to be in the range of $30 million to $36 million. This improvement is expected to be driven by better gross margin performance, continued inventory discipline and ongoing expense management. We expect capital expenditures to be between $20 million and $25 million, primarily related to technology investments as well as normal store maintenance.

To reiterate, our priorities for 2026 are driving profitable comp store sales growth through the execution of our strategic initiatives, managing our inventory efficiently and using excess free cash flow to pay down our debt and strengthen the balance sheet. That concludes our prepared remarks today.

I will now turn the call back to the operator to facilitate questions.

[Operator Instructions] It comes from Matt Koranda with ROTH Capital.

I wanted to start out with the near-term demand trends that you highlighted. I know you mentioned sort of a shift that you saw at the end of December that carried through. And I think you said in the prepared remarks, all the way through March. Does that mean we're effectively comping positive in the first quarter to date? And maybe just how you think about the category strength. I would assume it's still kind of the usual suspects in terms of firearms, ammunition, personal protection that's doing well, but maybe just unpack category strength as well for us.

Yes. Matt, this is Jennifer. Thanks for the question. Yes, what we made in our prepared remarks is that we were seeing the trends that really started in January continue through February and March, where you just called it as really strong growth coming from firearms and ammunition. And as we know and as you know, our industry tends to be really influenced by external events. And we think there's some tailwinds right now going on because of what is kind of going on externally. So yes, we feel good about the quarter. We gave guidance of a negative 1% to a positive 2% on the year, but we feel like we're coming out strong in Q1.

Okay. Understood. And then maybe just for the EBITDA improvement that you're embedding in the guidance for the full year. Just wanted to hear how to think about the building blocks there because obviously, the comp guide is, let's call it, flattish at the midpoint. And I would assume that the mix of categories being more skewed toward firearm, ammunition probably puts a little pressure on gross margin. So where are the building blocks to get to the positive EBITDA outlook despite kind of the flattish top line and maybe a little margin pressure from category mix?

Yes. So we do feel bullish about our fish category as well. That has been positive comping on a 1-year and a 2-year stack. So we're continuing to put our shoulder against fish, and we have a lot of initiatives that support it. And that with the exception of ice fishing in January, that category has bounced back nicely. So we will have some goodness there with the fish coming into play. That being said, Q1, just based on the penetration of firearms and ammunition, we expect margins to be down year-over-year.

And then for the rest of the quarters, margins will be flat to slightly positive, slight improvement. And then with SG&A, a little bit of the same story, do expect slight -- flat to some slight leverage within that range. And that essentially kind of gets you to where our improvement in adjusted EBITDA comes in. Just the one thing to note that Q3 of last year versus Q4 of last year, there was a heavily weight of EBITDA in Q3 versus Q4, but we do think some of the Charlie Kirk effect influenced that. We expect those to be a little more balanced going forward.

If I could sneak just one more in on the way to think about free cash flow this year, especially on, I guess, the inventory front. It sounds like the signal is we see more efficiency opportunity. Just wanted to hear about how you think about inventory balance throughout the year, especially as we're closing the 5 underperforming stores and how maybe there might be opportunity for inventory per store to improve further this year?

Yes. We're definitely -- as part of our go-forward strategy in addition to executing on our -- against our core pillars, we do think there's opportunity to continue to find efficiency in inventory, everything from really about the timing of inventory, making sure that we're getting in similar to what we did in Q3 and Q4 of this year, getting in a little ahead of the season and definitely looking to take the marks before the season is over while the demand is still there. So that's what's really helped our inventory, especially towards Q4 and then how we ended up lean even though we came into the quarter with the first 6 weeks were a little bit tough. So definitely opportunity in inventory.

From the stores that we discussed, which is an estimated 5 stores, it might be a few more, it might be a few less. We're still in negotiations on that one. Those we don't expect to close until after the holidays. So you're not going to see a material impact on those. depending on when we actually take action on those, we will transfer inventory and liquidate anything seasonal within the store when those, in fact, do close out.

Matt, I would just add, I think there's been a lot of learning on the inventory front as we went through last year. And I think from a seasonality standpoint, course correcting from '24 to '25, we're probably in seasons a little too early, carried inventory a little too long. So I think as we think of the discipline in the inventory approach this year, really, the rigor is going to be around being able to hit the mark, be able to improve the turns and to look at this improvement in inventory going through the quarters all the way through the year and be much more efficient with how we land the inventory and how we get out of the inventory.

Our next question comes from Anna Glaessgen with B. Riley Securities.

I guess I'd like to follow up on Matt's question about the first quarter here. I guess how should we be thinking about -- it sounds like the tailwinds from the external events are supporting demand offsetting maybe the con of gas inflation and the government shutdowns. How should we be thinking about the potential risk as the conflict extends? Do you think we should layer on an assumption of more consumer headwind if it extends into April, May?

Yes. With the risk, we do think the health of the U.S. consumer is really the risk that we're seeing. Q1, we do have a couple of months behind us, so we're feeling pretty good. But with fuel prices and given where our customer is positioned, that's definitely something we've contemplated in our guide. On the offset of that, the tailwind really is the 250th anniversary of America, which we think resonates well with our customer. And also, if there's anything else from an external event-driven factors, a lot -- we were just looking at all the legislation, both state and federal that's out there, and there's 16 that are on the table right now, some good for our industry, some not so good, but that's just -- that also impacts consumer demand. So there's a lot of variables in there. So we've tried to make sure that as we're thinking about the quarter and the year that we've accounted for that the best we can.

And then a bigger picture question. In the past, we've talked about potentially getting the mix back to pre-COVID, implying a lesser mix from firearms and ammo to help support margin recovery going back to the historical mid- to high single-digit adjusted EBITDA margin. Now we've seen hunt increase in penetration this past year, while, of course, it's great to see the outperformance versus the industry. I guess, how should we be thinking about the hunt penetration over -- in '26 and over the next few years and how that's being contemplated in the margin outlook?

Yes. We've contemplated it in our margin. What we're trying to also do kind of going back to the mix question is, as I mentioned on the first question, continuing to put our shoulder against fish. In addition, we have been working on cleaning up the apparel business. There was a pretty big hangover in that category. And we're finally getting to the point where we're able to bring in some new and exciting brands and kind of get that -- the soft goods business back on track as well. Probably have a little bit more work to do with camp. But as we actually start taking these other categories, the soft goods and camp and gift bar and whatnot and make them more attached to our pursuits, we know that's also going to help get them back on track as well because right now, they're a little bit ancillary and doing their own thing, but it's really aligning everything to hunt, shoot, Personal Protection and fish.

Yes. I would just add, Anna, I think the website experience that I mean, we're really leaning into this year and the opportunity around the bundling component of it where we're not putting that complete burden on the outfit or when they come in to attach at that rate, but to be able to allow the consumer to be able to walk through an easy process to be able to have the complete package and solution that they need and then allow them to have that solution when they get to the store versus putting the complete burden on our outfitter in the store. We like what we're seeing and what we're putting into place with that.

And then fish as well. We've started the work with fish. We know we're underpenetrated online with fish, even though we've seen growth over the last couple of years, we think we have a large opportunity to improve what our overall experience looks like online and to be able to allow us to be able to grow that penetration of fish as well. So the growth has really happened from fish. We need to accelerate it this year, and we think there's a huge opportunity for us to do that through investments we make on working online to allow the consumer to have an ease of experience.

It comes from the line of Mark Smith with Lake Street.

Can you walk through a little bit more some of the different headwinds on gross profit margin in Q4? Any additional insights you can give us on kind of how much of the pressure came from mix versus promotional intensity maybe late in the quarter and anything like freight that was an additional headwind?

Yes. It's a combination of mix as well as promotional cadence. We -- as we came out off of our third quarter call, we were still in the midst of having some pretty pressured sales. So as we discussed on that call, we had the inventory, and it was seasonal inventory that we needed to make sure that we were clean up into January. So we did take the opportunity to be more promotional to drive sales as well as to clean up our inventory. So that's definitely a component of it.

But in addition to that, with ice fishing not performing, -- it's probably one of our weaker comps for fish was Q4 simply because of ice fishing, there was no ice to fish. So that put pressure on it as well. But that since has come back. That season is behind us. So fish is back on track now. So a little bit of both. But as we look forward, there's not a ton of tariff impact in here. There's some. We know what that is, but I wouldn't say that's putting the pressure necessarily on our margins going forward.

I think, Mark, I mean the big part of it, we had to play a lot of catch-up in the back half. I think we -- November was an extremely challenging month for us as we started December, we were seeing the same thing. And to Jennifer's point, we were going to clean up and lift our commitment to be able to get out of product in season and not carry it forward. We like the way clearance is year-over-year now and the health of the inventory. So we did have to take some steps being promotional at the same time being cognizant of getting out of the seasonal inventory within the season. So I think the slow start that we saw in November and carrying over into the 1st of December caused us to react. And we did that knowing that we wanted to be in a much cleaner position and not have this continuous carryover of inventory.

Okay. And I think, Jennifer, you may have said that you expect Q1 margin to be down a little bit year-over-year. Is that just some continuation post January of some of those same pressures and lack of snow and that's all mix.

Yes, that's a mix. It's heavily penetrated towards firearm and ammunition.

I think that the way you think about it is with the mix, we're seeing a macro effect and February and March being lighter months for fish, not to help you there, then we get into the peak of fish, that helps to outweigh or at least to be able to take a little bit of pressure off of what the mix looks like, but to have February and March in there, especially with some of the temps that we saw on East and in particular, in the Southeast to start the year that we just don't have enough volume in those first couple of months of fish to be able to offset it.

Okay. And then I just wanted to dig in a little bit deeper on some of the store closures. You guys took impairments on 10 stores. It sounds like closing an estimated 5, but it's all going to come after kind of the holiday. Can you just walk us through the thought process, maybe of those 10 stores, how many are losing cash? And if any of these are kind of at the end of lease terms as you close it?

Yes. So we -- I think we've always talked about how -- in general, our fleet is very healthy. If you go store by store, it's good. But really, it came time to take a hard look at those 5 underperforming stores that just don't have a long-term place in our fleet and make some calls on those. So the thought process there is these are long-lasting leases that we have because our leases are unfortunately, 10 years long. So these aren't all 10 years, but they're going out quite a bit. But right now, what we're doing -- and these are actually losing adjusted EBITDA stores. So we're working with some brokers to try to either renegotiate, get a subtenant in there, look at all different options, do a buyout, all of which financially makes sense for us just given where they are within the portfolio.

I'd say the others, there's a lot of -- not a lot, but there are a few stores that are going to roll off within the next coming, call it, 18 or 20 -- excuse me, 12 to 24 months anyway. So those -- you really can't do much with landlords when you have that short of a time left on your lease. So those are ones we will -- that we may have impaired, but we will just let run off. And then there are some in there where if we're going to close some of these other stores that we know we want to close, there'll be some sales transfers to their neighboring stores, and that will actually help improve the overall productivity of those stores. So those might actually remain in the fleet.

And as I see no further questions in the queue, I will pass it back to Paul Stone for closing comments.

By way of note, we posted an updated presentation on our Investor Relations website. Thank you for all joining the call today, and thank you to all the passionate outfitters around the country for their commitment to Sportsman's Warehouse. Together, we look forward to providing our customers with great year and exceptional service. Thank you.

And this concludes our conference. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the Sportsman's Warehouse Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Riley Timmer, Investor Relations. Please go ahead, sir.

Thank you, operator. Participating on our Q3 call today is Paul Stone, our Chief Executive Officer; and Jennifer Fall Jung, our Chief Financial Officer.

I'll now take a moment and 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 will 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 with the SEC today, which is also available on the Investor Relations section of our website at sportsmans.com.

I will now turn the call over to Paul.

Thank you, Riley, and good afternoon, everyone. Before we begin, I want to recognize our team of dedicated outfitters across the country. Each day, they deliver on our promise of great gear and exceptional service, and their commitment continues to help drive our momentum.

Turning now to our third quarter results. I'm encouraged by the solid progress our team continues to make as we execute against our transformation strategy. Despite a tough consumer environment and the impact of prolonged government shutdown, we delivered our third consecutive quarter of positive same-store sales growth. Same-store sales grew 2.2% versus last year, with broad-based strength in our core categories of honey and shooting sports as well as fishing.

Our firearms business once again outperformed adjusted NICS checks, extended our market share gains for yet another quarter. While adjusting NICS checks declined, our farm unit sales increased, despite the election-driven headwinds from Q3 last year, underscoring the continued focus and improvements on a curated assortment with depth in key products, strong in-stocks and seasonal readiness with inventory, our enhanced marketing efforts and our outside are led in-store experience.

In ammunition, sales demand remained strong, growing nearly 2% in Q3. Our EDLP strategy on core calibers complemented by healthier in-stocks and bulk ammo strategy continue to resonate with customers, with average unit retail up in the low single digits. We are seeing sustained engagement from customers as we lean in further to drive the areas of our business.

Looking now at our key categories. We drove meaningful growth across several strategically important departments. Hunting and Shooting sports increased 5%, supported by strong inventory levels with relevant local assortments, heading into our peak fall season. Fishing delivered exceptional growth of 14%, reflecting broad participation in the category and strong execution from our teams. Apparel grew about 1.5% with particular strength in technical outdoor wear that supports our solution selling approach.

Camping, however, remained challenged. Sales declined versus last year, reflecting the highly discretionary nature of this category. This is a category where we continue to refine and curate the assortment to complement the pursuits that drive customers into our stores. In fact, inventory in this category was down more than sales, highlighting greater efficiency with our inventory and investments in our key sales and traffic-driving categories.

E-commerce was another bright spot, delivering growth of 8% in the quarter. Both ship to home and buy online, pick up in store perform well, with BOPUS continuing to drive traffic and improved conversion in our stores. Our digital-first marketing efforts are supporting higher engagement and customer acquisition across all channels. The improvements we're seeing across the business remain tied to the strategic priorities guiding our transformation.

Inventory precision, we meaningfully reduced inventory from Q2 to Q3, while supporting peak seasonal demand, demonstrating improved planning, forecasting and allocation disciplines, Importantly, we paid down debt during the quarter and remain on track to finish the year with lower total inventory than last year and positive free cash flow. Our focus on faster turning regionally relevant assortments continues to drive both margin and working capital efficiency.

Local relevance, aligning our merchandise and marketing to local outboard pursuits continue to drive measurable results. We are expanding targeted marketing, community partnerships and in-store educational events that reinforce our position as the local authority for outdoor enthusiasts.

Personal Protection. This category continued to resonate strongly with customers with strength across both lethal and nonlethal solutions. Byrna and TASER remain strong growth drivers and the try before you buy model and our archery lanes and enclosed pods is differentiating our store experience in meaningful ways. We added Byrna in additional stores during Q3 and now have live demos available in 116 of our 147 stores across the country. We are committed to building on this momentum as we further position Sportsman's Warehouse as the authority in personal protection.

Brand awareness, Q3 marked an important milestone in our brand awareness journey. Our venture like a local campaign and digital first go-to-market strategy has proven to resonate with customers as we noted highest year-to-date engagement, deepened our loyalty subscribers and strengthen brand affinity. Using our new first-party data insights, this now gives us the foundation to strengthen retention and customer value through the transformation of our Explorewards program, focused on increasing AOV, transactions per customer and long-term customer value. Q4 will be dedicated to road mapping and enterprise-level 2026 customer acquisition strategy that reduces reliance on promotion and shifts the business towards more sustainable profitable growth.

In early November, we were pleased to open our newest store in Surprise, Arizona, our 11th location in the state. Arizona is a market we know very well with several of our top performing stores already operating in the region. This new location features a unique personal protection focused format, the first of its kind in our fleet designed to meet the needs of the customers seeking both lethal and nonlegal solutions. This will be our only planned stores opening for both 2025 and 2026, reflecting our disciplined approach to growth and our commitment to investing where we see the greatest opportunity for long-term returns.

I'll now provide a little color in the current market conditions, creating headwinds in the business. Starting in mid-October, we started to see a slowdown in our positive sales trend, which we believe was partially driven by external disruptions from a prolonged government shutdown impacting consumer confidence. This has made for a challenging start to Q4, and while still early in the quarter, we believe it's prudent to take a conservative approach to the balance of the year.

With the U.S. consumer under pressure and a very promotional retail landscape, we are navigating the environment carefully and maintaining disciplined control over variable cost and inventory productivity. Given these dynamics, we are taking a cautious view of the fourth quarter. So we remain confident that our strategic priorities and ability to adjust with speed will support modest sales growth for the full year. We remain confident in our ability to finish the year with lower inventory than last year, generate positive free cash flow and a lower debt balance.

I'll now turn the call over to Jennifer.

Thank you, Paul, and good afternoon, everyone. We delivered our third consecutive quarter of same-store sales growth in Q3, with comps up 2.2% year-over-year, maintaining our positive trend from the second quarter. Net sales for the quarter were $331.3 million, an increase of 2.2% compared to the prior year.

We are pleased to report that the company achieved 3 consecutive quarters of year-over-year comp store sales growth. This has been the result of a focused strategy to win the seasons in hunting and fishing and our conviction to lean in heavy to the personal protection category, an area where others in the industry are backing away. Reflective of this focus is the 5.3% growth we achieved in Q3 in our hunting and shooting sports department and the 14.1% increase in fishing, which on a 2-year comp stack is up 17.9%. Additionally, apparel was up 1.4% in the quarter. The combination of this growth was partially offset by decreases in our other departments.

Gross margin for the quarter was 32.8%, a 100 basis point improvement versus Q3 last year. This increase was largely driven by improved overall product margins from healthier inventory, lower freight expense due to lower inventory receipts, improved shrink and a higher penetration of sales from our fishing department, which has a higher overall gross margin. This increase was partially offset by an outsized mix shift to firearms and ammo, which has lower gross margin and a lower penetration in the camping and footwear departments which carry higher margin rates.

SG&A expenses were $104.5 million or 31.5% of net sales versus 30.8% in the prior year. This increase was driven by a reinvestment in our customer-facing areas of the business. including store and support area labor and digital marketing to drive sales and omnichannel traffic. Additionally, SG&A was pressured this quarter from about a $3 million of additional nonrecurring add-back expenses. Excluding add back expenses in both years, SG&A as a percent of sales was 30.3% versus 30.1%. We will continue to closely manage our variable operating expenses.

Net income improved $8,000 or $0.00 per diluted share versus negative $0.01 per diluted share in the third quarter of last year. Adjusted net income in the third quarter was $3 million or $0.08 per diluted share compared with adjusted net income of $1.4 million or $0.04 per diluted share in the third quarter of last year.

Adjusted EBITDA for the third quarter grew 13% to $18.6 million compared with adjusted EBITDA of $16.4 million in the third quarter of last year, an improvement of 50 basis points as a percentage of net sales.

Now turning to inventory. Total inventory at the end of Q3 was $424 million compared to $438.1 million in the same period last year. a decrease of $14.1 million or 3.2%. As anticipated, we also reduced inventory by approximately $20 million compared with Q2. We strategically pulled inventory forward in the first half of the year and into early Q3. This was in an effort to ensure our stores were well prepared and set on time for the fall hunting and fishing season, and to be ready and on time to support the holiday selling season.

Our focus remains to build depth in core items and eliminating the slow-moving inventory that doesn't resonate with the customer. It's critical that our inventory is seasonally and regionally relevant faster turning and supported by predictable customer demand, which will produce lower inventory balances. This will continue to be a focused effort for 2026 and provide efficiency in our operating model.

Through enhanced buying discipline, our goal is to be in season earlier, exit earlier and achieved clean sell-throughs across the categories, which will improve the return on our working capital. Given the improvements in working capital efficiency, we expect to end the year with ending inventory less than $330 million, which is $12 million less than prior year on a higher base of sales.

In regards to liquidity, during the quarter, we paid down $13.2 million of debt and ended the quarter with a total debt balance of $181.9 million and total liquidity of $111.9 million. Additionally, in November, we drew inventory down by $23 million and paid down an additional $9 million in debt. As we move through the holiday selling season and end of the year, we expect to end the year both free cash flow positive and total debt to be lower than our ending balance last year. Inventory efficiency and tight control of variable expenses remain top priorities as we manage the business prudently through Q4 and into 2026.

Finally, let me speak to our update on full year guidance. Starting late in the third quarter and now into Q4, we are seeing accelerated macroeconomic headwinds from a pressured U.S. consumer and what we believe are the prolonged effects of the government shutdown. Given this pressure, we have increased our promotional efforts to maintain inventory efficiency while driving sales, which is putting pressures on margins. Additionally, we have increased our digital marketing spend to be more competitive in the marketplace to accelerate omni-channel traffic during this period of high shopper demand. Accordingly, as we recognize and navigate current market conditions, we are revising our full year guidance.

For the full fiscal year 2025, we are adjusting our net sales range to be flat to up slightly. Again, this adjustment reflects a tough Q4 environment due to a challenged U.S. consumer. Furthermore, we are adjusting our full year EBITDA guidance due to margin pressure from the very promotional Q4 and lower-than-anticipated Q4 sales. We now expect adjusted EBITDA to be in the range of $22 million to $26 million. As mentioned earlier, we expect ending inventory to be less than $330 million and we expect our capital expenditures to be less than $25 million for the full year.

As we move forward into 2026, we anticipate continued progress around our strategic initiatives with very modest top line growth and are focused on improved profitability through disciplined cost management, inventory efficiency and improved gross margins.

I will now turn the call back to the operator to facilitate any questions.

[Operator Instructions] Our first question comes from the line of Ryan Sigdahl from Craig-Hallum Capital.

I want to start with kind of what you're seeing in recent weeks, Black Friday, Cyber Monday, et cetera. And if you've seen any improvement? And then maybe separately to that, given the cut to the guidance, we consumer, you mentioned government shutdown curious if those trends have been persistent or if you've seen any improvement on let the government shutdown is no longer.

Great. Ryan, this is Jennifer. Thanks for the question. Yes, I think as we spoke about in our guidance, what we saw in the end of October, where our trajectory turn more negative. We started to see that through November as well. So we didn't necessarily see a pickup from right after the government shutdown. So that's really reflected in our guidance for the quarter.

Got you. Maybe just gross margin help us out for Q4. I guess how much of this is you guys are going to lean into promotions to try and bring customers in versus trying to more hold profitability and manage the margin side? .

Yes. So it's a little bit of using the inventory we have to drive sales and to drive foot traffic into the store, but it's also inventory management. There's a seasonal component to our business, and we know that we need to exit this inventory when the customer is shopping for it. We don't want to carry aged inventory into 2026. So it's twofold: one, managing our inventory, managing our net working capital and to using it to help stimulate our sales.

Last one for me, just we have Florida Second Amendment sales tax holiday. Curious if you guys saw any benefit to the business and how you think that trends into the new year as that goes away? .

Yes, not necessarily. That's not one of our larger markets, but no huge amount to us. .

And our next question comes from the line of Anna Glaessgen from B. Riley Securities.

I'd like to touch on the marketing spend commentary in Q4 understanding the headwinds that you're seeing from the consumer and the government shutdown impacting sentiment, I guess, what are your thoughts on elevating marketing when the consumer seems to be responding to more external headwinds? And what are you expecting in terms of that marketing efficiency in the quarter?

Anna, this is Jennifer. Thanks for the question. So the way we were thinking about it is twofold. First off, as we look across, excuse me, the competitive landscape, it is highly promotional and higher market out there. So it's really for us to be competitive in the marketplace, we feel we need to spend.

We did go up against print last year in the month of November, which we did not have this year. We've turned more to a digital marketing and e-mail, but that's really kind of what's been working for us. And so we have a lot of great deals out there right now, and we're going to start leaning in heavier into firearms and ammo. And so we need to tell our customers, that's what they come to us for. So we need to communicate that to it.

Got it. And then turning to camp. Could you give us what the comp was in the quarter? And then bigger picture, as what do you think needs to happen for that department to perform more consistently?

Thanks. Yes. For Camp, as you know, Q2 was tough on camp, Q3 has been tough on camp. So we've been expecting that -- that being said, the inventory trend is below their sales trend. On the quarter, they were down high single digits from a same-store sales perspective. But yes, their inventory is down double digits. So we're managing it. We know we have an area of opportunity there and from an assortment standpoint. And so that's definitely something we'll be focused on right now and in 2026.

I think the other thing just on that, Anna, is that's one of the biggest categories we hit from a general standpoint is we're evaluating where to redeploy working capital dollars. So as we were pulling back on inventory at the same time to be able to reinvest back into fish and to hunt and shoot that department took the biggest date as far as being able to pull back on our inventory versus categories.

And our next question comes from the line of Mark Smith from Lake Street.

First, I wanted to ask just about kind of the promotional environment, in particular around Black Friday. Jennifer, you just talked about how you guys didn't have print this year. It seems like -- and correct me if I'm wrong, that you weren't as promotional as we historically think about kind of doorbusters and print ads. Was this purposeful? And I'm curious, your thoughts around kind of the impact on your outlook for Q4 purely around kind of Black Friday weekend?

Yes. Great question. Mark, thanks for the question. For Black Friday, we are definitely promotional, but you called it out. We didn't necessarily go out with doorbusters like a lot of our competitors were right now during the month of December, we're reimplementing some of those doorbusters because it's still a high-traffic area. So that's where we were a little bit different. But if you looked across our box, we were very promotional, a lot of it was in-store signage in terms of like what our big deals were.

And we kept a lot of them on for maybe a couple of weeks versus being churning them constantly like some of our competitors were. So we're writing that and changing our strategy in the month of December to go after what our customer wants and to continue to drive foot traffic to the stores.

And I think looking year-to-year promotion to promotion, much heavier this year on the total promotion, the doorbuster -- we look at that. We'll continue to look at that on what that means and what it means to the customer markets as we think about it. But as we look at it now and then we think we have some runway over the next few weeks to be able to light up promotions actually starting tomorrow to be able to help us in a different time frame, but at the same time, be able to be super aggressive promotionally to be able to drive a that's needed.

Okay. And then as we think about kind of inventory by category, and I don't know how much you can share with us on this, you just talked about camping down kind of double digits. I'm curious, as we think about -- and the inventory looks good, down sequentially, down year-over-year. But if there's certain categories where maybe you're a little heavier and as we see maybe more promotions or marketing spend, here over the next 30-plus days. Should this we expect this to be really heavy in kind of that hunt shoot category? Or is it maybe more widespread as we think about inventory that you want to move through here in Q4.

Yes, I'll start with the category perspective. So if you look at kind inventory by category, all of the categories that were down in the quarter, they actually have inventory that is more down. So they are doing a great job managing the inventory for those categories that weren't performing. The only 2 categories that were up with fish, which as we mentioned, was very successful in the quarter and then slightly up than hunt but not much. I think it's like less than 2%. But as we look forward to the coming weeks, we are going to be leaning on the hunt and shoot category to drive sales because that's what we know drives our customers to our store. It's a large portion of our sales, and we have the inventory to do so. So that's how we're going to leverage that category.

I would just add, Mark. At this point, we're not worried about inventory. The team has done a great job all year where we do have it in fish, and we're running and continue to run strong performance in fish. And then farms and ammo is in the best position it's been and we feel good and have the opportunity, we think here over the next 7 weeks to be able to deploy more firearms and ammo from a promotional standpoint to be able to help drive that traffic. But as we look at inventory and where we're at and where we're working our glide path down, we feel very comfortable even given the current macros we're facing to put inventory in a good position.

Okay. And the last question for me, just personal protection, it seems like you're seeing some solid results there. I'm curious if you can share any thoughts around kind of the margin profile as we think about burn Taser lethal, non-lethal if there's any real difference in that nonlethal personal protection margin profile versus maybe traditional carry firearms?

Yes. Personal protection has been great for us, and it is 1 of our strategic pillars. So that will be a theme you'll continue to hear on calls. From a margin perspective, it is accretive, the nonlethal is accretive to the category. And right now, it's in at least Byrna is in 117 stores, TASER not as many. But we'll continue to evaluate stores to put those in. But it's been a success, and we're glad to see it bring in a different customer base. I mean, we think that's one of the values of it. You have a lot of customers coming in and buying it for other members of their family, maybe their wife, maybe the daughters. I had a friend that bought 4 of them for his entire family. So yes, it's bringing in people that are just looking for something different that don't necessarily want something that's lethal.

And our next question comes from the line of Matt Koranda from ROTH Capital.

This is Joseph on for Matt. Just kind of hop into your response on driving traffic for promotions in Hunt and so. Is that the only lever that we have here to pull in terms of returning back to positive comps here it looks like 3Q was down about 8%. Just anything else that we can pull to return back to those positive comps in hunt and shoot?

Okay. This is Jen. So our Q3 comp was a positive too. I'm not sure if I misunderstood your last comment. So we have been positive comping for 3 consecutive quarters. as we look forward into holiday, we're not leaning strictly on firearms and animals. That's more of a layer on. I mean holiday is a very promotional season in any way. So there'll be many promotions throughout the store. That's just something we are layering on that we didn't have as upfront in November or as in Q3.

Yes, I think just to answer that, I mean, to pits for the Q, north of 5% hunting, as we define it, was up over 5% for the Q. Clearly, that's the traffic drivers along with ammunition that helps to drive it, but also the attachment part of the business to around optics from the different components and the total solution of the firearm piece of it. But the kind of the milk and bread is clearly farms and ammunition to be able to drive people in and it really gives our operators the opportunity to be able to attach to increase the AOV and the UP as well. So I think we use that. You've got ammo and we said we'll start seeing that are extremely aggressive prices on oven our inventory is in great position. But it will be a driver to be able to help us to attach increase the overall box AOV and UPT.

Got it. And just if you guys could give us any preliminary thoughts on margin expansion, just going into fiscal '20 this current tougher demand environment sustains, can we still deliver any margin expansion in the next year?

We haven't quite given guidance on 2026, but what we'll be focused on is really efficient as I can see importable growth. We will continue to look at our inventory and make sure that we are getting as much margin accretion out of that as possible. But yes, we're really focused on 2026 on our profitable sales growth and managing inventory and margins and continue to look at our cost structure. .

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Riley Timmer for any further remarks.

Thank you for joining the call today, and thank you to all our passionate outfitters around the country for their commitment to Sportsman's Warehouse. Together, we look forward to providing our customers with great gear and exceptional service. Thank you all.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Thank you for standing by, and welcome to the Sportsman's Warehouse Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Riley Trimmer, Vice President, Investor Relations. Please go ahead, sir.

Thank you, operator. Participating on our Q2 call today is Paul Stone, our Chief Executive Officer; and Jennifer Fall Jung, 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 on the company's other filings made with the SEC.

We will 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 with the SEC today, which is also available on the Investor Relations section of our website at sportsmans.com.

I will now turn the call over to Paul.

Thank you, Riley, and good afternoon, everyone. Before we begin, I want to recognize our team of dedicated outfitters across the country. Each and every day, they deliver on our promise of great gear and exceptional service. I'd also like to welcome our Chief Financial Officer, Jennifer Fall Jung, who brings more than 2 decades of experience across both large-scale and specialty retail. She's a proven financial leader, and I look forward to partnering with her to further accelerate the transformation of our business.

Turning now to our second quarter results. I'm encouraged by the strong progress our team continues to make as we advance our transformation strategy in the second quarter. Despite ongoing consumer macroeconomic headwinds, we delivered our second consecutive quarter of comp store sales growth. Same-store sales were up 2.1% compared to last year, with positive comps achieved each month of the quarter. Importantly, this growth came even as June faced a difficult comparison due to last year's pull forward of sales in California ahead of the new firearm and ammunition taxes that took effect on July 1 last year.

Our efforts to localize merchandise assortments and geotarget our marketing is delivering strong early results. For example, in Alaska, sales in the second quarter grew by high single digits, reflecting how well these initiatives are resonating with customers. Aligning our merchandising and marketing to local outdoor pursuits and solution selling is proving to be a critical unlock, not only for driving growth, but also for improving inventory productivity and efficiency.

Our firearms business once again outperformed the industry. While adjusted NICS checks declined 4.9% in the quarter, our unit sales increased more than 4% versus last year, further evidence that we are capturing market share. Consistent with broader consumer trends, we did see some trade down behavior reflected in a 4% decline in average unit retail for firearms again this quarter.

However, attachment remains strong as average order value continues to be at all-time highs. In ammunition, our strategic shift to an everyday low price model on core ammo calibers and improved in-stock continues to resonate strongly with our customers. Ammunition sales grew 10% in the quarter with average unit retail up in low single digits. We are also sharpening and investing in our firearm-related merchandise assortment to drive higher basket attachment and greater overall customer value.

Looking now at our key categories. Driving our comp increase in the quarter was our hunting and shooting sports and fishing departments. Hunt and shoot increased 4% in Q2, driven by firearms, ammo and products related to personal protection. Fishing was up nearly 11% over last year and is up 20% on a 2-year stack. This is a category with expanding market participation and clear opportunities for us to capture additional share.

We are well positioned with our late season fishing inventory to sell down and end the season strong with clean inventory. We were disappointed with camping's performance this quarter as sales were down 10% compared to last year. As part of our ongoing transformation, we made a deliberate decision late last year to eliminate certain slow-moving categories that were tying up working capital, but we have not yet seen the level of offsetting growth we anticipated in other areas of the department.

To address this, we recently implemented an EDLP strategy on core consumables, similar to what has been effective in ammunition, and we are confident this will strengthen the business over time. Additionally, we invested in compelling new assortments, most notably with YETI and early results indicate that these additions are resonating with our customers.

Our e-commerce business grew 3% over last year and continues to be a strength of our omnichannel retail strategy. Importantly, over 70% of online transactions were fulfilled through our buy online, pick up in store BOPUS program, underscoring how e-com drives significant traffic and sales into our brick-and-mortar location. At the same time, our ship-to-home business remains strong, reflecting our ability to capture consumer demand well beyond our physical store footprint. With these dual strengths, we are uniquely positioned to gain market share as e-commerce continues to outpace traditional retail channels.

The improvements we're seeing across the business is directly tied to our strategic focus, which remains centered on our 4 key priorities: One, inventory precision. Inventory readiness for the critical fall hunting season was foundational in Q2. In prior years, we were often late to the season. This year, we are ahead. Our inventory is healthier, our in-stock levels are stronger, and we have depth in our core products.

With Q2 representing our peak inventory build, we are now well positioned to sell through as we move into the key fall hunting and holiday season. Two, local relevance. We continue to strengthen our role as a trusted local destination. This quarter, we launched our partnership with the United States Concealed Carry Association, or USCCA, to provide in-store training and education. Their robust market-specific programs are a natural complement to our localization strategy.

In addition, we are expanding in-store events that leverage the expertise of our outfitters further strengthening our role as a trusted resource and deepening our connection to the communities we serve. Three, personal protection. This category continues to outpace our total company performance. We've expanded the number of stores that carry the Byrna product line where we offer the customer a chance to try before you buy, leveraging our archery lanes and enclosed shooting pods.

We also launched TASER, well-known less lethal brand earlier this week in our top-performing personal protection stores. We will continue to lean in this category as we establish Sportsman's Warehouse as the authority in personal protection. Four, brand awareness. As a differentiated omnichannel retailer, we are strengthening brand recognition and trust. Our new adventure like a local campaign underscores the expertise and authenticity that set Sportsman's apart, while our refined digital strategy is accelerating customer acquisition and positioning us for sustained long-term growth.

Despite ongoing consumer macroeconomic challenges, I remain confident in both our strategic plan and our team's ability to deliver against it. Our competitive advantage is clear. We outlocal the big box retailers and out assort the smaller specialty shops, providing customers with a differentiated combination of value, quality, breadth of selection and personalized service rooted in the communities we serve.

We remain disciplined in managing the levers within our control, variable cost, inventory productivity and merchandise margins. As we advance our strategic initiatives, we are confident these efforts will drive sustainable sales growth, operating margin improvement and debt reduction in the back half of 2025. Finally, we continue to anticipate ending the year with lower total inventory than last year and generating positive free cash flow.

I'll now turn the call over to Jennifer.

Thank you, Paul, and good afternoon, everyone. It's great to be on the call and to be part of a very exciting transformation happening at Sportsman's Warehouse. We delivered our second consecutive quarter of same-store sales growth in Q2 with comps up 2.1% year-over-year, representing an improvement from the first quarter trend. Net sales for the quarter were $393.9 million (sic) [ 293.9 million ], an increase of 1.8% compared to the prior year.

Our sales momentum from Q1 carried into the second quarter, led by strength in our hunting and shooting sports department, which grew 4% and fishing, which increased 10.9% versus last year. These gains were partially offset by softer performance in other departments. Gross margin for the quarter was 32%, an 80 basis point improvement versus Q2 last year. The increase was largely driven by improved overall product margins from healthier inventory and a higher penetration of sales from our fishing department.

This increase was partially offset by a mix shift to firearms and ammo, which has a lower gross margin; a lower penetration in camping, which carries a higher margin rate and increased freight tied to our strategic pull forward of inventory to be store ready for our key hunting season. The freight expense due to the inventory pull forward resulted in an estimated 40 basis point drag on margin in the quarter.

SG&A expenses were $97.2 million or 33.1% of net sales versus 32.7% in the prior year. The increase was driven by a reinvestment in our customer-facing areas of the business, including store labor and digital marketing to drive sales and omnichannel traffic. We will continue to closely manage our variable operating expenses to align with sales trends.

Net loss for the second quarter of fiscal 2025 was $7.1 million or negative $0.18 per diluted share compared with a net loss of $5.9 million or negative $0.16 per diluted share in the second quarter of last year. Adjusted net loss in the quarter was $4.7 million or negative $0.12 per diluted share compared with adjusted net loss of $5.3 million or negative $0.14 per diluted share in the second quarter of last year.

Adjusted EBITDA for the second quarter improved to $8.3 million compared with adjusted EBITDA of $7.4 million in the second quarter of last year, an improvement of 20 basis points as a percentage of net sales.

Now turning to inventory. As anticipated, total inventory at the end of Q2 was $443.5 million compared to $363.4 million in the same period last year. As Paul noted earlier, this increase was a deliberate and strategic decision to ensure our stores are well prepared and set on time for the key late summer and early fall hunting seasons.

Our focus has been on building depth in core items that are seasonally and regionally relevant, faster turning and supported by the predictable customer demand. We believe our inventory remains healthy and of high quality as evidenced by cleaner sell-through during the spring and summer seasons. Importantly, Q2 represents our peak inventory position for 2025. We expect a slight sell-down in our inventory in Q3 and remain confident in our ability to finish the year with total inventory below last year's level.

Looking ahead, we are continuing to simplify our product assortment to drive efficiency in working capital and support margin improvement over time. With new systems, processes and enhanced buying discipline, our goal is to be in season earlier, exit earlier and achieve clean sell-throughs across categories, which will drive down the working capital investment needed for inventory.

In regards to liquidity, during the second quarter, we exercised our $20 million deferred draw feature on our term loan to strengthen the balance sheet. We ended the second quarter with total debt balance of $195.1 million and total liquidity of $109.5 million. We expect that Q2 will be our peak for reported debt balance as we sell down our inventory, generate improved EBITDA and begin to pay down our debt.

Inventory efficiency and tight control of variable expenses will remain top priorities. Finally, let me speak to our update on full year guidance. Our priorities for the back half of 2025 remain focused on the execution of our strategic priorities to profitably grow sales, improve margins and closely manage our variable operating expenses.

We have confidence in our second half strategy to drive profitable sales despite the macroeconomic headwinds and potential margin pressure from higher tariffs. For the full fiscal year 2025, we are raising the lower end of our net sales outlook to reflect flat growth versus our prior guide of down 1%, while maintaining the top end of our range at up 3.5%.

Reiterating our adjusted EBITDA guide to be between $33 million and $45 million, driven by modest gross margin improvement and disciplined expense management. Reiterating our capital expenditures target to between $20 million and $25 million, primarily related to technology investments to improve store service and merchandising productivity as well as our normal store maintenance. We remain focused on growing sales, generating positive free cash flow for the year, paying down debt and returning value to all of our stakeholders. I will now turn the call back to the operator to facilitate any questions.

[Operator Instructions] our first question comes from the line of Anna Glaessgen from B. Riley Securities.

First, I'd like to talk or start with the comp performance. Really nice to see another quarter of positive comps. Can you talk about the drivers of that? I know lapping out of stocks has been a really key driver of outperforming the industry. As we think about that easing benefit into 2026, how should we think about the durability of that growth?

Yes.

And I'll take it. I think just overall, the strategy that we put in place to start the year really aligned around hunting and shooting, fish and personal protection. And that's really where we've seen all of our strengths and at the same time, continue to invest in our inventory dollars to be able to continue to see the momentum as we've seen it from Q1 to Q2 and even as we start Q3, good strong momentum, in particular, in firearms.

So I look at it and think we've got -- we've positioned ourselves extremely well with the strategy. We have opportunities as we continue to work on our attached categories as we pulled small sub cats out of the business that didn't have the [indiscernible] that we wanted and reinvested the working capital back into our strategic focus.

Our key will be, as we think about it and the merchant is really in place and the team humming at this point is putting themselves in a position where we'll continue to refine what our inventory mix, the long tail that we have in our categories and be able to reinvest that back into the strong and our top-performing items, which I still think we have opportunity there as we work through multiple seasons of buys as we go on.

And I'll reiterate that I think as we look at fish and our performance overall in fish and our 2-year stack, we're not in a position where we're lackadaisical there. We think that we have even more room to grow in fish. We comped last year a lot of high-end merchandise that we got out of, and we were able to see it pick up and the performance really be driven through units, and we think we even have more upside as we think about that.

So I would just wrap it up to say the entire strategy, we love where we're at with hunt and Shoot, in particular, where we are starting the month of August compared to last year and where our inventory position was for the hunting season. We feel really good with where fish will be. We think we'll have another strong quarter of fish due to weather and what's happening there.

And then the newness of personal protection that we continue to add into the business, that's really outperforming all of our other parts of the business today. But we have, I think, continued upside in that as we think about the back half of the year and starting next year.

Great. And then turning to the implied back half guide. it seems to be implying some escalating margin improvement while facing a little bit of more difficult comps in the back half. Can you talk a little bit about the margin drivers or puts and takes in the back half of the year?

Yes. Anna, this is Jennifer. Nice to meet you. If you think about the margin in the back half of the year, there's a couple of things you need to keep in mind. As Paul was just mentioning, hunt continues to be a focus in the back half, and it does have lower margins than the rest of our business based on the firearms and the ammo and those have been drivers. So those will be putting a mix component into margin in the back half. And then also echoing where Fish has actually been a beneficiary to margin in Q2 based on its rate and its penetration as that category falls off as we get more into the quarter, that will also have a mix shift on the margin. So as you think about margin and also keep in mind, as a retailer, the Q4 is a very promotional time. Those are just things to contemplate as you're thinking about it.

And our next question comes from the line of Matt Koranda from ROTH Capital Partners.

Welcome, Jeff. I guess maybe just taking a crack at the comp guide for the back half. I guess it implies we're up against a little bit of tougher comp, so maybe a little bit of decel, but still positive for the back half. Any color on how demand trended through August and just sort of how we feel about the setup into the back half in terms of comps?

Yes. Matt, we like how August looked. We really liked our NICS performance that we got back yesterday in August. So we saw an acceleration compared to what our Q2 performance looked like. So good position there, good start to Q3. We like the way it looks. I think we've shared with you before, as we come into Q4, we're clearly going to be in a position of comping apples-to-apples. And from a marketing standpoint, will be digital to digital.

So I think Q3, we still have a little bit of a tailwind as we go through Q3 just based on the, I think, more productive ROAS measurement that we're going to have as we close out Q3, but Q4, we're going to be an apples-to-apples comparison with digital to digital is the way I would think about it. So we like the way August started out and I think momentum as we think about Q3 right now.

Okay. Understood. And then maybe just if you could break down the AOV trend a little bit more. I think it would be helpful. I know the strategy has been typically to kind of build a larger basket around a firearms purchase, typically trying to generate more accessories purchases. And so while you mentioned lower AUR in firearms, I think the AOVs have gone up.

So maybe if you could just break that down a little bit? And how much room, I guess, more room for improvement do we have on that strategy? Have we capped out in terms of AOVs? Or is there more room to run? And I guess is that -- is there AOV improvement built into the guidance for the back half of the year? Sorry, there's a lot in there, but I just figured it would be helpful to break it all down.

I think we're just really getting started around what we can do about attachment and in particular, in the firearms and getting loaded in with the inventory that we need and part of this working capital reinvestment out of some of these other sub cats in our attached categories to put back into attaching to firearms or into our ammo basket as we get those customers in that we're in kind of mid-stages of getting that build out, Matt, is the way that I would see it.

I will tell you we're extremely bullish on what we were able to do from an inventory position and be able to get our inventory aligned to start the queue and in comparison to where really, we would have peaked last year in October or closer to the end of October, missed a good portion of hunt, in particular, the Western Hunt and just left sales on the table. So I think to your first question, there's huge opportunity from an AOV standpoint and a UPT.

Craig and the team has done a fantastic job running the stores, converting and being able to increase the basket size. And I think as we look at last month, we continue to be above COVID marks there and at all-time highs is both on UPT and AOV with an opportunity to be able to be more sharp in inventory to continue to grow that. So I think that's part of the business that we continue to put a spotlight on and how do we invest more into it to be able to grow and to be able to help our overall mix as we're growing firearms at the rate we are, Matt.

And our next question comes from the line of Ryan Sigdahl from Craig-Hallum Capital Markets.

I wanted to stick on guns and the non-lethal. So impressive -- you said accelerating mix outperformance in August, but that trend has continued here. But you're also simultaneously leaning in on the non-lethal TASERs, Byrna, et cetera. I guess are those 2 things were related that the foot traffic is a similar customer? Or is it really mix assortment, store layout, all of the things that you can drive kind of growth in both?

Yes, I would think. The best way to say, we think it's a new customer that is really looking at the less lethal, and we've looked at it and done a deep dive on the mix and who it's bringing into the store. So we like what it's doing as we think about it and how we've set the site up to really be able to start the process on the site and to be able to drive the folks to the store as well as in Byrna's case, the way they're able to message it with their influencers to get people to the store.

So we like what's happening there. We feel we've got a lot of upside. We've just built out a larger subset of stores to be able to add inventory into a pretty big swath of store count as we get to the back half of the year. So we think we have an opportunity to continue to grow that. And I like the newness piece of it where we continue to be able to add new partners, TASER coming in. They set the product right. They were able to align, get the product, empty boxes, point of sale, have it all wrapped, ready to go to the store to be able to set and do it very professional.

So like the way that that's shaping up. And we continue -- as I mentioned to Matt, I think the opportunity around personal protection is not only the nonlethal, but the lethal component of it as well and then how we can really meet the customer where they want to be around the attachment of that, in particular, from handguns and ammo.

We saw great performance. Our hunt was really driven as we look at it from a category breakdown from handguns and ammunition, driving that piece of the business. And then as I think about the accessory or the nonlethal, the personal protection, the newness is what drove that part of the business. So it's good to see the mixture that we have there.

And then just as we shift over to -- around the store count, I'm sorry. So adding one store in Q3, as you've said before, I guess how do you think about the portfolio of stores you have? I know there have been some that were right around 4-wall breakeven-ish, but I think you even referred to them on life support in the past. But how do you think about adding stores, optimizing the existing stores you have? Just an update there would be helpful.

Just -- our real estate focus will continue to be around, one, ensuring that we are paying down our debt before we get into a position of growth around new stores. And that's the commitment that I've made and we've made as a company as we go out that we still think we have a lot of room within our current asset base we have to be able to sweat the assets to get the performance where we need to be and continue to be able to grow.

I mean we have a low, unaided awareness in our 30-mile radius that we actually operate in. So we think we have a ton of upside in the markets we actually are in. And to the earlier point of the question, I mean, we'll continue to measure and to look at our nonproductive stores. And given an opportunity, if we don't think we're in a position to where the store is going to meet the expectation. We're coming up on the end of lease and we make a decision to potentially get out of that location.

I think that's been the direction we've shared over the last couple of years is we'll continue to monitor the 4-wall. We'll do the right thing from a cash flow perspective as we look at it, and we'll make those decisions as we -- in a lot of cases, some of our small sample size of stores that we have that we don't like the way they're performing, and we'll look at it as those leases come up.

And our next question comes from the line of Justin Kleber from Baird.

Jennifer, welcome to the team. I was hoping if you could break down the comp in terms of transactions versus average ticket. Paul, you mentioned UPT, it seems like that's higher, at least in the firearms category. But I'm curious if your comp transactions are also now tracking positive.

I think there's a couple of ways we can look at it as we think of it from overall and based on how 70% of our purchases start online and then end up in the stores that we feel good from a transactional count where that true BOPUS is living today and the performance of that. And we continue to get strength there. And as we look at the overall position of the company from a sales performance and where we actually track with e-com-driven sales, we outperformed there.

So I think from a transactional count, we like the position we're in and from a growth standpoint and then what it's able to do for the overall performance is kind of how I would share that as we break it down. But I would say both AOV and UPT are up. And that's really saying the team is working from a unit standpoint and being able to add the basket as we get there.

Okay. That makes sense and good to hear. You mentioned, Jennifer, the potential for some tariff-related margin pressure in the back half of the year. I'm curious if you could share what's happening with pricing real time in the stores as tariff impacts start to build. Maybe how much you think retails might go up in the back half of the year? And what sort of unit elasticity you're embedding into your outlook?

Yes. So thank you for the greetings. So kind of how we're thinking about this is the merchants have really done a great job of getting ahead of this and working with our vendors so that we have visibility into cost increases that might be coming our way. We are fairly heavily reliant on MAP pricing. So we do have flexibility to offset some of those tariffs as they come in. I'm sure as you saw the notifications today, there's still so much uncertainty out there on tariffs that we wanted to make sure that we are mindful of them and that we've considered them in our back half guide, but the cat is still out on what's actually going to happen with those.

Yes. And we continue to watch it. I think it's -- what I would add to it is we've seen it and a portion of our pull forward that we had coming into the queue to be able to start a strategic decision on inventory to be able to bring into as we started Q3 and from a timing standpoint to ensure that we were not on the wrong side from a tariff early and to be able to position it to where we were able to bring it in, bring it in prior to peak and then be able to kind of ride this thing down Q3 and Q4 from an inventory standpoint.

So I feel good with what the team has been able to do there. And the low penetration that we have in private label right now at a 3%-ish that we're ringing. And the high percentage of MAP, as Jennifer said, I think gives us a position to be able to manage it as we go to back half and in particular, as we start '26.

Okay. If I could sneak just one more in, that was helpful. Just one more on gross margin. You mentioned the 40 basis point of freight headwind, how did the mix pressure compare to that freight headwind?

Yes. So if you look at our margin by category, all categories were up in margin with the exception of Hunt on a rate basis. Hunt is one of our lower-margin categories. And due to firearms and ammunition, it did impact margin in a negative way from a mix perspective. So really, rates across the board were up. Mix was negatively affected just simply because of Hunt as well as camping being down on the quarter, and that's one of our higher-margin business. So the mix did not offset the higher rates. Really all the improvement was driven by rate.

And our next question comes from the line of Mark Smith from Lake Street.

First off, Jennifer, welcome. Second, I'll apologize if you've hit some of these as I've been jumping between calls here. But I wanted to just hit on the inventory and kind of inventory levels here. If you can quantify or discuss maybe how much was maybe bought ahead of tariffs? And if you -- it sounds like you feel like you're kind of fully stocked maybe a little earlier this year moving into the hunting season and kind of fall compared to other years?

Yes. So the elevated level of inventory was a distinct strategic decision. The company had discovered that previously we had been entering into the market after the seasons had already really kicked off and customers already had their gears. So this year, we're bringing it in earlier, and that's what you saw in the big bump, especially around fish and hunt. But then also that we're going to clear out of it earlier.

When the season starts to wind down, the customer has all their gear. So it makes sense for us to kind of just shift the inventory up closer. And since we did invest heavily in hunt and fish, it paid off. Paul mentioned the comps on the call on how those performed. So feeling it was the right strategy to move. As we move forward to the rest of the year, we will continue to kind of move through the inventory and still expect to be below last year's level by the end of the year.

Perfect. And then I did want to ask, you just called out kind of margin in that hunt category being the only one kind of down percentage-wise. I'm curious just if you can give some insight into consumer behavior within hunt or within primarily firearms and ammo, are you seeing better sales momentum on promotion or lower-priced items? In other words, do you have to be promotional to drive people? Or is the consumer continuing to come out even at, we'll call it, regular price levels?

Yes. So both firearms and ammo do have lower margins in the hunt category, and ammo did outperform the category in and of itself this year. So that really did put a lot of pressure on it from a mix perspective. There has been some pricing that we've -- strategic pricing that we've done in ammo that we think is helping drive sales as well. So we're feeling good about that. And then firearms, we've talked a little bit about it before, but we do have a selection of firearms, and we do see a little bit of pressure in AUR in there.

I think, Mark, I'd just add to that. It's -- I mean, AUR is down about 4% and then units up 4.2-ish, so kind of offsetting each other there, but AUR under pressure, and I think we mentioned that earlier.

Okay. And the last question I just wanted to ask, I know that it's a very small segment, I think, for you guys. But just as we look at potentially increased demand for suppressors or even short barrel rifles with new tax laws and tax stamp going away in January, is there an opportunity as we look at next calendar year to maybe increase sales or inventory in those products?

Yes, we're definitely going to lean into both of the categories that you just mentioned there, but we think huge opportunity and even as we work through the back half of the year from the suppressors and working with our partners on how we look at that. But I think we want to get in a position back half of the year where we're able to get it shipped and take a little bit of that noise kind of waiting until the beginning of next year, but we think we have an opportunity in Q4 to be able to get it shipped directly to the home, not carry the working capital as we work with our partners in doing that and take advantage of what I think will be a hockey stick next year as we think of suppressor sales in particular.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Paul Stone for any further remarks.

Thank you for joining the call today, and thank you to all our passionate outfitters around the country for their commitment to Sportsman's Warehouse. Together, we look forward to providing our customers with great year and exceptional service. Thank you.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Hello, everyone, and welcome to the Sportsman's Warehouse First Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. Now it's my pleasure to turn the call over to the Vice President of Investor Relations, Riley Timmer. The floor is yours.

Thank you, operator. Participating on our Q1 2025 call today is Paul Stone, our Chief Executive Officer; 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 will 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 will now turn the call over to Paul.

Thank you, Riley, and good afternoon, everyone. Before we begin, I want to recognize our team of passionate outfitters across the country. Every day, they deliver on our promise of great gear and exceptional service. This remains the cornerstone of our strategy as we continue to execute our turnaround plan to transform Sportsman's Warehouse for sustained profitability and growth. On our last call, we outlined the next phase of our business transformation, focused on returning to same-store sales growth and improving operating margins. Rebuilding our foundation as a leading outdoor retailer hinges on disciplined execution across 4 key areas: one, inventory precision, ensuring we win the seasons by being narrow and deep in hunting and fishing to improve our in-stock levels in the 20% of key products that drive 80% of our sales; two, local relevance, empowering our talented store outfitters to leverage their deep expertise and community connections to deliver the hyperlocal knowledge our customers appreciate; three, personal protection, establishing Sportsman's Warehouse as the authority in personal and situational safety; and four, brand awareness, reinvigorating our brand and engaging customers to establish our position as the most convenient, trusted destination for outdoor gear and expertise. I'm proud of how our team executed against these key initiatives in Q1, delivering our first positive year-over-year sales comp in nearly 4 years. Despite ongoing consumer macroeconomic pressures and a later start to the spring selling season, first quarter sales were up 2% compared to last year. Notably, again this quarter, our firearms unit sales significantly outpaced the adjusted NICS data, suggesting we outsold the industry and continue to capture market share. Although the adjusted NICS declined 5.4% in Q1, our firearm unit sales increased nearly 7% over last year. While firearm customers continue to trade down, AUR for Q1 decreased 8%, compared with last year. We've engineered our assortment to capture demand for value-priced firearms and refined our accessory mix to drive basket growth and higher attachment rates. We also achieved positive sales comps in Q1 in most core categories, including firearms, clothing and footwear, ammunition, which was up 3%, and especially fishing, which was up 11%. Importantly, fishing was the first category we addressed through our new merchandising strategy, the 2-year comp stacked growth of 12.3% validates that when we get the right product in the right place at the right time and market in the right channel, the results follow. While camping sales were down, we believe this was largely due to the later spring and the timing of Easter. We are well positioned from an inventory standpoint with strong in-stocks in our key departments. In fact, sales were up while inventory was down in many core categories as we continue to adapt and refine our assortment to meet the changing needs of the customer. We continue to build out bench strength in our merchandising group to further align our merch refinement strategy to the needs of the customer. Our e-commerce business also posted a positive comp, up 8% over last year and outpacing the overall business. This growth is being fueled by our new digital-first marketing strategy and an improved omnichannel customer experience, which is delivering higher engagement and transaction growth. The improvement across our business was primarily driven by improved in-stocks on the key items, including depth in our top sellers, on-time readiness with in-store merchandising and e-commerce channels for the early spring seasons, particularly with fishing, and a strategic shift to everyday low price on core ammo calibers and other consumables that drive in-store and online traffic, where we saw a 12% increase in ammo unit sales during the quarter. I'm especially encouraged by our seasonal readiness and how far we've come in localizing our merchandise assortments and geo-targeting our marketing messages. For example, in markets like Alaska, where we were historically late to key seasons, we are now better aligned with local expectations, including depth in key items, and it's showing in our results. We are also seeing positive customer feedback, which we believe is largely driven by our improved in-stock performance and the service provided by our store outfitters. Early in Q1, we made proactive decision with select vendors to pull forward spring and summer inventory in categories impacted by tariffs, particularly in fishing and camping. While this temporarily elevated our inventory levels, it ensures we are well stocked in our key goods heading into these peak selling seasons. We'll continue to apply this approach in Q2 to ensure we're prepared for the critical hunting and holiday seasons. Importantly, we continue to anticipate ending the year with lower total inventory than last year and generating positive free cash flow. Jeff will speak more to this in his remarks. On the personal protection front, we are making significant progress to stand as the authority. We recently launched the Safety Outpost on our website, a curated experience focused on home defense and situational awareness. This signals our commitment to a major growth category that others have largely ignored, but our customers increasingly expect us to lead. To underscore our commitment, we recently launched a month-long campaign with Springfield, one of our top firearm brands in the personal protection space. In early May, we soft-launched the less lethal side of our personal protection strategy with our partner, Byrna. 11 stores now feature full shop-in-shops and 40 additional locations have smaller tailored assortments. All locations offer live fire demonstration capabilities that, from our test pilot, result in significant conversion versus without trial. The early results are encouraging, and we see significant upside as we build out this program. This quarter, we're also launching a new omnichannel brand campaign designed to reignite brand's relevance and reestablish Sportsman's Warehouse as the preferred destination for hunting, fishing, and sports shooting adventures, where great gear and great service meet trusted local expertise. Local is our competitive advantage brought to life by passionate outfitters and the communities they serve. Supported by our trade area and customer insights, this campaign is designed to integrate all marketing channels and reflects the strategic foundation of our turnaround and brand evolution. It's built to reengage former customers, build relationships with new ones, and earn loyalty in a fragmented and competitive market. Despite the ongoing consumer macroeconomic challenges, I remain confident in our strategic plan and the team's ability to execute. Our unique competitive advantage lies in our ability to out-local the big boxes and out-assort the small specialty retailers, delivering a compelling mix of value, quality, selection, and locally-centric personalized service. We are staying disciplined, managing what we can control, variable costs, inventory levels, and merchandise margins. As we execute on our strategic initiatives, we are confident that this will translate into continued sales growth, improved operating margin, and further debt reduction in 2025. With that, I'll now turn the call over to Jeff.

Thank you, Paul, and good afternoon, everyone. I'll begin my remarks today with a review of our financial results for the first quarter of fiscal 2025, followed by an update on our balance sheet, inventory strategy, tariffs, and finally, a review of our full year outlook for 2025. Net sales for the first quarter were $249.1 million, a 2% increase from $244.2 million in the same period last year. This marks a strong start to the year and reflects continued momentum from our improved Q4 performance. Our positive comp sales underscore the early success of our strategic initiatives, specifically improved in-stock levels across core categories and our refined omnichannel marketing strategy, which is driving more targeted customer engagement. Gross margin for the quarter was 30.4%, up 20 basis points from 30.2% a year ago. This expansion was largely driven by favorable mix and rate improvements in our fishing business, which carries a higher gross margin profile. That said, this gain was offset by increased freight expense tied to our strategic inventory pull forward in anticipation of higher tariffs and changes to international trade policy and to ensure we were fully stocked for the key spring and summer selling seasons. This action resulted in an estimated 50 basis point drag on margin in the quarter, an intentional tradeoff that positions us to deliver better full-price sell-through during peak selling seasons. SG&A expenses were $95.3 million, or 38.2% of net sales, versus 38.6% in the prior year. This improvement in SG&A leverage reflects our continued focus on expense discipline, simplification of the business, and higher sales productivity. As we move through the year, we will continue to aggressively manage controllable expenses while investing in customer-facing areas that directly drive omnichannel traffic and conversion. Net loss for the first quarter of fiscal 2025 was $21.3 million, or negative $0.56 per diluted share, compared with a net loss of $18.1 million, or negative $0.48 per diluted share in the first quarter of the prior year. Adjusted net loss in the first quarter was $15.6 million, or negative $0.41 per diluted share, compared with adjusted net loss of $17.8 million, or negative $0.47 per diluted share in the first quarter of the prior year. Adjusted EBITDA for the first quarter was negative $9 million, compared with adjusted EBITDA of negative $8.7 million in the first quarter of 2024. As we head into the stronger selling quarters, we expect to generate positive EBITDA in the second half and full-year improvement. Turning now to tariffs and inventory. Total inventory at the end of Q1 was $412.3 million, up from $391.6 million in the same period last year. This increase reflects a strategic decision to pull forward approximately $20 million of inventory ahead of rising tariffs and to ensure we are fully prepared for the spring and summer seasons. This was not an across-the-board build. We focused on buying core items, high-turning products, and seasonally relevant merchandise in categories like ammunition, fishing, camping, and personal protection, areas where customer demand is more predictable and where being in-stock matters most to our customers. We believe this was a low-risk investment, given these are high-turning products. We will also continue to look for low-risk inventory investment opportunities as we navigate the changing tariff environment. During the quarter, accounts payable increased disproportionately from the pull forward of inventory, resulting in a higher-than-planned balance. We expect that this will normalize in the second quarter. We also made meaningful progress reducing SKU count and eliminating underperforming vendors. Compared to last year, we've reduced total active SKUs by approximately 20%, helping us simplify the assortment, improve inventory turns, and drive margin improvement over time. This is a simplification and efficiency strategy we will continue to pursue throughout 2025. Looking ahead, we continue to expect to end the year with less total inventory than 2024 while maintaining the right products in the right stores at the right time. Our buying discipline has improved, and we are much better positioned to flex into peak periods. With a focus on SKU reduction, we are confident that we can drive sales, increase turns, and use less working capital. In regards to liquidity, we ended the first quarter with a debt balance of $166 million and total liquidity of $122.1 million. Our liquidity position remains strong, and we continue to actively manage working capital to ensure flexibility as we navigate through the year. Inventory efficiency and tight control of variable expenses will remain top priorities. As we move through 2025, we remain committed to generating positive free cash flow and using excess cash to reduce debt and strengthen the balance sheet. Finally, let me speak to our full year guidance. We continue to focus our efforts on executing our strategic plan for 2025 and closely managing our variable expenses. Despite the macroeconomic headwinds and downward pressure from tariffs, we are reiterating our guidance for the full year. We continue to expect fiscal 2025 net sales to range between down 1% to up 3.5% compared to 2024; adjusted EBITDA to be between $33 million and $45 million, driven by modest gross margin improvement and disciplined expense management; and capital expenditures between $20 million and $25 million, primarily relating to technology investments to improve store service and merchandising productivity, as well as our normal store maintenance. In summary, we are executing with urgency and discipline. We are seeing early validation of our strategy in the form of improved comp trends and better inventory execution. We remain focused on generating positive free cash flow for the year and returning Sportsman's Warehouse to consistent, sustainable growth. That concludes our prepared remarks today. I will now turn the call back to the operator to facilitate questions.

[Operator Instructions] One moment for our first question, please. And it comes from the line of Ryan Sigdahl with Craig-Hallum Capital Group.

I want to start with comp trends. Very nice to see that positive comp overall for the quarter, first one in 4 years. And curious if you could break that down by month and then also if you could extend that into May, what you've seen.

Yes, Ryan, great question. It's Jeff. Thanks for joining us today. So as we broke down Q1, saw good trends in February. We had an ad shift that really moved demand from March into April. So March versus an LY comp was a little pressured by just some of the change in ad that we had, but April was really strong, happy with the performance in April and that shift that we made to move the ads more in line with Easter and the start of summer. And then the trend, I'd say, has stayed strong as we've moved into May, into the warmer weather, into the strong fishing season. So happy with the trends that we've seen thus far in May.

Are you willing to say if that's positive when you say strong in May?

It is a positive comp for May. It continues to be positive for the month of May.

Very good. Then just curious, within the stores, are you seeing primarily increased foot traffic, or is it due to the inventory assortments and the narrow and deep in certain categories that you're actually getting basket sizes to increase here?

It's a mixture of everything. We're seeing better traffic trends, transaction trends being positive on a year-over-year basis. We're seeing higher basket size from a UPT perspective and higher AOV on the average order value of the basket. So I'd say the strategy, the attachment, what we're doing in terms of in-stocks, it's got the key metrics that we're looking at firing in a direction that we're really pleased with, given the tough consumer environment that we're operating in.

And I think I would just add, transactions continue to build from April as we go into May and then the e-comm performance continues to be a big part of the message from just a total omnichannel, which is helping. You get an 8% lift in Q1 on that. That's driving folks to the stores. So we like the way that looks.

Last one for me. You mentioned Byrna, the shop within the shops, less lethal option there. But curious if there's opportunity to lean more into shop within a shop, highlight brands. I know there's been a focus to do a little bit more of that, but any way to really emphasize the key brands that you're leaning into in a bigger, better way than you currently are?

Yes. I would say from a personal protection standpoint, we have the opportunity. We think we just continue to have upside based on what we're seeing from unit performance in firearms, and in particular, with handguns and what's happened within that subcategory over the last few months, we think we have great opportunity from an accessory standpoint, work with our partners to really blow out what that looks like to drive the overall basket. And then we do have even, as we think about it from shop-in-shops, as we start to build out the personal protection story even greater as we go through the year, but other partners to be able to join along with us as we really tell the story around personal protection, it's not isolated to one subcategory, nonlethal from a [ launching ] standpoint, but we can really expand that both from a lethal, from a technical gear, and build out a true total, I think, story as we think about the overall personal protection there. But a huge opportunity to continue to build upon some of the momentum we have with shop-in-shops there.

Our next question comes from Mark Smith with Lake Street.

First question for me, just wanted to clarify, it sounds like you pulled forward about $20 million in inventory here in Q1.

Yes. As we stated in our prepared remarks, Mark, we looked at addressing some of the headwinds or uncertainty with tariffs and made a strategic decision to pull forward about $20 million of inventory. As we highlighted, heavy penetration in that pull forward in the hunt category, firearms, ammo, some of the accessories, fish -- a lot of fish product was brought in to preempt the spring and summer seasons, and then just a little bit in the camp category as we were looking at the exposure there to make sure that we were in stock on the items that truly matter, have a high turn, know that we can sell. So we looked at it as a very risk-free investment and was able to preempt some of the uncertainty that's in the market right now.

Okay. And as we think about sales mix, you gave a good breakdown on gross profit margin on things that helped and where you saw some pressure. But did sales mix have a negative impact on gross profit margin here in Q1?

Yes. We did penetrate heavier on the firearm and ammo side than we normally would have, especially with the late start on Easter holiday. Easter fell the latest it's been since 2017 falling at the end of April. So saw a slow start to the camping season. We hopefully will see trends change as we move into Q2, and are optimistic and confident in where we have the merchandise and what we have in terms of performance there. But I would say that Q1 was pressured by heavy penetration in firearms and ammo. But that's what our strategy is leaning in towards heavy, and we're happy with our performance versus the adjusted NICS and taking market share in Q1.

And last one for me. You talked about, I guess, confidence in lowering inventory year over year here by the time we get to the end of the year. I'm curious, your thoughts around debt and the balance sheet and your ability to repay some debt this year and knock that down?

I'll start by just saying, Q1, we came in with a pull forward. Q2, we're going to continue to see inventory come in, in Q2. We're going to hit our hunt season Mark for the first time in a long time to be able to have the in-stocks. I feel we missed it last year and to be able to hit the season with the start date we wanted to. So I think it gives us an opportunity in Q1, Q2 as we build here, then Q3, Q4 to be completely clean and to be able to run that inventory level down where we've been pushing those inventory dollars into Q3, causing a quick pullback in Q4 alone. I think we're going to have all of Q2 to be able to capture the sales on the top side of it and then be able to pull the inventory down at the right appropriate level as we get through Q3 and Q4.

Yes. Mark, I would just add from a free cash flow standpoint, we feel confident in our ability to generate positive free cash flow. Ultimately, our top priority is applying any excess cash flow generated to a debt paydown. So we'll use the free cash flow we generate by the end of the year in order to pay down debt.

Our next question comes from Matt Koranda with ROTH Capital Partners.

Congrats on the positive comps. I guess just wanted to explore the reiteration on the guide. You mentioned there's still some pressure from tariffs. Maybe can you just talk about what you built in, in terms of like the unmitigated dollar pressure from tariffs that you're seeing, or that you expect as of now? I know it's a fluid situation. And then are we taking price to offset some of that unmitigated impact? Or are we offsetting through efficiency actions? Maybe just talk a little bit about what you're doing to mitigate the gross impact of tariffs.

Yes. I think the thing I would say on that, Matt, we're constantly assessing it and looking at pricing down to the item and SKU level. And this is something that we consistently do, and we've got a better cadence than we ever have. And I think we're fluid here, but with the ability to be able to make adjustments and change prices as needed as we go there. And then I think the thing I would just touch on, too, is that we'll continue to balance the everyday-low-price, really working on the efficiency of the ammunition. We've seen that from a customer sentiment that we're at an all-time high on Net Promoter Scores and the pricing action that we've taken, I think, correlates hand-in-hand with the pricing strategy that we've put on ammunition to be able to drive traffic to the store. And then our opportunity is to continue to work on the attachment piece of it. We like what it looks like from a UPT. We're at all-time highs now and continue from an AOV standpoint. But I think it's going to be fluid. We like the actions we took in the first half -- first half of Q1 to be able to pull forward any private label that we had, in particular, in camp, to mitigate any risk that we had there. But I think, as you said, it's going to constantly be fluid as we navigate this just like everybody else.

Yes, Matt, I'd say on the guide front, we feel confident in the guide that we published, barring any drastic reduction in consumer health. That can obviously have a significant impact on the business. But outside of those macroeconomic pressures, we feel confident in the guide and reiterating the guide for the quarter.

Does the pull forward in inventory mean we likely shouldn't expect any real tariff impact to the P&L until probably at least the partway into the third quarter or the fourth quarter of this year, given that we've brought in unburdened inventory?

Yes. I do think it helps prevent or get ahead of the game on some of that, where we feel comfortable from an in-stock perspective that we've brought in enough goods to last us through the summer selling season and probably into early fall.

Yes. In particular, camp and fish, I mean, fish, best position we've been in from a geo and from a localization standpoint. And the team really got in front of that, Matt, to ensure that we're going to be able to have and be at the pricing we need to and to be able to get through the season in a really clean position. So that's what's in front of us right now, and we feel good with the positioning we have there as we go through the first half of the year.

And then maybe just last one, if I could sneak one more in. You mentioned in the release significant outperformance of NICS. Is that on a unit basis or dollar basis for the quarter? I guess we'll get a little bit more information in the Q, but any callouts on what's driving that outperformance relative to the industry?

It would be on a unit basis. We're significantly outperforming NICS in the terms of greater than double-digit versus what they reported. And I know that the May NICS numbers just came out. I would tell you that, that trend has continued into May, with us outperforming significantly on a unit basis. As Paul mentioned in his prepared remarks, we are seeing pressure from an AUR perspective, but we're meeting the customer with the value they demand. We've made that strategic move to make sure we're assorted correctly. We got ahead of that. And so we feel very confident in our strategy around making sure we have the goods and the product that the customers are attracted to in the price point that they want to buy it at.

Thank you so much. And with this, I will conclude our Q&A session and pass it back to Paul Stone for final remarks.

Yes. Thank you for joining the call today. And thank you to all of our passionate outfitters around the country for their commitment to Sportsman's Warehouse. Together, we look forward to providing our customers with great care and exceptional service. Thank you.

Thank you. And this concludes our program for today. You may all disconnect. Have a great day, everyone.