- Same-Store Sales Growth: 2.2% YoY increase for third consecutive quarter, indicating sustained retail demand.
- Gross Margin Improvement: 32.8% gross margin, up 100 bps, driven by inventory efficiency and lower freight costs.
- Adjusted EBITDA Growth: 13% rise to $18.6M, reflecting operational leverage despite SG&A pressures.
- Inventory Reduction: $14.1M YoY decline (3.2%) and $20M drop from Q2 to Q3, enhancing capital efficiency.
- Category Performance: Fishing (+14.1%) and hunting/shooting (+5%) growth, with personal protection driving new customer acquisition.
Operational Highlights
The company saw growth across various categories, with hunting and shooting sports increasing 5%, fishing growing 14.1%, and apparel growing 1.4%. The company opened a new store in Surprise, Arizona, with a unique personal protection-focused format, which has been a success with accretive margins. Personal protection, including non-lethal options like tasers, is seen as a strategic pillar, and the company plans to continue to expand it.
Challenges and Opportunities
The company is navigating a challenging consumer environment, impacted by a prolonged government shutdown. Q3 has been challenging, with same-store sales down high single digits, but inventory down double digits. The company is managing this trend and sees an area of opportunity in inventory and assortment, which will be a focus for 2026. The camping category was hit hard, particularly in inventory reduction, as the company redeployed working capital dollars.
Valuation and Outlook
With a P/E Ratio of -1.79 and an EV/EBITDA of 37.27, the market is pricing in significant growth expectations. Analysts estimate next year's revenue growth at 1.5%. The company revised its full-year guidance due to a tough Q4 environment, expecting net sales to be flat to up slightly, and adjusted EBITDA to be in the range of $22 million to $26 million. The company is focused on inventory efficiency, tight control of variable expenses, and improved profitability, with preliminary thoughts on margin expansion for fiscal 2026.
Margin Expansion Plans
The company is focusing on efficiency and profitable growth, managing inventory and margins, and continuing to evaluate its cost structure. With a current P/S Ratio of 0.05, the market is pricing in a relatively low revenue multiple. The company's plans to be more aggressive with promotions, especially in the hunt and shoot category, which is a key driver of sales, may help drive growth and improve margins.