Focus on core strengths in hunting and fishing, improved inventory, and local strategies are expected to drive revenue growth and enhance margins.
Emphasis on omnichannel retail, e-commerce improvements, and personal protection expansion could boost sales, diversify revenue, and enhance customer experiences.
The company's revenue and margins are under pressure from consumer trade-down trends, sales volatility, discretionary spending constraints, inventory strategy risks, and tariff exposure.

About Sportsman's Warehouse Holdings

Operates as an outdoor sporting goods retailer in the United States.What are the underlying business or industry changes driving this perspective?

Sportsman's Warehouse is strategically focusing on its core strengths in hunting and fishing, enhancing merchandise assortments and improving in-stock levels, which are expected to drive revenue growth and improve inventory turnover in 2025.
The company’s shift to a narrow and deep inventory model, paired with local merchandising strategies, aims to enhance gross margins by reducing out-of-stock situations and minimizing markdowns.
Increased emphasis on omnichannel retail and improved e-commerce platforms are likely catalysts for revenue growth, with the potential to drive higher online and overall sales through enhanced customer experiences.
Initiatives to strengthen brand awareness and enhance local engagement are anticipated to increase customer traffic, supporting revenue growth and potentially improving operating margins.
Focus on expanding the personal protection category, including handguns and related accessories, is expected to contribute to revenue diversity and attract a broader demographic, while leveraging partnerships to maintain competitive pricing.

Sportsman's Warehouse Holdings Earnings and Revenue Growth

How have these above catalysts been quantified?

Analysts are assuming Sportsman's Warehouse Holdings's revenue will grow by 1.6% annually over the next 3 years.
Analysts are not forecasting that Sportsman's Warehouse Holdings will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Sportsman's Warehouse Holdings's profit margin will increase from -3.0% to the average US Specialty Retail industry of 4.7% in 3 years.
If Sportsman's Warehouse Holdings's profit margin were to converge on the industry average, you could expect earnings to reach $59.8 million (and earnings per share of $1.53) by about August 2028, up from $-36.2 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 3.2x on those 2028 earnings, up from -3.1x today. This future PE is lower than the current PE for the US Specialty Retail industry at 19.2x.
Analysts expect the number of shares outstanding to grow by 1.24% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

What could happen that would invalidate this narrative?

The company reports a trade-down environment for firearms, with consumers opting for more affordable options, which is pressuring sales dollars in the category. This trend could negatively affect overall revenue and gross margins.
The company experienced a decrease in net sales and same-store sales for Q4, and although there's an improvement, there's still volatility in sales performance that could impact revenue stability.
The outdoor retail market is experiencing pressure on discretionary spending, and the company notes a need to manage consumer price perceptions with everyday low pricing, which might strain net margins if not managed carefully.
While aiming to improve inventory efficiency, the company's transition to a narrow and deep inventory strategy entails risks related to out-of-stock situations during key seasons, potentially affecting revenue from lost sales opportunities.
The company’s exposure to tariffs, albeit small, poses a risk of cost increases that could impact gross margins if passed down through the supply chain from vendors.

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $3.45 for Sportsman's Warehouse Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $4.25, and the most bearish reporting a price target of just $3.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.3 billion, earnings will come to $59.8 million, and it would be trading on a PE ratio of 3.2x, assuming you use a discount rate of 12.3%.
Given the current share price of $2.9, the analyst price target of $3.45 is 15.9% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Hunting And Fishing Focus And Omnichannel Retail Will Boost Efficiency

Shared on01 May 25Fair value Increased 20%