Operator: Good day, and thank you for standing by. Welcome to the Sportsman's Warehouse Second Quarter 26 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question-and-answer session. To ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. I would now like to hand the conference over to your speaker today, Riley Timmer.

Riley Timmer: Thank you, operator. Participating on our Q2 26 earnings call today is Paul E. 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 2000, 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, 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.

Paul E. Stone: 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. We were pleased to report same store sales in the second quarter were essentially flat compared to last year. And in line with our expectations. In the quarter, we experienced headwinds as our core customer continues to be pressured by tough macroeconomic conditions. Including fuel prices that remain persistently elevated. Despite these pressures, I am proud of how the team responded with speed and quickly adjusted to meet the customer where they are. We moved with urgency to reinforce our value proposition which included a more promotional cadence than originally planned to improve performance in our key pursuits. Our customers are passionate about the outdoors. And they trust Sportsman's Warehouse Outfitters for local knowledge and the right advice. Backed by a relevant assortment of the name brands they count on. So they head out prepared for a successful day on the water or in the field, they are willing to spend on that passion. And we are further positioning ourselves to be the retailer of choice as they gear up for their fall pursuits. Our second quarter sales in our hunting and shooting sports department increased nearly 7% versus last year, This sales growth was led by firearms and ammunition, where demand remains strong partially influenced by event driven demand. Sales in our fishing department decreased about 2% in Q2. But are up nearly double digits on a 2 year comp stack. Drought conditions negatively impacted our fishing sales in key Western states, To give you a regional perspective, our Western stores were down mid single digits while our Eastern stores were up mid single digits in the quarter. This headwind pressured our Q2 results. But inventory levels are bought accordingly for the back half and we continue to see a long term growth opportunity in this category. Our Camping and Softlines department experienced declines in Q2, As we talked about last quarter, our inventory position in these categories is clean. Our fall assortment is better aligned with the products and brands that support our core pursuits of hunting, fishing, and shooting and personal protection. We are encouraged by the improved August trends in these 2 departments, And while they have not turned positive, we believe they are moving in the right direction. Close management of inventory remains a key priority. And total inventory is down over $44 million compared to last year. I am pleased with how the team is managing our flow of merchandise to ensure we are regionally and seasonally relevant and timed to meet the shopper demand. Our core in stocks are significantly improved, and our category level inventory is the healthiest it has been in many years. This will remain a focus as we expect to further improve terms and inventory efficiency in the balance of 2026. Our e commerce business grew nearly 3% in the quarter, led by Fishing, up 10% and hunting, up 6% and growing faster than our total sales for the ninth consecutive quarter. As a true omnichannel retailer, we see customers shop us both in our stores and online, So a better website experience drives traffic and sales into the store, not just online. Providing the customer with a tailored online assortment and a web that is easy to navigate and shop is an important part of a winning experience. And we continue to make meaningful improvements on both fronts. We are also upgrading our search and shop functionality, which will make it faster and easier for customers to find the right gear for their pursuit. By combining an improved ecommerce, solution based experience with in store expertise, we believe we can expand gross margins in the hunting and shooting sports department while reinforcing our outdoor authority. We continue to advance the reinvention of our loyalty program. Where we see meaningful headroom to grow both total membership and loyalty sales, with roll out on track for early 27. We are restaging the value proposition itself. Not just fine tuning the program we have, it is important that we give our best customers a reason to consolidate more of their spend with us. More customers worth more retained longer is how we build a recurring higher margin sales base. Just as important, the program turns our shopper data into insight we can act on. Putting it in the hands of our merchants and marketers to drive sharper decisions across the business. That work has already identified a repeatable trip driver: our core pursuits. We have built the business case and are executing against it in the back half. Given we are a seasonal business, Q3 and Q4 are the 2 largest and most important quarters for our business. With Q3 centered around hunting pursuit and Q4 focused on holiday. We believe we are well positioned with curated assortments and improved seasonal merchandise to ensure localization across our fleet of 147 stores. We also believe we have built more value into our key holiday gift giving items with compelling price points for a customer who is shopping carefully this year. Looking ahead, our customer remains under pressure with elevated fuel cost further constraining their discretionary spending. We remain optimistic about our position in the market and believe we have a differentiated omnichannel model to drive stronger returns across the business. Finally, I want to reiterate my confidence in our back half plan. We do not control the macro. We do control our assortment, our in stock and our channels. And on every 1 of those, we are in a stronger position than we have been in years. Here is why I have that conviction and what the customer is already telling us. First, in stocks. This key metric on our core products has improved from about 50% 2 years ago to over 80% today. The customer can now visit our website or walk into a store and find what they came for. Second, the healthiest inventory we have had in many years. We have spent the last couple of years selling down inventory in camping, apparel, footwear and even firearms where we did not have the right assortment or were carrying aged merchandise that was tying up much needed working capital dollars. That sell down is now largely behind us, providing us the working capital needed to buy into both core products and new products in the categories I just mentioned. That product is now landing and we believe a much improved assortment is a back half tailwind for the business. Third, new and more relevant merchandise, We have a strong assortment for both the hunting and holiday season, including unique gift giving items. We have been capital constrained the last 2 years and now have these volumes in motion and ready for the relevant regions and seasons. Fourth, ecommerce. That business has grown faster than total company sales for 9 consecutive quarters. With over 70% of online orders picked up in store that digital growth converts directly into store traffic. In addition, we reduced debt by $26 million and took over $44 million of inventory out of the business year over year strengthening our balance sheet 2 years of disciplined work by our team, and finally, where our work is furthest along, the customer is responding. Hunting and Shooting Sports grew nearly 7% in the quarter and fishing is up nearly double digits on a 2 year basis. We believe these actions strengthen our competitive position allowing us to drive long term profitable growth and generate free cash flow to further pay down debt. With that, I will turn the call over to Jennifer.

Jennifer Fall Jung: Thank you, Paul, and good afternoon, everyone. Net sales for the second quarter were $295.6 million a 0.6% increase from $293.9 million in the same period last year. Same store sales in Q2 were essentially flat versus last year. Our performance was driven by 6.7% same-store sales growth in our hunting and shooting sports department, led by increased sales and 1% in our optics, electronics, accessories and other departments. Our other categories declined in Q2, reflecting continued pressure on The U. S. Consumer and drought conditions in the Western U. S, partially offsetting our overall sales growth. Within camping clothing and footwear, and firearms categories, we strategically began reducing assortment and overall inventory levels over the last couple of years as we look to improve these categories' performance. With the cleanup of inventory now behind us and as we come into the fall season, a new fresher assortment is landing, and we believe these categories are set up for success in the back half of the year. Gross margin for the quarter was 32.5%, a 50-basis-point improvement compared to 32.0% in Q2 last year. Although we mixed higher in our hunting and shooting sports department in Q2, which carries a lower overall margin and we were more aggressive with our promotional cadence to offer value to the customer we were able to offset margins through more disciplined inventory management, reducing overall freight costs and a 1-time tariff benefit. We made a strategic decision to use the tariff refund to reinvest back into providing value to the consumer. SG and A expenses were $97.1 million or 32.9% of net sales versus $97.2 million or 33.1% in Q2 last year. The decrease in SG and A expense was primarily driven by a decrease in depreciation expense and continued cost management discipline. Net loss for the second quarter was $4.4 million or -$0.11 per diluted share, compared with a net loss of $7.1 million or -$0.18 per diluted share in the second quarter of the prior year. Adjusted net loss in the second quarter was $3.1 million or -$0.08 per diluted share, compared with the adjusted net loss of $4.7 million or negative $0.12 per diluted share the second quarter of last year. Adjusted EBITDA for the second quarter was $8.7 million compared with adjusted EBITDA of $8.3 million in the second quarter of 25. Turning now to the balance sheet. Total inventory at the end of Q2 was $399 million down $44.5 million or 10% versus Q2 of last year, while still delivering a flat sales comp for the quarter. The decrease in year over year inventory is part of our ongoing inventory efficiency strategy and the refinement of receipt timing to match seasonal demand. We continue to expect average inventory to be lower throughout the year, as we improve seasonal inventory timing and further eliminate slow moving inventory, resulting in better overall churns. We continue to expect to end the year with less total inventory than 2025. We believe the SKU reduction initiative is now largely behind us, and we are confident we have the right go forward assortment to grow the business. In regards to liquidity, we ended the second quarter with a net debt balance of $169 million a decrease of $26 million compared to Q2 of last year. And total liquidity of $105 million We believe that our liquidity position remains strong, and we continue to actively manage working capital to ensure flexibility as we navigate throughout the year in a tough consumer environment. We recently amended our $45 million ABL term loan and extended its maturity to June 2031. We also amended our revolving credit facility. Aligning the commitment to our operating needs of $315 million and extending its maturity to the same date. Actions that provide a longer dated capital structure and continued financial flexibility. Tight management of our 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. As we move into the back half of the year, we are optimistic about our plan and the strategic initiatives underway to support growth. While we expect consumer headwinds to continue to persist, including ongoing elevated fuel prices, we are reiterating our guidance for the full year. We continue to expect fiscal 26 net sales to range between down 1% to up 1% compared to last year. Adjusted EBITDA to be between $30 million and $36 million driven by better gross margin performance continued expense management and disciplined inventory management. And capital expenditures between $20 million and $25 million primarily related to technology investments to improve store service and merchandising productivity as well as general store maintenance. That concludes our prepared remarks today. Will now turn the call back over to the operator to facilitate questions.

Operator: Thank you. To withdraw your question, please press 11 again. 1 moment for questions. Thank you for joining the call today. And our first question comes from Mark Smith with Lake Street. You may proceed.

Mark Smith: Hi, guys. Wanted to ask a little bit about camping and soft line categories here. Know, overall, inventories look really good, but I am curious how you feel in your comfort levels with inventories in those categories.

Jennifer Fall Jung: Hey, Mark. This is Jennifer. So we are feeling really good about our inventory levels. We spent the past year plus cleaning up the assortments, making sure that we were not over assorted. Getting, putting bigger buys on our core category. So feel really Q2, the performance was not there, but we did not expect it to be. Q3 is when we really feel the assortment will be back in check. So, yeah, we are feeling good at where we are. Terms of the inventory levels, they are very clean. We think the majority of our work around assortment and SKU reduction has kind of been done, and now it is just really optimizing on a seasonal basis.

Mark Smith: Okay. And then within that, you know, it sounds like you guys feel pretty good about kind of your outlook for some of these categories in the second half. Given still pressure on consumers, I am curious maybe what gives you that confidence in second half?

Paul E. Stone: Yes, Mark. I think where we were placed in camp last year with really the cleanup and burn down on a lot of our non-go-forward merchandise that we had last year. And with the buys this year and the timeliness of the buys, we have already started to see it in August. And even as we start September, but huge improvement in camp apparel. This will be the first time where we have really put clearance in the best position the company has ever seen and really allow us to be able to have the newness to be able to flow through in those categories. So I think the expectation and based on what we are seeing now and you know, I would just add, we are really first time ever we have been able to be clean and seasoned on these products and to be able to hit the next season. With the curated product and assortment that we need to be able to drive the sales, but we feel very optimistic with the back half and to see improvements in our attached categories.

Mark Smith: Okay. And maybe 1 more for me. Just as we think about your performance in hunt shoot, obviously, it was it was positive, up about 7%. Curious kind of how you feel about that category versus mix and versus trends? And then if you can give us any insight into just-- pull up, looks like, next data, up 2%-plus here, adjust mix in August. Kind of curious what trends you are seeing today?

Paul E. Stone: Yeah. I think first, I mean, both firearms and ammo extremely strong. Firearms up 8% and ammo is up nearly 11% on the Q. So we like where that is heading and what it looks like We knew as we looked at next, we are looking at it more on 2 year stack. Last year, we had 1 really launch personal protection and have some key supplier partnerships as we made those launches. To really set up that program around personal protection and to I mean, we had to have the inventory, but we have really pushed that we are aged firearms. And we knew that we were getting some tailwind from that as we went through that cycle last year. So we had to level it out, look at it on a 2 year basis. And where it looks on a 2 year, we really like where it is at. And you are always gonna have micro events that are gonna happen to pop up and you know, within a Q or outside of a Q, but the consistency of where we are on a 2 year stack looks really good.

Mark Smith: Perfect. Thank you.

Operator: Thank you. Our next question comes from Matt Koranda with Roth Capital. You may proceed.

Matt Koranda: Hey, guys. Good afternoon. Maybe could you dimension for us the size of the tariff refund benefit in the quarter? And then you said, I think, you invested in price. Any particular categories, I guess, where that showed up most acutely, I guess?

Jennifer Fall Jung: Yeah. So if you look at the quarter as a whole, you know, it is pretty evident. Fuel prices hit in May. That was probably our toughest month of the quarter. And then it got progressively better as we went through. But firearms and ammo is where we heavily penetrated. As we just noted, camp and apparel were lagging behind, you know, bigger categories and fish just due to weather, you know, dinner performance we would have expected. So given all the competition out there being very discounted and given that we know our consumers stress, we strategically decided to use some of those light refunds to kinda offset some more value that we could offer to our consumer just in a very value oriented environment. You know, it for us, you know, we are we are 3% private-label goods. You know, if you if you look at just kind of the nonfirearm categories, it is not a big number for us. It did not it was not, impactful enough to make us a statement on it last year when the tariffs were hitting. So it is it is nominal for us, but it did help offset some of that discount that we are allowed to give to keep the quarter moving when the consumer was really tight. Thanks for the question, though.

Matt Koranda: Yeah. No. Okay. I appreciate that, Jennifer. Thank you. And then yeah. And you kinda maybe preaddressed 1 of the questions I wanted to ask. But I guess maybe asking the demand cadence in a different way. What are you seeing from your consumer, terms of behavioral changes in response to elevated gas prices? Any discernible changes that they have been making or that you can discern throughout the quarter and into August?

Jennifer Fall Jung: Yes. So it is a great question. What we are seeing, I mentioned the gas and that hit in May. That was, again, our toughest quarter of the month and it got progressively better throughout the quarter. In terms we are seeing high kind of penetration in consumables, whether it be lures, whether it be ammo. So the consumer is really continues to purchase the consumable aspect of our business. A little bit of trade down, and some of it might be simply because of the weather dichotomy between the West and the East where fish performed very well in the East. Not as well in the West where we are strapped for water and we had tough weather. But, you know, the rods and reels, a little bit of a trade down there to more of a basic model versus, you know, the higher end ones. But, you know, those are kind of the maybe the 2 most notable consumables and a little bit of trade down. Overall, our AOV is up. AUR is relatively flat. So we are still getting decent share of wallet for sure. Just nuances in terms of how they are choosing to spend their money. At the end of the day, they continue to, 1 thing they are not giving up is their firearms and their ammo. They continue to spend their discretionary income there.

Matt Koranda: Okay. Alright. That makes sense. And then maybe just you mentioned some improved trend in August. I think that was in particular in apparel, but maybe just if you could just speak to the other categories and any demand trends you have seen, in the August period.

Paul E. Stone: Yes. The thing I would say, Matt, is we are encouraged with what we are seeing in both camp and apparel from where we have been. I think a couple of the things, a couple of the factors as we were hit with tariffs last year and some delay of product that was coming in or some that was pushed completely out based on the uncertainty of the product and the cost of the product that we elected to pass on. That now we are getting those goods flowing and feel really good with what that looks like. And it does align with you know, the pursuits. Like, this is exactly how we wanted to line up, but we knew camp was going to be around the camp pursuits, whether it is the cots, the tents, know, the hunt tent itself. there is a dehydrated food all performing extremely well. And with apparel, we went through 2 years of really just trying to clean, get assortment right, and be able to hit the season. And I think now with the newness that is landing, and what the line reviews have resulted over the last year for the buy The team's done a great job of being able to land product that aligns with the pursuits and puts us in a much better position I mean, a couple nuances we have is you clearly have a Labor Day shift where, you know, that we would have seen that in August that bumps back into this week as we get to the run up of Labor Day, and then you are going to have a nuance of a macro with the Charlie Kirk event that happened. Mid September last year. So we have nuances that happened last year, but we built in a plan this year knowing that we were going to be against it and feel really good with what the team's been able to stand up and to be able to deliver for the back half of the year. High optimism.

Matt Koranda: Okay. that is great to hear. Thanks, Paul. Maybe if I could sneak 1 more in. Maybe just on the cash flow outlook and working capital discipline, it is really good to see the inventory coming down on a year over year basis in the second quarter. Maybe just speak to your level of confidence in sort of reducing inventory balance year over year by the end of fiscal year here. And how we should be thinking about the working capital benefits that come from that?

Jennifer Fall Jung: Extreme high confidence. We review this very frequently with the teams. We know exactly where we are headed. We know, we have our plans lined up. We have our inventory buys that match our promotional cadence. I would say we are in a much better position even than we were last year when we took a big chunk out. But we feel very confident we will be able to go get below last year's levels by the end of the year.

Paul E. Stone: Yeah. I will just say, Matt. I mean, as you think about it, I mean, I have been retail a lot of years. I have never seen really a team be able to stand up a 10% reduction year-over-year over year in inventory and be able to get to a position where you are up for a Q. And as we look at it with confidence going in the back half of the year, this is really a story of being able continue with the new goods to be able to burn down any non-go-forward and to be able to get the blend that we need to and be able to meet the customer where they need at the same time being able to improve turns and reduce working capital. But it is not at the sake of you know, we mentioned in the call that everything that we are taking out of the non-go-forward or SKU reductions, we have been able to put back into our core SKUs to be able to improve what that overall in stock looks like to be able to drive the business forward.

Matt Koranda: Excellent. I will leave it there, guys. Thank you. Thanks, Matt.

Operator: Thank you. Next question comes from Anna Glaessgen with B. Riley Securities. You may proceed.

Anna Glaessgen: Questions. I would like to follow up on the questions around the promotional environment. You noted that the promotional cadence was heavier than expected in the second quarter based on what you are seeing from competitors. Are you expecting that, that persists through the back half?

Jennifer Fall Jung: Yes. We expect given that we-- we cannot predict fuel price but I do not see those letting up anytime soon. And since that is what really pinches our consumer, we do have that expectation for the remainder of the year.

Anna Glaessgen: Got it. And is that concentrated to any particular category in specific, or is it kind of broad based?

Jennifer Fall Jung: I would say it is-- I will not say it is broad based because as we mentioned earlier, clearly, our consumer is still purchasing firearms and ammo. Some of the less attached categories have seen a little bit more pressure. Choose across the industry have been seeing a lot of pressure, but you know, shoes and apparel seem to be the ones that the consumer might you know, think twice about spending. When it comes to the pursuits, they are still very invested.

Anna Glaessgen: Got it. Thanks. And then turning to camp and apparel, it is nice that we have seen some improvement in August. I guess, are you expecting that those categories inflect to positive within the current fiscal year? Or is that more of a 2027 story?

Paul E. Stone: I think expectation is that we see this you know, we are coming off of, you know, both those categories, inventory being down 11% and 14% as we ran through and then finally, being able to put herself in a position to buy towards 1, the holiday and 2, being able to hit newness during the seasonality and the pursuit that is needed, Anna. So I feel comfortable that, you know, our expectation is based on the run rate that we have been running is that we are able to get that to where it is it is flattish to positive. I do not wanna go out on a limb there, but I would say we are extremely confident compared to where we have been and where our expectations are on those categories. And to be able to see margin improvements as we think about the mix, the back half of the year as well.

Jennifer Fall Jung: We will probably see a little bit more recovery in camp prior to apparel just some of the timing of some of the newest Yeah.

Paul E. Stone: I think 3 would Q3 with camp is going to be fast, and then Q4 and then based on our position last year and where we were at. From an inventory standpoint, clearness versus newness. We will I think that is a good call in Jennifer. Q3 first for camp, and then Q4, we start to see apparel follow suit.

Anna Glaessgen: Great. Thanks.

Operator: Thank you. Our next question comes from Mark Smith with Lake Street. You may proceed.

Mark Smith: Hey, guys. Thanks for the time. I just have a couple of quick ones. Is there any change on how you are thinking about any store closure plans since last quarter?

Jennifer Fall Jung: No, not necessarily. We do have 1 store confirmed close on January 31st. We do have another store. it is really-- it is in flux. We have another store that we expect that will have an agreement to close by the 30 first, but it might push into 2027 and a third, probably a little less certain, but, you know, definitely coming soon. And still making traction on negotiations with all the other ones as well.

Mark Smith: Okay. Great. And I am not sure if Matt asked this directly, but are you able to break out the tariff component of the gross margin expansion? And then can you talk about kind of gross margin trends just within the hunting category you know, going forward just kind of in general, in the hunting season? Is there anything that could move the needle way or the other besides just the ebb and flow of promos within firearms?

Jennifer Fall Jung: Yeah. So as I said earlier, the tariff refund was not that significant for us. We only have 3% of our assortment on private label. So we did not call it out you know, or notice it as a headwind, last year. So it is it is really not that large for us. As we think about gross margin go forward, we do see opportunity in the firearms and ammo categories. it is a little different in ammo because we are kind of that is more of a mix shift because as we do more bulk ammo, you will see a little bit more pressure on the rate, but, you know, more margin dollars, obviously. But as we continue to work on our attachment categories and our bundling initiative, that will really help drive our overall category margin up. So that is what we are focused on since it is 1 of largest piece of our business. it is a big win to get that going.

Paul E. Stone: Yes, Mark. I mean, we were happy with Q2. It was accretive for us in Q2 from a mix standpoint and the volume that we have there and encouraged with what we are going to be able to do in the back half of the year as well. I mean, we have what we believe is large opportunity to continue to be able to grow ammo with those greater margin than what we have with our firearms. And we feel like there is there is room there and continued room to be able to grow and to take share, and we will continue to be able to, I think, implement things to help us drive that part of the business and focus with what the margin mix looks like.

Mark Smith: Okay. Great. Maybe just 1 more. As we kind of think about the attachment of product to the ecom business when it is picked up in the store. Is that something we should think about? And how can that grow? Is it significant now? And, I mean, do people physically have to go always to the back of the store to pick up their firearm if it is online or to pick it up in the front? How are you kind of capturing and trying to get extra add-ons for those people?

Jennifer Fall Jung: Yes. They absolutely have to go and pick it up at the store. Unless they pick it up at an FFL, but I do not you know, those that are coming to Sportsman's have to go to the back of the store And I think the biggest opportunity there is really our e comm improvement. We have been working on our search, been working on our site experience. that is where you are going to get the bump in the lift. So as they come in, they will, you know, have their entire order ready to go, or they might, to your point, they are going to the back of the store. They have the opportunity to now leverage our racetrack and see what other kind of offerings we have.

Mark Smith: Thank you.

Operator: I would now like to turn the call back over to Paul E. Stone for any closing remarks.

Paul E. Stone: Thank you for joining the call today, and thank you to all our 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.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.