HIBB - Sportsman's Warehouse's High Dependence On Firearm Sales May Be Its Highest Risk
- The termination of SPWH's sale to Great Outdoors and the miss in Q3 results caused the stock to drop 21% YTD. Meanwhile, competition is up 20% to 154%.
- Peers took advantage of the pandemic and locked in double-digit margins thanks to pricing and cost dilution. Meanwhile, SPWH's margin dropped as it couldn't offset inflation with pricing.
- As SPWH is planning to expand stores, its capex intensity will remain the highest in the industry in the medium term. Also, its store deployment strategy is suboptimal.
- Biden's softer tone regarding firearm regulation is a 400M USD risk to SPWH revenues.
- I recommend staying on the sidelines as there will be better entry points.
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Sportsman's Warehouse's High Dependence On Firearm Sales May Be Its Highest Risk