Greetings, ladies and gentlemen and welcome to the Sportsman's Warehouse Second Quarter 2014 Earnings Conference Call. At this time all participants are in listen-only mode. A question-and-answer session will follow the formal presentation (Operator Instructions). As a reminder this conference is being recorded. I would now like to turn the conference over to your host, Ms. Rachel Schacter of ICR. Please go ahead.

Thank you. Good afternoon everyone. With me on the call is John Schaefer, President and Chief Executive Officer; and Kevan Talbot, Chief Financial Officer. Before we get started, I would like to remind you of the Company's Safe Harbor language, which I'm sure you're all are familiar with. The statements we make today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which includes statements regarding our expectations about our future results of operation, the manpower of products and growth of our industry. Actual future results may differ materially from those suggested in such statements due to a number of risk and uncertainties including those described in the Company's 10-Q for the first fiscal quarter filed with the SEC on June 11, 2014; as well as in today's press release included as Exhibit 99.1 to the Form 8-K we furnished to the SEC today. We will also disclose non-GAAP financial measures during today's call. 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 Relation section of our Web site at investors.sportsmanswarehouse.com. Now I would like to turn the call over to John Schaefer, President and Chief Executive Officer of Sportsman's Warehouse.

Thank you. Good afternoon everyone. With me on the call is John Schaefer, President and Chief Executive Officer; and Kevan Talbot, Chief Financial Officer. Before we get started, I would like to remind you of the Company's Safe Harbor language, which I'm sure you're all are familiar with. The statements we make today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which includes statements regarding our expectations about our future results of operation, the manpower of products and growth of our industry. Actual future results may differ materially from those suggested in such statements due to a number of risk and uncertainties including those described in the Company's 10-Q for the first fiscal quarter filed with the SEC on June 11, 2014; as well as in today's press release included as Exhibit 99.1 to the Form 8-K we furnished to the SEC today. We will also disclose non-GAAP financial measures during today's call. 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 Relation section of our Web site at investors.sportsmanswarehouse.com. Now I would like to turn the call over to John Schaefer, President and Chief Executive Officer of Sportsman's Warehouse.

Thank you, Rachel. Good afternoon everyone, and thank you for joining us today. I will begin by discussing the highlights of our second quarter current industry dynamics and the progress we are making against our strategic growth initiatives. Kevan will then go over our financial results in more detail and review our outlook, after which we will open up the call to your questions. Before I begin, I would like to once again thank all our associates for the great job they do. As you know we brag about our associates being passionate users of our products and that translates to high customer service and satisfaction in a low overhead model. Their passion and dedication really make us the local resource for our customers, something that has now been validated by third-parties as well. Now to our results, we are pleased with our second quarter results which came in better than our expectations. Net sales for the quarter were $159.5 million, reflecting a 2.3% increase from the prior year. Unit growth was 17.4% and same store sales declined 6.1% versus the second quarter of the prior year, better than our guidance of down 7% to 8%. We opened four stores during the second quarter, Chico, California; Vernal, Utah; Rancho Cordova, California and Kelso, Washington. These openings reflect our dual strategy of entering into smaller markets where we believe, we can be the main destination outdoor sporting goods retailer as well as larger markets where we are the conveniently located and attractively priced local store for our customers. We are very pleased with the initial performance we are seeing out of our class of 2014 stores. We opened our eighth and final store for 2014 in early August in Pocatello, Idaho and work on our 2015 class is well underway. Looking…

Thanks John, good afternoon everyone. I’ll begin my remarks this afternoon with a review of our second quarter results and then discuss our outlook for fiscal 2014. As John said, our top line results were better than our expectations. Net sales increased in the second quarter by 2.3% to $159.5 million, up from a $155.9 million in the second quarter of last year. Same store sales during the quarter decreased by 6.1%. Excluding sales of firearms and ammunition our same store sales decreased 1.4%. If firearms and ammunition and all shooting related categories including optics are excluded, our same store sales increased 1.1% during the quarter. Turning to our same store sales by each of our three store groupings, which are one, base stores; two, new stores or acquired stores that have been in the comp base for two years or less; and three, stores that were subject to competitive openings, which we define as a new competitive entrance into a market within the past 18 months, in the second quarter excluding the six stores in our comp base that were subject to competitive openings, our same store sales decreased 2.3%. Our 23 base stores saw same store sales declines of 4.3%. However our 17 new stores saw same store sales increases of 1.3%. Our six stores that were subject to competitive openings experienced a same store sales decline up 22.9%, which as John discussed was substantially better than our plan. Gross profit in the quarter was $52.8 million, compared to $52.2 million in the second quarter of fiscal 2013. Gross margin as a percentage of net sales decreased 40 basis points to 33.1% from the 33.5% in the corresponding period from last year. The decrease in gross margin as a percentage of net sales was driven primarily by our…

(Operator Instructions). Our first question comes from the line of Seth Sigman with Credit Suisse. Please proceed with your question.

I have a couple of questions about the gross margin. It was nice to see the improvement this quarter I guess relative to last quarter. One thing you pointed to was the normalizing of pricing and promotions within the guns and ammo category as I guess the supply-demand situation has started to normalize there. At what point is that no longer in issue? At what point last year or in the last few quarters did that already start to normalize and maybe it becomes less of a drag going forward.

Seth, I think it’s starting to normalize now. There is still some excess pricing going on in the ammunition, but I think as we enter this second half of fiscal year, we’re going to see what you saw in 2011 and 2012 in terms of price points and margin on both firearms and ammunition. I think short term we're going to see some mom-and-pops do a lot of promoting, because they have an overall allotment of mainly the MSR type firearms. I think there is a backlog in the distribution channel and that’s the result of a huge backlog in the mom-and-pop channel. But for the national players including us, I don’t think you’ll see any of that and we won’t need to promote that. So I don’t think you’re going to see any excess promotion impacting margin, but I do think you’re going to see margins returning to 2011 levels if you will in those categories.

Okay. And I guess just in general, as you think about the EPS guidance that you provided for the back half of the year, how would you think about margins? What’s kind of implied there, the combination of the activity and also obviously the loyalty program having a little bit of an impact too? How do you think about merchandise margins in the back half of this year?

Well, I'll let Kevan talk specifically if he has any comments on the specific merchandising margins. But I think our overall guidance remains the same and I don’t see us doing anything outside of the norm in terms of a promotional environment. I think most of the national players are back to a normal scheduled promotional pattern and that’s where we are as well.

Yes, the goal was what John has said already. We don’t expect significant pricing pressure from the national players. There is a little bit of pricing pressure that we see coming from the mom-and-pops as they -- I don’t want to say liquidate, but as they get rid of their excess inventory as they over purchase. So we have some slight declines to what we had originally expected with respect to gross margin, but not significant and that allows us to maintain our EPS guidance going forward.

Thank you. Our next question comes from the line of Peter Benedict with Robert W. Baird. Please proceed with your question.

A couple of questions. First, good to hear the competitive stores doing better than your plan. John, anything different you’re doing with those stores in response to these opening? What do you chalk this, the better performance up to?

We’re not doing anything different in terms of we didn’t promote or anything like that. I think we’re just doing a better job of blocking and tackling and that’s come over time as the experience of our store managers has increased, as our training programs have kicked in, as our customers have realized that we’re a pretty good place to shop. Sometimes it takes a competitor to enter into a market for people to who appreciate how good you are at customer service. And I think all of those things as well as -- we’re a growing company. So I think we’re known a little more, especially in the Western United States and especially in those markets in which we face competition. So I think our brand is strong in those markets and I think all of those factors really help us maintain where we want to go and beat the historical averages we’ve seen. In those stores where we have been impacted by competition, we have been in those markets for quite some years. We’ve been in the Alaska market for over 10 years now. We have a very loyal customer base and I think that’s part of the factor as it well, that we have been well established in lot of these markets for a number of years.

Okay. That’s certainly helpful. And then just on the new fixtures, how many stores is it in right now, and when do you expect -- what's the cadence in getting those into all your stores?

Well it is in the -- it is only in one store now, the store we opened in Pocatello, Idaho was the first store in which we gave it a shot and we were incredibly pleased with our ability to get 70,000 SKUs in that store. So every store going forward will have that fixturing strategy in place and that really allows us to put as many SKUs in 30,000 square feet as we got in 42,000 square feet. Then what we’ll probably do is do certain fixturing changes in our other stores to make sure we can do the store within a store in all of our stores. So we don’t need to change our fixtures in the 31 stores in which we’ve expanded the clothing area because we have plenty of room. But there are 15 or so stores that are above 30,000 square feet, below 40,000-42,000 square feet that we were not able to expand. Those are the ones that we will put new fixtures in. It’s our intent to get that done in the next year or maybe a little longer than the next year, based on the cadence of sales in new store openings.

Thank you. Our next question comes from the line of Mark Miller with William Blair. Please proceed with your question.

This is actually Mike Signore for Mark. Just had a question on the new store pipeline for next year. I guess you guys have kind of announced several openings, wondering how the effect from competition from some of those or some of the existing stores is kind of pulling it out as you see it right now and if it's going to be kind of more of an impact next year versus this year or less of an impact or vise-versa?

Kevan can point to the exact stores that we know about that will be competitive openings next year. I don’t have that number in front of me, Kevan does. Our new store pipeline for next year is the same as always. It’s a mix of opportunistic locations in larger markets and new store openings in smaller markets, where frankly you really can’t justify a store greater than 40,000 square feet. We have a number of stores we have announced to. We have probably several that we are getting very close to announcing, although I don’t want to announce them on this call yet today. And our pipeline for the back half of 2015 and 2016 is relatively robust. So we have plenty of stores to choose from, when we decide to move forward.

With respect to your question on competition, as John mentioned in his remarks during the script, there currently are six stores that are in that new competitive category. There are four more that we anticipate before the end of our fiscal year. And as of right now we are aware of an additional five stores that will be impacted by competition in 2015. So if you take the 10 stores from 2014 to the five stores from 2015, we actually expect less of a competitive impact next fiscal year than we do this fiscal year.

Okay, great and then just a quick question on the comp outlook for the remainder of the year. So obviously the sequential trends are getting a lot better and it looks like if you hit the low end of your Q3 guidance and you come in at the low end for the full year that the comps can actually be positive in the fiscal fourth quarter. Is that right and how realistic is that versus the other way I guess?

I'm not going to provide guidance of that specific nature. I think we're reiterating our full year guidance. I think if you look at the trends, fiscal Q1 for us was down 18.1%. Calendar Q2, which I think is an important data point was down 8.9% and fiscal Q2 was down 6.1%. So, you can see the trend and act accordingly.

Again referring the NAICS data, the NAICS data also show sequential improvement as well. So those are good data points from a historical basis. And again we're reiterating our full year guidance with respect to that outlook.

Thank you. Our next question comes from the line of Matt Nemer with Wells Fargo. Please proceed with your question.

I just wanted to follow-up on that last question and if we look at the NAICS data, what is your sense for when that data could be positive, if you have any thoughts on that and then same for ammo. It seems like ammo was very strong through sort of the end of last year. So, just wanted to get your thoughts on when both of those could turn positive?

Well I don’t know that we can sit here and tell you when we think they're going to turn positive. The NAICS data, historical data from the National Shooting Sports Foundation is on our Web site. I think there is a huge spike that has to be made up somewhere. I think if you look at the trends, the trends are growing at 5.9% or better. So I think that’s positive for our entire industry and I think those trend lines overall will continue. What we're looking at specifically and I think this might be only us, is we believe that the values will be maintained where they are, which is not bad from historical perspective but the peaks might be a little shorter going forward. What that translates to is I think it translates to an up and down kind of comparison on a month-to-month basis, on a quarter-to-quarter basis but overall I think you'll see an increasing line. So because I think the peaks will be a little smaller, I really don’t have an opinion on when a turn will occur to the positive. But I certainly think over time you will see the return to the positive and if you look at the historical numbers, clearly this is a growth industry over time and I think we'll see that happen. As it relates to ammunition, the one caveat I'll talk about in terms of ammunition is there has been a huge spike in ammunition sales and ammunition demand last year. And what you would have thought this year, based on that purchase of that much ammunition is you would have thought that you have had more shooting going on. Now while targets and cleaning supplies are only two categories, we kind of look at those categories in…

That’s very helpful and then secondly, it sounds like the new fixtures open up an opportunity to do a lot more remodels and I'm wondering if you can just give us an update. I may have missed this if you provided it, but how are those clothing remodels doing? I don’t know if there's a way to look at that, that side of stores or maybe just that department, give us a sense for what happens when you add that in?

On the stores in which we’ve done the store within a store and expanded the area to do store in a store, those stores have performed 10% better than the stores that didn’t have a store within a store concept. So while we had to put money into expanding the stores previously, we now do not have to do that. We just have to put the money into new fixturing because the fixturing is -- we lost a whole lot of cubic space with the plywood fixtures and things we have. And the new fixturing makes a lot better use of the cubic space of the store. And as a result, there's 50 new sort of stores that at this time three months ago we were saying just can’t have store within a store, and the ability to do store within a store in the 30,000 square foot format was a little bit iffy. Now I can clearly say that we can do store within a store in all of our stores and I think that’s a huge organic growth opportunity for us going forward and we’re really excited about getting that thing going.

And then just one last one if I could. Just love to get your take on what you’re seeing currently in terms of getting close to hunting season, people prepping for hunting season. Any update on demand or traffic or what you’re seeing in the market right now would be helpful?

Well, I think we’ll say the same thing I think others have said, that the retail environment is kind of tough right now. We don’t have the benefit of a back-to-school season. So we can’t really gauge what the need demand will be, and frankly as we go into the third quarter, there isn’t not a lot of need. The fall hunting season really starts late September, early October. We’re encouraged by what we’re seeing in the last several days as we approach that time, but I don’t know that I can give you a definite response overall on what’s going on other than what we said before, which is we believe that with the availability of hunting ammunition this year, that was not available last year, with the increase in new shooters into the market and with the surge in demand moderating now along with the -- I think the ability of our customers to replenish their wall, which we saw going on for the last couple of quarters where we really saw that; they weren’t spending a whole lot except when they really needed to spend the money. I think all those signs point to a pretty decent and encouraging hunting season for us going forward.

Thank you. Our final question comes from the line of Andrew Burns with DA Davidson and Company. Please proceed with your question.

From your commentary and what we’ve heard from your competitors and firearm manufacturers, it sounds like the weakest area of the firearm market is clearly the MSR space. I was hoping that you could perhaps quantify that as a percent of the mix or give us any sort of data to help us better understand sort of way that category peaked out at, what its shrunk to is in relation to your overall revenue? Thank you.

I don’t have those numbers off the top of my head. I can tell you that as a percentage of the firearms mix, we are back to a more normal level as to where we were before this big surge occurred. I don’t recall off the top of my head. So I don’t want to quote an incorrect number here with respect to that, but it has returned back to normal levels. But one thing that we’re -- with respect to the MSRs and I pointed this out in my comments, is that from an inventory perspective, we feel very comfortable both with the quantity and the quality of SKUs that we have in that MSR category. For a while there, it was quite crazy, the demand in that and that caused a little bit of growth in the number of SKU count. We have paired that back to those SKUs that we feel very comfortable with, that we can sell at normal price points without having to liquidate things and we’re very comfortable with the quantity that we have on hand of those items.

Okay, thanks and then I believe I heard that the clothing comp was positive 4.2%. I believe it was double digits last quarter. Is there anything to call out there or was it -- how it performed relative to your expectations?

With respect to the clothing, last year we -- after we acquired the 10 stores, we did a significant liquidation at the end of the second quarter into the beginning of the third quarter. So I think last year sales were little bit artificially inflated. We also have just barely been putting out the fall categories, which is the fresh reset. It’s going on during the third quarter. So we're still very pleased with respect to the results of our clothing. The number did decline a little bit but as I indicated, last year’s sales were little bit inflated as we liquidated some of the inventory from the 10 stores that we acquired.

We have one more question from the line of Matthew Fassler with Goldman Sachs. Please proceed with your question.

It’s Steve Cannell for Matt. I wanted to just focus on one comment. I think you guys said that you may be sort of focusing on markets that generally can’t support larger stores and I’m wondering if that’s a bigger focus now or a bigger part of the strategy than it had been or if that marks any sort of a change at all in your thinking.

I don’t think it marks any sort of change in our thinking. We have numerous sites that we are looking at. I think what you’ll find is you’ll find that -- that this thing will ebb and flow. Clearly with all of the national players growing, the capacity for certain larger markets to handle numerous entrants is declining and I think we have a significant competitive advantage in those smaller markets where we can go. So probably over time, we will be looking at smaller markets. But we haven’t purposefully changed our strategy at all. Time will tell and the numbers will tell us where to go.

Got it, okay. And then on the same store sales guidance for the third quarter, is there still sort of a ramp here as we get through the quarter? I think if I look at mix it looks like maybe the August compare was tougher than September, October and then you normalize but I was sort of wondering if you’re sort of tracking the guidance or there is some ramp that we should see through the quarter here.

We haven’t talked specifically about months. I can tell you that we’re comfortable with the guidance that we have provided with respect to the same store sales guidance there. So, we haven’t talked specifically to the months. So I don’t know exactly how to answer that question but providing information that we’re not going to provide.

Okay, fair enough. And just lastly, if you have any thoughts and sort of the relative strength and handguns versus rifles or long guns lately? Any reason in your minds, why we’re seeing that?

The strength of handguns versus long guns is what you’re asking?

Yes, the trend in handguns have been very, very healthy even year-on-year.

Yes, I think that’s there is a couple of reasons. Home security I think is a reason. I think clearly new entrants into the market are looking at shooting as much as people are looking at hunting and that lends itself to stronger handgun sales. And I think women entering the market are generally -- and I don’t -- I have anecdotal evidence on this. I don’t have factual evidence but I think most people in our niche of the market would agree that most of the women entrants into the shooting sports are in to the handgun shooting sports first. That doesn’t mean they won’t go to long guns. We see transitions of women going to long guns all over the place, but it think their entrance -- their point of entrance is a handgun.

Thank you. I’d now like to turn it back to management for closing comments.

Great. Thank you for joining us today. We look forward to speaking with you when we report third quarter. Have a nice day everybody. Thanks.

Thank you. Ladies and gentlemen this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.