Good afternoon, ladies and gentlemen. This is Sportsman's Warehouse First Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Ms. Rachel Schacter of ICR.

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. 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 operations, demand for our products and growth of our industry. Actual future 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 10-K filed with the SEC on March 24, 2016. We will also discuss 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 investors.sportsmanswarehouse.com. Now, I'd 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 reviewing the highlights of our first quarter performance and then discuss our progress on our strategic initiatives and thoughts on the remainder of the fiscal year. 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. We're pleased with our first quarter results which came in within our guidance. While the overall retail environment was difficult and we faced some of the same headwinds affecting the retail industry generally, we do believe the unique characteristics of our business model and our execution of that model allowed us to navigate these headwinds in the first quarter. Similar to the previous several quarters, we met each of our financial performance objectives and performed within our guidance. Our continued focus on maintaining and, where possible, enhancing gross margin has allowed us to meet our ROIC objectives and earnings guidance. While we are not immune to the traffic declines facing retail, there were a number of initiatives put in place in previous quarters as well as our positioning as a strong hard goods retailer that have allowed us to successfully weather this headwind in the first quarter. We continue to grow the company while also meeting our twin objective of a 20% ROIC on new stores and creating free cash flow to pay down debt. We opened three stores in the first fiscal quarter of 2016 and are on pace with our plan to open 11 stores in fiscal year 2016. Net sales for the quarter increased 9% to $151.6 million. Same store sales decreased 2.2% versus the prior year period. Breaking down this number tells an interesting story and confirms…

Thanks, John. Good afternoon, everyone. I'll begin my remarks with a review of our first quarter results and then discuss our outlook for the remainder of fiscal year 2016. My comments today will focus on adjusted results. We have provided these results as well as explanation of each line item and reconciliations to GAAP net income and earnings per share in our earnings press release which was issued earlier today. As we disclosed in our press release, we have historically presented the sales of state fish and game licenses, duck stamps and state government-mandated firearm background checks in sales and cost of goods under the gross method. We have determined that the presentation for these transactions should be under the net method, thereby recognizing only the commission received in the net sales for acting as the agent under the principal versus agent model. This revision does not have any impact on gross profit, net income or earnings per share. As a result of the revision, all references to net sales and cost of goods sold including our revenue guidance conform to the net presentation. We are pleased with our first quarter 2016 results. Net sales increased 9% to $151.6 million from $139.2 million in the first quarter of last year, with a 17.5% increase in stores and a same store sales decrease 2.2%. When adjusting for the revision in revenue presentation related to hunting and fishing license sales, our first quarter revenue was within our previously issued first quarter guidance. As John discussed, our same store sales faced headwinds from the pull forward in demand for firearms and ammunition, weak economies in oil and gas markets and the impact of new competition. These factors impacted all of our categories, while sales in our clothing and footwear departments were negatively impacted…

[Operator Instructions] The first question comes from Seth Sigman from Credit Suisse.

Just one clarification question. When you look at the sales guidance, $770 million to $790 million, the change from the prior guidance, is that just the accounting change, because it seems like there's no real change in the comp outlook, just wanted to clarify that?

That is correct. It is simply a result of the gross versus net revenue presentation.

And then outside of the competitive headwinds that you pointed to, a number of retailers have pointed to weather impacting sales in April, maybe a little bit in March too. Can you talk about any variability that maybe you saw in performance across your store base from a regional perspective?

Seth, our clothing and footwear is really used clothing and footwear except in the second half of the year where you have all kinds of outerwear being sold. So we're seeing some movement in things like waiters, active wear I think where you're seeing depressed sales throughout the retail environment and in general active wear we're seeing that as well. And frankly the first two quarters aren't that big of a deal for us in terms of camel clothing and things like that, so we expect that from an overall retail environment that our active wear would be down and we really don't make that up with the kind of product that we sell in clothing and footwear. So bottom line, the weather is actually getting better in the West in terms of being wet enough to fill up some of the dry waterways that we had last year, so fishing can take off a little better. And in terms of the unpredictability of weather is – that's an ongoing thing that really just keeps hitting everybody.

Just to follow up on that, John, in light of maybe conditions getting a little bit better, the guidance for the second quarter of comps down 1 to up 1. Can you give us a sense of where you may be tracking currently within that range or above that range, and how to think about some of the headwinds and tail winds for the quarter?

I think it's really too early to talk about the second quarter. I know various other retailers, some have said things have and some haven't and I don't want to be coy or anything but frankly, Seth, we've got Memorial Day weekend ahead of us, Father's Day and July 4 in the second quarter and those are – for our business, those are all major events because they have to do with outdoor activities, they have to do with sales. So it's really just too early to say what's going on in the second quarter. I think our guidance on the second quarter is really reflective of what we talked about in the fourth quarter. We see people paying attention to the presidential election. We see people being a little bit cautious with their spending. We see our customer really focusing on the used categories as opposed to the ancillary categories. And really we expect that to continue until we get into the back half of the summer, when the fall hunting seasons begin and people really start gearing up and we have a little more clarity on which way the Senate is going to go, which way the presidential election is going to go or at least people start having an opinion on that.

Our next question comes from Stephen Tanal from Goldman Sachs.

Just thinking about the gross margin number, so up about 100 bps, it sounds like clothing and footwear together probably contributed about 80 bps, if my math is right, then you've got probably another 20 bps. Is that right? And if so, on the other 20 bps, what's going on there that’s driving the upside?

I think your math is relatively close. We haven't done it ourselves to that detail. Our customer is really telling us they're coming in with an intent to purchase. That's why our average ticket is up and that's why our conversion is up. So we're doing things on an inventory basis to basically say listen there are several times a year where the customer expects you to have a sale event and I just mentioned three of them, Memorial Day, Father's Day, July 4. But there are also times where you would do events, whether it’d be a balloon pop or a customer appreciation event to try to drive incremental traffic and we have chosen not to do that in the first quarter and we will not be doing that in the second quarter. And in the first quarter, just to give you an example, on the customer appreciation sale, that probably cost us $250,000 in sales, but increased our gross profit dollars by almost $600,000. So I think our customer is telling us they have a reason to come in and we're not going to get them to come in if we just put random things on sale and I think that's the biggest reason for the additional 20 to 30 basis points you're talking about.

And on SG&A, that number looked pretty good, much lower than we had modeled. Is there anything in the quarter that we should know about? Are there one-time issue nature or what just enabled that discipline there?

There's really nothing to call out that we didn't call out in our prepared remarks. Really, the SG&A was impacted by the offering expenses and then the shift in the cooperative marketing. Those were the two biggest factors there. We’ve tried to do a good job of controlling our expenses and managing through our budgets and I think the first quarter was a good example of how we were able to successfully achieve that.

And just lastly, would you mind quantifying the vendor shift, just so we can get our heads around that a little bit?

That shift is 10 to 15 basis points of that – the 100 basis points came from that shift in cooperative marketing.

Our next question comes from Lee Giordano from Sterne Agee.

Just following up on the firearms category, up 18%, and you talked about you’re expecting that to continue to normalize at this pace. Are you expecting sales to be up double digits for the rest of the year? Is that how we should think about it or is it going to be varied?

I think in the past we've always said that the NICS data has been a little higher than we had anticipated and we thought a steady state was in that 7% to 9% range. So we're modeling still in that 7% to 9% range. I don't know that that's overly conservative. I don't think it's aggressive. I think it's probably ultimately realistic.

And then just secondly on the competitive openings, are you seeing anything differently from your competitors when they come into your markets? Are they being more aggressive on their promotions out of the gate? Just anything new there would be helpful.

We’ve seen two new competitive openings impacting three stores in this first quarter and other than some layout changes within the stores themselves that I think our competitors have talked about we really haven't seen anything that's been unusual on the marketing side or the promotions side. So it's just pretty much following the historical path that we've seen for the last several years.

The next question comes from Daniel Hofkin from William Blair.

Just to clarify a little bit more on the sales pattern in the quarter, is it fair to say that things slowed over the course of the quarter with the weather and now you're seeing things pick up a little bit so far? Is that a fair way to categorize the quarter plus so far in 2Q?

We've never talked about our inter-quarter sales patterns or cadences or anything else there. And as John indicated earlier with respect to 2Q, there's still a lot ahead of us with respect to that in terms of events there. So I don't know that we can provide anything there with respect to cadences within the quarter itself. There's been no surprises.

And then in terms of your full-year comp outlook and your expectation that things ease in the second half, you obviously have a little tough comparison to the fourth quarter, but is there anything that you're seeing within your sales pattern right now that suggests acceleration, or is it mostly the items that you highlighted, reduced competition and whatnot in the second half?

Those are the two biggest factors as we look to the second half of the year. The big spike, I guess I should say the impact in oil occurred really in late second quarter of last year, that's when we really started to notice that. So as we get past – anniversary those events, we have seen some, a little bit of a rebound in oil prices and some talk in our markets that that is going to have a positive impact on the employment in those markets, so that remains to be seen. But as we anniversary that significant decline in oil prices of a year ago, we expect those factor to wane, as well as additional stores coming into our store base and getting further along into that curve on the competitive openings that John discussed by the end of the year, we anticipate that the headwind from competitive openings will have a significant benefit for us as far as improving our comp position and that's why we're comfortable with that flat to positive 2% guidance for the year.

Our next question comes from Andrew Burns from DA Davidson.

Congrats on 1Q performance in this environment. A couple of follow-ups. In terms of the average ticket increase, is that really just firearms is what we are looking at or were there any trends outside of that category to call out in terms of driving average ticket price?

On an overall basis, I think it's more due to our loyalty customers. They tend to buy more items and spend more money. I will give you – while we’re certainly selling more firearms, we’re still selling the same amount of units of clothing. But the average price of the clothing is decreasing. So it's a little bit of a mix to firearms, but I think the bigger deal is the people who are buying from us are the users and they’re buying products for use which obviously is in firearms.

Our loyalty customers obviously have had a significant impact on that. As John mentioned in his prepared remarks, 44% of our sales dollars are now flowing through the loyalty program. Our loyalty customer spend almost twice as much as our non-loyal customers. And as we're able to continue to get penetration into our loyal customers, we're seeing the increase in the frequency of those customers go up as well as the positive of benefits from that two times average ticket and that is helping us as well. So clearly firearms is a large portion of our business, drives the average ticket, but the impact of our loyalty program we believe that we're starting to see the benefits from as well.

And it didn't come up in your prepared remarks, so I'd assumed it is immaterial, but just any implications from store closures from Sports Chalet, Sports Authority, whether it's real estate locations or some indirect impact to your apparel or soft goods performance embedded into that quarter guidance?

I don't think it's a material impact. There were about three of our – you know what happened in the first quarter were as TSA moved from a sale to a liquidation, you go through a process of first markdown, second markdowns, third markdowns. Some of our markets that TSA also was in happen to be some of their better markets and we saw relatively large influx of goods coming into those stores, so they continued their first markdown process, but the effect was actually pretty minimal. On the real estate side, we've looked at all 450 locations and frankly there really aren’t a lot that are intriguing to us. So I don't know that there's any real estate benefit moving forward and that's probably why we just didn't see the necessary to bring up the topic.

Our next question comes from Peter Benedict from Robert W. Baird.

It’s Justin Kleber on for Pete. Just wanted to clarify the comment on firearms business. John, that 18%, I assume that was a net sales number. Can you help us out on what the comps were in firearms for the first quarter?

We've not disclosed comps. That is the overall store, the 18% is what we were up in total for firearms. We do not disclose the comps on the firearms.

So on the ammo being down 4.4%, that was a comp number though?

That is correct; that is a comp number [indiscernible] so that’s why we use the total number on firearms and ammo it's better to talk on a same store basis because that makes more sense.

And then on the oil and gas region, 90 basis point hit, can you remind us what that was 3Q and 4Q last year?

It was between 70 and 80 bps in 4Q, it was 60 bps in 3Q. I don’t recall the 2Q hit off the top of my head from a year ago. But I want to say it was 30 or 40 bps.

And then, Kevan, just this new overtime rule that's being enacted later this year, have you had time to dig into those changes? What, if any, type of financial impact do you foresee later this year or into 2017, how are you guys planning for that?

We have not had a chance yet to dig into that guidance. In fact, I've got a call scheduled later this week to begin that process. I'll be able to speak to it better in our next quarterly release.

As there are no further questions, I'd like to turn the floor back over to management for any closing remarks.

Thanks everyone for joining us today and have a great rest of the week. Thank you very much.

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