Greetings, and welcome to the Sportsman's Warehouse Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a 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, Rachel Schacter of ICR.

Thank you. Good afternoon, everyone. With me on the call is John Schaefer, 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 include 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 under the caption risk factors in the Company's 10-K for the year ended January 28, 2017, and 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 Web site at investors.sportsmanswarehouse.com. Now, I would like to turn the call over to John Schaefer, 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 third quarter and then discuss our progress on our key priorities 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. Our third quarter results were largely in line with our expectations as we again navigated a difficult operating environment. The revenue modestly fell short of our expectations in part due to the timing shift of the opening for one new store from Q3 to Q4. Comparable store sales were in line with our expectations. Our comp performance reflects the continued softness in firearms, and to a greater extent, ammunition as we anniversaried difficult comparisons from the election run up last year. The sales performance, combined with gross margin expansion, drove EPS in line with the lower end of guided range. We managed inventory well and paid down debt during the quarter, ending with a net debt to adjusted EBITDA ratio of 2.78 times, a sequential decrease of 0.28 from the end of the second quarter. Turning to our results. Total sales grew 0.4% to $218.1 million for the third quarter. Same-store sales declined 7% versus the prior year, driven by continued softness in firearm demand, which declined to 12.4% for the quarter and even more pronounced weakness in ammunition demand, which was 19.4% for the quarter. Drawing down further on the composition of same-store sales The weakness in firearms was reflected in the NICS data, which showed still slow firearm demand for the third quarter as a result of the difficult comparisons in the prior year due to the election run up.…

Thanks, John. Good afternoon, everyone. I'll begin my remarks with a review of our third quarter results and then discuss our outlook for the remainder of fiscal year 2017. My comments today will focus on adjusted results. We have provided these results, as well as an explanation of each line item and a reconciliation to GAAP net income and earnings per share in our earnings press release, which was issued earlier today. Net sales for the quarter increased 0.4% to $218.1 million from $217.2 million in the third quarter of last year with the same-store sales decrease of 7%. As John mentioned, sales came in lower than expected, partially due to the delay in the opening of our Pueblo, Colorado store, which shifted from Q3 into Q4. We opened three stores during the quarter and ended the quarter with 86 stores in 22 states or square footage growth of 10.8% from the end of the third quarter of fiscal year 2016. The store openings in the third quarter were Spokane Valley, Washington Stockton, Stockton, California and Visalia, California. The last of our 12 store openings for this fiscal year opened subsequent to the end of our quarter on November 9th in Pueblo, Colorado. For fiscal year 2018, we are planning to open five stores total or approximately 3% square footage growth. With this morning's announcement of a location in Anderson, South Carolina, we have now announced three of the five locations that we intent to open in fiscal year 2018. This future site in Anderson, South Carolina joins the previously announced locations in Sheridan, Wyoming and Walla Walla, Washington. We will announce the remaining two locations as the lease agreements and permits are finalized in the next few months. Turning to our same-store sales by each of our three store…

At this time, we will be conducting a question-and-answer session [Operator Instructions]. Our first question is from Seth Sigman, Credit Suisse. Please proceed with your question.

Just two quick questions for me, firstly on the firearms category. Are you seeing any evidence that demand has started to stabilize as we anniversary the election? And then related to that, can you speak on the inventory type level that you're seeing in the channel. And the second question is just on the weather, what kind of weather have you baked into your guidance here for Q4. Any color there would be appreciated. Thank you guys.

I think we're starting to see the ending of the last peak in MSR increased demand, and we're going to start seeing in 2018, I think a more normal level of MSR demand. I think that’s one of the reasons that while the hunting category is down, the use firearms, the hunting firearms and the short guns on a unit basis were actually up over 6% from us. The hand guns, I think are also going to continue to be down. And I think that’s probably going to go into 2018 a little longer because again those are for concealed carry and for protection. And I think we’re going to see a moderation in the protection purchases as we go through 2018. Now, luckily where we have our stores, we’re skewed way towards the use category. So I don’t think the impact will be as severe for us as it may be for others. As it relates to inventory in the channel, I think the inventory is working its way through. It’s taken a little longer than we had thought. A number of the mom and pops early in the year we thought would be putting firearms on sale and getting rid of them by the end of the first quarter or second quarter that’s continued through the third quarter. And then I think there’s also the consolidation of the business with the undergoing out of business Bass and Cabela's combination is going to -- there's going to be some movement from a promotional standpoint to reduce inventory in the channel through that mechanism as well. I don't know that we are predicting anything in terms of weather to be impacting the fourth quarter. Everything we've heard is just going to be a pretty normal weather pattern for Q4. So we haven't really built anything from aweather standpoint into our guidance.

Our next question comes from Andrew Burns, D.A. Davidson and Company. Please proceed with your question.

Just a question on the promotional activity that you're expecting in the fourth quarter, you're looking at the past few holiday seasons. There's certainly a heighted promotional environment. You faired fairly well given your everyday low pricing strategies. So could you highlight a little bit more about what part of this season's promotional activity is seemingly a little more impactful than past seasons?

I think the types of products that are being promoted this year, especially by a major competitor of ours, are a little different than last year. And I think that's probably due to trying to clear out some inventories. So I think that's something that we have to acknowledge and deal with usually. The promotions on the key product categories are usually pretty consistent across the channel. But I think there's some unusual things one-time things going on this quarter as it relates to inventory rationalization from a couple of our major competitors that we have to be aware of, and have to be ready to address.

And then as you look at the hunt category into next year, it sounds like -- ammunition is likely to remain a headwind, huge driven gun purchases seems to have turned the corner but handgun and probably like the MSRs continue with it. So it fair to think that that we should think about the hunt category remaining under pressure even as we move past for anniversary impact in early next year?

Andrew with respect to how things play out next year, we'll provide more color on our year end call. As we sit here today, certainly there're some headwinds and some factors that you've enumerated there that we are watching very closely as to exactly how it turns we were -- remains to be seen. With respect to the performance of the hunt category, it performed very strong for us in the third quarter. We are, as John mentioned, concerned about the heightened promotions going into the fourth quarter, which obviously will impact those categories as well. So we will continue to monitor the situation closely and provide a little bit more color based upon what we're seeing through the fourth quarter and are looking to all of 2018 on our year end call.

As a reminder, we are now conducting a question-and-answer session [Operator Instructions]. Our next question comes from Patrick McKeever, MKM Partners. Please proceed with your question.

Just a question on the acceleration in online sales and what drove that. Was that primarily in firearms that are purchased online and then picked up in store, or have you done things in other categories as well to drive that. And what are you thinking as we move into next year in terms of how this site and the offering evolve. And then my second question is just on the Bass-Cabela's merger. Do you have any clear sense as to what might happen there as it relates to potential store closures or the pace of new store openings, that sorts of things.

Let me answer the second question first, because it's very short. We don’t know anything more than I think anybody else knows. Any sources we have are basically maintaining status quo, almost as if it’s still two separate companies. So I don’t know that we know anything more definitive than anyone else would know at this point.

Patrick, with respect to your first question. Just as a matter of policy, our online firearms because the transactions are consummated in the stores, any online firearm transactions that revenue gets reported as retail revenue not as online revenue. The consumer has to come into our retail locations to complete the background checks and consummate that transaction. So all of that revenue is there. That being said, we did see an increase in our online fire arms that helped us with respect to our same store sales. The increase that we're seeing there is in all departments. All departments were up. We have made some changes with respect to partners that we have used with respect to PPC, other online strategies that are there, and we're starting to realize the benefits there. So again its small number, but we have seen an increase in the assortment, we've seen an increase in the benefits coming from our service provides and that is resulting in increased online revenue that we saw for the quarter.

And then just a question on the cadence of firearm sales last year, post the election. Can you remind us of how the months shook out in the fourth quarter for your fire arms business?

I don’t have the monthly NICS data in front of me. We don’t disclose our own monthly data. We simply disclose that on a quarterly basis. However, our data tracks fairly closely with the NICS data. So I don’t have that in front of me but I would refer you back to the NICS data from last year. If I recall, the NICS data was strong in November and then it fell off in December and January.

Our next question comes from Ronald Bookbinder, IFS Securities. Please proceed with your question.

I was wondering on the gross margin expansion. How many basis points came from the shift away from firearms and how many basis points might have come from increased IMU or increased private label?

My estimates, as I analyzed that data, is approximately 52 basis points of our 110 basis points came from product mix shift. That is down from 75 basis points that we experienced in the second quarter. And the remaining 58 basis points came from increased product margins. As John called out in his remarks, four of our six departments saw increases. The other two were just slight decreases. We're starting to realize the benefits of some of the opportunistic buys that we have referenced to. Our inventory position being where it is allows us to take advantage of deals that come our way from the vendor community. And we're starting to realize some of those benefits as we sell through some of that product. So we're very pleased with our margin position through the third quarter.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to management for closing remarks.

Very well. I appreciate everybody being on the call today and have a great rest of your day. Thanks very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.