SPORTSMAN'S WAREHOUSE HOLDINGS, INC. The discussion below contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those which are discussed in the "Risk Factors" section in Part I, Item 1A of this 10-K. Also see "Statement Regarding Forward-Looking Statements" preceding Part I.
The following discussion and analysis should be read in conjunction with the consolidated financial statements and the notes thereto included in this 10-K.
Overview
We are an outdoor sporting goods retailer focused on meeting the everyday needs of the seasoned outdoor veteran, the first-time participant and everyone in between. Our mission is to provide outstanding gear and exceptional service to inspire outdoor memories.
Our business was founded in 1986 as a single retail store in
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Our stores and our e-commerce platform are aggregated into one operating and reportable segment.
On
COVID-19 Pandemic
Since
The increased demand we experienced during fiscal 2020 and fiscal 2021 resulted
in our net sales increasing by 63.8% to
In addition, with respect to our supply chain, we continue to see some interruption with various vendors as a result of restrictions or limitations on their operations due to the pandemic. While our increase in sales shows significant demand for ammunition during the pandemic that we believe is outpacing supply, we do not believe supply chain disruptions resulting from restrictions and limitations on supplier operations caused by the pandemic are resulting in significantly less supply and we are working closely with our vendors to limit such disruption. Moreover, the pandemic and current economic conditions have resulted in a short supply of qualified employees. If we are unable to hire and retain sales associates capable of consistently providing a high level of customer service, our business could be materially adversely affected.
While we experienced increased sales during fiscal 2020 and fiscal 2021, especially in our hunting and shooting category, we cannot predict the future impact on us of the COVID-19 outbreak. The future impact of the COVID-19 pandemic will depend on a number of future developments, which are highly uncertain and cannot be predicted, including, but not limited to the duration, spread and severity of the COVID-19 outbreak, any resurgence of COVID-19, the effects of the outbreak on our customers and vendors and the remedial actions and stimulus measures adopted by local and federal governments. Further, we may experience a decrease in sales if the increased demand we experienced during the pandemic subsides with the pandemic.
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Fiscal Year
We operate using a 52/53-week fiscal year ending on the Saturday closest to
How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of performance and financial measures. The key measures for determining how our business is performing are net sales, same store sales, gross margin, selling, general and administrative expenses, income from operations and adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA").
Our net sales are primarily received from revenue generated in our stores and also include sales generated through our e-commerce platform. When measuring revenue generated from our stores, we review our same store sales as well as the performance of our stores that have not operated for a sufficient amount of time to be included in same store sales. We include net sales from a store in same store sales on the first day of the 13th full fiscal month following the store's opening or acquisition by us. We exclude sales from stores that were closed during the period from our same store sales calculation. We include net sales from e-commerce in our calculation of same store sales. For fiscal years consisting of 53 weeks, we exclude net sales during the 53rd week from our calculation of same store sales. Some of our competitors and other retailers may calculate same store sales differently than we do. As a result, data regarding our same store sales may not be comparable to similar data made available by other retailers.
Measuring the change in year-over-year same store sales allows us to evaluate how our retail store base is performing. Various factors affect same store sales, including:
? the impact of the COVID-19 pandemic;
? changes or anticipated changes to regulations related to some of the products
we sell;
? consumer preferences, buying trends and overall political and economic trends;
? our ability to identify and respond effectively to local and regional trends
and customer preferences;
? our ability to provide quality customer service that will increase our
conversion of shoppers into paying customers;
? the success of our omni-channel strategy and our e-commerce platform;
? competition in the regional market of a store;
? atypical weather;
? new product introductions and changes in our product mix; and
? changes in pricing and average ticket sales.
Opening new stores and acquiring store locations is also an important part of our growth strategy. For fiscal year 2021 we opened 10 stores and plan to open 10 locations in fiscal year 2022. While our target is to grow square footage at a rate of 5% to 10% annually, we may deviate from this target if attractive opportunities are presented to open stores or acquire new store locations outside of our target growth rate.
We also have been scaling our e-commerce platform and increasing sales through our website, www.sportsmans.com.
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We believe the key drivers to increasing our total net sales include:
? increasing our total gross square footage by opening new stores and through
strategic acquisitions;
? continuing to increase and improve same store sales in our existing markets;
increasing customer visits to our stores and improving our conversion rate
? through focused marketing efforts and continually high standards of customer
service;
? growing our loyalty and credit card programs; and
? expanding our omni channel capabilities through larger assortment and
inventory, expanded content and expertise and better user experience.
Gross Margin
Gross profit is our net sales less cost of goods sold. Gross margin measures our gross profit as a percentage of net sales. Our cost of goods sold primarily consists of merchandise acquisition costs, including freight-in costs, shipping costs, payment term discounts received from the vendor and vendor allowances and rebates associated directly with merchandise and shipping costs related to e-commerce sales.
We believe the key drivers to improving our gross margin are increasing the product mix to higher margin products, particularly apparel and footwear, increasing foot traffic within our stores and traffic to our website, improving buying opportunities with our vendor partners and coordinating pricing strategies among our stores and our merchandise group. Our ability to properly manage our inventory can also impact our gross margin. Successful inventory management ensures we have sufficient high margin products in stock at all times to meet customer demand, while overstocking of items could lead to markdowns in order to help a product sell. We believe that the overall growth of our business can also help improve our gross margins, because increased merchandise volumes will enable us to maintain our strong relationships with our vendors. We have, however, experienced increased transportation and logistics costs over the last two years. We believe these increased costs will continue into fiscal year 2022 and beyond and could continue to put pressure on our gross profit and gross margin.
Selling, General and Administrative Expenses
We closely manage our selling, general and administrative expenses. Our selling, general and administrative expenses are comprised of payroll, rent and occupancy, depreciation and amortization, acquisition expenses, pre-opening expenses and other operating expenses, including stock-based compensation expense. Pre-opening expenses include expenses incurred in the preparation and opening of a new store location, such as payroll, travel and supplies, but do not include the cost of the initial inventory or capital expenditures required to open a location.
Our selling, general and administrative expenses are primarily influenced by the volume of net sales of our locations, except for our corporate payroll, rent and occupancy and depreciation and amortization, which are generally fixed in nature. We control our selling, general and administrative expenses through a budgeting and reporting process that allows our personnel to adjust our expenses as trends in net sales activity are identified.
We expect that our selling, general and administrative expenses will increase in future periods due to our continuing growth. We also have experienced increased payroll expenses due to increased minimum wages and generally increasing salaries and wages due to a competitive labor market over the last year, including payments of retention and increased merit bonuses, and we expect for payroll expense to increase in fiscal year 2022. Fifty-three of our current stores were impacted by minimum wage increases in fiscal year 2021 that have and will continue to increase our selling, general and administrative expenses during fiscal year 2022.
Income from Operations
Income from operations is gross profit less selling, general and administrative expenses. We use income from operations as an indicator of the productivity of our business and our ability to manage selling, general and administrative expenses.
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Adjusted EBITDA
We define Adjusted EBITDA as net income plus interest expense, income tax expense, depreciation and amortization, stock-based compensation expense, pre-opening expenses, and other gains, losses, and expenses that we do not believe are indicative of our ongoing expenses. In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as an additional measurement tool for purposes of business decision-making, including evaluating store performance, developing budgets and managing expenditures. See "Non-GAAP Measures."
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Results of Operations
The following table summarizes key components of our results of operations as a percentage of net sales for the periods indicated:
Fiscal Year Ended
January 29, January 30, February 1,
2022 2021 2020
Percentage of net sales:
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 67.4 67.2 66.5
Gross profit 32.6 32.8 33.5
Selling, general, and administrative expenses 26.6 24.3 29.7
Income from operations 6.0 8.5 3.8
Gain on bargain purchase - (0.2) -
Merger termination payment (3.7) - -
Interest expense 0.1 0.3 0.9
Income before income taxes 9.6 8.4 2.9
Income tax expense 2.4 2.1 0.6
Net income 7.2% 6.3% 2.3%
Adjusted EBITDA 9.1% 11.3% 6.7%
The following table shows our sales during the periods presented by department:
Fiscal year Ended
January 29, January 30, February 1,
Department Product Offerings 2022 2021 2020
Camping Backpacks, camp essentials,
canoes and kayaks, coolers,
outdoor cooking equipment,
sleeping bags, tents and tools 13.1% 12.7% 14.4%
Apparel Camouflage, jackets, hats,
outerwear, sportswear,
technical gear and work wear 8.4% 7.5% 9.3%
Fishing Bait, electronics, fishing
rods, flotation items, fly
fishing, lines, lures, reels,
tackle and small boats 10.0% 9.9% 11.1%
Footwear Hiking boots, socks, sport
sandals, technical footwear,
trail shoes, casual shoes,
waders and work boots 6.8% 5.6% 7.5%
Hunting and Ammunition, archery items, ATV
Shooting accessories, blinds and tree
stands, decoys, firearms,
reloading equipment and
shooting gear 54.2% 57.6% 49.1%
Optics, Gift items, GPS devices,
Electronics, knives, lighting, optics,
Accessories, and two-way radios, and other
Other license revenue, net of revenue
discounts 7.5% 6.7% 8.6%
Total 100.0% 100.0% 100.0%
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Fiscal Year 2021 Compared to Fiscal Year 2020
All of our departments had increases in net sales for fiscal year 2021 compared
to fiscal year 2020, with the exception of our hunting and shooting department.
Our footwear, apparel, camping, optics, electronics, and accessories, and
fishing departments saw increases in net sales of
With respect to same store sales, our footwear, apparel, optics, electronics and accessories, and camping departments saw increased same store sales of 21.2%, 12.7%, 7.0%, and 2.6%, respectively. Our hunting and shooting and fishing departments incurred decreases in same store sales of 8.7% and 0.6% respectively. Firearms same store sales decreased by 12.5% and ammunition same store sales decreased by 13.7% during fiscal year 2021 compared to fiscal year 2020.
Gross Profit. Gross profit increased by
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by
Interest Expense. Interest expense decreased by
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Other Income. Other income increased by
Income Taxes. We recorded an income tax expense of
Fiscal Year 2020 Compared to Fiscal Year 2019
All of our departments had increases in net sales for fiscal year 2020 compared
to fiscal year 2019, led by our hunting and shooting department with an increase
in net sales of
Each of our departments had increases in same store sales for fiscal year 2020
compared to fiscal year 2019, led by our hunting and shooting department with an
increase in same store sales of 70.0%. Our camping, fishing, optics, electronics
and accessories, footwear, and apparel departments had increases in same store
sales of 34.0%, 30.8%, 28.9%, 18.5%, and 13.0% respectively, for fiscal year
2020 compared to fiscal year 2019. As of
Gross Profit. Gross profit increased by
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by
Interest Expense. Interest expense decreased by
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year 2020 compared to fiscal year 2019, including our repayment of our term loan and all outstanding amounts under our revolving credit facility during fiscal year 2020.
Income Taxes. We recorded an income tax expense of
Seasonality
Due to the openings of hunting season across the country and consumer holiday buying patterns, net sales are typically higher in the third and fourth fiscal quarters than in the first and second fiscal quarters. We also incur additional expenses in the third and fourth fiscal quarters due to higher sales volume and increased staffing in our stores. We anticipate our net sales will continue to reflect this seasonal pattern.
The timing of our new retail store openings also may have an impact on our quarterly results. First, we incur certain non-recurring expenses related to opening each new retail store, which are expensed as they are incurred. Second, most store expenses generally vary proportionately with net sales, but there is also a fixed cost component, which includes occupancy costs. These fixed costs typically result in lower store profitability during the initial period after a new retail store opens. Due to both of these factors, new retail store openings may result in a temporary decline in operating profit, in dollars and/or as a percentage of net sales.
Weather conditions affect outdoor activities and the demand for related apparel and equipment. Customers' demand for our products, and, therefore, our net sales, can be significantly impacted by weather patterns on a local, regional and national basis.
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Liquidity and Capital Resources
Overview; Sources and Uses of Cash
Our primary cash requirements are for seasonal working capital needs and capital
expenditures related to opening and acquiring new store locations. For both the
short term and the long term, our sources of liquidity to meet these needs have
primarily been borrowings under our revolving credit facility, operating cash
flows and short and long-term debt financings from banks and financial
institutions. We believe that our cash on hand, cash generated by operating
activities and funds available under our revolving credit facility will be
sufficient to finance our operating activities for at least the next twelve
months and beyond. In addition, on
Material Cash Requirements
Our material cash requirements are primarily for opening and acquiring new store locations, along with our general operating expenses and other expenses discussed below.
Capital Expenditures. For fiscal year 2021, we incurred approximately
Principal and Interest Payments. We maintain a
Operating Lease Obligations. Lease commitments consist principally of leases for
our retail stores, corporate office and distribution center. Our leases often
include options which allow us to extend the terms beyond the initial lease
term. For 2022, our expected operating lease payments will be
Purchase Obligations. In the ordinary course of business, we enter into arrangements with vendors to purchase merchandise in advance of expected delivery. We or the vendor can generally terminate the purchase orders at any time. These purchase orders do not contain any termination payments or other penalties if cancelled.
Share Repurchase Authorization. In addition, our board recently authorized a
share repurchase program to allow for the repurchase of up to
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Cash Flows
Cash flows from operating, investing and financing activities are shown in the
following table:
Fifty-Two Weeks Ended
January 29 , January 30,
2022 2021
(in thousands)
Cash flows (used in) provided by operating activities
(53,452) (26,227)
Cash provided by (used in) financing activities 66,571 (148,749)
Cash and cash equivalents at end of period 57,018 65,525
Net cash used in operating activities was
Net cash used in investing activities was
Net cash provided in financing activities was
Indebtedness
We maintain a
Borrowings under our revolving credit facility bear interest based on either, at our option, the base rate or LIBOR, in each case plus an applicable margin. The base rate is the higher of (1) Wells Fargo's prime rate, (2) the federal funds rate (as defined in the credit agreement) plus 0.50% and (3) the one-month LIBOR (as defined in the credit agreement) plus 1.00%. The applicable margin for loans under the revolving credit facility, which varies based on the average daily availability, ranges from 0.25% to 0.75% per year for base rate loans and from 1.25% to 1.75% per year for LIBOR loans.
Interest on base rate loans is payable monthly in arrears and interest on LIBOR loans is payable based on the LIBOR interest period selected by us, which can be 7, 30, 60 or 90 days. All amounts that are not paid when due under our revolving credit facility will accrue interest at the rate otherwise applicable plus 2.00% until such amounts are paid in full.
Each of the subsidiaries of Holdings is a borrower under the revolving credit facility and Holdings guarantees all obligations under the revolving credit facility. All obligations under the revolving credit facility are secured by a lien on substantially all of Holdings' tangible and intangible assets and the tangible and intangible assets of all of Holdings' subsidiaries, including a pledge of all capital stock of each of the Holdings' subsidiaries. The lien securing the obligations under the revolving credit facility is a first priority lien as to certain liquid assets, including cash, accounts receivable, deposit accounts and inventory. In addition, our credit agreement contains provisions that enable Wells Fargo to require us to maintain a lock-box, or similar arrangement, for the collection of all receipts.
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We may be required to make mandatory prepayments under the revolving credit facility in the event of a disposition of certain property or assets, in the event of receipt of certain insurance or condemnation proceeds, upon the issuance of certain debt or equity securities, upon the incurrence of certain indebtedness for borrowed money or upon the receipt of certain payments not received in the ordinary course of business.
Our revolving credit facility requires us to maintain a minimum availability at
all times of not less than 10% of the gross borrowing base. In addition, the
credit agreement governing our revolving credit facility contains customary
affirmative and negative covenants, including covenants that limit our ability
to incur, create or assume certain indebtedness, to create, incur or assume
certain liens, to make certain investments, to make sales, transfers and
dispositions of certain property and to undergo certain fundamental changes,
including certain mergers, liquidations and consolidations. The credit agreement
also contains customary events of default. As of
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with accounting principles
generally accepted in
Our significant accounting policies are discussed in Note 2 to our Consolidated Financial Statements elsewhere in this 10-K. We believe that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results.
Revenue Recognition
We operate solely as an outdoor retailer, which includes both retail stores and
an e-commerce platform, that offers a broad range of products in
Substantially all of our revenue is for single performance obligations for the following distinct items:
? Retail store sales ? e-commerce sales
? Gift cards and loyalty reward program
For performance obligations related to retail store and e-commerce sales contracts, we typically transfer control, for retail stores, upon consummation of the sale when the product is paid for and taken by the customer and, for e-commerce sales, when the products are tendered for delivery to the common carrier.
The transaction price for each contract is the stated price on the product, reduced by any stated discounts at that point in time. We do not engage in sales of products that attach a future material right which could result in a separate performance obligation for the purchase of goods in the future at a material discount. The implicit point-of-sale contract with the customer, as reflected in the transaction receipt, states the final terms of the sale, including the description, quantity, and price of each product purchased. Payment for our contracts is due in full upon delivery. The customer agrees to a stated price implicit in the contract that does not vary over the contract.
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The transaction price relative to sales subject to a right of return reflects the amount of estimated consideration to which we expect to be entitled. This amount of variable consideration included in the transaction price, and measurement of net sales, is included in net sales only to the extent that it is probable that there will be no significant reversal in a future period. Actual amounts of consideration ultimately received may differ from our estimates. The allowance for sales returns is estimated based upon historical experience and a provision for estimated returns is recorded as a reduction in sales in the relevant period. The estimated merchandise inventory cost related to the sales returns is recorded in prepaid expenses and other. If actual results in the future vary from our estimates, we adjust these estimates, which would affect net sales and earnings in the period such variances become known.
Contract liabilities are recognized primarily for gift card sales and our loyalty reward program. Cash received from the sale of gift cards is recorded as a contract liability in accrued expenses, and we recognize revenue upon the customer's redemption of the gift card. Gift card breakage is recognized as revenue in proportion to the pattern of customer redemptions by applying a historical breakage rate of 4.0% when no escheat liability to relevant jurisdictions exists. We do not sell or provide gift cards that carry expiration dates. We recognized revenue for the breakage of loyalty reward points as revenue in proportion to the pattern of customer redemption of the points by applying a historical breakage rate of 54%.
As it relates to e-commerce sales, we account for shipping and handling as fulfillment activities, and not a separate performance obligation. Accordingly, we recognize revenue for only one performance obligation, the sale of the product, at the shipping point (when the customer gains control). Revenue associated with shipping and handling is not material. The costs associated with fulfillment are recorded in costs of goods sold.
We offer promotional financing and credit cards issued by a third-party bank that manages and directly extends credit to our customers. We provide a license to our brand and marketing services, and we facilitate credit applications in our stores and online. The banks are the sole owners of the accounts receivable generated under the program and, accordingly, we do not hold any customer receivables related to these programs and act as an agent in the financing transactions with customers. We are eligible to receive a profit share from certain of our banking partners based on the annual performance of their corresponding portfolio, and we receive monthly payments based on forecasts of full-year performance. This is a form of variable consideration. We record such profit share as revenue over time using the most likely amount method, which reflects the amount earned each month when it is determined that the likelihood of a significant revenue reversal is not probable, which is typically monthly. Profit-share payments occur monthly, shortly after the end of each program month.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue.
Sales returns
We estimate a reserve for sales returns and record the respective reserve amounts, including a right to return asset when a product is expected to be returned and resold. Historical experience of actual returns, and customer return rights are the key factors used in determining the estimated sales returns.
Inventory Valuation
Inventory is measured at the lower of cost or net realizable value. Cost is
determined using the weighted average cost method. We estimate a provision for
inventory shrinkage based on our historical inventory accuracy rates as
determined by periodic cycle counts. The allowance for damaged goods from
returns is based upon our historical experience. We also adjust inventory for
obsolete or slow-moving inventory based on inventory productivity reports and by
specific identification of obsolete or slow-moving inventory. Had our estimated
inventory reserves been lower or higher by 10% as of
Valuation of Long-Lived Assets
We review our long-lived assets with definite lives for impairment whenever events or changes in circumstances may indicate that the carrying value of an asset may not be recoverable. We use an estimate of the future undiscounted net cash flows of the related asset or group of assets over their remaining useful lives in measuring whether the assets are
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recoverable. If the carrying amount of an asset exceeds its estimated future
cash flows, an impairment charge is recognized for the amount by which the
carrying amount exceeds the estimated fair value of the asset. Impairment of
long-lived assets is assessed at the lowest levels for which there are
identifiable cash flows that are independent of other groups of assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value, less the estimated costs to sell. No impairment charge to long-lived
assets was recorded during the fiscal year ended
Leases
We have operating leases for the Company's retail stores facilities,
distribution center, and corporate office. In accordance with ASC 842, which we
adopted on
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, see Note 2 to our Consolidated Financial Statements included elsewhere in this report.
Non-GAAP Measures
In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as supplemental measures of our operating performance. We define Adjusted EBITDA as net income plus interest expense, income tax expense, depreciation and amortization, stock-based compensation expense, pre-opening expenses, and other gains/losses, and expenses that we do not believe are indicative of our ongoing expenses. Adjusted EBITDA excludes pre-opening expenses because we do not believe these expenses are indicative of the underlying operating performance of our stores. The amount and timing of pre-opening expenses are dependent on, among other things, the size of new stores opened and the number of new stores opened during any given period. Adjusted EBITDA margin means, for any period, the Adjusted EBITDA for that period divided by the net sales for that period. We consider Adjusted EBITDA and Adjusted EBITDA margin important supplemental measures of our operating performance and believe they are frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. Other companies in our industry, however, may calculate Adjusted EBITDA and Adjusted EBITDA margin differently than we do. Management also uses Adjusted EBITDA and Adjusted EBITDA margin as additional measurement tools for purposes of business decision-making, including evaluating store performance, developing budgets and managing expenditures. Management believes Adjusted EBITDA and Adjusted EBITDA margin allow investors to evaluate our operating performance and compare our results of operations from period to period on a consistent basis by excluding items that management does not believe are indicative of our core operating performance.
Adjusted EBITDA is not defined under GAAP and is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP. Adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, you should not consider Adjusted EBITDA in isolation or as a substitute for net income or other consolidated income statement data prepared in accordance with GAAP. Some of these limitations include, but are not limited to:
? Adjusted EBITDA does not reflect our cash expenditures or future requirements
for capital expenditures or contractual commitments;
? Adjusted EBITDA does not reflect changes in, or cash requirements for, our
working capital needs;
Adjusted EBITDA may be defined differently by other companies, and, therefore,
? it may not be directly comparable to the results of other companies in our
industry;
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? Adjusted EBITDA does not reflect the interest expense, or the cash requirements
necessary to service interest or principal payments, on our debt; and
? Adjusted EBITDA does not reflect income taxes or the cash requirements for any
tax payments.
A reconciliation of net income to Adjusted EBITDA is set forth below.
Fifty-Two Weeks Ended
January 29, January 30, February 1,
2022 2021 2020
Net income $ 108,470 $ 91,380 $ 20,215
Interest expense 1,379 3,506 7,995
Income tax expense (benefit) 35,769 30,080 5,254
Depreciation and amortization 26,226 21,830 19,321
Stock-based compensation expense (1) 3,328 3,302 2,104
Pre-opening expenses (2) 4,098 1,942 2,695
Hazard pay (3) - 6,526 -
Acquisition costs (4) 9,733 3,710 662
Bargain purchase (5) - (2,218) -
Legal accrual (6) - 2,125 -
Store closing write-off (7) - 1,039 -
Executive transition costs (8) - - 770
Retention pay (9) 2,549 - -
Merger termination payment (10) (55,000) - -
Adjusted EBITDA $ 136,552 $ 163,222 $ 59,016
Net sales 1,506,072 1,451,767 886,401
Net income margin (11) 7.2% 6.3% 2.3%
Adjusted EBITDA margin (11) 9.1% 11.2% 6.7%
Stock-based compensation expense represents non-cash expenses related to (1) equity instruments granted to employees under our 2019 Performance Incentive
Plan and Employee Stock Purchase Plan.
Pre-opening expenses include expenses incurred in the preparation and opening (2) of a new store location, such as payroll, travel and supplies, but do not
include the cost of the initial inventory or capital expenditures required to
open a location.
(3) Expense relating to bonuses and increased wages paid to front-line and back
office associates due to the COVID-19 pandemic.
Includes $237 of expenses incurred relating to the acquisition of cash,
inventory, furniture, fixtures, and equipment, and certain other assets
(4) related to
includes $3,473 and $9,733 of expenses incurred relating to the proposed
merger with Great Outdoors Group on December 21, 2020 , respectively, for
fiscal year 2020 and fiscal year 2021.
Excess of the fair value over the purchase price of tangible assets acquired
(5) in connection with the
2020. See Note 3 to the financial statements for additional information.
(6) Accrual relating to pending labor litigation in the state of
Costs and impairments recorded relating to the closure of one store during (7) the first quarter of 2020. These costs were recorded as a component of
selling, general, and administration expenses on the condensed consolidated
statement of operations.
(8) Costs incurred for the recruitment and hiring of various key members of our
senior management team.
(9) Expense relating to retention bonuses paid to certain senior employees in
response to the terminated merger with
(10) Represents a one-time
with the terminated merger with
(11) We calculate net income margin as net income divided by net sales and we
define adjusted EBITDA margin as adjusted EBITDA divided by net sales
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