Greetings and welcome to the Sportsman's Warehouse Fourth Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host Rachel Schacter of ICR. Thank you, Rachel. You may now begin.

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 10-Q for the first fiscal quarter filed with the SEC on June 11, 2014. We will also disclose non-GAAP financial measures during today's call. Definitions of such non-GAAP measures as well as reconciliation 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 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 fiscal 2014 including our fourth quarter and comments on industry dynamics, discuss the progress we are making against our strategic growth initiatives, and finally go over our priorities for fiscal 2015. Kevan will then go over our financial results in more detail and review our outlook, after which we'll open up the call to your questions. While 2014 was a difficult year from an industry standpoint, we are very pleased with our performance as well as the progress we made against our strategic growth initiatives during the year. We delivered 17% store growth with the opening of eight new stores, including four in an eight week period, all of which were self funded with free cash flow generated from operations. We continue to refine and implement our 30,000 square feet store model. We finalized our store within a store program in the closing area. We made significant strides in our private label initiatives. We implemented a customer loyalty program that has just passed a 500,000 member level. We continue to develop bench strength via our store in department manager and training programs that has currently resulted in 52 of our 55 store managers being hired from within, and we have met each of our financial performance objectives despite unprecedented competition in some of our larger markets and continue the industry headwinds that impacted the firearms and ammunition categories of our business. With respect to the fourth quarter, we are pleased with our fourth quarter results which overall came in within our guidance range. Net sales for the quarter were 185.6 million, reflecting an increase from the prior year of 5.6%. Same store sales declined 5.3% versus the fourth quarter…

Thanks John, good afternoon everyone. I’ll begin my remarks this afternoon with a review of our fourth quarter and full fiscal year 2014 result and then discuss our outlook for fiscal year 2015. My comments today will focus on the adjusted results that we described in the financial tables in our earnings press release issued today. A reconciliation of GAAP net income and earnings per share to these adjusted numbers is contained in these tables along with an explanation of each adjustment. As John said our top line results came in consistent with our guidance net sales increased in the fourth quarter by 5.6% to $185.6 million from $175.7 million in the fourth quarter of last year. Same stores sales during the quarter decreased by 5.3%. Excluding sales of fire arms and ammunition our same stores sales decreased 3.4% excluding fire arms, ammunition and all shooting related categories including optics, our same stores sales decreased 1.4% which was due to the impact of the warm weather primarily upon our soft goods sale. 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 new competitive entrant into a market within the past 18 months. In the fourth quarter excluding the 10 stores in our comp base that were subject to competitive openings, our same-store sales decreased 2.8%. Our 22 base stores saw same-store sales declines of 4.6%. However, our 15 new stores saw same-store sales increase of 0.8%. Our 10 stores that were subject to competitive openings experienced a same-store sales decline of 16.1%, which, as John mentioned, was better than our plan.…

[Operator Instructions]. Thank you and our first question comes from the line of Seth Sigman with Credit Suisse, please proceed with your question.

Just go back to the comments about the promotional activity across the industry clearly it was more aggressive in the fourth quarter. Can you talk a little bit about how you guys were able to navigate that and essentially offset that they’ll take share, grow margins and just generally what are you seeing so far in the first quarter cause I think you did make some mention of that thanks.

Sure, well first of all let me just kind of give you some history on promotions and my perspective to it. I’ve been in retail for almost 25 years, I’ve been in everything from men’s clothing to women’s clothing to electronics, home furnishings, home improvement, team sports and outdoor sports, so I’ve been in a lot of different categories. What I will tell you about promotions as it relates to us is that you need to be very strategic about it and very careful about it. We are the everyday low price leader. So by definition when people who are not everyday price leader put items on sale, they usually come to us or slightly above us. So we don’t have a customer that expects significant promotions. Now if -- that doesn’t mean you shouldn’t do promotions and we do promotions but we do them on a very calendarized basis and a very calculated basis. And with a customer such as ours it is a multi-visit customer, they grow to expect certain events and certain promotions on certain items at certain times of the year and that’s what we do. The rest of the year they expect everyday low price from us and that’s what we give them. So if we were to go out and we almost did but we held off and do a special promotion that is out of the norm so to speak. A couple of bad things can happen, one is you can bring in traffic that expects to never pay retail and once we stop doing those promotions those people go away or two you can start promoting those products of yours that have the highest margin and that can be detrimental to those brands that you’re promoting once those promotions stop. So we’re…

Thanks for the color, John, if I get follow-up in the firearms and ammo business and some of the supply conditions that you talked about, can you maybe just elaborate on that because that is putting some downward pressure on pricing, I mean, in general when do you expect that to normalize?

I think firearms are normalizing now, we’re seeing vendors and I think partially because all the national competitors are opening new stores so you get that surge in purchases to stock a new store. I think a lot of vendors are seeing that dynamic and are very happy with that dynamic and are now getting at a point where they’re shifting more of their sales to the national players and more away from the mom and pops and the distributors in that as a result that's given them more confidence that they don’t need to promote, so I don’t see a whole lot of firearms promotions coming. The ammunition side, there has been about a 48% increase in the last five years in the ammunition, a lot of it's the Rimfire category but it’s been across the board and at some point that can’t be maintained. I think in the Rimfire category, we’re going to see continued price increases until supply equals demand and I think those are going to stick mainly because that category is now profitable for vendors were in the past. It has either been breakeven or lost leader for our vendors, but in other calibers unless there is something that went out with the green tips scare of few weeks ago in the 556 caliber stuff. I don’t -- I see slight to small price decreases as we moderate toward and equalization between supply and demand through the first half of the year. Now I’ll give you a little more color because I think it’s important -- what all of this means to us and what we’ve been seeing and I am not -- I am speaking for us only, we’re seeing very choppy sales of firearms in the first quarter of 2015 and what that means to us is that means, the bottom is here and we’re starting that slow rise, that doesn’t mean the rise occurs in Q1, doesn’t necessarily mean the rise occurs in Q2. I think our perspective is that the firearms category will turn positive on the same-store sales basis probably in the second half of the year.

Thank you. And our next question comes from the line of Matt Fassler with Goldman Sachs. Please proceed with your question.

Thanks for that guys, [indiscernible] here. Just following up on the ASPs for firearms, is that -- when you guys talk about that being down are you looking at like-for-like products or is that more reflective of the mix, [it’s been a handgun sort of the stronger] lately?

Well, handgun has been a bit stronger but if you really look at the type of firearms we sell the price points aren't dramatically different. So while there is a change in price that’s due to mix, I am not going to tell you it’s all -- we said it was down 2.7% in the fourth quarter, it's not all due to mix. There is some promotions act that went on. There is some overstocking in certain long rifles, non-MSR long rifles that got moved in the fourth quarter at slightly better pricing, so it’s a combination.

Got it okay and then in terms of the ban that was proposed in first quarter, I guess, I am little bit surprised that it doesn’t seem like it’s had more of an impact. Could you comment on that and whether that was sort of a surge type episode that brought a lot of traffic in the stores or is that not, not what you got saw?

Well, it’s not as big as some have thought it could have been, first of all you’re talking about a small segment of ammunition and basically bullets. And you know what we saw on our stores were some stores in some states there was a huge run on these products, in other stores and other states it was a non-event. The fact that it ended quickly I think had a positive impact on our ammunition sales but not an impact that you would say is something we have to consider next year when we annualize this thing, it was relatively short and it certainly wasn’t across all of our stores.

And our next question comes from the line of Matt Nemer with Wells Fargo Securities. Please proceed with your question.

Just two questions; one, on the weather impact that you’ve talked to I would think that the early spring weather, the warm weather, would probably help some other categories, obviously it impacted outerwear but did you see a positive or are you seeing a positive benefit in fishing and campaigning and some of your other kind of spring [moving] categories? And then just secondly on the loyalty program, you mentioned that some marketing programs are going to start to kick in later this year, can just describe what we should be looking for in those e-mails to loyalty members or special in store events? What sort of programs do you have planned? Thanks.

The weather impact on the spring has clearly had a positive impact on our fishing. Non-ice fishing is clearly significantly greater than ice fishing and while we suffered in the ice fishing categories we have had very good numbers in fishing overall. Camping has always been a good category for us and it continues to be a good category for us. The tradeoff is still in the clothing and footwear, what you're basically trading is high dollar price, heavy outerwear and [pack food] some things like that for low dollar price T-shirts, and shorts and sneakers. So the impact of the weather on Q1 is not the same as the impact of the weather on Q4. But it has caused a change in dynamic, the biggest of which is there is a period of time where you're trying to get rid of your fall outerwear and when it's 60 degrees out you can't price at low enough to sell it and you are stuck with basically no spring goods in your store yet and a bunch of winter clothes that no one wants to buy and that’s the impact of the weather as it relates to a Q1 dynamic as opposed to a Q4 dynamic. On the loyalty program the only thing I can say is yes. We're in the process to finding all those types of activities and all the types of things you want to do to gain enthusiasm from your loyalty members to have been come in more frequently and spend more money. So everything is on the table right now and nothing has been specifically calendarized other than we're going to do most of it in the second half of the fiscal year.

And just a quick follow up. How do you characterize your inventory exposure to the winter product is that kind of still in front of us something that needs to be kind of exited in front of us or you sort of clean there at this point.

I think we're cleaner than we could have been. I think we're very happy with where we sit, that said we don’t sell a lot of fashion items, so the only items we really had to liquidate at to really prices where those items from brands that we knew were going to have new [silhouettes] next year. So we didn’t have to real dramatic, have real dramatic price decreases in the clothing categories. We ended up boxing more than we normally do this time of year and as a result when we get to the time where that stuff sells again they will probably be sold not at full retail and that’s why I think our expectations for margin for the entire year have come down a little bit.

And our next question comes from line of Mark Miller with William Blair. Please proceed with your question.

Just to be clear on the fourth quarter outcome then you came in at the high end of your plans for EPS despite whether particularly that outerwear being unfavorable. So besides the better performance in the stores that have a new competitor in the [street area] help us understand where else you came in stronger than the guidance or was it simply you are appropriately conservative.

I think the number of stores in the areas in which we have mature competition performed very well. I think the categories in camouflage private label in the fishing area and the camping area performed a little better than we had anticipated and frankly the hunting category did not perform as detrimentally I guess is the best word as we had initially anticipated. Ammunition for example is same store positive now and it started at that turn in the fourth quarter and its continued into the first quarter and I think that helped fourth quarter.

And then looking into 2015 I understood the plan for CapEx to appears to be a little higher than we were thinking is that right that it's come up a little bit and then I guess netting it out to free cash flow I know you said you can fund the store growth but what kind of free cash flow would you are anticipating and how much is that going roughly to that pay down? Thanks.

Yes with respect to the CapEx we are continuing as I mentioned to improve our infrastructure in our distribution center. We've got some project going on there as well as some IT improvements as well that we're planning to do also as we look to 2016 in getting those stores up and going, some of those stores, the CapEx for those stores will fall in 2015 as well. So that includes more than just the nine stores that we're going to open in '15. But it will include the beginning construction periods of our 2016 class. With respect to our free cash flow, our term loan does have a debt requirement that we take 50% of our free cash flow and pay that down as a mandatory pre-payment on our term loan that occurs after fiscal 2015. So that pre-payment will occur in the spring of 2016 once that is done and we expect to be even with these CapEx dollars we expect to be making a debt pay down at that point in time.

So Kevan just to be clear, are you expecting then any meaningful free cash flow in 2015 or you’re staying close to neutral then?

Close to neutral after we have the mandatory pre-payment but it will be positive and there will be a debt pay down in 2016 so.

And our next question come from the line of Peter Keith with Piper Jaffray, please proceed with your question.

I wanted to get into a little bit on the gross margin trend, it was better than we had expected and despite in terms of probably a little bit of a drag from weather would you give us what you think the drag from weather was and was it called and maybe a gross margin basis relative to your expectations.

The comp, the weather patterns were extremely unpredictable particularly in the Western US, we started warm, we got cold and we finished warm, so it’s difficult to estimate that, that being said our best estimate is good as it can be given the weather patterns that were there, is on an impact on the same store sales is somewhere around 50 basis points to a 100 basis points on the same store sales comp. With respect to the gross margin it really is coming in mix, as we’re seeing declines in the hunting department which is our lowest category margin, we’re picking that up in sales dollars and mix dollars in the other categories which come in higher, almost all of that 80 basis point increase in gross margin is a result of mix. So that was very pleasing to us as we saw our initiatives take place even though it was soft from an expectation perspective because of the weather in the soft goods we’re still pleased to see the continued shift in the mix to the higher margin categories.

Okay, very good, and then I want to follow on with that with the private label expansion, I think you’ve been seeing anywhere from 40 to 60 basis points of shift in the mix of private label year on year, I think you said for the full year it may have been up -- was it 70 basis points? I was wondering if that was for the quarter or for the full year, if you didn’t give us a quarter if you could do so.

I don’t have the quarter numbers right in front of me, that is the full year, last year we were just below 2% from a private label perspective. This year we finished at 2.6% so I don’t have the quarter data in front of me, but the full year was 70 basis points.

Okay, so then maybe just a follow on so it looks like there’s now an accelerating shift to private label that has been a fourth quarter even with some of the weather headwinds. Could you just talk a little, [about there’s] some new products that came in or customers is finally getting traction with that, it kind of looks like a curious acceleration.

Well I think there is a shift to the footwear and clothing side of the store that despite the weather the shift is still occurring because it just isn’t as dramatic as it could have potentially been had all things been equal. That said it’s a combination of a number of things. We’re doing the store within the store concept especially with [indiscernible] Columbia and Carhart. It’s really dramatically changed the perception of our store and the perception of our clothing offerings in our store. Private label has been an excellent fill in with our rustic ridge brand, especially in the camo area where Russel exited the business over a year ago now and we’ve kind of filled that price point and it’s done better for us than Russel did for us and we’re working on a mid-level to higher level price point, a camouflage pattern in product line which we tested in the fourth quarter which has so far been exceeding our expectations. So all, I don’t think you can just say it’s private label, although private label’s a big driver, I think you also have to say presentation in our merchandizing of the entire soft goods side and the footwear side is dramatically better than it was a year ago.

Thank you, it appears that there are no other questions in the queue at this time, we’d now like to turn the call back over to management for any closing comment.

Great, well thank you for joining us today, we look forward to speaking with you when we report our first quarter results, thanks very much, have a nice day everybody.

Thank you, this concludes today’s teleconference, you may disconnect your lines at this time, I will thank all of you for your participation.