Sportsman’s Warehouse (Nasdaq: SPWH) seems almost determined to shoot itself in the foot again.
Under the gun to hit ambitious growth targets that look increasingly difficult to achieve, SPWH has tried to overcome a persistent decline in same-store sales by rapidly building new stores on credit after following a similar plan straight into bankruptcy. This time, SPWH faces even stiffer competition in a market hurt by plunging sales of guns and ammunition – a business that accounts for roughly half of its revenue – too, as big-name players like Cabela’s (NYSE: CAB) and Bass Pro Shops race to open new locations of their own. Willing to settle for the leftover scraps that likely remain untouched for a reason, SPWH has decided to focus more heavily on smaller markets that rival chains might understandably choose to avoid.
After all, SPWH has started hunting for new business in some rather dinky towns.
SPWH intends to open five of the eight new stores that it has pledged to build during its next fiscal year in towns with a combined population of barely 70,000 residents. In fact (as illustrated in the section that follows), three of those new locations will serve entire counties that look either too small or too poor to support one of the company’s big-box stores.
With a measly $1.7 million in its bank account and a staggering $219.3 million worth debt on its balance sheet, SPWH obviously cannot afford to start blowing a bunch of precious cash on new stores that make little business sense.