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Sportsman's Warehouse Holdings (NASDAQ:SPWH)
Q2 2020 Earnings Call
Sep 02, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Greetings, and welcome to Sportsman's Warehouse second-quarter and first-half 2020 earnings conference call. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Caitlin Howe, vice president, corporate development and investor relations. Thank you.

Ms. Howe, you may begin.

Caitlin Howe -- Vice President, Corporate Development and Investor Relations

Thank you. With me on the call today is Jon Barker, chief executive officer; and Robert Julian, chief financial officer of Sportsman's Warehouse. 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 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 February 1, 2020, 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 website at sportsmans.com. I would also like to note that today's materials include an earnings conference call PowerPoint presentation, which is available at sportsmans.com in the Investor Relations section of the website.

You may utilize this deck to follow along with today's prepared remarks. I would now like to turn the call over to Jon Barker, chief executive officer of Sportsman's Warehouse.

Jon Barker -- Chief Executive Officer

Thank you, Caitlin. Good afternoon, everyone, and thank you for joining us today. I hope you and your families have continued to stay safe and healthy. I will begin my remarks by providing an update on COVID-19 as it pertains to Sportsman's Warehouse.

I will also comment on industry trends and discuss high-level results from the second quarter. Following my comments, Robert will provide specifics on our Q2 and first-half financial results, as well as some updated commentary on full-year 2020 expectations. Finally, we will open up the call for questions. I'm going to start on Slide 4 of the presentation.

During the second quarter, we continued to prioritize the health and safety of our associates while remaining open in all markets. I cannot overstate how proud I am of the Sportsman's Warehouse team. They continued to safely serve customers while we navigated a sustained surge in our business. In the stores, we continue to focus on cleaning, sanitizing, and utilizing face masks to ensure customers, associates, and their families stayed safe.

E-commerce also continued to be an increasingly crucial part of our retail strategy, allowing us to serve customers while limiting person-to-person contact. In the second quarter, demand was elevated across all of our major categories, with significant increases in firearms, ammunition, fishing, and camping. Quite simply, demand outstrip supply for many of our products. Although we are not satisfied with our current inventory levels, we believe, based on our market share gains, that in most cases, we are better positioned than our competition, which is a testament to our team's planning, processes, and vendor relationships.

As was the case in Q1, we will not be providing forward guidance today due to the uncertainty in the economic environment. Turning to Slide 5. We are highly encouraged by the significant increase in participants in outdoor activities across the U.S. In addition to the increase in fishing, hunting, camping, and hiking activities, most state national park attendance is up versus prior year.

Across the country, many Americans are transitioning their resources away from travel and entertainment toward spending time with family and friends in the outdoors. The firearm industry has seen a historic surge of new customers in 2020. During the first seven months of this calendar year, nearly 5 million people purchased a firearm for the first time. It is important to note that a firearm customer has the highest lifetime value of any segment within our customer base and drive significant value across other product categories in our business.

History has shown that outdoor activities, particularly those done with family and friends, typically have remarkable participation resilience, especially during recessionary times. We are optimistic that the new participants in outdoor activities, including hunting and fishing, bode well for outdoor specialty retail in general and Sportsman's Warehouse, in particular. During Q2, we grew our loyalty program to nearly 2.5 million customers and increased our overall email database by 68% year over year. We believe we are in the early innings of capitalizing on our best-in-class loyalty program and our expanded database to better engage with customers.

Turning to Slide 6. Combination of multiple factors in Q2, led by market share gains, the surge in outdoor participation, and social unrest, resulted in very favorable financial results in the second quarter of 2020. Net sales were $381 million, an increase of 80% year over year. Same-store sales for Q2 increased 61%.

Same-store sales for firearms and ammunition were up 123% and 75%, respectively. Total Sportsman's Warehouse firearm unit sales increased 100% and 71% during the quarter, while the adjusted NICS checks were up 111%. Our unit sales materially exceeded the NICS checks increase for the quarter, which confirms that we are continuing to gain market share and new customers. Footwear and apparel also recovered nicely in the second quarter.

We saw a particular strength in our functional footwear and apparel such as hunting boots, waders, and camouflage. We believe we have a right to win in these subcategories, and we will continue to evolve our assortment to better serve our customers. The higher proportion of firearms and ammunition revenue continued to materially impact our gross margin during Q2. Robert will discuss product mix and margin implications in greater detail during his prepared remarks.

Turning now to Slide 7. I will comment on our e-commerce results and omnichannel strategy. Since launching our new e-commerce platform in late 2018, we've continued to build the team, tools, and capabilities to adapt to changing consumer behaviors. The events of 2020, especially COVID-19 and social unrest, accelerated adoption of our e-commerce platform, including BOPUS and ship-to-home.

In Q2, e-commerce sales growth accelerated even further. During the quarter, e-commerce-driven sales grew over 300% versus the prior year. Through the first half of 2020, e-commerce-driven sales now account for more than 10% of total net sales, which has exceeded our expectations and timeline. Therefore, we will continue to invest in our platform and capabilities to enable future growth in this channel.

We also continue to expand our store footprint. We opened our first small-format store in Laramie, Wyoming in early August. At roughly 7,500 square feet, this store is currently the smallest in our portfolio and an ideal approach to further penetrate small to midsize markets where our national competitors cannot perform. We are highly encouraged by the store's results so far, and we believe our flexible store format will continue to serve as a competitive advantage moving forward.

We have opened four new Sportsman's Warehouse stores year to date and have plans to open another three for a total of seven new Sportsman's Warehouse stores in 2020. The three new stores will be located in Chambersburg, Pennsylvania, which is set to open in late September, Brentwood, California, and Corona, California, which are planned for later in Q3 or early Q4. In addition, our first legacy shooting center opened in March of this year and is performing ahead of expectations. As a result, we will be assessing expansion opportunities for this concept in 2021.

Finally, I would like to highlight the astonishing improvement in our balance sheet and financial position over the last year. We have reduced net debt by $150 million and improved liquidity by $130 million compared to this time last year. We ended Q2 with a net debt-to-EBITDA ratio of less than 0.1, reflecting our nearly debt-free position. Turning to Slide 8.

In summary, with the recent increase in outdoor participants, we believe there is significant momentum in our core business coming out of Q2. We have gained a tremendous number of new customers and have grown our email database exponentially over the last two quarters. As we reengage with these new customers across categories, there is substantial opportunity to grow sales and further increase customer lifetime value. In the near term, we view the upcoming election cycle and economic uncertainty as two factors that could influence our business.

However, we remain optimistic that over the long run, there is significant opportunity for continued market share gains, e-commerce growth, and physical store expansion. We believe these factors and our laser focus on execution for both an operational and strategic perspective position Sportsman's Warehouse for long-term growth and profitability. We look forward to speaking with you again in early December when we report our third-quarter results. With that, I'll turn the call over to Robert to discuss our financial results.

Robert Julian -- Chief Financial Officer

Thanks, Jon. I'll begin my remarks today with a review of our Q2 and first-half 2020 financial results. As Jon mentioned earlier, we are not providing forward guidance at this time. However, I will update the commentary provided on the last earnings call regarding full-year 2020 expectations for some key financial metrics.

Turning now to Slide 10 of the presentation. Second-quarter 2020 net sales were $381.0 million, compared to $211.8 million in the second quarter of 2019, an increase of $169.2 million or 79.9% over the prior-year period. Same-store sales increased 61% in the quarter, led by firearms and ammunition, which increased 123% and 75%, respectively. Camping and fishing also had strong quarters, increasing over the prior-year period by 46% and 45%, respectively.

Finally, footwear and apparel also increased nicely over prior year, up 30% and 19%, respectively, all on a same-store basis. Q2 2020 gross profit was $129.1 million, compared to $73.2 million in the second quarter of 2019, an increase of $55.9 million or 76.4%. Gross margin was 33.9% for the quarter, a decline of 70 basis points versus prior year. This decline can be attributed to several factors.

Product and channel mix caused a 250-basis-point headwind in gross margin due to a higher proportion of revenue coming from firearms and ammunition, and more sales coming through our e-commerce platform. This gross margin decline was partially offset by higher product margins, volume incentives, and other adjustments, which positively impacted gross margin by 180 basis points. SG&A expense of $83.6 million for Q2 2020 was an increase of $20.1 million or 12% compared to the second quarter of 2019. However, SG&A leverage improved approximately 800 basis points with SG&A expense coming in at 21.9% of net sales for the quarter.

We incurred additional payroll expense of $13.6 million versus prior year, including $1.5 million of hero pay for our frontline and nonexecutive back-office associates. The remaining increase is primarily due to minimum wage increases and new store growth. Rent expense increased approximately $2.2 million, primarily due to new store openings. Other operating expense increased approximately $3.9 million versus the prior year, which is primarily a result of higher credit card fees due to increased sales volume.

Income from operations was $45.5 million in Q2 2020, compared to $9.8 million in the prior-year period, an increase of $35.7 million. Interest expense in Q2 2020 was $1.0 million, compared to $2.4 million in Q2 of 2019, a reduction of $1.4 million. This improvement is the result of lower total borrowings and lower interest rates. We recorded income tax expense of $12.0 million in Q2 2020, compared to $1.9 million in Q2 2019.

This increase is the result of improved profitability year over year. Net income for the quarter was $32.5 million or $0.75 per diluted share as compared to net income of $5.5 million or $0.13 per diluted share in the prior-year period. This represents a year-over-year improvement of $0.62 per diluted share. Adjusted net income in Q2 2020 was $33.6 million or $0.76 per diluted share, compared to adjusted net income of $5.7 million or $0.13 per diluted share in Q2 2019.

This also represents a year-over-year improvement of $0.62 per diluted share on an adjusted basis. Adjusted EBITDA for Q2 2020 was $53.6 million, compared to $15.8 million in the prior-year period, an increase of $37.8 million. Turning now to Slide 11 of the presentation. First-half 2020 net sales were $627.8 million, compared to $385.8 million in the first half of 2019, an increase of $242 million or 62.7%.

Same-store sales increased 47% in the first half of 2020. First-half 2020 gross profit was $203.9 million, compared to $127.4 million in the first half of 2019, an increase of $76.5 million. Gross margin was 32.5% for the first half of 2020, a decline of 60 basis points versus the prior-year period. SG&A expense of $158.8 million for the first half of 2020 was an increase of $35.8 million or 15% compared to the first half of 2019.

As a percentage of net sales, SG&A leverage improved approximately 660 basis points to 25.3% of net sales for the first half of 2020. Income from operations was $45.0 million in the first half of 2020, compared to $4.4 million in the prior-year period. Interest expense in the first half of 2020 was $2.6 million, compared to $4.5 million in the first half of 2019. We recorded income tax expense of $11.2 million in the first half of 2020, compared to an income tax benefit of $0.1 million in the first half of 2019.

Net income for the first half of 2020 was $31.3 million or $0.72 per diluted share compared to zero net income in dollars or $0.00 per diluted share in the prior-year period. Adjusted net income in the first half of 2020 was $34 million or $0.77 per diluted share, compared to adjusted net income of $0.5 million or $0.01 per diluted share in the first half of 2019. First-half 2020 adjusted EBITDA was $61.8 million, compared to $16.2 million in the prior-year period. Turning to Slide 12.

I will now comment on our balance sheet and liquidity. Q2 2020 ending inventory was $297 million, compared to $289 million at the end of Q2 2019, an increase of $8 million. We have added 16 new stores and closed one store during this time period. Inventory is down 9% on a per-store basis compared to prior year.

We incurred $12 million of net capital expenditures in the second quarter of 2020 compared to $14.5 million in Q2 2019, an increase of $2.5 million. First-half 2020 operating cash flow was $145.7 million versus $35.4 million for Q2 2019. This $110 million improvement in operating cash flow year over year is primarily due to higher accounts payable balances associated with increased sales volume, higher net income, and higher accrued expenses versus prior year. While our accounts payable balance increased year over year, our days payable outstanding metric has remained relatively flat to prior year.

Our liquidity continues to improve as we ended Q2 with $3 million in net outstanding borrowings on our line of credit compared to $127 million at the end of Q2 2019. This reduction was achieved while holding an incremental $11 million in cash balances versus prior year in order to provide maximum flexibility during these uncertain times. At the end of second-quarter 2020, we had approximately $171 million of availability on our revolving credit facility. The outstanding balance on our term loan was $16 million at the end of Q2 2020, compared to $32 million at the end of Q2 2019, a reduction of $16 million.

This includes an accelerated payment on our term loan of $10 million made early in Q2. Our total liquidity, including cash on hand, at the end of Q2 2020 was $183 million, compared to $53 million in the prior-year period. Turning now to Slide 13 of the presentation. As I mentioned previously, we will not be providing forward guidance at this time due to the significant uncertainty surrounding the current economic environment.

However, I would like to provide some updated data points as it relates to expected full-year 2020 results. Starting with new store growth. We are on track to open a total of seven new Sportsman's Warehouse stores and one legacy shooting center in 2020. With respect to gross margin, we expect a continued higher than normal proportion of revenue to come from firearms and ammunition and a higher volume of sales to be conducted through our e-commerce platform in the back half of the year.

Both of these factors will continue to put pressure on gross margin. However, we also expect product margin expansion and higher volume incentives to continue as well. We expect our fiscal-year 2020 effective tax rate to be approximately 27%. Fiscal-year 2020 interest expense is estimated to be approximately $4 million.

Finally, full-year 2020 capital expenditures are anticipated to be approximately $20 million to $25 million. We look forward to updating you on our business and financial results during our Q3 earnings call in early December. With that, I will now turn the call back over to the operator for questions.

Questions & Answers:


Operator

Thank you. [Operator instructions] Our first question comes from the line of Seth Sigman with Credit Suisse. Please proceed with your question.

Seth Sigman -- Credit Suisse -- Analyst

Hey, guys. Good afternoon and congrats on the quarter. Obviously, very strong results. I'm curious about the consistency in results across your regions.

You obviously have a very diverse footprint. So what did you see across the U.S.? And then the adjusted mix looked like in August, it was still strong, but it did decelerate. So curious what you're seeing early in the third quarter. That would be helpful.

Thanks.

Jon Barker -- Chief Executive Officer

Seth, it's Jon speaking with you. Regionally, we saw a very consistent demand across all categories. Maybe the one outlier in the entire business, and it was strong, just not the same level, was Alaska. That was partially impacted by the lack of travel, which certainly slowed down the fishing and hunting season.

But those stores continue to perform very well, just not at the rate of the rest of the country. As you think about the slowdown or the change in mix growth that was announced this morning -- or yesterday, pardon me, the adjusted mix, I think what you're seeing, Seth, is not necessarily a change in demand. What you're seeing is demand outstripping supply in certain categories of firearms. And again, we performed extremely well against adjusted mix in Q2, which is a testament to what the team has been able to do through the relationships and their planning and forecasting with the vendors, and we expect that to continue going forward.

Seth Sigman -- Credit Suisse -- Analyst

OK. That's helpful. Just on that point, what is your sense of how inventory phases here as you look into the back half of the year? You're headed into a seasonally bigger period for the business. So how are you planning for your inventory position?

Jon Barker -- Chief Executive Officer

Actually, we feel like we're in a better position than most going into the back half of the year. Now, with that said, there's probably going to be some spots within the chain that will have some thin inventory. But the team is working diligently every day to fill in those gaps, the manufacturers, of course, and the vendors are working diligently. But as you can imagine, the supply chain, in general, see some impact from COVID and the things that are related to the regulatory and attendance that might be occurring in a particular location.

So each one of those is unique. We're feeling pretty good about our ability to be successful across the board in the back half of the year, knowing there'll be some spots that will be a little late.

Seth Sigman -- Credit Suisse -- Analyst

OK. That's helpful. And just one follow-up on the gross margin. It did seem stronger despite the big mix impact.

I think you mentioned volume incentives and higher merchandise margins. I assume it's also less promotional activity in the period. Can you just talk about sustainability of some of those positive offsets? I think you talked about some of the volume incentives continuing. What is the nature of that? If you could just elaborate on that.

And is that something more structural or more unique to the current environment? Thank you.

Robert Julian -- Chief Financial Officer

Yeah. Seth, this is Robert. Certainly, the headwinds that are created by mix over some time should normalize. We do not expect firearms and ammunition to continue to be this high of a proportion of our total sales, and so that should abate after some period of time.

Some of the offsets are more structural, and we would expect to continue the rate variance that we see within a product category where we've seen incremental improvement, but some improvement in just about every category. And the vendor incentives is structural in terms of how the program is designed, but it is also affected by volume. So we're seeing higher-than-normal incentive dollars due to higher-than-normal volume. That will also abate over some period of time and will go back to normal.

But the program is in place, and so that is structural in that regard.

Jon Barker -- Chief Executive Officer

If I may, Robert. To add to that, Seth, on the promotional side of the business, as you can imagine, throughout the end of Q1 and all through Q2, there's been very little promotional activity in the market around firearms, ammunition, and even fishing and some parts of camping. So we've been able to keep our margins in really good spot at the category level given the lack of promotional activity by our competition.

Seth Sigman -- Credit Suisse -- Analyst

That's great. Thanks very much.

Operator

Our next question comes from the line of Daniel Hofkin with William Blair & Company. Please proceed with your question.

Daniel Hofkin -- William Blair and Company -- Analyst

Good afternoon. One question I would have is to what degree -- and it sounds like if we're hearing it correctly, like continued strong trends thus far and expectations of outperforming mix. To what degree, especially for firearms, which are not consumable product the way that ammo is, could current demand sort of pull forward from future demand, let's say, next year, to what degree do you think that's a factor? Is there anything you can look to historically to tell you about that? That's my first question.

Jon Barker -- Chief Executive Officer

Dan, it's Jon. Hope all is well. As we think about this year's demand in firearms specifically, it's unique to anything we've ever seen in the industry. The reason I say that is a number of new first-time customers into the industry, we're estimating 5 million first-time buyers of a firearm this year.

And that means that's not a pull-forward of our traditional customer. Some of those customers are going to start participating in shooting activities. That's going to lead them to their second, third, fourth firearm. Of course, some of them may decide not to buy a second one.

But we're actually optimistic about what we've seen on the first-time buyer counts, that that can help offset any pull forward that might happen due to an election cycle where our traditional customers buying one more firearm that he or she is concerned about in the political process.

Daniel Hofkin -- William Blair and Company -- Analyst

OK. And then maybe could you give maybe a little more color about different categories that performed better or worse than -- obviously, firearms and ammo are kind of a standout, but just kind of any variance among the other categories, including by region. I know you talked about Alaska being weaker regionally, but just any color on performance of the categories overall, relative to each other and by region would be helpful.

Jon Barker -- Chief Executive Officer

Yes. Dan, I'll try to give you just some high level. What we've seen on the participation, again, starting in kind of late April, early May, as I think people were assessing, having been inside for weeks and weeks under a COVID lockdown -- and again, I think some of this is specific to the physical location you were at as to how long you're inside when you actually start to go outdoors. I think people started to assess how they're going to spend their time, their money, and their resources.

And the outdoors is a great fit for somebody that maybe isn't going to travel this year, maybe doesn't have the resources to travel because of financial concerns, economic concerns. We saw an immediate uptick in fishing. I think if you look at the fishing license sales across this country, they exceeded anything we've seen in decades. And we saw that in our stores, with combination of first-time buyers, the customer coming in, looking for the rod-reel combo.

They wanted to take their kids fishing. And we heard a lot of folks say, "I haven't fished in 10, 15, 20 years. I need a new rod-reel combo." What's exciting about that? That's an activity, once you do it a few times, you start to get hooked on it. No pun intended.

And you're back next year and instead of buying a $69 combo, maybe you're looking for $200 rod-reel, and that can lead to $1,000 for the year. So we're excited about what we saw in fishing. The same holds true in camping. We saw lots of new participants.

And if you spend any time in a state park or a national park this summer, you've seen the number of folks that are outdoors. And again, I believe that those customers, many of them will decide they like it, and this is not a one-time activity for them to go out and camp with their family, and we're going to see those folks return in the future years. So we've really seen nice uptick across everything. Certainly, in the camping -- I'm sorry, the apparel and footwear, the functional part of those, meaning the hiking boots, the trekking poles, the camouflage in turkey season and now what we're seeing camouflage going into the early archery season is showing very well for us with the customer.

Daniel Hofkin -- William Blair and Company -- Analyst

Right. Thank you very much. Best of luck.

Jon Barker -- Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Peter Benedict with Robert W. Baird. Please proceed with your question.

Peter Benedict -- Robert W. Baird -- Analyst

Oh, hey, guys. Thanks. Thanks for taking the question. Great quarter, obviously.

On the supply chain, I know there's the short-term stuff here. But assuming these activities and demand for these products, fishing, camping, firearms, ammo are going to sustain for a bit, is there anything going on in the supply chain that you can help us with that reflects kind of the ability to supply product for next year and even beyond that? I mean, what are you hearing from your vendor partners? Is there capacity being added? What can you tell us on that?

Jon Barker -- Chief Executive Officer

I think it depends on the sector, Peter. But we are seeing all the manufacturing ramp-up. And you certainly got the insight on what some of the public companies are doing in the U.S. with their sales of firearms and ammunition, and that's certainly a direct reflection of their ability to ramp up production to meet the demand.

Some of the categories, the longer lead time to ramp up that production, they're primarily overseas. And I think the forecasting that we're working through as an industry, this fall and winter will be critical in the factory's ability to meet the demand next spring, summer, and fall for the outdoor activity. So certainly, everybody is stretched right now in the supply chain because of demand. But we are in pretty good shape as we think about the future and ramping up to meet the demand.

Peter Benedict -- Robert W. Baird -- Analyst

OK. Great. And, Jon, one more for you. Just maybe comment on the mix of e-commerce sales, how that is trending, how it compares, maybe how it differs from what you see in the store.

And the fulfillment of e-commerce, how is that looking right now and kind of the utilization of your third-party partners? Just curious on how that's looking during this time of elevated demand.

Jon Barker -- Chief Executive Officer

Pete, I want to make sure I understand your question. As far as the e-com demand, how is it performing or that...

Peter Benedict -- Robert W. Baird -- Analyst

Well, no, just the mix of sales maybe across category. How do the category mix of your e-commerce channel compared to what you've got going on in the stores? And then how are those being fulfilled? The stores are fulfilling a lot of those orders, but you also have your third-party firearm vendors around the country that can fill all orders for you. Just curious how that's mixing out. Thank you.

Jon Barker -- Chief Executive Officer

Yes, Peter. The mix of product across the e-com business is pretty consistent with what we see in the store. The delivery mode is materially different, as you can imagine. So if you think about a percentage of footwear and apparel being 5% each, etc., in this quarter, we're seeing a similar trend on e-commerce as a percentage of the total e-commerce.

However, when you think about the delivery, the stores are still seeing a larger percentage of the product transacted through the store, meaning picked up in the store or curbside from the store than we are seeing delivered to the home. Delivered to the home either through our distribution centers, our dropship under integration for our own store fulfillment, and we expect that to continue. The third-party program that you mentioned, due to elevated demand, Peter, we've paused that to take care of our core customers first that are serving -- or coming to our stores for firearms. We'll continue to evaluate the right time to reengage the third-party program on our website and use our partnership to expand our geographic reach of firearm sales.

Peter Benedict -- Robert W. Baird -- Analyst

OK. Great. That's helpful. And then, Robert, maybe for you, two quick questions.

First, the 250-basis-point mix headwind to gross margin. Can you give us any color between maybe magnitude product margin versus channel mix? And then what's the future or the outlook here for hero pay? I apologize if you mentioned that earlier, but just curious what your thoughts are here in the second half of the year in terms of hero pay. Thanks.

Robert Julian -- Chief Financial Officer

Sure. So on your first question, I would say that sort of in round numbers, about three-quarters of the mix issue is product mix and about a quarter of it is channel mix, just in round numbers. And that stayed pretty consistent first quarter, second quarter. As it relates to hero pay, that's something that we have evaluated each quarter.

Given the circumstances, we've made no commitments to continue to do further hero pay, but I also wouldn't rule it out depending on, again, the circumstances and the situation. So that's a TBD, I guess, on hero pay.

Peter Benedict -- Robert W. Baird -- Analyst

That makes sense. Well, thanks. Congratulations on the great quarter and also the balance sheet progress. Great to see.

Thanks, guys.

Operator

Our next question comes from the line of Ryan Sigdahl with Craig-Hallum Capital Group. Please proceed with your question.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Good afternoon, guys, and congrats on the strong results. First, I want to ask what, if you can say directionally or quantify, but the sales cadence within the quarter and then also what you've seen in August?

Jon Barker -- Chief Executive Officer

Ryan, it's Jon. And your first question was the sales cadence by month within Q2. We saw very consistent curve on demand in Q2 to previous years' Q2, and it was a pretty consistent traffic demand, both online and in-store, and a pretty consistent demand in the store. There wasn't a material change.

As far as Q3, at this point, Ryan, we're not going to be providing any guidance or insight into how August or Q3 might be performing.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Gotcha. Then just on inventory, down a similar percent kind of on a per-store basis, exiting Q1, exiting Q2. But maybe within that -- or I guess how do you feel about your inventory positioning relative to where you guys were at three months ago exiting Q1 to where you are today? Better or worse, similar?

Jon Barker -- Chief Executive Officer

Very similar, Ryan. The trend has been -- it's changed a little bit from category to category with some categories being consistent overall that we're about in the same place as far as the in-stocks go today as compared to where we would like to be at this point.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Last one for me, and then I'll hop back in the queue. But balance sheet significantly improved. Any change in thoughts on kind of the near- and medium-term store expansion strategy and big opportunity, accelerated participation? Balance sheet's in better place. Any thoughts on accelerating new store openings there?

Jon Barker -- Chief Executive Officer

I don't think that we would say that our plan is to accelerate new store openings. We talked about the ones that are in the queue. We're going to continue to be opportunistic. And as you mentioned, the balance sheet puts us in a position to continue to look for opportunities for expansion, which we've done in a variety of different ways over the last year.

And so if opportunities presented themselves, we would take advantage of it. But I wouldn't call that a change in strategy. That's sort of similar to how we've been operating in kind of business-as-usual.

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Great. Thanks. Good luck.

Jon Barker -- Chief Executive Officer

Thanks, Ryan.

Operator

Our next question comes from the line of Peter Keith with Piper Sandler. Please proceed with your question.

Peter Keith -- Piper Sandler -- Analyst

Thanks for taking the question. Obviously, a great quarter. Jon, I will compliment you for ramping up the e-com capabilities. I don't think two years ago, you guys would be able to maximize that e-com growth, so nice work.

From a big-picture perspective, looking at the 61% comp, have you given any thought on breaking that down between what amount is being driven by just general demand growth and what amount is being driven by market share gains?

Robert Julian -- Chief Financial Officer

Yeah. Peter, this is Robert. I would say, and I'll let Jon weigh in it. There are so many factors, and there are so many moving pieces that are occurring right now that it's hard to be very precise in trying to bifurcate where the growth is coming from.

We know for sure that we are gaining share and we know for sure that we're getting some benefit from extraneous events. And trying to break that out and categorize how much is coming from each is really, really difficult. We'd like to, but it's just hard to do that math.

Jon Barker -- Chief Executive Officer

And, Peter, this is Jon. That is hard to really parse out. But what I think is important about that question and how we're thinking is we can see how many new customers we've gained over the last two quarters, and that's really what's important. We've introduced Sportsman's Warehouse, the stores, and sportsmans.com to an incredibly large amount of new customers that purchase from us.

They became loyalty customers, they're in our email database and the opportunity for us to continue to grow this organization and continue to grow market share is through retaining those customers and reengaging them across the category. So while it's hard for us to say exactly how much of this growth is market share versus extraordinary activities, what I think we really want to focus on is how we take those new customers and those new participants in the outdoors and continue to reengage them to build lifetime value for the long run.

Peter Keith -- Piper Sandler -- Analyst

Great. So maybe as a follow-on, Jon, with the new customers that you've acquired here year to date, have you made any observations around the purchasing behavior? What I mean by that is, are you seeing now repeat visits at a similar rate as before or maybe at a stepped-up rate? Curious on how the new customers are behaving already with you.

Jon Barker -- Chief Executive Officer

Yes. That's a great question. Peter, I'll give you some generalization. I probably can't speak to the exact repeat rate of new customers as a data point.

But I can tell you is we've seen a return to more normal shopping behavior inside the store and online. And what I mean by that, in Q1, people are really questing to get what they need and get out, and we saw that in the basket analysis. We saw that in the quantity of customers signing up for loyalty, the quantity of customers signing up for our new credit card. In Q2, we started to see normal shopping behavior -- sorry, my apologies, normal shopping behavior inside the store.

Customers were moving from department to department. And actually, their basket analysis was looking more similar to what it would have last summer. So I think from our perspective, we're excited to see some normalization in that activity. We're seeing a great improvement in our new credit card file growth, our new loyalty customer growth, and our email growth on the website.

And all those things together give us optimism that we're getting more to a normal shopping behavior, which will allow us to be better at that retention component and increasing the repeat at sportsmans.com and in the stores.

Peter Keith -- Piper Sandler -- Analyst

OK. Good. Maybe one last one for me, just a follow-up on Ryan's question on the cadence. Is it fair to say that the quarter finished as strong as it started? And then also, I know you don't want to comment on Q3, but any kind of early signs on hunting season, particularly with large chunks of college football canceled, any early purchase activity there?

Robert Julian -- Chief Financial Officer

So, Peter, I'll take the first part of your question. I'll let Jon answer the second. If I understand it correctly, you're probably thinking about how the cadence changed in Q1 when we reported our Q1 results. And we said the first month of the quarter was sort of normal, and then the next two months hit these elevated levels.

In Q2, what we saw is real consistency. Every single month had very, very similar total growth and same-store growth throughout the quarter. So there was no change in trend, up or down. And we started Q2 at a level, and we ended at that level, and it pretty much stayed that way throughout the quarter in terms of growth, both total and same store.

Jon Barker -- Chief Executive Officer

I think that, if I could, Peter, one thing that's worth mentioning, and this applies to both fishing licenses and hunting licenses, on the hunting side, we've seen a greater growth so far this June to July. This is not Sportsman's data, this is a state data, that we have a better participation rate this year than we've had in many, many, many years. And in some cases, licenses sold out in minutes that in the past may have taken weeks or never sold out at all. So I think there's going to be more people in the field this year, more people participating.

And again, I think that early data would indicate that the hunting season will be good for the overall industry.

Peter Keith -- Piper Sandler -- Analyst

Sounds great. Great feedback and keep up the good work. Thank you.

Operator

Our next question comes from the line of Mark Smith with Lake Street Capital Markets. Please proceed with your question.

Mark Smith -- Lake Street Capital Markets -- Analyst

Hey, guys. First off for me, I was impressed with the apparel and footwear sales during the quarter. Can you talk at all about margins in those businesses? Did you have some clear-out of some things in spring maybe impeded that? Or did you really just see strength across the board in those categories?

Robert Julian -- Chief Financial Officer

Yeah. Mark, this is Robert. And I agree with you, we saw really nice progress in those categories. Those categories are traditionally much higher-margin product categories than, say, firearms to the ammunition.

However, there was some pressure on gross margin within those categories, and what I would refer to the rate, product rate. As we saw, looking at our assortments and thinking about where we have a right to win -- and we really want to focus on the technical sort of apparel and so on. So we didn't see the same increase in rates within that category. However, sales within that category to continue to be at a much higher margin than our average.

Mark Smith -- Lake Street Capital Markets -- Analyst

OK. Perfect. And then any change as we look at, we'll call it, broadly stimulus spending? Any changes that you saw in consumer behavior as maybe stimulus checks wound down or as maybe higher unemployment rates rolled off in July?

Jon Barker -- Chief Executive Officer

Not really, Mark. This is Jon. One of the things I will add on the apparel side, there were a lot of mapped holidays from our key vendors this summer, which were unique. And I don't mean to add color, but I think that that probably put a little bit more of a rate variance into apparel this summer than we traditionally see.

And these are the big brands. I think they probably were over inventoried with the pullback from some retailers on apparel, and we did see some mapped holidays come through, which, again, go right to our bottom line and margin.

Mark Smith -- Lake Street Capital Markets -- Analyst

OK. And then I think the last one for me. As we look at kind of a shift into winter and hunting season, you just talked about this a little bit, but maybe can you talk about two trends as far as any changes that you've seen and then maybe how well you're positioned on inventory? First, as we look at archery, how that category has trended maybe during the quarter, as well as into Q3. And then also as we look at firearms and ammunition within a more hunting kind of caliber, instead of looking at 9-millimeter, looking at traditional hunting rounds within ammunition and what inventory you have in firearms on yourselves, are you seeing that bump as we move into kind of a more historical sales trends for those rounds in those categories?

Robert Julian -- Chief Financial Officer

Sure. Sure, Mark. Let me try and give you some color first. Let's talk about primitive weapons, both the combination of compound crossbow and muzzleloaders.

First of all, we've got some new buying talents, been in the organization for a little while now, and that team has really done a nice job of positioning us in those primitive categories better than we have in the last few years. So we have new brands and we got a really, really strong positioning and market strategy. Inventory is in good shape, and we are seeing demand. And we started seeing it not just in the last few weeks.

Those really started kind of early summer as people started thinking about getting into the field in the fall. We started hunting in the last three weeks ago, right, two and a half weeks ago, and archery. And the sales have been fantastic. So again, I think from a Sportsman's Warehouse perspective, we were well-positioned for archery, we're well-positioned for primitive muzzleloader and crossbows, where they're legal.

And we are seeing a nice participation rate. As I think about going into firearm season with firearm bolt -- bolt-action centerfire rifles for hunting season and ammunition, we're in very good, good shape. Again that's kind of the core of how we built this business, was on hunting and hunting rifles, and we are in exceptional shape. We've had some exclusive firearms that we've partnered with key vendors on this year, and we're really happy with the performance in those.

Ammunition can be a little spotty. To be fair, there are certain calibers that maybe somebody normally buys two boxes. They were in the summer, they bought four boxes, just to be sure. So we've seen some thin spots on centerfire rifle but nothing to the extent we've seen in handgun ammo or NATO ammo.

Mark Smith -- Lake Street Capital Markets -- Analyst

That is helpful. Thank you.

Operator

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Jon Barker -- Chief Executive Officer

This is Jon, and I want to thank everyone for their time today. A very special thanks to all of our associates in our stores, distribution center, care center, and at our corporate office. I'm very proud of the team's dedication and contributions not only during second quarter but this entire year. I want to say thank you again.

And with that, we will close the call.

Operator

[Operator signoff]

Duration: 54 minutes

Call participants:

Caitlin Howe -- Vice President, Corporate Development and Investor Relations

Jon Barker -- Chief Executive Officer

Robert Julian -- Chief Financial Officer

Seth Sigman -- Credit Suisse -- Analyst

Daniel Hofkin -- William Blair and Company -- Analyst

Peter Benedict -- Robert W. Baird -- Analyst

Ryan Sigdahl -- Craig-Hallum Capital Group -- Analyst

Peter Keith -- Piper Sandler -- Analyst

Mark Smith -- Lake Street Capital Markets -- Analyst

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