Should You Hunt or Fish for Profits With Sportsman's Warehouse Holdings (SPWH)? CAB, DKS & BGFV

Last Thursday, outdoor sporting goods retailer Sportsman's Warehouse Holdings Inc (NASDAQ: SPWH) had an IPO that was priced below expectations, meaning its worth taking a closer look at the stock along with the performance of peers like mid cap Cabelas Inc (NYSE: CAB) and Dicks Sporting Goods Inc (NYSE: DKS) and small cap Big 5 Sporting Goods Corporation (NASDAQ: BGFV).

What is Sportsman's Warehouse Holdings?

Founded in 1986 as a single retail store in Midvale, Utah, small cap Sportsman's Warehouse Holdings says it has the largest outdoor specialty store base in the Western United States and Alaska (47 stores across 18 states) that's focused on "meeting the everyday needs of the seasoned outdoor veteran, the first-time participant and every enthusiast in between." The company adds that its mission is to provide a one-stop shopping experience that equips customers with the right hunting, shooting, fishing and camping gear to maximize their enjoyment of the outdoors. 

As for potential peers, mid cap Cabelas Inc is the world's largest direct marketer of hunting, fishing, camping and related outdoor merchandise; mid cap Dicks Sporting Goods was founded by an avid fisherman who wanted to sell fishing gear but has evolved into a full-line sporting goods retailer offering a broad assortment of brand name sporting goods equipment, apparel and footwear in a specialty store environment; and small cap Big 5 Sporting Goods Corporation offers athletic shoes, apparel and accessories, as well as a broad selection of outdoor and athletic equipment.

What You Need to Know or Be Warned About Sportsman's Warehouse Holdings

Last Thursday, Sportsman's Warehouse Holdings priced its IPO at $9.50 per share (instead of the $11 to $13 price range) with 8,333,333 shares of common stock being sold by the company and 4,166,667 shares being sold by affiliates of Seidler Equity Partners III, L.P. that raised approximately $70.3 million. The company intends to use all of the net proceeds to repay amounts outstanding under its term loans.

Sportsman's Warehouse Holdings' prospectus noted that the company competes in a large, growing and fragmented outdoor activities and sporting goods market which it believes to be underserved by full-line multi-activity retailers. The company believes that the US outdoor activities and sporting goods retail sales totaled over $50 billion in 2012 and that growth in the US outdoor activities and sporting goods market is driven by several key trends, including:

An expanding demographic focused on healthy and active lifestyles; Successful new product introductions centered around enhancing performance and enjoyment while participating in sporting and outdoor activities; The resilience of consumer demand for purchases in these categories versus other discretionary categories.

Stores can vary in size from 30,000 to 65,000 gross square feet and the company has had success leasing existing sites as well as constructing new build-to-suit sites. The company also believes that over the longer term, its retail concept has the potential to expand to more than 300 locations throughout the United States.

The prospectus noted that Sportsman's Warehouse Holdings has reported revenues of $467,435k (Thirty-Nine Weeks Ended November 2, 2013), $337,927k (Thirty-Nine Weeks Ended October 27, 2012), $526,942k (fiscal 2013), $376,551k (fiscal 2012) and $311,363k (fiscal 2012) along with $14,339k (Thirty-Nine Weeks Ended November 2, 2013), $14,104k (Thirty-Nine Weeks Ended October 27, 2012), $28,074k (fiscal 2013), $33,694k (fiscal 2012) and $5,244k (fiscal 2012). It should be noted though that Sportsman's Warehouse Holdings has a rather high debt load of $288,910k – a reason why the offering will be used to pay off debt to help lower interest expenses.

Finally, investors should be aware that affiliates of Seidler control a majority of outstanding common stock, meaning the Sportsman's Warehouse Holdings is a "controlled company" that is exempt from some of the NASDAQ Stock Market corporate governance requirements, including requirements that:

• a majority of the board of directors consist of "independent directors" as defined under The NASDAQ Stock Market corporate governance standards;

• our director nominees be selected, or recommended for our board of directors' selection, either (1) by a majority of independent directors in a vote by independent directors, pursuant to a nominations process adopted by a board resolution, or (2) by a nominating and governance committee comprised solely of independent directors with a written charter addressing the nominations process; and

• the compensation of our executive officers be determined, or recommended to the board for determination, by a majority of independent directors in a vote by independent directors, or by a compensation committee comprised solely of independent directors.

However, a majority of the board of directors along with the audit committee and a compensation committee will be comprised solely of independent directors; but the nominating and governance committee will not be comprised solely of independent directors.

Share Performance: Sportsman's Warehouse Holdings vs. CAB, DKS & BGFV

On Tuesday, small cap Sportsman's Warehouse Holdings rose 1.68% to $9.66 for a market cap of $453.56. Here is a look at the long term performance of Cabelas Inc, Dicks Sporting Goods and Big 5 Sporting Goods Corporation:

As you can see from the above performance chart, mid cap Cabelas Inc and Dicks Sporting Goods has been a steady performer since the end of the financial crisis while Big 5 Sporting Goods Corporation has given investors a more mixed performance.

Finally, here is a look at the latest technical charts for all three outdoors sporting goods retailers:

The Bottom Line. Despite the disappointing IPO pricing, small cap outdoors sporting goods retailer Sportsman's Warehouse Holdings does appear to at least be holding onto its IPO price. Given the growth of the outdoor sporting goods market along with the steady performance of Cabelas Inc and Dicks Sporting Goods, investors might want to have the Sportsman's Warehouse Holdings on their watch list.