Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the Big 5 Sporting Goods Corporation (“we,” “our,” “us”) financial condition and results of operations includes information with respect to our plans and strategies for our business and should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes (“Interim Financial Statements”) included herein, the Risk Factors included herein and in our other filings with the Securities and Exchange Commission (“SEC”), and our consolidated financial statements, related notes, Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended January 1, 2023.
Our fiscal year ends on the Sunday nearest December 31. Fiscal 2023 is comprised of 52 weeks and ends on December 31, 2023. Fiscal 2022 was comprised of 52 weeks and ended on January 1, 2023. The interim periods in fiscal 2023 and 2022 are each comprised of 13 weeks.
Overview
We are a leading sporting goods retailer in the western United States, with 430 stores and an e-commerce platform under the name “Big 5 Sporting Goods” as of April 2, 2023. We provide a full-line product offering in a traditional sporting goods store format that averages approximately 12,000 square feet. Our product mix includes athletic shoes, apparel and accessories, as well as a broad selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, home recreation, tennis, golf, and winter and summer recreation.
In the first quarter of fiscal 2023 we closed two stores and in the first quarter of fiscal 2022 we did not open or close any stores. For fiscal 2023, we anticipate opening approximately six new stores and closing approximately six stores.
Executive Summary
Net income decreased in the first quarter of fiscal 2023 compared with the first quarter of fiscal 2022 as a result of reduced net sales and lower merchandise margins year over year. Reduced net sales in the first quarter of fiscal 2023 in part reflected challenging macro-economic conditions including significant inflationary pressures which dampened consumer sentiment and negatively impacted discretionary spending.
•Net sales for the first quarter of fiscal 2023 decreased 7.1% to $224.9 million compared to $242.0 million for the first quarter of fiscal 2022. The decrease in net sales reflects a decline of 7.1% in same store sales when compared with the first quarter of fiscal 2022. Our lower same store sales in the first quarter of fiscal 2023 in part reflected significant inflationary pressures and heightened recessionary concerns that negatively impacted consumer demand, which contributed to reduced net sales across our major merchandise categories of hardgoods and footwear, partially offset by an increase in our apparel category that reflected higher winter-product sales.
•Gross profit for the first quarter of fiscal 2023 represented 33.4% of net sales, compared with 35.5% in the first quarter of the prior year. The decrease in gross profit margin primarily reflects higher store occupancy and distribution expense as a percentage of net sales as well as lower merchandise margins compared with the prior year. While merchandise margins were down year over year they remained healthy and continued to compare favorably to pre-pandemic levels.
•Selling and administrative expense for the first quarter of fiscal 2023 remained relatively unchanged at $75.2 million, or 33.4% of net sales, compared to $75.3 million, or 31.1% of net sales, for the first quarter of fiscal 2022. Selling and administrative expense primarily reflects decreases in company performance-based incentive accruals offset by an increase in employee labor expense.
•Net income for the first quarter of fiscal 2023 was $0.2 million, or $0.01 per diluted share, compared to net income of $9.1 million, or $0.41 per diluted share, for the first quarter of fiscal 2022, primarily reflecting lower net sales and, to a lesser degree, lower merchandise margins year over year.
•Operating cash flow for the first quarter of fiscal 2023 was a positive $12.3 million compared to operating cash flow in the first quarter of fiscal 2022 of a negative $23.7 million. The increased operating cash flow was due primarily to decreased funding of merchandise inventory and accrued expenses, primarily related to performance-based incentive accruals, partially offset by decreased net income.
•Capital expenditures for the first quarter of fiscal 2023 decreased to $2.5 million from $2.9 million for the first quarter of fiscal 2022. We expect to open approximately six new stores in fiscal 2023, after opening three new stores in the prior year.
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•We had cash and cash equivalents of $27.5 million, $25.6 million and $62.0 million as of April 2, 2023, January 1, 2023 and April 3, 2022, respectively. The balances as of April 2, 2023 and April 3, 2022 included cash equivalents of $15.0 million and $50.0 million, respectively, related to investments in highly-liquid U.S. Treasury bills. We have had no borrowings under our credit facility since the full pay-down of outstanding balances under the credit facility in the third quarter of fiscal 2020.
•We paid cash dividends in the first quarter of fiscal 2023 and 2022 of $6.1 million, or $0.25 per share.
•We did not repurchase any shares of common stock in the first quarter of fiscal 2023, and we repurchased 94,983 shares of common stock for $1.6 million in the first quarter of fiscal 2022.
Results of Operations
The results of the interim periods are not necessarily indicative of results for the entire fiscal year.
13 Weeks Ended April 2, 2023 Compared to 13 Weeks Ended April 3, 2022
The following table sets forth selected items from our interim unaudited condensed consolidated statements of operations by dollar and as a percentage of our net sales for the periods indicated:
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13 Weeks Ended |
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April 2,
2023 |
|
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April 3,
2022 |
|
|
|
(Dollars in thousands) |
|
Net sales |
|
$ |
224,939 |
|
|
|
100.0 |
% |
|
$ |
241,981 |
|
|
|
100.0 |
% |
Cost of sales (1) |
|
|
149,795 |
|
|
|
66.6 |
|
|
|
156,048 |
|
|
|
64.5 |
|
Gross profit |
|
|
75,144 |
|
|
|
33.4 |
|
|
|
85,933 |
|
|
|
35.5 |
|
Selling and administrative expense (2) |
|
|
75,173 |
|
|
|
33.4 |
|
|
|
75,317 |
|
|
|
31.1 |
|
Operating (loss) income |
|
|
(29 |
) |
|
|
0.0 |
|
|
|
10,616 |
|
|
|
4.4 |
|
Interest (income) expense |
|
|
(115 |
) |
|
|
(0.1 |
) |
|
|
184 |
|
|
|
0.1 |
|
Income before income taxes |
|
|
86 |
|
|
|
0.1 |
|
|
|
10,432 |
|
|
|
4.3 |
|
Income tax (benefit) expense |
|
|
(107 |
) |
|
|
0.0 |
|
|
|
1,329 |
|
|
|
0.5 |
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Net income |
|
$ |
193 |
|
|
|
0.1 |
% |
|
$ |
9,103 |
|
|
|
3.8 |
% |
(1)Cost of sales includes the cost of merchandise, net of discounts or allowances earned, freight, inventory reserves, buying, distribution center expense, including depreciation and amortization, and store occupancy expense. Store occupancy expense includes rent, amortization of leasehold improvements, common area maintenance, property taxes and insurance.
(2)Selling and administrative expense includes store-related expense, other than store occupancy expense, as well as advertising, depreciation and amortization, expense associated with operating our corporate headquarters and impairment charges, if any.
Net Sales. Net sales decreased by $17.1 million, or 7.1%, to $224.9 million in the first quarter of fiscal 2023 from $242.0 million in the first quarter last year. The change in net sales reflected the following:
•Same store sales decreased by $17.0 million, or 7.1%, for the 13 weeks ended April 2, 2023, versus the comparable 13-week period in the prior year. The decline in same store sales was attributed to the following:
oThe decrease in same store sales in the first quarter of fiscal 2023 in part reflected significant inflationary pressures and heightened recessionary concerns that dampened consumer sentiment and negatively impacted discretionary spending. While we experienced strong winter-related product sales as a result of cold winter-weather conditions during the first fiscal quarter, the continuing cold and wet winter-weather patterns negatively impacted sales for the spring categories of product such as baseball and other spring sports during the second half of the fiscal quarter.
oOur lower same store sales reflected decreases in our major merchandise categories of hardgoods and footwear, while our apparel category increased reflecting higher winter-product sales.
oSame store sales comparisons are made on a comparable-day basis. Same store sales for a period normally consist of sales for stores that operated throughout the period and the full corresponding prior-year period, along with sales from e-commerce. Same store sales comparisons exclude sales from stores permanently closed, or stores in the process of closing, during the comparable periods. Sales from e-commerce in the first quarter of fiscal 2023 and 2022 were not material.
•We experienced decreased customer transactions of 5.9% and a lower average sale per transaction of 1.2% in the first quarter of fiscal 2023 compared to the prior year.
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Gross Profit. Gross profit decreased by $10.8 million to $75.1 million, or 33.4% of net sales, in the 13 weeks ended April 2, 2023, compared with $85.9 million, or 35.5% of net sales, in the 13 weeks ended April 3, 2022. The change in gross profit was primarily attributable to the following:
•Net sales decreased by $17.1 million, or 7.1%, compared with the first quarter of last year.
•Merchandise margins, which exclude buying, occupancy and distribution expense, decreased by an unfavorable 23 basis points compared with the first quarter of last year when merchandise margins increased by a favorable 119 basis points. Our decreased merchandise margins primarily reflect increased promotional pricing and higher product purchase costs. While merchandise margins were down year over year they remained healthy and continued to compare favorably to pre-pandemic levels.
•Store occupancy expense increased by $0.7 million, or an unfavorable 110 basis points as a percentage of net sales, compared with the first quarter of last year.
•Distribution expense, including costs capitalized into inventory, increased by $0.5 million, or an unfavorable 59 basis points as a percentage of net sales, in the first quarter of fiscal 2023 compared to the prior year. The increase primarily reflected decreased costs capitalized into inventory, which were partially offset by lower trucking and fuel expense.
Selling and Administrative Expense. Selling and administrative expense decreased by $0.1 million to $75.2 million, or 33.4% of net sales, in the 13 weeks ended April 2, 2023, compared to $75.3 million, or 31.1% of net sales, in the first quarter last year. The change in selling and administrative expense was primarily attributable to the following:
•Administrative expense decreased by $1.7 million, primarily attributable to decreases in company performance-based incentive accruals and employee benefit-related expense in the current year.
•Our advertising expense decreased by $0.2 million in the first quarter of fiscal 2023. Our expense remains less than half of pre-pandemic expense as a result of initial measures we took in response to COVID-19 in fiscal 2020. We expect our expense to continue to benefit from reduced advertising activity in the foreseeable future as we continue to evaluate the impact on our sales.
•Store-related expense, excluding occupancy, increased by $1.8 million due largely to increases in employee labor expense, store security and systems improvements and the impact of broad-based inflation, partially offset by reductions in health and welfare expense as compared to the prior year which experienced a surge related to post-COVID-19 medical treatment. Wages continue to reflect the incremental impact of legislated minimum wage rate increases primarily in California, where over half of our stores are located. In California, state-wide minimum wage rates have risen from $10.00 per hour in 2017 to $15.50 per hour beginning on January 1, 2023. Additionally, certain other jurisdictions within California, including Los Angeles and San Francisco, as well as various other states in which we do business, are and have been implementing their own scheduled increases that exceed the state-wide minimum wage rates, which may also include interim impacts effective at various points throughout the year. Labor expense for the first quarter of fiscal 2023 also reflected higher demand for labor in many of our markets resulting in higher wages. We estimate that the combined impact of these wage pressures caused our labor expense to increase by approximately $1.2 million for the first quarter of fiscal 2023 compared with the first quarter of fiscal 2022.
Interest (Income) Expense. Interest expense decreased by $0.3 million in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022 as a result of generating interest income for the current fiscal year reflecting higher interest earned on cash equivalents.
Income Taxes. The provision for income taxes was a benefit of $0.1 million for the first quarter of fiscal 2023 compared to an expense of $1.3 million for the first quarter of fiscal 2022, primarily reflecting lower pre-tax income and a tax deduction related to share-based compensation compared to the first quarter of fiscal 2022.
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Liquidity and Capital Resources
Our principal liquidity requirements are for working capital, capital expenditures and cash dividends. We fund our liquidity requirements primarily through cash and cash equivalents, cash flows from operations and borrowings from the revolving credit facility, when necessary.
As of April 2, 2023, we had $27.5 million of cash and cash equivalents compared to $62.0 million of cash and cash equivalents as of April 3, 2022. Our cash flows from operating, investing and financing activities are summarized as follows:
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13 Weeks Ended |
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April 2,
2023 |
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April 3,
2022 |
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(In thousands) |
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Total cash provided by (used in): |
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|
|
|
|
|
Operating activities |
|
$ |
12,292 |
|
|
$ |
(23,717 |
) |
Investing activities |
|
|
(2,529 |
) |
|
|
(2,926 |
) |
Financing activities |
|
|
(7,869 |
) |
|
|
(8,739 |
) |
Net increase (decrease) in cash and cash equivalents |
|
$ |
1,894 |
|
|
$ |
(35,382 |
) |
Operating Activities. Operating cash flows for the first quarter of fiscal 2023 and 2022 were a positive $12.3 million and a negative $23.7 million, respectively. The increased cash flow provided by operating activities for the first quarter of fiscal 2023 compared to the prior year primarily reflects decreased funding of merchandise inventory and accrued expenses, primarily related to performance-based incentive accruals, partially offset by lower net income.
Investing Activities. Net cash used in investing activities for the first quarter of fiscal 2023 and 2022 was $2.5 million and $2.9 million, respectively. Capital expenditures, excluding non-cash acquisitions, represented substantially all of the cash used in investing activities for each period. Capital expenditures for both periods primarily reflect store-related remodeling, distribution center investments and computer hardware and software purchases.
Financing Activities. Financing cash flows for the first quarter of fiscal 2023 and 2022 were a negative $7.9 million and a negative $8.7 million, respectively. For the first quarter of both periods, cash was used primarily to fund dividend payments and make principal payments on finance lease liabilities, partially offset by proceeds received from the exercise of employee share option awards. For the first quarter of fiscal 2022, cash was also used to purchase treasury stock.
As of April 2, 2023, January 1, 2023 and April 3, 2022, we had no revolving credit borrowings, and $1.4 million, $1.4 million and $1.1 million, respectively, of letter of credit commitments outstanding.
In fiscal 2022 we paid quarterly cash dividends of $0.25 per share of outstanding common stock. In the first quarter of fiscal 2023, we paid a quarterly cash dividend of $0.25 per share of outstanding common stock, and in the second quarter of fiscal 2023, our Board of Directors declared a quarterly cash dividend of $0.25 per share of outstanding common stock, which will be paid on June 15, 2023 to stockholders of record as of June 1, 2023.
Periodically, we repurchase our common stock in the open market pursuant to programs approved by our Board of Directors. We may repurchase our common stock for a variety of reasons, including, among other things, our alternative cash requirements, existing business conditions and the current market price of our stock. In the first quarter of fiscal 2022, our Board of Directors authorized a new share repurchase program of up to $25.0 million of our common stock, which replaced the previous share repurchase program. Under this program, we may purchase shares from time to time in the open market or in privately negotiated transactions in compliance with the applicable rules and regulations of the SEC. However, the timing and amount of such purchases, if any, would be at the discretion of our management and Board of Directors, and would depend on market conditions and other considerations. We repurchased 94,983 shares of our common stock for $1.6 million in the first quarter of fiscal 2022 and repurchased 295,719 shares of our common stock for $4.1 million in the full year of fiscal 2022. We did not repurchase any shares of our common stock in the first quarter of fiscal 2023. Since the inception of our initial share repurchase program in May 2006 through April 2, 2023, we have repurchased a total of 4,186,014 shares for $53.6 million.
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Loan Agreement. We are party to a Loan, Guaranty and Security agreement with Bank of America, N.A. (“BofA”), as agent and lender, which was amended on November 22, 2021 and October 19, 2022 (as so amended, the “Loan Agreement”). The Loan Agreement has a maturity date of February 24, 2026 and provides for a revolving credit facility with an aggregate committed availability of up to $150.0 million. We may also request additional increases in aggregate availability, up to a maximum of $200.0 million, in which case the existing lender under the Loan Agreement will have the option to increase their commitment to accommodate the requested increase. If the lender does not exercise that option, we may (with the consent of BofA in its role as the administrative agent, not to be unreasonably withheld) seek other lenders willing to provide such commitments. The credit facility includes a $50.0 million sublimit for issuances of letters of credit.
We may borrow under the Loan Agreement from time to time, provided the amounts outstanding will not exceed the lesser of the then aggregate committed availability (as discussed above) and the Borrowing Base (such lesser amount being referred to as the “Line Cap”). As defined in the Loan Agreement, the “Borrowing Base” generally is comprised of the sum, at the time of calculation, of (a) 90.00% of eligible credit card receivables; plus (b) the cost of eligible inventory (other than eligible in-transit inventory), net of inventory reserves, multiplied by 90.00% of the appraised net orderly liquidation value of eligible inventory (expressed as a percentage of the cost of eligible inventory); plus (c) the cost of eligible in-transit inventory, net of inventory reserves, multiplied by 90.00% of the appraised net orderly liquidation value of eligible in-transit inventory (expressed as a percentage of the cost of eligible in-transit inventory), minus (d) certain agreed-upon reserves as well as other reserves established by BofA in its role as the administrative agent in its reasonable discretion.
Generally, we may designate specific borrowings under the Loan Agreement as either base rate loans or Term SOFR rate loans. The applicable interest rate on our borrowings is a function of the daily average, over the preceding fiscal quarter, of the excess of the Line Cap over amounts borrowed (such amount being referred to as the “Average Daily Availability”). Those loans designated as Term SOFR rate loans bear interest at a rate equal to the then applicable secured overnight financing rate as administered by the Federal Reserve Bank of New York (“SOFR”) rate plus a 0.10% “SOFR adjustment” spread, plus an applicable margin as shown in the table below. Those loans designated as base rate loans bear interest at a rate equal to the applicable margin for base rate loans (as shown below) plus the highest of (a) the Federal funds rate, as in effect from time to time, plus one-half of one percent (0.50%), (b) the one-month SOFR rate, plus one percentage point (1.00%), or (c) the rate of interest in effect for such day as announced from time to time within BofA as its “prime rate.” The applicable margin for all loans will be a function of Average Daily Availability for the preceding fiscal quarter as set forth below.
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Level |
|
Average Daily Availability |
|
SOFR Rate
Applicable Margin |
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Base Rate
Applicable Margin |
I |
|
Greater than or equal to $70,000,000 |
|
1.375% |
|
0.375% |
II |
|
Less than $70,000,000 |
|
1.500% |
|
0.500% |
The commitment fee assessed on the unused portion of the credit facility is 0.20% per annum.
Obligations under the Loan Agreement are secured by a general lien on and security interest in substantially all of our assets. The Loan Agreement contains covenants that require us to maintain a fixed charge coverage ratio of not less than 1.0:1.0 in certain circumstances, and limits the ability to, among other things, incur liens, incur additional indebtedness, transfer or dispose of assets, change the nature of the business, guarantee obligations, pay dividends or make other distributions or repurchase stock, and make advances, loans or investments. We may generally declare or pay cash dividends or repurchase stock only if, among other things, no default or event of default then exists or would arise from such dividend or repurchase of stock and, after giving effect to such dividend or repurchase, certain availability and/or fixed charge coverage ratio requirements are satisfied, although we are permitted to make up to $5.0 million of dividend payments or stock repurchases per year without satisfaction of the availability or fixed charge coverage ratio requirements, but dividends or stock repurchases made without satisfying the availability and/or fixed charge coverage ratio requirements will require the establishment of an additional reserve that will reduce borrowing availability under the Loan Agreement for 75 days. The Loan Agreement contains customary events of default, including, without limitation, failure to pay when due principal amounts with respect to the credit facility, failure to pay any interest or other amounts under the credit facility, failure to comply with certain agreements or covenants contained in the Loan Agreement, failure to satisfy certain judgments against us, failure to pay when due (or any other default which permits the acceleration of) certain other material indebtedness in principal amount in excess of $5.0 million, and certain insolvency and bankruptcy events.
Future Capital Requirements. We had cash and cash equivalents of $27.5 million as of April 2, 2023. We expect capital expenditures for fiscal 2023, excluding non-cash acquisitions, to range from approximately $15.0 million to $20.0 million primarily to fund store-related remodeling, the opening of new stores, distribution center investments and computer hardware and software purchases. For fiscal 2023, we anticipate opening approximately six new stores and closing approximately six stores.
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Dividends are paid at the discretion of our Board of Directors. In fiscal 2022 we paid quarterly cash dividends of $0.25 per share of outstanding common stock. In the first quarter of fiscal 2023, we paid a quarterly cash dividend of $0.25 per share of outstanding common stock, and in the second quarter of fiscal 2023, our Board of Directors declared a quarterly cash dividend of $0.25 per share of outstanding common stock, which will be paid on June 15, 2023 to stockholders of record as of June 1, 2023.
As of April 2, 2023, a total of $20.9 million remained available for share repurchases under our new share repurchase program. We did not repurchase any shares of our common stock in the first quarter of fiscal 2023. We repurchased 94,983 shares of our common stock for $1.6 million in the first quarter of fiscal 2022 and repurchased 295,719 shares of our common stock for $4.1 million in the full year of fiscal 2022. We consider several factors in determining when and if we make share repurchases including, among other things, our alternative cash requirements, existing business conditions and the market price of our stock.
We believe we will be able to fund our cash requirements from cash and cash equivalents, operating cash flows and borrowings from our credit facility, for at least the next 12 months.
Contractual Obligations. Our material contractual obligations include operating lease commitments associated with our leased properties and other occupancy expense, finance lease obligations, borrowings under the credit facility, if any, and other liabilities. Operating lease commitments consist principally of leases for our retail store facilities, distribution center and corporate offices. These leases frequently include options which permit us to extend the terms beyond the initial fixed lease term, and we intend to renegotiate most of these leases as they expire. Operating lease commitments also consist of information technology (“IT”) systems hardware, distribution center delivery tractors and equipment. Additional information regarding our operating and finance leases is available in Notes 2 and 5 to the Interim Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.
In the first quarter of fiscal 2023 and 2022, we had zero borrowings under our revolving credit facility.
In the ordinary course of business, we enter into arrangements with vendors to purchase merchandise in advance of expected delivery. Because most of these purchase orders do not contain any termination payments or other penalties if cancelled, they are not included as outstanding contractual obligations.
Critical Accounting Estimates
As discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended January 1, 2023, we consider our estimates on valuation of merchandise inventory and valuation of long-lived assets to be among the most critical in understanding the judgments that are involved in preparing our consolidated financial statements. There have been no significant changes to these estimates in the 13 weeks ended April 2, 2023.
Seasonality and Impact of Inflation
We experience seasonal fluctuations in our net sales and operating results, which can suffer when weather does not conform to seasonal norms, such as the first quarter of fiscal 2022 when we experienced warm and dry winter-weather conditions across our markets that resulted in significant carryover of winter inventory. Seasonality in our net sales influences our buying patterns which directly impacts our merchandise and accounts payable levels and cash flows. We purchase merchandise for seasonal activities in advance of a season and supplement our merchandise assortment as necessary and when possible during the season. Our efforts to replenish products during a season are not always successful. In the fourth fiscal quarter, which includes the holiday selling season and the start of the winter selling season, we normally experience higher inventory purchase volumes and increased expense for staffing and advertising. If we miscalculate the consumer demand for our products generally or for our product mix in advance of a season, particularly the fourth quarter, our net sales can decline, which can harm our financial performance. A significant shortfall from expected net sales, particularly during the fourth quarter, can negatively impact our annual operating results.
In fiscal 2022 and the first quarter of fiscal 2023, we experienced greater inflation in the cost of products that we purchase for resale as well as higher freight costs than in previous years. While our merchandise inventory costs have been impacted by inflationary pressures, we have generally been able to adjust our selling prices in response to these higher product purchase costs. However, if we are unable to adjust our selling prices for product purchase cost increases that might occur in the future, then our merchandise margins could decline, which would adversely impact our operating results. In fiscal 2022 and the first quarter of fiscal 2023, we also experienced increased wage expense as a result of higher demand and competition for labor in many of our markets and we expect these dynamics to continue in fiscal 2023. Broad-based inflationary pressures adversely impacted many categories of costs and expenses during fiscal 2022 and this impact is expected to continue during fiscal 2023.
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Recently Issued Accounting Updates
See Note 2 to the Interim Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.
Forward-Looking Statements
This document includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, among other things, our financial condition, our results of operations, our growth strategy and the business of our company generally. In some cases, you can identify such statements by terminology such as “may,” “could,” “project,” “estimate,” “potential,” “continue,” “should,” “expects,” “plans,” “anticipates,” “believes,” “intends” or other such terminology. These forward-looking statements involve known and unknown risks and uncertainties and other factors that may cause our actual results in current or future periods to change significantly and differ materially from forecasted results. These forward-looking statements involve known and unknown risks and uncertainties and other factors that may cause our actual results in current or future periods to change significantly and differ materially from forecasted results. These risks and uncertainties include, among other things, the economic impacts of COVID-19, including any potential variants, on our business operations, including as a result of regulations that may be issued in response to COVID-19, global supply chain disruptions resulting from the ongoing conflict in Ukraine, changes in the consumer spending environment, fluctuations in consumer holiday spending patterns, increased competition from e-commerce retailers, breach of data security or other unauthorized disclosure of sensitive personal or confidential information, the competitive environment in the sporting goods industry in general and in our specific market areas, inflation, product availability and growth opportunities, changes in the current market for (or regulation of) firearm-related products, a reduction or loss of product from a key supplier, disruption in product flow, seasonal fluctuations, weather conditions, changes in cost of goods, operating expense fluctuations, increases in labor and benefit-related expense, changes in laws or regulations, including those related to tariffs and duties as well as environmental, social and governance issues, public health issues (including those caused by COVID-19 or any potential variants), impacts from civil unrest or widespread vandalism, lower than expected profitability of our e-commerce platform or cannibalization of sales from our existing store base which could occur as a result of operating the e-commerce platform, litigation risks, stockholder campaigns and proxy contests, risks related to our historically leveraged financial condition, changes in interest rates, credit availability, higher expense associated with sources of credit resulting from uncertainty in financial markets and economic conditions in general. Those and other risks and uncertainties are more fully described in Part II, Item 1A, Risk Factors, in this report and in Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K and other filings with the SEC. We caution that the risk factors set forth in this report and the other reports that we file with the SEC are not exclusive. In addition, we conduct our business in a highly competitive and rapidly changing environment. Accordingly, new risk factors may arise. It is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. We undertake no obligation to revise or update any forward-looking statement that may be made from time to time by us or on our behalf.