Vista Outdoor’s revenues slumped 9.8 percent in the first quarter to $568.7 million as a slight gain in its Outdoor Products was offset by a steep decline in its Shooting Sports segment.
Excluding sales from Camp Chef, which was acquired in the second quarter last year, sales were down 13 percent on an organic basis.
Net income in the period ended July 2 reached $16.7 million, or 29 cents a share, a year-over-year decline of 42.6 percent. Adjusted EPS was 24 cents, compared to 48 cents in the prior-year quarter.
On the positive side, results surpassed Wall Street targets. The Street was expecting on average of 12 cents on sales of $554 million.
Vista’s officials noted that sales programs resulted in the company pulling ahead some revenue from the second quarter into the latter part of its first quarter. Margins were helped by the timing of some general overhead spending and by a late introduction in the quarter of ammunition promotional programs that pushed the impact of those programs into later quarters. Guidance for the year was maintained.
Michael Callahan, on his first quarterly conference call since being elected interim CEO on July 10, said he was “very pleased with the company’s solid performance in the first quarter” and mentioned that the company across its brands this summer had launched approximately 150 new products – three times more than the prior year period – to drive growth in the quarters ahead.
Among its two segments, Outdoor Products sales were $290 million in the quarter, up 1 percent from $287 million from the prior year quarter, including approximately $21 million of sales from Camp Chef. Excluding Camp Chef, organic sales were down approximately 6 percent from the prior year quarter. The segment also includes CamelBak, Bushnell, Jimmy Styks, Bollé, Bell and Giro.
Said Stephen Nolan, SVP and CFO, on the call, “The organic decrease was caused by lower sales across most product lines, including the impact of increased promotional activities across the segment.”
Gross profit in the first quarter for Outdoor Products was $77 million, a decrease of 6.1 percent. The recent Camp Chef acquisition contributed $7 million of gross profit. Organic gross profit in the segment was down 13 percent as a result of lower organic sales across most product lines, increased promotional activity, and unfavorable product mix, partially offset by cost-reduction initiatives.
In its Shooting Sports segment, sales slumped 18.7 percent to $279 million as a result of lower demand across all product lines. The segment’s brands include Federal Premium, Savage Arms, Primos and Blackhawk. Gross profit was down 23.1 percent to $70 million as a result of lower volume, sales programs and product mix.
Companywide, beside the sales drop, the wider loss reflects a reduction in gross margins to 25.8 percent from 27.2 percent due to profit declines in both segments.
Operating expenses for the first quarter were reduced 1.8 percent to $112 million. The reduction was due to cost-cutting initiatives and some overhead spending timing favorability that offset operating expenses from the acquisition of Camp Chef. Operating profits on an adjusted basis declined 41 percent to $34 million.
On the call, Callahan, the company’s lead independent director who took over for the retired Mark DeYoung, said his priority was R&D, cash flow and cost structure, employee development and retention, and supporting its retail customers.
He said the company’s “2018 planning is complete and our new product pipeline is robust.
On the Shooting Sports side, product is being rolled out four months earlier than typical to better supports customer’s order planning. In the Outdoor Products segment, Jimmy Styks was relaunched at the summer trade shows and introduced two inflatable surfboards. Camelback launched a number of new products in the running, mountain biking and hiking categories while Camp Chef successfully launched a direct-to-consumer campaign for the Woodwind Pellet Grill. Giro is earning “rave reviews on its pro-light tech light cycling shoe,” while Bushnell has come out with an “innovative new engaged optics line.”
To better manage costs, the company in June changed its pension programs while enhancing its 401K match program. Excess inventories are also being reduced to reach its cash-flow targets for the year.
The company remains “particularly focused” on employee development and retention. Said Callahan, “We’ve always been brand-focused at Vista Outdoor and now more than ever, we are emphatic that these brands stay true to their DNA and that our employees within the brands have the resources and support to win in their markets.”
Finally, Callahan said that while the overall market Vista serves has seen a reduction in square footage since 2015 due to numerous bankruptcies and store closures, outdoor recreation participation rates are up across most areas within its portfolio.
Vista is also “making sure we are for the right products at the right price regardless of where and how our consumers want to shop.” The company has renewed its focus on its relationship with independent retailers, is expanding its e-commerce and online presence, and building on its strong relationships with big-box retailers.
Looking to the back half of the year, Nolan said that while the promotional climate at retail continues, Vista has largely seen a normalization of inventory levels of ammunition in the big-box retail channel. Added Nolan, “In other markets, the favorable winter conditions last year in North America largely depleted channel inventories of winter sports product, and we are seeing strong sell in to those channels. We are also experiencing encouraging preorders in the cycling market for next year’s season.”
On the downside, the company was able to delay pricing actions in the value-brand ammunitions area until the latter part of the first quarter to support margins but the reductions ended up being steeper than planned. Along with other promotional actions, sales between $20 million to $30 million expected in the second quarter were pulled forward into the first as a result.
Vista Outdoor reaffirmed its 2018 financial guidance. The company continues to expect sales in the range of $2.36 billion t0 $2.42 billion and adjusted EPS in the range of $1.10 to $1.30. That compares with adjusted EPS was $1.90 on sales of $2.55 billion
Photo courtesy Federal Premium
