Vista Outdoor recently announced plans to acquire Simms Fishing Products for $192.5 million and Fox Racing for $540 million in moves that will extend its portfolio to 41 brands.
SGB Executive talked with Chris Metz, Vista’s CEO, about the reason behind the acquisitions and the company’s better-than-expected fiscal first-quarter results.
Let’s start by discussing the acquisitions of Simms Fishing Products and Fox Racing. Were both companies for sale? Both were for sale, but these are typically years in the making. We start strategically and open our aperture up at each of our brands. We explore what extensions we would like to make, who makes that list and what new platforms would make sense to invest in, like a fishing platform. We do all of that homework. Simms, in particular, is one of those brands we’ve had our eye on since I walked in the door five years ago. I built a strong relationship with the owner, K.C. Walsh. Given the iconic nature of the brand, as well as Fox, both entered a process to make sure that they gave everyone a chance in a sale, but we had a hold position with the relationships we built as well as the platform and strategic nature of the Vista Outdoor business versus a financial buyer. We were great homes for both of those brands.
What appealed to Vista about Simms? You will see similarities woven into the reasons we make many acquisitions. One, they are in large markets, so they have a large TAM, or total addressable market. Two, they’re fast growing. Three, they’re typically selling to a higher-end demographic, so they are recession-resistant and also sell to a socio-demographic that allows us to invest in innovation and higher-margin products. They all have great management teams and are great cultural fits, enabling us to leverage the strengths that we bring in DTC, supply chain excellence and other areas. With Simms, we can immediately add value to the business but let it continue doing the things it does well.
Simms gets Vista into the fishing category. Does the acquisition offer other synergies? Fox Racing has synergies and adjacencies with the Bell and Gyro business. But with Simms, the synergies will largely be in our two centers of excellence. From a supply chain standpoint, we think we can help the brand with efficiencies, with different materials and what have you. We can also leverage our strength in online marketing and selling via DTC or partnering with retailers.
Do you see sizeable, untapped growth for Simms? A lot of growth, and that’s an area where we think we can also help the business extend its current offering. Simms is a business that has been very well run, but like a lot of entrepreneur-led companies, we bring in scale, size and capital to help it grow.
How about the appeal and synergy potential with Fox Racing? Again, the same criteria fit. It has a strong management team and an iconic, almost cult-like brand. It’s one of the few brands you see people tattoo on their bodies. It has that following, and it has momentum. Fox is selling into the motocross space that is growing. It’s also a business that is more recession-proof. And it’s a global brand, so there are synergies between Bell and Gyro in leveraging distribution channels, geographic plays and suppliers that we’re excited to explore.
How do the two acquisitions impact Vista’s appetite for acquisitions? We’re hitting the pause button and continuing to study while looking at acquisitions. Given the macroeconomic conditions, it’s prudent that we integrate our two latest acquisitions. They came at the right time, and we’re happy with them.
Can you elaborate on Vista’s plans, announced earlier, to separate the Outdoor Products and Shooting Products businesses? The new acquisitions seem to support those efforts. They do. When you think about Outdoor Products and Shooting Products, both are nearing $2 billion in platform size on a pro-forma basis with strong, sizable, stand-alone platforms. That was part of the premise that when we spin the two companies, they’re both spinning from a position of strength. And we’re on track, if not ahead, on the efforts and work-streams required to spin the two organizations.
How did the first quarter end for Vista? We knocked the cover off the ball. We had a terrific first quarter, but it’s a tough environment. The economic challenges that every business in consumer products and outdoor products, in particular, is facing, we’re facing the same challenges. And we could offset some of those with our faster-growing businesses. We think we can offset some of those with our acquisitions in the future but are not immune to it. Those same categories that are struggling for our peers are the same for us. We want to win on a relative basis. We want to win regardless of the economy, but you know a win in this economy will differ from a win during COVID.
Can you elaborate on the Outdoor Products segment’s quarterly performance? It showed a 2 percent decline where many brands did well. Our Outdoor Recreation platform, which includes Bushnell Golf, Foresight Sports, CamelBak and Camp Chef, performed well, growing over 20 percent. We expect that to continue.
The Action Sports platform, which includes Bell, Gyro and soon-to-be Fox, was flatter. It was a tale of two cities—Action Sports struggled when selling lower price point products through more mass merchants, but selling through specialty dealers with some of our more innovative, higher-end products did great. In total, that segment was relatively flat. Where we took it on the chin was outdoor accessories. Outdoor Accessory sells to a socio-demographic more impacted by inflation and its hunting-oriented accessories. Consumers continue to participate in hunting at a high rate, which we’re encouraged about, but they slowed down some of their purchases.
Do you see consumers who picked up outdoor pursuits during the pandemic staying with them for the most part? Generally, most of the outdoor categories’ participation levels remain elevated. COVID spiked some categories more than others, but when you look at pre-COVID versus post-COVID, we see participation levels at a high rate across the board.
The Shooting Products category delivered 40 percent growth in the first quarter. Did Vista catch up on its ammunition supply? We did, and we will have to replenish some of our inventory, which is a focus for the team; however, we were able to fill some of the backlogs. The demand continues to remain strong, but it’s leveling off, like the rest of outdoor products, to a new normal level. We’re excited that the new normal level is higher than pre-COVID.
Did Vista raise its outlook or adjust it for the new acquisitions? We took our guidance up, reflecting the back-half contribution from the two recent acquisitions. We took a more conservative look at the organic Outdoor Products and Shooting Products businesses. We took growth plans for both businesses down, but they’re more than offset by the acquisitions.
Photo courtesy Simms Fishing Products
