Johnson Outdoors’ sales fell 8 percent in the fiscal third quarter ending June 30 as sales slowed significantly in Fishing, its largest segment, and continued to plunge in its Camping and Watercraft Recreation segments. Improved pricing, however, helped improve profitability.
“We’re seeing consumer demand continue to moderate from the strong pandemic-fueled levels of the past few years,” said Helen Johnson-Leipold, chairman and CEO, on a call with analysts. “At the same time, the marketplace continues to be competitive, reinforcing the critical importance of innovation for the continued growth and success of our brand.”
The hardest hit segments by far were Camping and Watercraft Recreation.
In the Camping segment (Jetboil outdoor cooking systems and Eureka! camping and hiking equipment), sales fell 50.3 percent to $11.7 million. The decline was partly due to the sale of its Military and Commercial Tents product lines in the fiscal second quarter, high retail inventories, and reduced consumer spending in the category. Sales fell 28 percent in the second quarter and 18 percent in the first quarter. Camping’s operating profits in the latest quarter plunged 59.2 percent to $2.0 million.
The Watercraft Recreation segment (Old Town canoes, kayaks and Carlisle paddles) generated sales of $15.7 million, down 28.1 percent year-over-year year due to significant reductions in the overall market. Sales fell 44 percent in the second quarter and 34 percent in the first. Operating profits in the latest quarter were down 48.7 percent to $1.5 million.
“Our Camping and Watercraft Recreation business is continuing to face softening markets due to the post-pandemic slowdown,” said Johnson-Leipold. “Retailers still have product on the shelf to work through, and, at the same time, consumer spending has slowed. We’re committed to the long-term opportunity in these two businesses, and our consumer-focused innovation plays a critical role in that.”
One innovation highlight is the Old Town ePDL+ drive, which was honored with the Best of Boats and Watercraft at the ICAST Show in July in Orlando, FL.
Sales in the Fishing segment (Minn Kota trolling motors, shallow water anchors and battery chargers, Cannon downriggers, and Humminbird marine electronics and charts) increased 0.7 percent to $137.5 million, reflecting improved pricing, although growth slowed from the 20 percent gain in the second quarter. Operating profits in the latest quarter advanced 12.8 percent to $18.7 million.
Johnson-Leipold highlighted innovation in the segment showcased at the ICAST, including Minn Kota’s Quest trolling motor series. Minn Kota also restaged its bow-mount trolling motors with more seamless integration with Humminbird products. The One-Boat Network App, also introduced at ICAST, combines Humminbird and Minn Kota devices into one dashboard.
Johnson-Leipold said, “Sustaining our innovation leadership position and a competitive fishing market remains a top priority. We are excited about the breadth of new innovation we’ve just announced, and we will continue to work on a pipeline of new products to give anglers the best fishing experience possible.
Sales in the Diving segment (ScubaPro equipment) were flat in the quarter at $22.2 million. Operating income improved 13.3 percent to $2.7 million. Johnson-Leipold noted that the Diving segment showed positive year-to-date growth, boosted by Europe and Asia. She said, “We will continue to leverage our innovation and brand-building efforts to ensure ScubaPro remains the world’s most trusted dive brand.”
Overall sales declined 8 percent to $187.0 million.
Gross margin jumped 540 basis points to 41.5 percent due primarily to price increases and lower freight and materials costs. David Johnson, CFO, said on the call, “We’re pleased that our gross margins have started to recover, and we’ll continue to look for ways to improve efficiencies to maintain strong gross margins going.”
Operating expenses of $60.1 million increased $10.4 million from the prior-year period. The increase was due primarily to a $5.1 million increase in deferred compensation expense related to marking plan assets to market and entirely offset by Other Income. Higher warranty expenses and advertising and promotion costs also increased between quarters.
Operating profit was $17.4 million for Q3 versus $23.8 million in the prior-year third quarter.
Interest income increased $1.1 million over the prior-year quarter, with net investment gains and earnings on the assets related to the company’s non-qualified deferred compensation plan, included in Other Income, improved by $5.1 million over the prior-year third quarter, which fully offset the increase in deferred compensation expense in operating expenses.
Net income rose 5.0 percent to $14.8 million, or $1.44 per diluted share, from $14.1 million, or $1.38, a year ago.
Johnson said, “Looking ahead, we remain focused on continuing to improve operational efficiency and strengthen our operating margins. Our balance sheet continues to have no debt, and our cash position enables us to invest in opportunities to strengthen the business.”
Inventories were down 6.3 percent at the quarter’s end year over year, but Johnson said they remain elevated. He stated, “While we have generated strong cash flow from operations through June, we’re still working through high inventory levels as we wind down the season. We’ll continue proactively managing our inventory position and working capital levels appropriately.”
In the Q&A session, Johnson-Leipold remarked that while Camping and Watercraft Recreation inventories have been facing the biggest inventory challenges, “we are seeing some light at the end of the tunnel for the Camping business. And hopefully, Watercraft will get better as we go forward. But we do have some exciting new products coming into the market. So, we’ll keep an eye on that. But as we said, the demand is softening, but we feel good that we’ll move some products and be in better shape by the end of the year.”
Inventories in the Diving segment are “in good shape,” while Fishing is “certainly healthier than it has been” and positioned well enough to capitalize on demand. Johnson-Leipold said, “So, it depends on which market you’re talking about. But hopefully, by the end of the season, we’ll be in good shape.”
Photo courtesy Johnson Outdoors/Eureka!
