Along with the sale of its Sporting Products business to Czechoslovak Group. (CSG), Vista Outdoor announced that it was slashing its full-year guidance, largely due to weakness at its Outdoor Products segment.

Share fell $7.78, or 23.7 percent, to $25.02 on Monday’s duo announcement. The stock’s 52-week range is between $22.97 and $33.78.

The guidance change reflects below-plan results for the fiscal second quarter ending September, as well as an increasingly challenging economic environment for consumers with higher interest rates expected for longer, and other short-term factors.

Gary McArthur, interim CEO, said, “In the second quarter we observed high-interest rates and other short-term factors impact consumer demand. These impacts are also affecting our channel partners and their expectations for returning to normal purchasing patterns that are aligned with sell-through. Our near-term view expects these factors to persist longer than originally anticipated. As a result, we have removed any expectations of improvement in the economic environment for consumers in our outlook for the remainder of this fiscal year. However, we continue to be optimistic about our brands over the long term.”

The Outdoor Products segment includes Bell, Bushnell, Bushnell Golf, CamelBak, Camp Chef, Foresight Sports, Fox Racing, Giro, QuietKat, Simms Fishing, and Stone Glacier. The Sporting Products segment includes CCI, Federal, HEVI-Shot, Remington, and Speer.

The updated guidance for the fiscal year ended March 31, 2014 calls for:

  • Sales of $2.725 billion to $2.825 billion (Previous guidance: $2.85 billion to $2.95 billion; Prior year: $3.1 billion.).
  • Sporting Products sales of $1.450 billion to $1.500 billion (Previous guidance: $1.475 billion to $1.525 billion; Prior year: $1.8 billion)
  • Outdoor Products sales of $1.275 billion to $1.325 billion (Previous guidance: $1.375 billion to $1.425 billion; Prior year: $1.3 billion)
  • Adjusted EBITDA margins between 15.50 percent and 16.25 percent (Previous guidance: 17.75 percent to 18.75 percent; Prior year: 2 percent.)
  • Sporting Products EBITDA Margin Range of 26.50 percent to 27.50 percent (Previous guidance: 26.75 percent to 27.75 percent; Prior year:8 percent.)
  • Outdoor Products EBITDA Margin Range of 7.75 percent to 8.25 percent (Previous guidance: 12.00 percent to 13.00 percent; Prior year: 5 percent)
  • EPS between $3.37 and $3.77 (Previous guidance: $4.38 to $4.88, Prior year:.17 cents loss);
  • Adjusted EPS between $3.65 and $4.05 (Previous guidance: $4.50 to $5.00; Prior year: $6.40)
  • Effective tax rate of approximately 19.5 percent (Previous guidance: 23.5 percent)
  • Interest expense in the range of $55 million to $65 million (Previous guidance: $65 million to $75 million)

Second-Quarter Guidance
Vista also offered expectations for the two segments for the fiscal second quarter ended September 24. Full results be reported on November 2.

For the Sporting Products segment, sales are expected to be between $347 million and $352 million from $432 million a year ago. The decrease of about 19 percent was driven by a challenging economic environment for consumers and market normalization which resulted in pressures across multiple categories. Operating income is expected to be in the range of $91 million to $95 million compared to EBIT of $134 million a year ago.

Sales in the Outdoor Products segment are expected to decrease in the second quarter to a range of $325 million to $330 million compared to $349 million a year ago. The decline of about 6 percent was driven by decreased buying across all business units as channel partners continue to be cautious with purchasing due to inventory levels and as consumers are pressured by high interest rates and other short-term factors, partially offset by inorganic sales contribution. Operating income is expected to be in the range of $11 million to $15 million as retailers continue promotional pricing to move through inventory resulting in lower sales and bottom-line pressure. EBIT was $30 million a year ago.

Andrew Keegan, VP and interim CFO at Vista, said the Sporting Products segment’s decline in the second quarter reflects “a challenging economic environment for consumers and market normalization, which resulted in pressures across multiple categories.”

Looking to the full fiscal year, Keegan sees a recovery for the Sporting Products segment. He said, “In the Sporting Products’ segment, Q2 top line was pressured by market softening across categories. However, in the back half, we believe that a strong hunting season in Q3 and the start of the election season in Q4 will result in more favorable performance than Q2. Our team is laser-focused on maintaining strong profitability. We see EBITDA margins in the mid-20 percent for the rest of our fiscal year, which is still well above where the business was pre-pandemic.”

Keegan said the Outdoor Products segment’s sales decline in the second quarter “was driven by decreased buying across all business units as channel partners continue to be cautious with purchasing due to inventory levels and as consumers are pressured by high interest rates and other short-term factors. This was partially offset by an inorganic sales contribution.”

The operating decline in the Outdoor Products segment in the second quarter reflects retailers’ continued “promotional pricing to move through the inventory, resulting in lower sales and bottom line pressures.”

Keegan said Vista now sees a “slower recovery” for the Outdoor Products segment.

“In Outdoor Products, high-interest rates and other short-term factors have impacted consumer demand. We see a slower recovery than originally anticipated and have revised our guidance downwards accordingly. We expect consumer demand to be slower for the rest of the calendar year of 2023, resulting in retail partners remaining cautious and not increasing their purchasing behavior until calendar year 2024. This dynamic is causing slower-than-expected inventory destocking, resulting in lower expectations for revenue in the back half of our fiscal year.”

Keegan said the reduction in sales from previous guidance, coupled with pricing and promotional pressures across categories, is driving down profitability.

Keegan said, “We expect these pressures to continue until higher-priced inventory sells through to clear the way for new products, leading us to be less optimistic than we previously were. Through these pressures, we are still gaining market share in key categories, which positions us well as demand returns and channel partners begin purchasing at normal rates again. We’re still expecting a return to growth in our fourth quarter, which positions us well to start strong in FY25.”