Johnson Outdoors shrugged off the potential after-affects of the recall of one of its dive computers and the potential loss of an important military contract in its Outdoor Equipment Group to see shares surge 10.1% for the week to close at $15.52 on Friday.
Unusual charges, including $2.8 million from the UWATEC dive computer recall (SEW 0329) and $800,000 from an discontinued acquisition sent operating profit down 31.5% to $8.9 million. The charges impacted earnings by $2.5 million and offset any gains picked up from currency exchange benefits.
The picture was a bit rosier when looked at on “continuing operations” basis, with the Jack Wolfskin business pulled out of the numbers for both years.
The Outdoor Equipment Group saw sales jump nearly 30% for continuing operations and operating profits surged almost 50% thanks in large part to an 88% increase in military sales for the quarter and a 50% gain for the year. Non-military sales for OEG, which includes the Eureka!, Camp Trails and Silva brands, were flat for the quarter. OEG is the company's smallest division, but largest profit contributor for the year.
Military sales will account for more than 50% of sales for the division for the year and 10% of total company sales. Management said the long-term military contract is up for renewal this year and there is no way to determine if they will secure the deal again. They did benefit from emergency programs such as the Iraq war.
JOUT said Wal-Mart will be extending their Eureka! Tent program for a second year despite softness in the camping business there. Johnson shipped tents late in the season, resulting in higher inventories than expected going into JOUTs fiscal Q4.
On the Watercraft side, JOUT said they are seeing progress, with the division posting a profit for the first time this fiscal year, with 7 of 11 brands in the black.
A major contributor to the issues here is the JD Edwards implementation underway at Old Town that saw delayed orders turn into cancels as the quarter progressed. The group also saw reductions in orders from a “major Leisure Life customer”. On the positive side Ocean Necky sales were up 11% YTD.
The company reiterated that for 2004, every Watercraft rep will be selling every Watercraft brand except Ocean Necky. Some brands are also being consolidated, with Extrasport and Carlisle now operating with Leisure Life.
>>> Outdoor brands continue to benefit greatly from the military effort. You have to wonder how long it will take for others to go after this business, especially now that Columbia now has a toe-hold in equipment and deep pockets to play…
