Shares of Vista Outdoor Inc. rose on Thursday after the company said higher retail inventories of firearms should normalize by mid-year following an “unprecedented” drop in demand after the recent election.
The November election of Republican Trump slowed demand for guns as consumers became less worried the government would curtail their ability to purchase firearms. Sales had been boosted prior to the election in anticipation of a Democratic win.
“We recognize that we fell short in the fourth quarter and the full year,” said CEO Mark DeYoung on a conference call. “We anticipate channel inventories will stabilize by mid FY’18 and we are determined to improve the performance in the second half of this fiscal year.”
Shares rose 95 cents to $21.49 on Thursday in over-the-counter trading.
In its fourth quarter ended March 31, net earnings tumbled to $857,000, or 2 cents a share, from $37.3 million, or 61 cents, in the same period a year ago.
Revenues dropped 5.4 percent to $578.8 million. Sales were down 21 percent organically.
The decrease was caused by lower sales in both its Outdoor and Shooting Sports segments partially offset by $93 million of sales from its Action Sports and Camp Chef acquisitions.
For it full year, sales were $2.55 billion, up 12 percent from the prior year but down 7 percent organically. EPS showed a loss of $4.66 a share due to massive write-downs primarily related to its Hunting and Shooting Accessories reporting unit. Adjusted EPS was $1.90, compared to $2.50 in the prior year.
For the fourth quarter, its Outdoor product segment reported sales of $270 million, a 17 percent increase from the prior-year quarter, including approximately $93 million of sales from acquisitions. Organically, the segment was down 23 percent over the prior-year quarter.
This decline was caused by decreases across most product lines “due to the challenging retail environment, which began to worsen in the third quarter, partially offset by growth in the eyewear and golf product lines.” The Outdoor segment includes: Bushnell, CamelBak, Camp Chef, Primos, Bollé, Bell, Giro, Serengeti, Jimmy Styks, Cébé, RCBS, Hoppe’s, Uncle Mike’s, Gold Tip, Weaver, Blackburn, KRASH!, Copilot, Raskullz and Tasco.
For the full-year, sales in Outdoor products were $1.2 billion, up 36 percent from the prior year, including $426 million of sales from acquisitions. Organically, sales in the segment were down 14 percent year-over-year caused by decreases across all product lanes.
Outdoor products gross profit for the fourth quarter was $57 million, a 17 percent decrease from the prior quarter, including $24 million from acquisitions. Organically gross profit tumbled 52 percent compared to the prior year quarter. The decrease was caused by lower organic sales, unfavorable product mix and the inventory rationalization.
Gross profit for the full-year in outdoor products was $293 million, an increase of 21 percent from the prior year, including $122 million from acquisitions. Organically gross profit was down 13 percent due to a decrease in organic sales, unfavorable product mix, increased sales programs and inventory rationalization.
In its Shooting Sports segment, fourth quarter sales of $309 million were down 19 percent from the prior-year quarter. The decrease over the prior year quarter reflects lower demand across its product lines due to the challenging retail environment, which began to worsen in the third quarter with the exception of rimfire ammunition. Its Shooting brands include Federal Premium, Savage Arms, CCI, Speer, Stevens and Savage Range Systems.
For the full-year, Shooting Sports reported sales of $1.4 billion down 2 percent, caused by decreases in center fire and shot show ammunition volume, partially offset by increases in rimfire ammunition volume.
Fourth-quarter gross profit in Shooting Sports was $87 million, down 8 percent from the prior year quarter. The decrease was due to the lower sales, partially offset by product mix and lower sales programs. Full-year gross profit in Shooting Sports was flat compared to the prior year of $377 million.
Vista Outdoor said it had finalized a new long-term supply agreement with Orbital ATK that extends through September 2020. This agreement ensures an ongoing supply of ammunition products produced at the Lake City Army Ammunition Plant with the first phase of coming online in the second half of this fiscal year. DeYoung said the company will be “suspending future capacity expansion phases at this time.”
Looking forward, sales are expected in the range of $2.36 billion to $2.42 billion for the current year. Overall gross margins and R&D investment are expected to be in line with fiscal ’17. Shooting sports margins for the year to be in the mid-20s and outdoor products margins to be in the mid to upper 20s. Vista Outdoor expects EPS for its current year to arrive in the range of $1.10 to $1.30 with improvement in the second half of the year.
“Looking to the near term, we see weak conditions in the first quarter similar to those we saw in the fourth quarter,” said CFO Stephen Nolan. “We expect these conditions to be exacerbated by impacts from Gander Mountain inventory liquidations and the recent incident at Orbital ATK Lake City Army Ammunition Plant, which will lead to constrained supply of certain products from that facility during the quarter.”
DeYoung said that while overall “market softness” continues to impact results, strength in certain areas of its portfolio, such as powersports and outdoor cooking, is offsetting the weakness.
He expects the company’s scale and diversity will continue to provide opportunities for Vista to gain market share by leveraging product innovation and distribution strengths across all of its brands.
“Much progress is being made across the company and functional and operational areas. We are confident that a continued focus on our long-term strategy and execution of our near-term initiatives will ensure that we achieve the vision we created just two years ago,” said DeYoung. “We cannot change the market but we are taking actions on those things that we can control to improve the performance of the company.”
Photo courtesy Vista Outdoor