American Outdoor Brands, Inc. reported earnings on an adjusted basis fell 51.8 percent in its fiscal second quarter ended October 31 as sales decreased 23.1 percent.

Second Quarter Fiscal 2023 Financial Highlights

  • Quarterly net sales were $54.4 million, a decrease of $16.3 million, or 23.1 percent, compared with net sales of $70.8 million for the comparable quarter last year. E-commerce channel net sales of $22.7 million declined 17.5 percent from the comparable quarter last year, resulting primarily from reduced demand in the shooting sports category, partially offset by a 119.1 percent increase in direct-to-consumer sales, which are primarily in the outdoor lifestyle category. Traditional channel net sales of $31.7 million declined 26.6 percent from the comparable quarter last year, reflecting the impact of lower foot traffic at retail and retailers’ efforts to reduce their overall inventory levels, as well as lower shooting sports sales to OEM customers. Compared with pre-COVID levels in the second quarter of fiscal 2020, total net sales grew 14.0 percent, while e-commerce channel net sales grew by 171.3 percent and traditional channel net sales declined by 19.4 percent.
  • Quarterly gross margin was 47.7 percent compared with the quarterly gross margin of 46.7 percent for the comparable quarter last year.
  • Quarterly GAAP net income was $370,000, or $0.03 per diluted share, compared with a net income of $4.6 million, or $0.32 per diluted share, for the comparable quarter last year.
  • Quarterly non-GAAP net income was $4.0 million, or $0.29 per diluted share, compared with non-GAAP net income of $8.3 million, or $0.58 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for net income excludes acquired intangible amortization, stock compensation, technology implementation, stockholder cooperation agreement costs, and facility consolidation costs. For a detailed reconciliation, see the schedules that follow in this release.
  • Quarterly Adjusted EBITDAS was $6.4 million, or 11.8 percent of net sales, compared with $11.7 million, or 16.5 percent of net sales, for the comparable quarter last year.

Brian Murphy, president and chief executive officer, said, “Our second quarter performance demonstrates our ability to successfully navigate ongoing challenges in the macroenvironment while executing on our long-term strategy. We achieved net sales growth of 14 percent above our pre-pandemic levels of fiscal 2020 and introduced several innovative new products while strengthening our balance sheet and marking a number of achievements that support our strategic priorities and reflect our dedication to leveraging our culture of innovation to deliver solutions for consumers in the moments that matter.

“Our DTC business, which is largely comprised of our outdoor lifestyle brands, remained strong in the second quarter, delivering year-over-year growth of over 119 percent. We consider our direct-to-consumer sales to be one gauge of how well our brands are resonating with consumers, since those sales are not typically impacted by issues that have hindered retailers, such as inventory levels or limited open-to-buy dollars. Our direct-to-consumer category also includes MEAT! Your Maker meat processing equipment and Grilla outdoor cooking products, which are sold exclusively, direct-to-consumer. Together, these two brands generated nearly 10 percent of our total net sales and helped our Outdoor Lifestyle category generate 55.6 percent of our total net sales in the second quarter. We remain excited about growth opportunities in our Outdoor Lifestyle category, which consists of products related to hunting, fishing, camping, and rugged outdoor activities, and which delivered three-year growth of 22.5 percent over the pre-pandemic second quarter of fiscal 2020.

“Innovation is a key element in our long-term strategy, and new products launched within the past two years generated 30 percent of our second quarter net sales. During the quarter, we continued to leverage our Dock & Unlock™ process to deliver a steady flow of organically developed, exciting new products, including MEAT! Your Maker Dual Grind Grinders, and two new BOG® tripods, the Sherpa and the Infinite. These innovative tripods deliver enhanced versatility, durability, and weight savings, and they expand our BOG® product offering, which is extremely popular with hunters. During the quarter, we attended the National Association of Sporting Goods Wholesalers Expo, where our Caldwell Claymore Clay Target Thrower was recognized as ‘Best New Accessory’.

“Our long-term strategy also includes a focus on leveraging our business model. We recently completed the consolidation of our Crimson Trace operations in Wilsonville, Oregon, as well as our Grilla operations in Holland, Michigan and Dallas, Texas, into our Missouri facility. We estimate that these consolidations will yield a net cost savings of approximately $1.5 million per year, beginning in our fiscal fourth quarter, moving us closer to our long-term profitability objectives.”

Andrew Fulmer, CFO, said, “We continued to further fortify our balance sheet in the second quarter, demonstrating effective capital deployment. We purchased over $750,000 of our common stock in the quarter. Nevertheless, positive operational cash flow, including a reduction in inventory of over $9.0 million, helped yield an ending cash balance of $16.4 million.”

“Turning to our outlook, we believe that retailers and distributors remain cautious regarding their inventory levels and that consumer spending patterns going forward are still undetermined. That said, we believe our brands are performing consistently with long-term, positive consumer outdoor trends. As a result, we continue to believe our net sales for fiscal 2023 could exceed pre-pandemic fiscal 2020 levels by as much as 25 percent. We believe our solid financial position enables us to continue executing on our long-term strategic plan, investing in our business, returning capital to shareholders and addressing the exciting growth opportunities we have identified for our company in fiscal 2023 and beyond,” concluded Fulmer.