The growing strength of the Black Diamond Equipment brand around the world was a primary driver behind the solid second quarter that Salt Lake City, UT-based parent company Clarus Corp. reported on Monday.

Black Diamond’s double-digit growth, which included improvement across product categories and geographies, was the result of an 18-month strategic initiative to improve the brand’s positioning and grow market share. Those efforts are paying off, as Black Diamond helped Clarus beat analysts’ estimates on both income and revenue in Q2.

“The record results of our second quarter signaled the momentum in our brands and reinforced that our strategy is gaining strength,” CEO John Walbrecht told analysts on Monday’s conference call.

With overall growth of 14 percent, Black Diamond saw success wherever the brand is sold. In Europe, Black Diamond grew 15 percent, driven by apparel, trekking poles and gloves. In North America, Black Diamond grew 14 percent, driven by footwear, apparel, trekking poles and snow safety gear via growth in key accounts.

And in Japan, Black Diamond grew 30 percent thanks to a renewed emphasis there, not only because of market demographics, but also because of improved channel relations and because the nation will be in the world spotlight for the next two years as host of the Olympics.

“We are experiencing solid growth in Asia, primarily in Japan, and the strong acceptance of apparel and climbing products,” Walbrecht said. “Over the last 18 months, we have been very focused on repairing and building the long-term relationship with our distributor partner in Japan, who has been with BD from the beginning as one of our initial investors and reinforcing our long-term focus on the ski market.

“We will continue to make Japan an area of strategic focus as we cheer on our amazing athletes as they prepare for the 2020 Games in Tokyo.”

The numbers across Black Diamond’s categories were equally impressive. Black Diamond performance apparel grew 89 percent, “driven by continued strong demand in our new rainwear, as well as our climb bottoms, sportswear and logo programs,” Walbrecht said. The climb category was up 6 percent, while ski business was up 11 percent and mountain business grew 15 percent.

Responses that the Black Diamond crew received at Outdoor Retailer Summer Market last month in Denver, CO, reinforced the traction that the brand is gaining globally, Walbrecht said.

“Our belief is that if we continue to meet or exceed our consumers’ expectations and retailers’ expectations, and build confidence and consistency with our retailers that they’ll continue to buy into our vision and strategy,” Walbrecht said. “And that seems to be working, and that’s what we’re hearing back from them at Outdoor Retailer.

“I think those who saw the booth at Outdoor Retailer saw that in the reaction from the consumers and the retailers, and the excitement around the number as well as the types of new product innovations that we launched.”

Clarus’ excitement about brand performance extends beyond Black Diamond. The company’s newest asset, Sierra Bullets (acquired in August 2017), also performed well in Q2 with $10.9 million in sales. On a pro forma basis, if Clarus owned Sierra in the same quarter a year ago, the division would have grown 32 percent.

Overall, Clarus’ strong performance in Q2 wasn’t driven by any particular outlier or surprise in the company’s financial or product mix. Instead, the company’s leaders attributed the performance to Clarus’ ability to adhere to “financial disciplines” and to follow a “dedicated, executed strategy that initiated 18 months ago,” Walbrecht said.

Clarus reported an adjusted net income increased to $2.6 million, or 9 cents per share, compared to an adjusted net loss of $3.4 million, or (11) cents per share the same quarter a year ago, beating analysts’ consensus estimates by 9 cents.

Sales grew 50 percent to $45.9 million, while gross margin increased 510 basis points to 34.6 percent compared to 29.5 percent in the year-ago quarter. The increase was primarily due to a favorable mix of higher margin products and distribution channels, the stabilization of the company’s sourcing strategy and more normalized levels of discontinued merchandise.

“It’s all coming together as we hoped,” Walbrecht said.

Clarus now anticipates fiscal year 2018 sales to grow 20 percent to 23 percent to approximately $205-$210 million (from $200-$205 million prior) compared to $170.7 million in 2017. On a constant currency basis, that translates to an expected sales range between $202-$207 million, or up 18 percent-21 percent compared to 2017.

The company also now expects adjusted EBITDA margin to be approximately 8.5 percent (from 8 percent prior), which includes $5 million of cash corporate overhead expenditures compared to 3.6 percent in 2017.

Clarus has only three assets in the company’s portfolio (Pieps is the third), sparking one analyst on Monday’s earnings call to ask if there was any M&A on the horizon. Walbrecht said the company would consider a target that profiles similarly to Black Diamond or Sierra in brand position and market opportunity.

“I think we’re always looking at the market to see if there are super fan brands that fit our perspective of the marketplace,” he said. “I think both Sierra and BD represent that well. They are super fan brands that have significant opportunities to continue to be innovators in product. We will continue to look at the market and where that opportunity comes; we’re going to definitely continue to focus most on the outdoor market, in that space, and that’s a driver for us.”

Black Diamond’s brand momentum and the immediate success of Sierra Bullets for Clarus’ bottom line drew praise from analysts like Jim Duffy of Stifel, who wrote in a note to investors: “Black Diamond is a strong heritage brand with potential for growth and margin expansion under new leadership. [The] opportunity to monetize Clarus Corp.’s $157 [million] in NOLs [net operating losses] through the accretive Sierra Bullets acquisition complements value in the legacy Black Diamond business. We view risk-reward favorably, with expectation for multiple expansion in contemplation for the acquired profitability, margin improvements in the Black Diamond business and capacity for future M&A activity.”

Photo courtesy Clarus Corp.

Eric Smith is Senior Business Editor at SGB Media. Reach him at ericsmith@sportsonesource.com or 303-578-7008. Follow him on Twitter or connect on LinkedIn.