Escalade Inc.’s sales slumped 13.1 percent in the second quarter due to the fallout from tariffs. On an analyst call, Armin Boehm, president and CEO, said the firm will focus on maintaining margins and gaining market share as demand for sporting goods and recreation equipment is expected to remain soft for the remainder of the year.
Escalade’s brands include Brunswick Billiards, Stiga, Accudart, Rave Sports, Victory Tailgate, Onix, Goalrilla, Lifeline, Woodplay, and Bear Archery.
“From a demand standpoint, uncertainty continues to weigh on consumer behavior,” Boehm told analysts. “We are seeing consumers delay or reduce discretionary spending or trade down to lower price points, particularly as price becomes a more prominent factor in their decision making. Consumer sentiment remains well below its historical average, reflecting concerns around the impact of tariffs on inflation and fears of a broader economic slowdown. Furthermore, elevated interest rates and a frozen housing market have impacted sales of indoor and outdoor recreational categories, which often correlate with new home investments. These combined factors create a challenging near-term backdrop for consumer demand for many of our categories.”
However, he said that due to recent efforts to drive production efficiencies and reduce overhead costs, Escalade is “well positioned to navigate this environment and capitalize on opportunities to gain market share.”
He said despite the overall decline in sales during the quarter, Escalade maintained or gained market share in key categories including basketball, safety, archery and recreational games. Boehm said, “Our economy of scale, supply chain flexibility and organizational agility give us a clear competitive advantage.”
He added, “Our U.S. based manufacturing footprint and global sourcing capabilities have allowed us to offer competitive programs and to gain new placements, underscoring the value of our strategic execution over the past years, and supporting this momentum through continued investment in product innovation and consumer connections.”
In the quarter, sales fell to $54.3 million compared to $62.5 million a year ago. Boehm attributed the decline to “delayed customer orders driven by changing tariff landscape, shifting consumer behavior due to the uncertain macroeconomic environment, and a slow start to the seasonal demand in some of our regions due to unfavorable weather conditions.”
Additionally, Escalade faced an approximately $900,000 year over year headwind from exiting certain categories over the past year.
Gross margins improved 56 basis points to 24.7 percent, driven by reduced manufacturing and logistics costs, supported by recent facility consolidations and cost rationalization initiatives that helped offset tariff-related costs and an unfavorable product mix.
Operating income sunk 42.2 percent to $2.6 million from $4.5 million in the year-ago Q2 period. EBITDA decreased 32.8 percent year-over-year (y/y) to $3.9 million versus $5.8 million in the prior-year period. The improved gross margins were offset by approximately $400,000 in executive transition expenses and the lower sales.
Net income totaled $1.8 million, or 13 cents per share, in the quarter, compared to $2.8 million, or 20 cents, the prior year.
Boehm said inventories were reduced by approximately $14 million in the quarter to add flexibility in managing supplier orders and limit the cost exposure to tariffs.
Looking to the third quarter, Boehm said Escalade expects a slightly lower seasonal inventory build ahead of the holiday season compared to prior year. He said, “We believe this current flow of goods will provide sufficient inventory levels to service our retail partners for the balance of the year.”
Tariff-related expenses are expected to increase in the second half. To offset these costs, Escalade strategically implemented targeted price increases and underwent negotiations with sourcing partners to share the cost burden.
“We continue to investigate opportunities to strengthen our supply chain resiliency, to further increase our U.S. based manufacturing capacity, streamline our product assortment
and implement other measures to further mitigate evolving tariff headwinds,” said Boehm . “Our pricing strategy is based on market dynamics, closely monitoring the evolving tariff landscape, and will continue to balance margin preservation with competitiveness in the market.”
Addressing product, key launches include the Onyx Hype and Hype X Pro pickleball paddles and an update to Stiga’s flagship Paragon table tennis table. Escalade is also celebrating the 50th anniversary of the Woodplay outdoor playground equipment brand.
Boehm said Escalade is not making any changes to its product launch cadence in the back half due to the tariffs but is increasing the frequency of new product introductions. He added, “While doing that, we will also watch the market’s pricing and the promotion dynamics that are out there with diligence and at-once replenishment orders will depend really on consumer behaviors and how they will react on the overall price increases on the market.”
Image courtesy Onix Pickleball/Escalade, Inc.
