Escalade Inc. reported that the company’s key archery category is finally showing some signs of stabilizing, but investments in new businesses and e-commerce brought down earnings slightly in the first quarter.

In the first quarter ended March 24, net earnings slid 14.3 percent to $1.2 million, or 8.4 cents a share. Sales inched up 0.9 percent to $32.1 million.

The bottom line was aided by an increase in gross margins by 200 basis points to 28.0 percent due to product mix and signs of stability within the archery category. Archery brands include Bear Archery and Trophy Ridge.

In an interview with SGB Executive, Patrick Griffin, VP of corporation development and investor relations, said demand for the archery category spiked earlier in the decade due to excitement over The Hunger Games books and movies, but that benefit has faded with the last movie arriving in 2014.

Griffin also said the category may have been helped in the recent past due to politically-driven strength in the firearms category that brought traffic to hunting stores. But he said many of Escalade’s businesses tend to be cyclical and archery sales are now running flattish.

“They’ve leveled off and we see that kind of stabilizing, which is good for us because archery is one of our important categories,” said Griffin. “We may see some upside later in the year.”

In a statement, Dave Fetherman, president and CEO, noted that Escalade still managed a small revenue gain in the quarter despite an unseasonably cold start to the spring that impacted the outdoor categories of Basketball and Playground, as well as retailers managing their inventory to lower levels.

Escalade’s outdoor recreation businesses include Onix pickleball equipment, Triumph Sports indoor and outdoor games, Goalrilla and Goalsetter residential in-ground basketball systems, Goaliath and Silverback residential in-ground and portable basketball goals and Woodplay premium playsets. Escalade also in January became the exclusive North American distributor of Vuly’s line-up of trampolines and swing sets.

Said Fetherman, “We anticipate sales to increase in these categories during the second quarter as the weather warms across the country.”

Escalade’s indoor businesses include STIGA and Ping-Pong table tennis, Accudart and Unicorn darting and Cue&Case specialty billiard accessories.

The bottom line was impacted by an increase in SG&A by 18.6 percent to $7.0 million, or 21.6 percent of sales, from $5.9 million, or 18.6 percent, a year ago. The increase was due in part to expenses associated with Escalade’s Q1 2017 acquisition of Lifeline Products, a maker of yoga mats, resistance training and other fitness gear, its new Vuly trampoline distribution agreement and ongoing investments in the e-commerce channel.

Griffin said that e-commerce investments include building back-end capabilities to support expanding sales through Amazon. Amazon accounted for 18 percent of Escalade’s revenues last year, up from 13 percent the prior year, to become the company’s largest customer, according to the company’s 10-K. Dick’s accounted for 17 percent, slightly down from 18 percent the prior year.

Said Fetherman, “We expect SG&A to be higher during 2018 as we continue to invest in the e-commerce channel and operational systems. We continue to execute our operational and sales initiatives and remain optimistic for the balance of 2018.”

Escalade’s 10-Q filing shows that e-commerce sales grew to $7.6 million in the first quarter, from $7.4 million a year ago. The biggest distribution channel for Escalade was mass merchants, with $13.1 million sales in the three months against $12.7 million a year ago. Specialty dealers’ sales dipped slightly to $12.9 million from $13.2 million.

International is seeing the strongest growth, with sales of $1.9 million in the quarter, up from $844,000 a year ago.

Griffin said key initiatives for the year include rolling out the Vuly trampoline line and building out its fitness platform with Lifeline Products joining its STEP fitness line. He said Escalade continues to look for acquisitions that complement its sports and outdoor hard goods focus.

Griffin likewise suspects much of the sales lost to the chilly spring weather will be made up in warmer months, and said Escalade is encouraged that housing starts are looking more positive. He said, “We think the consumer is in pretty good shape and the housing market is doing pretty good. If someone is investing in their house, they may buy a basketball system or a billiard table. So we like to see housing starts picking up.”

Photo courtesy Bear Archery