Black Diamond (BDE), a portfolio company of Clarus Corporation, saw a return to growth in the fourth quarter and also boasted a “much healthier” gross margin rate, lower costs, lower inventory levels, with a better quality of inventory, and a significant lift in adjusted EBITDA.
However, the BDE team appears to be dealing with similar headwinds as others in the outdoor specialty space, including a Consumer Products Safety Commission/Department of Justice (CPSC/DOJ) investigation of its Avalanche Beacons coupled with weak consumer spending, Trump tariffs, and the effect of PFAs exposure.
Still, BDE President Neil Fiske said the company entered 2025 in great shape.
Outdoor segment revenues, which primarily include Black Diamond, grew 2.0 percent globally in Q4. “Our objective has been to build a smaller, more profitable business, and our fourth quarter Outdoor results are further evidence that the strategies that we have implemented are delivering,” offered Clarus Corporation Executive Chairman Warren Kanders.
North America wholesale, BD’s largest market, increased 6.5 percent. North America digital D2C declined 3.2 percent, with growth in the consumer segment, offset by a reduction in its probe business as the brand tightened discounts and availability of its probe program. “Overall, we believe this was a healthy rebalancing of our direct channel mix,” Fiske said.
In Europe, wholesale was down 1.8 percent, while digital DTC reported up 22.1 percent.
“In the International markets, we’re up 90.4 percent, largely driven by a more optimal timing of deliveries, which we expect to be a permanent shift,” Fiske said. “Importantly, though, we are also starting to see recovery and organic growth take hold in these markets after a couple of years of contraction.”
The company reported gross margin for the fourth quarter to reflect the benefit of product, inventory and simplification initiatives. On an aggregate basis, the company also reported adjusted gross margins for PFAs and other inventory reserves in 2024 and 2023 to be up 410 basis points year-over-year.
Segment operating expenses were down 15.6 percent for the year on a year-over-year basis. Excluding restructuring and legal costs in the current and prior year period, operating expenses were down 12.7 percent.
“Restructuring costs were $789,000 as we completed the remainder of our restructuring program,” Fiske noted. “We expect very little restructuring costs in 2025. Adjusted EBITDA for the fourth quarter came in at $4.5 million versus zero in the prior-year Q4 period.
Full-Year Summary
Full-year 2024 revenue came in at $183.6 million, down from $204.1 million in 2023, and adjusted EBITDA for the year was $11.4 million.
“In line with our direction of a smaller, more profitable business, revenues for the year were down 9.9 percent, but adjusted EBITDA was up 80 percent,” Fiske shared. “In [a] down market, we gained share in most of our important categories and with our most important retailers.”
Fiske noted that revenue from high-margin A and B styles was $11 million higher in the full year 2024 versus the prior year, offset by a $32 million less revenue from low-margin C and D styles, the BDE chief shared. He also noted that this was deliberate and consistent with the company’s focus on building its outdoor business with higher gross margins, higher profitability and higher inventory, which will turn more and help improve working capital.
“Notably, as we annualize the gains from all our restructuring work, we see a run rate that can sequentially build towards double-digit EBITDA margins on the existing level of sales,” Fiske said. “Gross margins are lifting and are expected to continue to expand. Our inventories are in much better shape, both lower in the aggregate and higher in the quality of the inventory we have against our A styles. Service levels and fill rates are up. Feedback from our retail partners continues to improve, particularly in the critically important specialty channel.”
PFAs Exposure
Clarus CFO Mike Yates said the team at Black Diamond has done a great job dealing with the “unfortunate” PFAs situation. He said he does not expect further reserves associated with this inventory going forward.
“Since Q4 of last year, we have reserved approximately $4.2 million for PFAs, which is consistent with how we frame this exposure back during our year-end call in early March of last year,” detailed Yates. “And, I don’t expect the need for any additional reserves related to PFAs inventory going forward at this point in time. We have sold over $20 million of PFAs inventory in 2024 and believe our future exposure on the remaining inventory is covered via our existing reserves.”
Outlook
Looking ahead to 2025, Fiske said BDE expects to see the benefits of its strategic initiatives continue to lift profitability.
“Feedback on our new product and overall assortment has been very strong for both the spring/summer and fall/winter seasons,” he shared. “Our forward order book looks to have upside potential based on these initial reads, although our overall top-line expectations remain cautious.
“Response to our new apparel line, in particular, has been better than we anticipated, and we are working to chase the demand. Our Mountain and Climb divisions, which represent the core of our assortment, have sold in well, and we believe that fill-in could provide additional lift as retailers return to more normalized levels of ASAP orders,” continued Fiske.
On the margin front, Fiske said the company sees an opportunity to increase gross margins and decrease operating expenses in 2025 as a result of prior restructuring and realizing the benefits of changing the way it works and improving simpler processes.
“The one caution in all of this, however, is tariffs,” Fiske added. “There’s tremendous uncertainty and chaos in the market right now following the initial Trump tariff outlines. At the levels most recently proposed, there is no question, prices will have to go up for consumers. The outdoor industry has absorbed inflationary pressures for too long. Prices will simply have to go up.”
Fiske said it’s difficult to understand at this point what impact that may have on consumer sentiment and demand. “Our focus remains on controlling what we can,” he said. “And in that regard, I feel confident both about our progress and our position for the year ahead.”
“Looking ahead, we believe our success simplifying the business, rightsizing inventory and reshaping the organization positions Black Diamond for a return to growth as the market stabilizes, and we expect to see the benefits of our strategic initiatives to continue to lift profitability,” added Kanders. While our revenue growth expectations in 2025 are muted, we see another 350 to 450 basis points of margin improvement possible this coming year.
Other News
On November 7, 2024, the CPSC notified Clarus that they referred an unresolved matter with Black Diamond to the DOJ. In January 2025, the DOJ served the company and Black Diamond with grand jury subpoenas, requesting various categories of documents related to Black Diamond’s Avalanche Beacons. Yates confirmed that the company is cooperating with the its request.
Image courtesy Black Diamond/Clarus Corporation
