On Clarus Corp.’s Q3 analyst call, Neil Fiske, president of Black Diamond Equipment, said he sees a “more cautious” outlook for the fourth quarter with promotions ticking up and conservative buying in the outdoor channel, but Black Diamond delivered “solid results” in the third quarter, marked by 16 percent growth in its North American wholesale business, led by apparel, and an uptick in margins.
Strength in North American wholesale and margin improvement offset the impact of U.S. tariffs, with Black Diamond traditionally heavily reliant on Chinese production, as well as FX headwinds due to a strengthening Euro. Sizeable sales declines were also observed in direct-to-consumer (DTC) channels in the U.S. and Europe due to efforts to reduce discounting; however, Fiske said these steps are helping Black Diamond build a healthier full-price premium brand.
“Overall, we delivered solid results for Q3 in the face of stiff macro trade and consumer headwinds,” Fiske told analysts. “I’m pleased with our continued progress, the strengthening of the Black Diamond brand and the reshaping of the business to be more focused, more profitable and more competitive. Revenue, gross margin, and EBITDA were all up for the third quarter compared to the prior year’s third quarter, excluding PIEPS. Costs were down and inventories ended the period in great shape.”
Black Diamond’s Q3 Sales Increase 0.7 Percent
Sales in the Outdoor segment, which now consists solely of Black Diamond, slipped 1 percent in the third quarter to $48.7 million compared to $49.3 million in the year-ago quarter. Excluding Pieps, which was sold in July, the Outdoor segment’s revenue increased by 0.7 percent.
The sales gain reflected a solid growth of 4 percent in Black Diamond’s full price in-line business, offsetting a 37 percent reduction in sales from discontinued merchandise, “reflecting a healthier business and stronger quality of revenue,” said Fiske.
By region and channel, North America wholesale, Black Diamond’s largest channel, grew 15.6 percent from the prior year period. North America digital DTC, which represents 13.6 percent of the region’s revenue, was down 16.5 percent as the brand continued to pull back on pro-channel sales. Black Diamond also experienced some sales pullback due to its price increases, as the brand is generally ahead of the market in implementing tariff-impacted prices.
“Margins, however, lifted 820 basis points, and we were actually ahead of the prior year period on channel contribution margin dollars, reflecting a much-improved profitability equation for the channel,” said Fiske. “In total, North America was up 9.1 percent versus the prior period.”
Europe wholesale, excluding the impact of FX contracts, was up 2.9 percent in dollars and down 3 percent on a constant currency basis. Europe’s digital DTC, which accounts for 5.8 percent of the region’s revenue, declined 16 percent in dollars and 21 percent in constant currency, reflecting efforts to reduce promotional sales and discounting that contributed to a 570 basis-point improvement in margin. Overall, Europe, excluding the impact of FX contracts, reported a 1.9 percent decline in revenue and a 4.0 percent decrease in constant currency.
The Outdoor segment’s international distributor channel was down 28.9 percent, reflecting a previously disclosed move to realign deliveries to better suit the needs of international markets. Black Diamond has fully cycled those two shifts from Q1 into Q4 and from Q3 into Q2 and normalized comps are expected going forward.
Within product type, Black Diamond saw “breakout growth in apparel and solid sales in mountain, offset somewhat by softness in climb, a strategic pullback in ski and a narrowed focus in footwear. The decline is consistent with broader industry trends based on point-of-sales data,” according to Fiske.
Apparel is seeing “strong momentum” across channels and regions, noted Fiske. Apparel represented 23 percent of the Outdoor segment’s mix in Q3, up 490 basis points from a year ago. Total apparel sales increased by 29 percent compared to the prior period, with in-line sales up 40.5 percent and discontinued merchandise down 24 percent. Margins, meanwhile, were up 650 basis points for the apparel business unit. Said Fiske, “Overall, a great story upon which we expect to build.”
Outdoor Segment’s EBITDA Climbs 9 Percent
Gross margins for the Outdoor segment improved 320 basis points, reflecting its efforts to focus on full-price sales. Excluding the impact of FX contracts, comparable gross margins were up by 410 basis points.
Operating expenses, excluding restructuring and legal costs from both periods, were down 4.6 percent. Adjusted EBITDA came in at $4.7 million for the quarter, up 9 percent to the prior year period.
Inventories were up 2.1 percent at the quarter’s close, at $62.8 million, largely due to increases in capitalized duties from higher tariffs. Inventories of discontinued merchandise were down $2.1 million, or 25 percent, at quarter’s end. Said Fiske, “We are now near our target of having 70 percent of our inventory against our best-selling A styles.”
Tariff Impact
Fiske said Clarus now estimates the unrecovered impact of tariffs on the Outdoor segment’s EBITDA will be in the range of $2.5 million to $3.5 million in 2025. For 2026, the Outdoor segment expects to offset about 70 percent of the annualized tariff impact, or approximately $7.8 million out of the $11 million in tariffs, leaving Black Diamond with approximately $3.2 million in unrecovered tariffs. Fiske said, “We believe that $3.2 million represents the downside as we see it today.”
He noted that Clarus in May estimated that the Outdoor segment could offset roughly half of the tariffs that were in place at the time through mitigating actions, including raising prices, negotiating vendor concessions, airfreighting products where necessary and accelerating its exit from China. At the time, the tariff rates included 50 percent on steel and aluminum, 54 percent on China and a 10 percent reciprocal tariff on most other countries. Since then, reciprocal tariffs have increased from the original 10 percent to a range of 20 percent to 35 percent or more.
Fiske noted that Black Diamond has “made great strides in rebalancing our supply chain,” with new country-of-origin production expected to be up and running in 2026 for headlamps, climbing helmets, and other categories historically sourced from China. Fiske said further reductions in the tariff burden will come over time from sourcing, product reengineering and new product introductions, but those initiatives will take time to fully materialize.
Operationally, he also noted that Black Diamond has deployed a new state-of-the-art sales and operations planning capability, which is expected to better match supply and demand globally and within each channel. Said Fiske, “Organizationally, the company is leaner, more focused and more productive.”
Outlook
Fiske said Clarus is “more cautious” about the fourth-quarter outlook for the Outdoor segment.
He said, “Consumer sentiment remains low. Promotional activity seems to be on the rise as the broader market struggles to balance cash and working capital requirements. Macro factors continue to cause uncertainty and disruption. Tariff impacts are not yet fully understood nor manifested. Retailers are taking a conservative stance. And so, against this backdrop, we’ll continue to simplify, reduce costs and stay laser-focused on the fundamentals of our strategy.”
Clarus again declined to provide forward-looking guidance, given the ongoing uncertainty related to trade, consumer sentiment, and the overall macroeconomic environment, including expectations for the performance of the Outdoor segment.
Asked in the Q&A session about “much more conservative” ordering patterns that will spring from Black Diamond’s wholesale partners, as well as holiday trends, Fiske said, “Order books look pretty good for spring and certainly reflect some caution on the part of our retail partners. But our order book is up. And of course, ultimately, it comes down to how much of that sticks. But I think the indications are quite positive. And we feel like we have really good momentum in the wholesale channel, both with our big national accounts, REI and MEC, as well as Amazon and real strength in specialty. So, I think looking ahead to spring, we feel as good as we can in this environment about the strength of the wholesale channel.”
As far as the outlook for the fourth quarter, Fiske said it’s “too early to tell” and again expressed caution. He said, “We do see the environment being more promotional. We see retailers being cautious and not wanting to take on too much inventory. But I would say 90 percent of the game is still to be played in the fourth quarter. So, we’re cautious. I think it’s prudent to be cautious in this environment, but it’s hard to find a trend line at this point for Q4.”
Image courtesy Black Diamond
