Marucci, acquired in November 2023, was a “standout performer” for Fox Factory Holding Corp in the second quarter, Mike Dennison, Fox Factory’s CEO, said on an analyst call. Fox Factory’s bike business was down, but the category’s prolonged destocking phase is showing signs of nearing an end.
Sales in Fox Factory’s Specialty Sports Group (SSG), which features the brands Fox Factory, Marucci, Easton cycling, and Race Face, climbed 17.8 percent in the quarter to $123.6 million from $104.9 million a year ago. The gains reflect the inclusion of $41.6 million in net sales from the Marucci business, partially offset by a reduction in bike sales of $22.9 million due to the ongoing channel inventory recalibration and, to a lesser extent, lower-end consumer demand.
In the bike category, Dennison said the company sees “positive signals” that the OEM inventory destocking phase “is nearing its conclusion.” The bike category has faced a lengthy destocking period after a significant build-up during the pandemic.
“We were pleased to deliver a 52 percent sequential increase in bike revenue, which is a positive sign of both significance and predictability,” said Dennison. “In addition, our move into the entry premium space has been very well received and is helping offset broader sluggishness.”
He said that although the U.S. market remains in a state of transition toward stabilization, the European market continues to improve on a relative basis due to its lower exposure to excess inventory. Dennison added, “I am particularly excited about our multiple new product launches scheduled throughout the year. These innovations are already generating incremental demand and are expected to drive growth in the coming quarters.”
Dennison said the e-bike category “continues to exceed our expectations and is an important avenue for our expanding addressable market.”
Meanwhile, Dennison said Marucci “continues to be a standout performer,” noting that over 10,000 fans, players, coaches, and families recently attended the Marucci World Series in Baton Rouge, LA.
“While the highlight was watching young players compete for the championship, the excitement for me was seeing the potential for our combined businesses,” said Dennison. “Our Hitter’s House-associated pop-up stores were essentially sold out. Marucci and Victus bats were literally everywhere, as thousands of players guided to the swing of things. And parking lots were filled with trucks boasting Fox shocks, including our latest vehicles, such as the Fox Factory Truck and upfitted UTVs, which generated tons of interest. It was a reminder that Marucci and Fox customers are one and the same, united by two aspirational brands and a combined vision to make high-performance products for our enthusiasts.”
Marucci’s underlying growth comes from its strength across its product portfolio, including the Victus and Marucci brands in baseball and softball, Lizard Skins accessories, apparel, and international growth. Marucci’s Hitter’s House platform “also continues to gain traction,“ with the opening of a location in Tokyo.
Victus and Marucci brands were “very well represented“ at MLB’s recent All-Star game, with both finalists of the Home Run Derby swinging Marucci bats.
Marucci also recently announced it had signed an exclusive license agreement with Major League Baseball, designating Marucci and Victus as MLB’s official bats starting January 1, 2025. Louisville Slugger has long held the title.
“This four-year agreement not only underscores our brand’s leadership in professional baseball but also provides exclusive rights for our products. This partnership, combined with Lizard Skins’ position as the official bat grip of MLB, further cement our status as a premier choice for players at all levels,“ said Dennison said. “With this new MLB agreement on the horizon, we’re even more excited about Marucci’s future growth potential and congratulate the team for achieving this distinction.”
Looking ahead, Dennison said the company is “optimistic“ about SSG’s trajectory. “The anticipated recovery in the bike segment, coupled with Marucci’s consistent strong performance and our exciting product pipeline, positions us well for continued growth through the second half of this year,” said Dennison.
Companywide sales declined 13.0 percent to $348.5 million, compared to net sales of $400.7 million in the second quarter last year.
In other segments, sales in the AAG (Aftermarket Applications Group) fell from $155.6 million to $107.1 million, driven by lower upfitting sales due to product mix and higher interest rates impacting dealers and consumer. Sales in the PVG (Powered Vehicles Group) dropped from $140.2 million to $117.8 million, said to be primarily due to lower industry demand in Power Sports because of higher interest rates.
Net income in the second quarter was $5.4 million, or 13 cents per share, compared to net income of $39.7 million, or 94 cents, in the second quarter last year. Adjusted net income in Q2 was $15.9 million, or 38 cents, compared to adjusted net income of $51.4 million, or $1.21, in the prior-year quarter. Adjusted EBITDA in the second quarter was $44.1 million, compared to $79.4 million in the second quarter of fiscal 2023.
For the third quarter of fiscal 2024, the company expects net sales in the range of $355 million to $385 million and adjusted EPS earnings per diluted share in the range of 35 cents to 50 cents per diluted share.
For the fiscal year 2024, the company now expects net sales in the range of $1.41 billion to $1.48 billion and adjusted EPS in the range of $1.40 to $1.72. Previously, guidance called for net sales in the range of $1.53 billion to $1.61 billion and adjusted EPS in the range of $2.30 to $2.55.
“While we continue to see encouraging signs of stabilization in bike, we must be prudent and responsible in aligning our guidance with revised expectations of our large OEM customers,“ said Dennison. “As a result, we are adjusting our full year guidance to reflect a more tempered sequential revenue lift in the second half of the year.“
Dennison said the adjustment is directly driven by ongoing industry demand and quality challenges, which are leading to reduced orders.
“Despite these near-term challenges, we maintain a positive outlook,“ said Dennison. “We still expect sequential growth throughout the second half of the year, albeit at a more moderate pace than initially projected. Furthermore, we anticipate this trend of sequential improvement to continue through 2025. Our revised assumptions for the second half of the year include gradual improvement in bike channel inventory and the impact of OE’s model year ’25 releases, Marucci’s continued growth across its diversified portfolio and new product launches, slow but steady improvement in power sports dealer inventory, ongoing progress in upfit chassis availability and mix, and new product launches within our lift kit and wheel business.”
Image courtesy Marucci
