In one of the first casualties of the rise and fall of the outdoor space during and after the pandemic, Vista Outdoor, Inc.’s CEO Chris Metz was ousted Thursday due to the “board’s loss of confidence in his leadership.”

On an analyst call for its fiscal third quarter ended December 25, board member Gary McArthur, named interim CEO following the Metz news, did not provide a reason for the former CEO’s exit beyond noting it did not involve “financial reporting or internal controls.”

McArthur said, “On behalf of the entire board, I appreciate Chris’ many contributions to Vista Outdoor and wish him well in his next endeavor. We’ve entered into an agreement with Chris to ensure access to institutional knowledge, and I look forward to working with him to ensure a seamless transition.”

McArthur said he had been on Vista’s board since 2015 and is a former CFO at CH2M Hill and Harris Corp. He said, “Together with my fellow directors, I have been deeply involved in the oversight and execution of Vista’s Outdoor strategy, including the planned separation of our Outdoor and Sporting Product segments.”

He said Vista remained on track to complete the separation of its Outdoor and Sporting Products segments in the calendar year 2023.

“I’m confident we will continue to capitalize on our strong momentum,” added McArthur. “With Vista Outdoor’s unmatched portfolio of iconic brands, resilient operating model and strong balance sheet, we are well-positioned to create compelling value for our shareholders.”

Vista declined to provide more information on Metz’s departure during the call.

Metz became CEO in October 2017 after a three-year stint leading Arctic Cat, the maker of snowmobiles. Before that, he spent nine years at Sun Capital Partners, Inc., a private equity firm, after a 13-year role at Black & Decker.

Metz guided the spinoff of Vista’s Savage and Stevens firearms brands in 2018 as Vista narrowed its focus to outdoors enthusiasts, its primary customer base, and winnowed its Shooting Sports segment to emphasize ammunition. 

The move to sell its firearms brands came as a series of mass shootings in the U.S. renewed the debate over gun control, and some investors had become increasingly concerned over gun ownership.

Before Metz’s arrival, Vista had been on an acquisition spree, acquiring Camelbak, Camp Chef, cycling and protective-gear brands Bell, Blackburn and Giro, and the paddleboard maker Jimmy Styks. Under Metz, acquisitions picked up again recently with Remington ammunition and HEVI-Shot in fiscal 2021, followed by Foresight Sports, QuietKat, Fiber Energy Products, Venor, and Stone Glacier in fiscal 2022, and Simms Fishing, which closed in August 2022.

Vista Outdoor saw a surge in growth in its Outdoor and Shooting Sports segments during the pandemic, leading its stock price to jump from $7.48 a share at the close of 2019 to reach an all-time high of $52.69 in January 2022. However, shares steadily fell in 2022 as sales slowed due to a slowdown in pandemic-driven outdoor participation when the U.S. economy re-opened. Vista Outdoor stock closed in 2022 at $24.37. On Thursday, shares closed at $29.10, down 77 cents, in over-the-counter trading.

By early May last year, Vista said its board had approved a plan to separate its Outdoor Products and Sporting Products segments into two independent, publicly-traded companies. Following the separation, the Outdoor Products segment included Bell, Bushnell, Bushnell Golf, CamelBak, Camp Chef, Foresight Sports, Fox Racing, Giro, QuietKat, Simms Fishing, and Stone Glacier, while Sporting Products focused on CCI, Federal, HEVI-Shot, Remington, and Speer.

McArthur reiterated his confidence in the split on Thursday’s third-quarter analyst call. He said, “As independent companies, both Outdoor Products and Sporting Products, will have enhanced strategic focus with supporting resources, tailored capital allocation priorities, strength and ability to attract and retain top talent, compelling value for shareholders, and expanded strategic opportunities.

McArthur also told analysts Vista achieved “solid results again” in the period, and he remained bullish on the company’s prospects. He told analysts, “I’d like you to walk away from our call today with four key takeaways. We are operating from a position of strength, our separation is on track, and we are reaffirming expectations for the spin to be completed in calendar year 2023. Our long-term outlook is encouraging, and we’re growing our own share of wallet via operating discipline and brand strength. We maintain a strong and healthy balance sheet because of our robust free cash flow generation, prudent use of cash and disciplined inventory management practices.”

In the third quarter, sales declined 5.0 percent to $755 million but were up 78 percent over the same period in fiscal year 2020, the last quarter before the pandemic. Sales were just ahead of Wall Street’s consensus estimate of $753.7 million.

The Outdoor Products segment posted record sales of $353 million, up 5 percent over the prior year period and up 59 percent over the same period in FY20. Sporting Product sales were $402 million, down 13 percent over the prior year period and consistent with previous guidance. Sporting Product segment sales were up 98 percent over the same period in FY20.

Adjusted EBITDA margins in the quarter were 18.1 percent, down 609 basis points year-over-year, but approximately 1,000 basis points higher than the same period in FY20 and roughly 300 basis points above Vista’s long-term target of 15 percent.

Net earnings dropped 44.9 percent to $65.1 million, or $1.13 a share, from $118.1 million, or $2.00, a year ago. On an adjusted basis, earnings were down 36.1 percent to $75.5 million, or $1.13 a share, from $118.1 million, or $2.00, a year ago. Adjusted EPS was ahead of Wall Street’s consensus estimate of $1.12.

The year-over-year profit decline reflects a reduction in gross margin by 378 basis points to 31.6 percent, primarily due to increased promotional activity, mix shift and other higher input costs, including freight. 

Operating expenses also grew 12.8 percent to $129.7 million and to 17.2 percent of sales from 14.5 percent a year ago, primarily driven by acquisitions.

McArthur noted that adjusted EPS of $1.30 was approximately 520 percent higher in the same period in fiscal year 2020. He said, “These results continue to prove that we are operating from a position of strength.”

On current broader market conditions, McArthur said Vista continues to see macroeconomic pressures impact consumer purchasing behavior in response to high inflation and higher interest rates.

“We still see consumer purchasing patterns tightening in some categories, and many are seeking to buy discounted or promotional items,” said McArthur. “Overall, retailer inventory levels remain high.”

However, he said Vista sees “positive signs emerging” and expects retailers to return to more normalized purchasing in the coming quarters compared to the continuous restocking of the prior year period. He added that some of Vista’s categories have benefitted from reordering activity.

He added, “Even with these headwinds, we are still seeing positive industry data and demand for our brands. Our Outdoor Products DTC sales are up, specifically a good leading indicator that consumers are still demanding our products and are continuing to recreate in outdoors. We believe that the pull-through of demand will start appearing as retailers work through their accessory inventory and resume their normal line purchasing patterns in the coming quarters.”

Vista Outdoor updated its outlook for its fiscal year, tightening and slightly lowering the range of its prior guidance as follows:

  • Sales in the range of $3.06 billion to $3.08 billion, down 1 percent at the midpoint. (Previously, $3.05 billion to $3.15 billion, up 2 percent at the midpoint);
  • Adjusted EBITDA margin in the range of 19.85 percent to 20.15 percent. (Previously, adjusted EBITDA margin in the range of 19.75 percent to 20.25 percent);
  • EPS in the range of $5.64 to $5.89 (Previously, EPS in the range of $5.76 to $6.26); and
  • Adjusted EPS in the range of $6.05 to $6.30 (Previously, adjusted EPS in the range of $6.00 to $6.50).

Photo courtesy Vista Outdoor/Stone Glacier