American Outdoor Brands reported sales fell 10.5 percent in the fiscal second quarter ended October 31, to $70.8 million. Officials blamed it on the timing of orders from traditional brick-and-mortar channels, and underlying demand remains healthy. 

Brian Daniel Murphy, president, CEO, said certain retail customers accelerated the company’s inventory purchases into the first fiscal quarter to mitigate its supply chain risk.

“In our second quarter last year, certain customers increased their orders to address depleted inventories as they reopened from COVID-related closures,” said Murphy on an analyst call. “This year, many of our largest customers indicated that they accelerated their orders into our first quarter to mitigate supply chain concerns.”

Murphy said the fluctuations in timing were why the company viewed its six-month performance as a more meaningful comparison than its shorter-term quarterly comparison.

For the first half of fiscal 2022, sales grew 1.5 percent versus the year-ago period, and overall growth was 62 percent ahead of the first half of fiscal 2020.

“These results reflect our dedication to building authentic lifestyle brands that help consumers make the most out of the moments that matter,” said Murphy. “In the markets we serve, fishing, camping, hunting, shooting sports, and the rugged outdoor lifestyle have all benefited from a new higher level of participation that began in our last fiscal year and continues to provide us with an expanded consumer base containing millions of new participants.”

Murphy said the growth also reflected the company’s increased reach into adjacent markets such as land management, meat processing and home security.

American Outdoor Brands makes accessories for the hunting, fishing, camping, shooting, and personal security and defense markets. Brands include Caldwell, Wheeler, Tipton, Frankford Arsenal, Hooyman, BOG, MEAT!, Uncle Henry, Old Timer, Imperial, Crimson Trace, LaserLyte, Lockdown, Just, BUBBA, and Schrade.

The sales decline in the quarter also reflected heightened demand in the year-ago period driven by increased foot traffic at retailers in traditional channels as it reopened from pandemic restrictions. Sales in the year-ago second quarter grew 65.7 percent.

E-commerce sales managed growth in the period, up nearly 5 percent year-over-year and ahead 228 percent on a two-year basis.

Gross margins in the second quarter came in above expectations at 46.7 percent, a reduction of 20 basis points from last year due to heightened transportation costs stemming from supply chain disruption.

GAAP operating expenses for the quarter were $27.7 million, roughly flat compared to last year. Operating expenses benefited from lower variable costs tied to the reduced sales and lower website costs due to last year’s launch of new websites for each of its key brands. Those factors offset higher IT infrastructure and insurance expenses and increases in freight costs and advertising expenses.

Non-GAAP operating expenses in the quarter were $22.7 million compared to $22.5 million in Q2 of last year. Non-GAAP operating expenses exclude intangible amortization, stock compensation and certain nonrecurring costs.

Net income declined 37.5 percent to $4.6 million, or 32 cents a share, from $7.3 million, or 52 cents, a year ago.

Adjusted EBITDAS for the quarter was $11.7 million, down 25.9 percent from $15.8 million a year ago and EBITDAS margin eroded to 16.5 percent from 19.9 percent in the prior year. Adjusted EBITDAS for the first half of fiscal 2022 was $21.3 million or 16.2 percent, in line with expectations and above the high end of the company’s guidance range for the full fiscal year.

Innovation Set To Drive Growth 
On the call, Murphy highlighted progress in American Outdoor Brands’ Dock & Unlock strategy created to drive growth ‘well beyond” the 8 percent to 10 percent organic CAGR established for the next few years.

“Our brand lanes, Defender, Marksman, Harvester, and Adventurer, organize our brands by consumer activity and provide us with an ideal competitive advantage for developing innovative new products year after year that turns consumers into long-term advocates as we take our brands from niche to known,” said Murphy.

In the latest quarter, strength came from hunting-related brands in its Harvester brand lane in anticipation of the fall hunting season.

MEAT! Your Maker, a direct-to-consumer brand of meat processing equipment, achieved trailing 12-month net sales of just over $6 million from a starting point of zero less than two years ago as it benefits from the growing field-to-table movement.

Among other new products, BOG, the hunting gear line in the Harvester brand, expanded its tripod family to include two camo design patterns while adding a hay bale blind to its ground blinds offering. BUBBA, its fishing lifestyle brand known for angling equipment and apparel in its Adventurer brand, entered a new product category with the launch of the Kitchen Series, a collection of culinary knives designed to complement the water to plate lifestyle. In the Defender brand, the Crimson Trace brand introduced the CT RAD series covering 10 rapid aiming sites in red and green illuminated options and micro, compact and full-size platforms. The Lockdown brand rolled out its latest Lockdown Logic App.

Overall, new products in the second quarter made up over 25 percent of revenue. Murphy said, “This innovation is the direct result of our Dock & Unlock strategy and new products resulting from this process drive our long-term organic growth and generate healthy, accretive and sustainable margins. The strong margins we demonstrated in the second quarter are a direct reflection of this power and action.”

In fiscal 2022, American Outdoor Brands expects to launch over 350 new products, surpassing its annual average.

Inventories Up 41 Percent
Inventories as of October 31 were up 41.3 percent to $105 million from $74.3 million at the start of its year on April 30.

The gains reflect planned strategic investments in inventory to mitigate supply chain risk, including supporting high-volume products and inventory to support several upcoming new product launches.

“Our efforts here have been very successful,” said Andy Fulmer, EVP and CFO, on the call. “The current challenges we face from port congestion and container shortages are in line with what we expected. And our team has done a great job, as usual, closely managing these issues on a daily basis. In addition, we believe our planned pull forward of inventory purchases in Q1 and Q2 positions us well to continue servicing our customers through the second half of fiscal 2022. Going forward, we would expect inventory levels to decrease in the second half of the year as we fulfill the demand for our products.”

Murphy added, “With a robust new product pipeline in place, a portfolio of authentic brands in hand and an energized outdoor consumer market, we are excited about the future, and we look forward to sharing our progress as we take our brands from niche to known.”

Outlook Narrowed 
Based on first-half results and current market conditions, American Outdoor Brands narrowed its guidance range for fiscal year 2022. The outlook calls for:

  • Sales for the fiscal year in the range of $280 million to $285 million, which at the midpoint would represent growth of roughly 2 percent over the prior year and growth of nearly 69 percent over fiscal 2020. Third-quarter sales are expected to be slightly higher sequentially from Q2, followed by another slight sequential increase in Q4 as retailers restock after the 2022 holidays and new launches arrive.
  • Full-year GAAP EPS in the range of $1 to $1.19 and non-GAAP EPS in the range of $2.02 to $2.21. In the year-ago period, full-year GAAP EPS was $1.29 and non-GAAP EPS was $2.32.
  • Adjusted EBITDAS margins are still expected to be between 15 percent and 16 percent.

Photo courtesy American Outdoor Brands