Johnson Outdoors Fiscal Q2 Profits Slip…

Johnson Outdoors Inc. reported second quarter earnings dropped considerably in spite of double-digit revenue increases in every division except Outdoor Equipment, a division that continues to suffer from lagging military tent sales.

In a conference call with analysts, company Chairman and CEO Helen Johnson-Leipold attributed the profit decline to the expected slowdown in military sales; supply chain challenges that caused inefficiencies in its Diving and Marine Electronics divisions; and a one-time corporate investment of $1.8 million earmarked for key future growth initiatives.

On the top line, the continued slowing of military sales was more than offset by gains in the Marine Electronics, Watercraft and Diving business units. Excluding the $2.4 million military sales decline, total company net sales would have increased $17.1 million, or 16%, in Q2.

Marine Electronics revenues rose 25% due to favorable reception to new products across all brands. Operating profit rose slightly to $8.8 million from $8.4 million, with the gains slowed by operational inefficiencies. Management said that despite some boat manufacturers predicting a slowdown, demand for its products remains strong for its Minn Kota, Humminbird and Cannon brands. A lack of availability of some key components, as well the need to hire new employees is leading to operational inefficiencies at the division.

Watercraft sales climbed 12% led by strong performances across the entire paddle sport brand portfolio. The division showed an operating loss of $501,000 although it was better than the $1.1 million loss recorded last year. The lower loss was helped by infrastructure investments. Shipments continue to occur closer and closer to consumer-buying season, leading Johnson to hold inventory longer than in the past. Key international markets posted double-digit growth year-over-year led by market and distribution expansion in Europe.

Diving revenues increased 14% based on the strong performance of the SCUBAPRO brand internationally. Excluding the impact of currency, Diving revenues would have grown 9%. Operating profits dropped to $125,000 from $969,000. The company continues to address the operating efficiencies at UWATEC.

Outdoor Equipment revenues were down 16% due to a 25% decline in military sales versus the prior year quarter. Operating profit fell to $1.2 million from $3 million.
Johnson said the increased corporate spending during the quarter included new marketing initiatives, including a successful 30-minute infomercial for a new Humminbird line of products. The company also invested online to create “interactive destination websites” for all its brands this year. Finally, the company will continue to aggressively pursue acquisitions until it reaches its goal $500 million in sales.

Johnson said the company is looking for complementary acquisitions where it can leverage its existing infrastructure and marketing force. As an example, she noted that the company was able to grow Humminbird by 50% and to more than double the brand’s margins since it was acquired two years ago. But, she also said Johnson is “looking for acquisitions to establish a much larger footprint in the outdoor recreation universe.”

During the quarter, the company completed a comprehensive analysis of the outdoor recreational landscape to identify new growth platforms and targeted acquisition opportunities. JOUT is actively talking to a group of outdoor companies to gauge possible acquisitions.