Johnson Outdoors: Marine Electronics, Acquisition Sustain Growth in Second Fiscal Quarter

Gross Margin reached 40.9 percent in the quarter, up 160 basis points (b.p.) thanks largely to new products in Marine Electronics. Operating expenses as a percentage of net sales increased 300 b.p. to 31.4 percent, but were down for the first six months of the year. Operating margin reached 9.6 percent, down 130 b.p. from the year earlier quarter, when operating earnings benefited from a $3.5 million insurance settlement. Net income reached a second-quarter record of $8.9 million, or 90 cents per diluted share, up 21.9 percent from the year earlier quarter.

 

Marine Electronics and Outdoor Gear sales grew 9 and 7 percent respectively while Watercraft and Diving sales declined 19 and 6 percent respectively.

 

Marine Electronics revenue grew across all brands, which include Minn Kota motors; Cannon downriggers; Humminbird marine electronics and LakeMaster electronic charts. Revenues for the first six months are up 11 percent. Sales of the iPilot Link, which enables the companys trolling motors, fish finders and GPS mapping devices to talk to each other so fisherman can store and retrace favorite fishing spots, exceeded expectations.  Operating margins reached 17.8 percent, up from 15.3 percent a year earlier.

 

These are remarkable results considering some significant challenges facing the fishing market this year not the least of which has been the weather, said Chairman and CEO Helen Johnson-Leipold. For perspective, the U.S. experienced the coldest spring on record in 13 years as compared to an unseasonably warm spring last year. The average temperature in March this year was 13 degrees colder than last March. This stalled the beginning of the season in key fishing markets in the upper Midwest and South.

 

Outdoor Gear revenue increased 7 percent thanks largely to $2.4 million in sales at Jetboil, which JOUT acquired in November, 2012. Those sales more than offset a 42 percent decline in tent and other sales to the military during the quarter. The Outdoor segment also sells Silva compasses and Eureka! camping and hiking equipment. The segment generated an operating loss of $268,000 compared to a operating profit of $831,000 a year earlier.

 

Watercraft sales continued to fall as JOUT phased out lower margin SKUs and sales declined in Europe. The segment, which makes Old Town canoes and kayaks; Ocean Kayak and Necky kayaks; Carlisle paddles; Extrasport personal flotation devices, swung to an operating loss of $542,000 from an operating profit of $3.1 million a year earlier.

 

 
Diving sales lagged 6 percent behind their year earlier level due to weak economic conditions in key diving markets. The segment sells both the premium SCUBAPro and mid-priced Subgear dive equipment brands. Johnson-Leipold estimated SCUBAPro controls about 40 percent of the premium market and the two brands together control about 20 percent of the global market for all dive gear. Operating margins reached 10.1 percent, up from 7.7 percent a year earlier.

 

While we started off strong this year, it’s too early to predict full year performance, Johnson-Leipold said of the companys general outlook. Unseasonably cold and wet weather has delayed the retail season in some parts of the U.S. and consumer demand is always the critical determining factor. Economic conditions throughout Southern Europe are challenging and we dont know what to expect in that region, but we feel good about where we are and our ability to adjust to unpredictable variables.

 

Going forward, JOUT will endeavor to increase profit contributions from the lagging Watercraft, Camping and Diving segments. Its Value Plus plan calls for growing operating profit faster than sales through 2015. The company plans to achieve this primarily by bringing innovative products to market. Innovation will increasingly hinge on JOUTs ability to solicit consumer input early in the product design process and analyze customer data. In the Diving segment, innovation will come largely in electronics, such as dive computers.

 

A key goal is to find the way for enthusiasts to see, touch and feel the product every step along the way from concept to commercialization, but before major dollar commitment is required, said Johnson-Leipold. Now deep market knowledge is also critical to maximizing growth for our customers and were pioneers in customer data analytics in our industry and going forward, we plan to further leverage and enhance our data analytics capabilities.

JOUT ended the quarter with inventory valued at $85.2 million, or 64.6 percent of trailing 12-month sales, up from 61.6 percent a year earlier. CFO David Johnson attributed the increase to the late start of the spring selling season in many markets.