Johnson Outdoors, Inc. cut its losses from continuing operations by more than a third in the fiscal first quarter ended Jan. 1 on a 1% rise in net sales, primarily driven by a resurgent diving business and a 3.5% sales gain at its largest business-marine electronics.
The results, along with favorable exchange rates, were more than enough to offset a 22% decline in outdoor gear sales, driven by declining military sales, and a 7% decline in watercraft sales, which was due in part to later shipping of canoes and kayaks.
Last year’s economic downturn dramatically impacted the industry, explained Chairman and CEO Helen Johnson-Leipold However, there are early indications already that the outdoor rec industry is beginning what we expect to be a slow recovery in the years ahead.
JOUT said net sales rose 1.0% from the year earlier quarter to $70.5 million, with favorable currency translation having a positive 3.3% impact on revenues during the quarter. Losses from continuing operations reached $4.2 million, or 45 cents per diluted share for the quarter, compared to a loss of $6.9 million, or 75 cents per diluted share, in the prior year quarter.
The Racine, WI company normally loses money in the first quarter as it gears up for spring deliveries of everything from Scubapro diving gear and Eureka tents to Necky kayaks and Minn Kota trolling motors.
CEO Helen Johnson-Leipold said the results showed that the companys latest cost restructuring — including a consolidation of kayak and canoe building in Maine – was yielding results. JOUT ended the quarter with 25% less inventory and $20 million less debt, which drove its debt-to-total-capitalization ratio to 29% from 39% a year earlier. The company will keep inventory levels within 5% of 2009 levels going forward, said VP and CFO David Johnson.
Marine Electronics lost $493,000 on a 3.5% increase in sales to $33.1 million. Outdoor equipment earned $730,000 on a 22.0% decline in sales to $8.8 million. Watercraft lost $1.1 million on a 7.0% decline in sales to $10.3 million. Diving lost $84,000 on an 18.9% increase in sales to $18.5 million.
Over the past few years, the recession and credit crisis took a toll on the boat industry, which put a drag on Marine accessories like Minn Kota, Humminbird and Cannon, Johnson-Leipold said. This quarter, all of our Marine electronics brands posted revenue gains. Diving, our most international business, faced last year’s economic turmoil on a global basis as sales softened in virtually every diving market. This quarter, sales in key geographies were up significantly and the unit posted a double-digit increase in revenues.
CFO David Johnson said gross margins had improved 1.4 points from a year earlier, when the company had to resort to more closeout pricing to clear inventory.
Johnson-Leipold added that the watercraft business, which makes Necky kayaks and Old Town canoes, was on track to become profitable this year, even given what she described as the new normal. The company carved $4 million in annual costs out of the watercraft business last year.
Johnson Outdoors sees consumer spending trends favoring mid-priced segments. For that reason, JOUT introduced Sub Gear, a new mid-priced line of diving equipment with the functionality and quality you would expect from the maker of Scubapro.
