Johnson Outdoors reported net profits in the fiscal third quarter ended June 26 fell 41.6 percent as revenues declined 21.5 percent.
“As expected, the COVID-19 pandemic had a significant impact on the quarter. Strong momentum in Fishing, Watercraft Recreation and Camping in May and June could not offset the pandemic-related impact on operations in April. Stay-at-home mandates hit during the heart of our primary selling season, as many retailers were closed and consumers were restricted to essential-only activities. As those mandates eased, we began to see high demand and growing participation in Fishing, Camping and Watercraft Recreation, while travel restrictions continue to limit accessibility to Diving,” said Helen Johnson-Leipold, Chairman and CEO. “Going forward, our goal is to continue the positive momentum of our Fishing, Watercraft Recreation and Camping brands through the end of the year by leveraging the increased interest in outdoor activities to the fullest.”
At the beginning of the third quarter, the company temporarily suspended operations at some locations. When production and shipments resumed in its North American operations on April 22, 2020, the company began operating under strict procedures and protocols, consistent with CDC guidelines and public health safety directives for COVID-19, and will continue to do so for the foreseeable future.
Third Quarter Results
Typically the third quarter is the primary selling season for warm-weather outdoor recreation products; however, due to COVID-19, customer inventory and replenishment and consumer sell-through patterns have shifted. Total company net sales declined 21.5 percent to $138.4 million, versus $176.3 million in the prior-year third quarter.
- Strong demand in Fishing throughout May and June was not enough to offset the impact of COVID-19 in April, resulting in a 20 percent decline in sales.
- New product innovation and positive market dynamics in Watercraft drove higher demand, leading to a 17 percent growth in revenue.
- Retail closures and state and national park closures contributed to a 34 percent decline in Camping sales.
- Diving was the first to be affected by stay-at-home mandates as it has the most global distribution. Diving posted a 47 percent decline in revenue for the quarter.
Total company operating profit was $12.9 million for the third quarter compared to $28.0 million in the prior-year third fiscal quarter, due primarily to lower sales volume. Gross margin of 45.2 percent was flat to the prior-year quarter. Reduced efficiencies from COVID-19 shutdowns were offset by improved product mix and pricing. Operating expense decreased $2.1 million compared to the prior-year quarter, due to reduced sales volume-related costs which were offset in part by a $2.1 million unfavorable impact year-over-year from valuation adjustments to the company’s deferred compensation plan assets, which are totally offset in Other Income. Net income was $12.9 million, or $1.27 per diluted share, versus $22.1 million, or $2.19 per diluted share in the previous year’s third quarter.
Fiscal 2020 year-to-date net sales declined six percent to $429.5 million compared to $458.4 million in last year’s first fiscal nine-month period. Total company operating profit was $51.5 million compared to $61.9 million in the prior fiscal year-to-date period. Gross margin was 44.5 percent in the current year-to-date period, and operating expenses declined $1.5 million year-over-year. Net income during the first fiscal nine months was $39.7 million, or $3.93 per diluted share, versus $47.5 million, or $4.72 per diluted share, in the prior fiscal year-to-date period. The company’s effective tax rate decreased slightly year-over-year to 24.4 percent.
Other Financial Information
JOUT reported cash and short-term investments of $181.4 million as of June 26, 2020, versus $149.0 million on June 28, 2019. Depreciation and amortization were $11.5 million compared to $10.4 million in the previous year’s quarter. Capital spending totaled $11.4 million in the first fiscal nine months compared with $12.0 million in the prior year-to-date period. In May 2020, the company’s Board of Directors approved a quarterly cash dividend to shareholders of record as of July 9, 2020, which was payable on July 23, 2020.
“During the quarter, where appropriate, we reduced expenses; however, at this time, the challenge is keeping pace with demand, with a focus on ending the year strong,” said David Johnson, Chief Financial Officer. “Our debt-free balance sheet and our healthy cash position will be beneficial as we continue to work through challenges ahead and make smart investments to strengthen the business and drive value for our shareholders.”
Johnson Outdoors said innovation continues to capture awards and generate excitement at ICAST, the prestigious fishing show, winning its third “Best of Show” award in the last five years. The new Old Town Sportsman Autopilot won the 2020 “Best of Show” honors as well as this year’s “Best Boats and Watercraft” award. The Sportsman Autopilot, part of Old Town’s new line of power, pedal and paddle fishing kayaks, utilizes a GPS-enabled Minn Kota trolling motor to propel, maneuver and “anchor” the kayak with its unique Spot-Lock Technology.
Johnson Outdoors also said their fishing brands continue to dominate their respective categories at ICAST. The Humminbird CoastMaster won “Best Electronics” honors resulting in nine ICAST “Best of Electronics” awards in the last ten years. CoastMaster arms saltwater anglers with the very latest information to identify the most productive fishing areas in any U.S. coastal waters and allows anglers to navigate these areas safely and with confidence. The Minn Kota Raptor Shallow Water Anchor grabbed “Best Boating Accessory” honors. Minn Kota’s new Raptor debuts two industry-first technologies: Active Anchoring™, which monitors anchoring force and adjusts to stay pinned to the bottom, and Auto-Bottom Mode, which automatically detects bottom hardness to determine the right amount of anchoring force.
Photo courtesy Johnson Outdoors/Humminbird CoastMaster