Johnson Outdoors reported a slight decline in profits in the first quarter ended December 28 as sales slid 10.5 percent. Sales were impacted by a shift in pacing of new product releases in the Fishing category and weakness in Diving.
“We are building momentum behind an exciting new product line-up, particularly in Fishing, as we head into the primary selling period for our warm-weather outdoor products. At this time, we continue to anticipate year-over-year revenue growth in fiscal 2019. We believe our brands are well-positioned for marketplace success and confident in Johnson Outdoors’ sustained industry leadership long-term,” said Helen Johnson-Leipold, Chairman and Chief Executive Officer.
First Quarter Results
During the first fiscal quarter, the company is ramping up for the primary selling period of its warm-weather outdoor recreation products across the second and third fiscal quarters. Total company net sales in the quarter declined 10 percent to $104.4 million compared to net sales of $116.6 million in the prior year quarter. Key contributing factors to the results were:
- A shift in pacing of new product releases this fiscal led to an unfavorable year-over-year comparison in Fishing sales.
- Diving sales declined 11 percent due primarily to weakness in Asian dive markets and a two percent negative impact of foreign currency translation.
- Positive momentum in Jetboil kept Camping revenue on par with the prior year quarter.
Watercraft Recreation sales were flat to last year’s first quarter despite challenging market conditions.
Total company operating profit for the first fiscal quarter was $6.0 million vs. $7.0 million in the prior year first quarter. Gross margin improved quarter-to-quarter, despite a $0.7 million unfavorable impact from recently enacted tariffs in the first three months of the fiscal year. Operating expenses benefitted from a decline in deferred compensation expense due to a $2.3 million downward adjustment in the valuation of the plan’s assets, however, an offsetting loss was reflected in other expenses.
The company reported net income of $3.5 million, or 35 cents per diluted share, versus $0.2 million, or $0.02 per diluted share, in the previous year’s quarter. The company’s effective tax rate for the quarter was 18.7 percent compared to an effective rate of 97.2 percent in the prior year first quarter. The prior year’s rate was significantly impacted by a one-time transition tax related to new U.S. tax legislation in that period.
Other Financial Information
Cash and short-term investments improved $25.9 million to $104.2 million in the current quarter versus $78.3 million in the prior year period. Depreciation and amortization was $3.3 million compared to $3.2 million in the previous year’s quarter. Capital spending declined to $4.1 million in the current quarter versus $6.5 million in the prior year quarter. In December 2018, the company’s Board of Directors approved a quarterly cash dividend to shareholders of record as of January 10, 2019 which was payable on January 24, 2019.
“While pacing of new product releases affected first quarter year-over-year comparisons, we expect moderate sales growth for the full year. Further, while we continue working on various tariff mitigation efforts, at this time we are still projecting these to have a potential $6-9 million impact on fiscal 2019 profits,” said David W. Johnson, vice president and chief financial officer. “Nonetheless, we continue to benefit from our ongoing efforts to improve operational efficiency, enabling us to strengthen margins and keep working capital in check. The balance sheet remains strong, providing us the financial capacity and flexibility to strategically invest in growing our business while also paying a cash dividend to our shareholders.”
Johnson Outdoors designs, manufactures and markets a portfolio of winning, consumer-preferred brands across four categories: Watercraft Recreation, Fishing, Diving and Camping. Johnson Outdoors’ iconic brands include: Old Town canoes and kayaks; Ocean Kayak; Carlisle paddles; Minn Kota fishing motors, batteries and anchors; Cannon downriggers; Humminbird marine electronics and charts; SCUBAPRO dive equipment; Jetboil outdoor cooking systems; and, Eureka! camping and hiking equipment.