Johnson Outdoors Inc. sales declined 5.8% to $141.2 million for its  fiscal third quarter ended June 27, as sales in its marine electronics segment dropped and June refill orders from canoe and kayak dealers slowed considerably.

 

The biggest decline in sales came in marine electronics, where sales fell 12.1% for the quarter. The business sells Minn Kota trolling motors, Humminbird fish finders and other fishing gear. Sales in JOUTs watercraft segment slid 4.9%. The segments brands include Old Town, Necky and Ocean Kayak canoes and kayaks, Extrasport PFDs and accessories and Carlisle paddles.


The third quarter is one of the most important for JOUT because its when it ships most its marine electronics and watercraft products to retailers for the spring and summer boating season.


The timing could not have been worse for a warm weather season business like ours, said Helen Johnson-Leipold, chairman and CEO. In April, just as retail market got underway, economic concerns sky rocketed and consumers put the brakes on spending. 


She said retailers have responded by clamping down on spending and coming back on recorders to keep inventory at a minimum.
Watercraft came into the quarter with a good first six months, however, restocking orders which comprise the bulk of third-quarter sales, slowed considerably through June, she said. 


Johnson-Leipold said a consultant is expected to finish next year a strategic study of how to make the paddling business more profitable.
Sales at JOUTs outdoor equipment segment were essentially flat. Sales at the Diving segment rose 7.1%, thanks in part to a more favorable foreign currency exchange rate.


Despite the declines, JOUT said operating profits held more or less steady at $14.6 million, down just 1.4% as the company continued to focus on cutting costs. Johnson Outdoors is striving to cut the SKU count for all its businesses by 20% and squeeze costs out of its supply chain and production operations. That was achieved in the third quarter in part by reversing accruals of $3.2 million related to discretionary bonus and profit sharing plans.


Net income for the quarter slid 4.8% to $7.8 million, or 84 cents per diluted share.


Inventories were up 15.2% to $97.0 million at quarter-end .
JOUT has shortened work weeks, eliminated production shifts, reduced its labor force and is developing SKU reduction plans and close-out programs to help bring finished goods inventory levels down over the next three months, said David W. Johnson, VP and CFO. He said cuts to production and executive compensation will likely remain in place through the back half of the year.


Obviously, we think the next 12 months will be very challenging, said Johnson-Leipold. Its going to be a very tough season for us. From the customer standpoint, they are very hesitant on buying and doing everything on a short-term basis. They are not building inventory. That makes it very tough on us. Hopefully the innovation we have focused on will help us out next season.


On the positive side, she continued, despite a soft summer retail market, retail reports indicate that, in general, our brands are outperforming the competition as meaningful new-product innovation accounted for more than a third of year-to-date revenues.