The chairwoman and CEO of Johnson Outdoors said the company is reviewing its money-losing watercraft business “very closely.” Helen Johnson-Leipold said the emphasis is on finding new opportunities at the business through  innovation and cost-cutting. JOUT reported that the business, which includes Necky kayaks, Old Town canoes and Ocean Kayak sit-on-tops, Lendal and Carlisle paddles and Extrasport PFDs, dry suits and accessories, lost $230,000 in the second quarter ended March 28, even though sales rose 5.1% to $23.7 million. The business earned a mere $36,000 in the second quarter of 2007. Johnson-Leipold said the numbers were encouraging, since they reflect initial shipments to retailers stocking up for spring and summer.

Short-term, the company is focusing on how it can reduce inventory and freight costs and squeeze more efficiencies out of its supply chain.  It has also stopped filling some fulltime positions and cut back seasonal hiring, said CFO Dave Johnson. Long term, the company is challenging all its businesses to rationalize their SKU count by 20% in coming years in an effort to simply business.


The rise in kayak and canoe sales came even as sales by JOUT’s largest business – Marine Electronics – fell 4.6% due to soft conditions in the domestic powerboat market.  The coincidence of rising paddlesports sales with falling powerboat sales lends credence to the notion that fishermen are driving much of the growth in kayak sales.


Operating profits, meanwhile, fell 21.7% to $3.6 million because of lower margins in marine electronics, lower sales of tents to the military and a $600,000 restructuring charge taken on the company’s global diving business. That translated to operating margins of 3.0%, down 78 basis points from the year ago quarter. Gross margins dipped 20 basis points to 38.4%.


Net income from continuing operations fell 61.9% to $800,000, or 9 cents per diluted share, from $2.1 million, or 23 cents per diluted share in the prior year quarter.  The bulk of the loss was caused by a $1.6 million pre-tax foreign exchange loss in Switzerland. Net income for the quarter fell to $500,000, or 5 cents per share, from $1.7 million, or 19 cents per share.