Remington Outdoor Company reported net sales grew 1.1 percent in the quarter ended June 26 as demand for its modern sporting rifles (MSR) more than offset a decline in other guns, an unfavorable shift in ammunition spending and the absence of Mountain Khakis, an apparel brand it sold last year.
The Madison, NC-based company reported adjusted EBITDA of $30.1 million, up 67 percent from a year earlier, thanks largely to an $18 million swing in income tax expenses.
Firearms
Remington Outdoor, which reports its results because its debt is publicly traded, reported Firearms net sales of $94.8 million, an increase of $6.9 million, or 7.8 percent, as compared to the three months ended June 28, 2015.
Consistent with the current market demand for MSR and handguns, MSR sales increased $12.3 million and handgun sales increased $2.0 million. These increases were partially offset by decreased sales of centerfire rifles, rimfire rifles, shotguns and other firearms used by hunters and sportsmen of $3.1 million, $2.7 million, $1.3 million and $0.3 million, respectively.
“The market for modern sporting rifle (MSR) products continues to see higher demand in the opening price point segments,” the company reported. “In response to this demand, we increased production and launched the QRC rifle, an entry level price point Bushmaster MSR.
“The overall handgun market continues to grow; however, this growth is primarily in the polymer pistol, subcompact and micro pistol categories,” the report continued. “We have launched the Remington RM380 Micro Pistol as our first introduction into the growing handgun market for self-defense and concealed carry pistols. In July, we introduced the newly enhanced Model R51 concealed carry pistol.”
Gross profit declined 2.9 percent to $20.3 million, or 21.4 percent of net sales, compared with 23.8 percent for the three months ended June 28, 2015. The decrease in gross profit was primarily due to an unfavorable sales mix of $2.4 million as a result of a consumer trend to lower price point and lower margin products, higher accrued discounts of $2.1 million and higher manufacturing costs of $0.2 million, partially offset by higher sales volumes of $2.8 million and favorable pricing of $1.3 million.
Ammunition
Net sales for the three months ended June 26, 2016 were $93.0 million, a decrease of $0.6 million, or 0.6 percent, as compared to the three months ended June 28, 2015. Sales of centerfire ammunition decreased $3.4 million, sales of rimfire ammunition decreased $0.9 million and sales in our other ammunition product lines decreased $2.6 million. These decreases were partially offset by increased sales of shotshell ammunition of $6.3 million.
Gross profit came in flat at $30.6 million, or 32.9 percent of net sales, comapared with 32.7 percent for the three months ended June 28, 2015. The differences within gross profit included higher manufacturing costs of $2.1 million resulting from hedging losses and unfavorable labor and overhead variances, higher accrued discounts of $2.0 million and lower sales volumes of $0.2 million, partially offset by a favorable sales mix of $2.7 million and favorable pricing of $1.6 million.
Consumer
Net sales for the three months ended June 26, 2016 were $16.5 million, a decrease of $4.1 million, or 19.9 percent, due primarily to lower parts sales of $1.3 million, lower clothing sales of $1.7 million as a result of the sale of Mountain Khakis and lower sales of airguns and accessories of $1.1 million.
Gross profit fell 22.9 percent to $6.4 million, or 38.8 percent of net sales, compared with 40.3 percent for the three months ended June 28, 2015 due to lower sales and prices, higher discounts and other costs, which were partially offset by a favorable mix of $0.5 million.
The gross profit figures reflect restated figures for the second quarter of 2015, which Remington changed after finding an error in the way it calculated its annual inventory January 1 of that year, as well as how it accounted for capitalized inventory variances.
