By Eric Smith
When Vista Outdoor Inc. ended its fiscal fourth quarter on March 31, the Anoka, MN-based company closed the book on a transformational year that included a portfolio shakeup, business segment realignment and, of course, an economy-crushing pandemic that drastically altered the demand environment.
The company on Thursday morning reported a steep loss in Q4. Sales were $426 million, down 17 percent from the prior-year quarter, or down 8 percent adjusted for the sale of the firearms business in the second quarter of fiscal year 2020. Revenue missed Wall Street’s expectations by $28.6 million.
Vista—whose brands include Federal Premium, CamelBak, Bushnell, Camp Chef, Primos, Blackhawk, Bell and Giro— said the decline in its organic business was “due to a large international order in the prior-year quarter, and lower sales in hydration and hunting and shooting accessories in the quarter.”
The company’s fully diluted earnings per share (EPS) were -$2.44, compared with -84 cents in the prior-year quarter, due to goodwill and indefinite-lived intangible asset impairment charges of $156 million recognized in the fourth quarter, and an impairment charge of $36 million on held for sale assets in the prior-year quarter.
Adjusted EPS was 11 cents, compared with 1 cent in the prior-year quarter, primarily due to a customer bankruptcy-related write-off the company recorded in the prior-year quarter, the benefit of cost savings initiatives, and a favorable tax rate.
“Our results exceeded our expectations for the fourth quarter and full fiscal year,” said Chris Metz, Vista Outdoor CEO. “In this challenging environment brought on by the COVID-19 pandemic, we delivered strong financial performance, met our revenue expectations, and exceeded our expectations for adjusted EPS and free cash flow. Overall, the impact of the COVID-19 pandemic on our operations in the fourth quarter was minimal. We experienced stronger-than-expected demand in many of our categories, including commercial ammunition, bicycle helmets and accessories, and outdoor cooking. Looking forward, we believe that our stronger operating fundamentals, improved balance sheet and financial flexibility will help us respond to this uncertain environment and seize opportunities where they arise.”
Before looking forward to Vista’s guidance, let’s look back at what the company accomplished in fiscal 2020.
In Q2, Vista Outdoor completed the sale of its firearms business for $170 million. Vista said completing this divestiture “was a critical step in the company’s strategic portfolio reshaping and allowed the company to further pay down debt and free up capital to invest in product categories where the company believes it can be a market leader.”
It also allowed the company to reenter REI Co-op, as SGB Executive first reported last September.
Vista’s hydration pack and bottle brand, CamelBak, inked its first contract with the retail giant in more than a year with plans to grow shelf space in the company’s many stores. REI had lifted its boycott of Vista products last July after Vista Outdoor announced it had secured a buyer for Savage Arms.
Another key move included Vista modifying its segment reporting to better reflect its strategic focus. The company’s two new reportable segments are Shooting Sports and Outdoor Products.
The Shooting Sports reporting segment consists of the company’s ammunition and hunting and shooting accessories business units, which include the company’s Federal, CCI, Speer ammunition brands, as well as Bushnell Optics, Primos, Blackhawk and Eagle hunting and shooting-related brands, among others.
The Outdoor Products reporting segment consists of the company’s action sports and outdoor recreation business units, which include the company’s Bell/Giro, CamelBak, Camp Chef and Bushnell Golf brands, among others.
The company’s reported fourth-quarter and FY20 results reflect these two new reporting segments.
For shooting sports, sales were $295 million, down 21 percent from the prior-year quarter, or down 8 percent over the prior-year quarter adjusted for the sale of firearms. EBIT was $22 million, up 26 percent from the prior-year quarter, and was up 116 percent from the prior-year quarter adjusted for the sale of firearms.
And for outdoor products, sales were $132 million, down 9 percent from the prior-year quarter, due to continued lower demand across the segment for the majority of the quarter and headwinds in the retail channel as a result of COVID-19 related restrictions, partially offset by increased demand in bicycle helmets and accessories and outdoor cooking near the end of the quarter. EBIT was $4 million, down 49 percent compared with the prior-year quarter.
“As we begin fiscal year 2021, we are closely monitoring consumer purchasing behavior due to the uncertainty caused by COVID-19. At this time, we believe it is prudent to set expectations only for the first quarter of fiscal year 2021,” said Metz. “We will revisit guidance for the remainder of the year at a later date. We believe that the profitability improvements we have undertaken over the past two years, combined with our significantly reduced leverage and more flexible balance sheet, put us in a strong position going into fiscal year 2021. The solid foundation that we have built will allow us to navigate these uncertain times while continuing to generate profitable revenue and provide our core consumers with the innovative products that they depend on for their outdoor pursuits.”
The company now projects sales in a range of $370 million to $400 million, compared with $460 million in the prior-year quarter, which includes $24 million in revenue from divested businesses. And Vista expects EPS in a range of -5 cents to breakeven, compared with -29 cents of GAAP EPS and -8 cents of adjusted EPS in the prior-year quarter.
Photo courtesy Vista Outdoor