Vista Outdoor Inc. (Nasdaq:VSTO) will spend most of its $90 million capital budget this year kicking off a three-year initiative to expand its ammunition manufacturing capacity after reporting record fiscal-fourth-quarter results at its shooting sports segment.
Shooting sports revenue reached a record $382 million in its fiscal 2016 fourth quarter, ended March 31, up 22 percent from a year earlier thanks to increased demand that signals distributors, retailers and consumers have finally worked off ammo hoarded during a period of frenzied demand surrounding the last presidential election.
For the full year, shooting sports reported sales of $1.4 billion, up 4 percent, driven by firearms and rimfire ammunition, partially offset by a decrease in shotshell sales. Gross profit grew 23 percent to $95 million in the first quarter and 14 percent to $377 million during the fiscal year.
“Looking ahead, we see continued growth in the ammunition market at rates higher than can be met with throughout enhancement alone,” Chairman and CEO Mark DeYoung explained. “To better position Vista Outdoor to meet this growing demand for the long-term, we will commence a three-year ammunition capacity expansion project in fiscal-year 2017, with the additional capacity starting to become available in fiscal-year 2018.”
DeYoung said the expansion is justified by growing participation of women, who have helped drive down the average age of shooting sports customers to the 18-to-34-year range.
“All of these things bode very well for long-term support and consumption on volumes of ammunition beyond what we believe we might be able to produce through our current investment in capacity,” he said.
Fiscal 2016 Full-Year Results
Outlook for Fiscal-Year 2017
Vista Outdoor released initial fiscal-year 2017 financial guidance that calls for sales in a range of $2.72 to $2.78 billion, or growth of at least 20 percent.
The guidance reflects growing demand for its ammunition and the impact of acquisitions at its outdoor products division, which has spent $852 million since July 2015 snapping up brands outside shooting sports. That sum includes $400 million it paid in April to acquire Giro, Bell, Blackburn and three other cycling and snow sports brands from BRG Sports Inc.’s Action Sports division.
Vista Outdoor also announced May 6 that it had lured Dave Allen away from his job as president of The Coleman Company to become the company’s senior vice president of sales. Coleman, which has annual sales north of $1 billion, is the crown jewel of what was Jarden Corp.’s $2.74 billion a year outdoor solutions segment. That business, which includes Marmot, K2, Rawlings and more than a dozen of fishing brands, is now being digested by Newell Rubbermaid Inc.
Vista Outdoor plans to more than double its R&D spending from $12.5 million to $30 million in fiscal 2017 to fuel organic growth of its brand portfolio, which has expanded to include Jimmy Styks stand-up paddleboard, CamelBak hydration products and Giro and Bell bicycle and ski helmets. Those businesses typically derive a third of their annual sales from new products.
Vista Outdoor officials estimate fiscal-year EPS to grow 30 to 35 cents, or by 13 to 21 percent, including 7 to 10 cents from the BRG Action Sports acquisition.
