Despite having paid approximately $450 million last month to acquire CamelBak Products Inc. and an SUP company, Vista Outdoor Inc. remains on the hunt for human-powered outdoor recreation brands, the company's chairman and CEO told analysts during the company's earnings call last week.
“We've mentioned previously on our prior call that we had a healthy and robust pipeline,” Mark DeYoung told analysts during the company's fiscal first quarter earnings call. “That is still the case, even after those two acquisitions. We're looking at adjacent categories that stick to this rugged outdoor recreation enthusiast.”
Vista reported Thursday that revenues at its Outdoor Products segment, which derived most its sales from Bushnell during the period, grew 2.4 percent to $183 million compared with the same period a year ago. The increase was driven by growth across most categories partially offset by foreign exchange impacts. Gross margins reached 29 percent, up 80 basis points from a year earlier due to higher sales and improved operations and growing contributions from Bushnell.
The segment is scouting brands it that will provide access to new types of outdoor enthusiasts and where it can build brand equity through expanded distribution or by applying operational excellence.
For example, Vista has already begun pitching CamelBak products to national hunting and fishing retailers.
“We are very strong in areas where CamelBak has an opportunity to expand in categories like Sportsman's Warehouse and Dick's, Cabela's, Bass Pro Shop,” said DeYoung. “We've already begun the cross-selling of CamelBak, with meetings with our key customers where maybe CamelBak is underrepresented. And we've also had meetings with some of the key CamelBak customers where perhaps Bushnell and some of our other products are underrepresented.”
A PowerPoint shared during the call shows CamelBak doubling Vista's presence in Camping and tripling it in Cycling and Trail Sports. Jimmy Styks, meanwhile, provides Vista access to paddle sports dealers as well as products it can cross sell to the hunt-and-fish channel.
The acquisitions are expected to shift the company's overall sales mix from 65/35 Shooting Sports/Outdoor Products to 60/40.
Price increase signals turnaround at Shooting Sports
Vista reported consolidated sales in the fiscal first quarter ended July 5, reached $514 million, down 9 percent from the prior-year quarter. Net income declined 17 percent to $34 million, or 53 cents per fully diluted share, compared to 64 cent in the prior-year quarter.
Consolidated gross profit rose 170 basis points to 27.1 percent as decreased sales were largely offset by improved product mix.
Operating margins reached 11.5 percent, down from 13.2 percent in the same period of 2014 due primarily to the ongoing correction in the shooting sports market, where the company's sales of centerfire ammunition and reloading components fell but were partially offset by an increase in rimfire ammunition and firearms.
Sales at its Shooting Sports segment reached $322, down 14.4 percent year-over-year, but up 5.8 percent from the previous quarter. Gross margin, rose 200 basis points to 26.2 percent as the decline was offset by an improve mix of sales.
The company continues to take market share in the shrinking centerfire market and ramp up production at its Savage brand to meet strengthening demand for long guns, including rimfire rifles and shotgun sales, which were particularly in the home defense segment.
“We've done some hiring and call back of employees, where we had to reduce headcount last year,” said DeYoung.
He added that the company passed through a modest price increase for rimfire ammunition in July and sees no sign of broad discounting of wholesale ammunition prices.
“That was our first price increase in the last 18 months to two years,” he said.
Rapid integration foreseen
Vista still expects to deliver low single-digit revenue growth for the full fiscal year, with low double-digit margins, but said it now expects EBITDA margins to be at the lower end of the previously disclosed 14-to-16 percent range. Updated guidance for FY16, which reflects recent acquisitions and excludes transaction-related expenses, calls for sales of $2.17-to-$2.24 billion and Adjusted EPS in a range of $2.05-to-$2.30.
DeYoung said he expects integration of CamelBak and Jimmy Styks to proceed much more quickly than it did with Savage and Bushnell, because there is less overlapping distribution. The process will focus primarily on sourcing at Jimmy Styks and will take longer at CamelBak because of some duplicate distribution.
“CamelBak and Jimmy Styks will be much, much simpler,” he said. “These will not create a bandwidth drain that will inhibit us from continuing to pursue M&A.”
“Last week, I was able to participate with CamelBak in customer meetings during the Outdoor Retailer show in Salt Lake City, and it's apparent that this brand will help advance our strategy of growth and expand our leadership position in the outdoor recreation industry,” said DeYoung.
