By Thomas J. Ryan
<span style="color: #999999;">Vista Outdoor Inc. reported sales slid 7 percent on an organic basis in the second quarter ended September 29 with continuing weakening sales in its ammunition business. Encouragingly, however, earnings marked break-even results on an adjusted basis, ahead of Wall Street’s targets, and adjusted earnings guidance was maintained for the year.
Shares of Vista Outdoor jumped $2.15, or 31.2 percent, to $9.05 Thursday in over-the-counter trading.
“We have had a good start to the first half of the year and have delivered a solid second quarter of results,” said Vista Outdoor’s CEO Chris Metz. “While we were presented with several significant new challenges in the second quarter, particularly within our Ammunition business unit, we have continued to make progress on our profitability and de-leveraging goals. The decisive actions we have taken to strengthen performance are yielding results. I am confident in the plans we have in place and in our team’s ability to successfully deliver on our financial guidance for Fiscal Year 2020.”
In the quarter ended September 29, sales slid 18.6 percent to $445.0 million. Excluding the sale of its Eyewear brands, which was sold in the second quarter of FY19, and the Firearms business, which was sold in the second quarter of FY20, organic revenues were down 7 percent. The Eyewear brands were Bollé, Cébé and Serengeti while the Firearms brands were Savage and Stevens.
The loss in the quarter was reduced to $12 million, or 21 cents a share, from $32.8 million, or 57 cents, a year ago.
On an adjusted basis, Vista Outdoor recorded break-even results against a profit of 5 cents a share from the prior year. Analysts on average were expecting a loss of 10 cents.
Gross profit was $90 million, down 17 percent from the prior-year quarter. Excluding results from the sale of its Eyewear brands and Firearms business, gross profit was down 3 percent on an adjusted organic basis.
Operating expenses were $89 million, down from $128 million in the prior-year quarter. Adjusted operating expenses were $81 million compared to $94 million in the prior-year quarter, a decline of 13.8 percent.
The Outdoor Products segment generated $234 million in sales during the quarter, down 14 percent from the prior-year quarter on a reported basis. Excluding the Eyewear brands, sales were down 7 percent on an organic basis.
Brands in the segment include Bushnell, CamelBak, Camp Chef, Primos, Bell, Giro, RCBS, Hoppe’s, Uncle Mike’s, Gold Tip, Weaver, Blackburn, KRASH!, Copilot, Raskullz, and Tasco.
Gross profit in the Outdoor Products segment was $61 million, down 0.3 percent from the prior-year quarter, and up 9 percent on an adjusted organic basis. The gross profit margin was 26 percent, up 361 basis points from the prior-year quarter, and was 26 percent on an adjusted organic basis, up 397 basis points from the prior-year quarter.
<span style="color: #999999;">In the Shooting Sports segment, sales reached $211 million in the quarter, down 23 percent from the prior-year quarter. Excluding the sold Firearms business, sales were down 6 percent on an organic basis. The segment’s core brands include Federal Premium, CCI and Speer.
Gross profit in the Shooting Sports segment was $29 million, down 39 percent from the prior-year quarter, and down 22 percent on an adjusted organic basis. The gross profit margin was 14 percent, down 353 basis points from the prior-year quarter, and was 14 percent on an adjusted organic basis, down 277 basis points from the prior-year quarter.
Mick Lopez, Vista Outdoor’s CFO, said the company has continued to deliver on its debt reduction and de-leveraging goals, paying off the balance of its higher interest Junior Term loan in October. Said Lopez, “We have now reduced our debt by approximately $600 million, which is a 51 percent reduction from our peak long-term debt balance of approximately $1.176 billion. Our transformation initiatives continue to deliver positive impacts in our financial results, and our more efficient, profitable brand platforms are now better positioned to seize growth opportunities going forward.”
Vista Outdoor’s updated guidance for FY20 is as follows:
- Sales in a range of $1.75 billion to $1.85 billion. That compares to previous guidance of $1.79 billion to $1.89 billion;
- Interest expense of approximately $40 million and adjusted of approximately $37 million, the same as previous guidance;
- GAAP EPS in a range of a loss of 23 cents to a loss of 8 cents a share, as compared to the previous range of a loss of 3 cents to a profit of 12 cents. The change reflects restructuring and asset impairments;
- Adjusted EPS was maintained in the range of 10 to 25 cents, in line with previous guidance;
- Capital expenditures are still expected to be approximately $40 million;
- Free cash flow is still expected in a range of $30 million to $40 million; and
- FY20 EBITDA margins are still expected to be approximately 6 percent.
Photo courtesy Vista Outdoor