Johnson Outdoors Reports Fiscal Third Quarter Results

Rhea-AI Summary

Johnson Outdoors Inc. (Nasdaq:JOUT) reported a challenging fiscal third quarter ending June 28, 2024. Net sales declined 8% to $172.5 million, with an operating loss of $0.5 million compared to a $17.4 million profit in the prior year. Gross margin fell to 35.8% from 41.5% due to lower sales volumes and product mix changes. Net income decreased to $1.6 million ($0.16 per diluted share) from $14.8 million ($1.44 per diluted share).

Year-to-date results show a 14% decrease in net sales to $487.0 million. The company reported cash and short-term investments of $148.4 million. Despite challenges, Johnson Outdoors remains committed to cost-saving initiatives, inventory reduction, and strategic investments in innovation and digital capabilities to drive future growth.

Positive

• Maintained a strong cash position with $148.4 million in cash and short-term investments
• Continued commitment to paying dividends to shareholders
• Implementing cost-saving initiatives and inventory reduction efforts
• Investing in innovation and digital capabilities for future growth

Negative

• 8% decline in quarterly net sales to $172.5 million
• Operating loss of $0.5 million compared to $17.4 million profit in prior year quarter
• Gross margin decreased to 35.8% from 41.5% in the prior year quarter
• Net income fell to $1.6 million ($0.16 per share) from $14.8 million ($1.44 per share)
• 14% decrease in year-to-date net sales to $487.0 million
• Lower consumer demand for outdoor recreation products
• Increased promotional activity impacting profitability

Insights

Financial Analyst

Johnson Outdoors' Q3 results paint a concerning picture for investors. The company reported a 8% decline in net sales to $172.5 million, with an operating loss of $0.5 million compared to a $17.4 million profit last year. The gross margin contracted significantly from 41.5% to 35.8%, primarily due to lower sales volumes and unfavorable product mix.

The year-to-date performance is equally worrying, with a 14% decrease in net sales and an operating loss of $0.7 million compared to a $34.3 million profit in the previous year. These results reflect challenging market conditions and lower consumer demand for outdoor recreation products.

Despite these challenges, the company maintains a strong balance sheet with $148.4 million in cash and short-term investments. This financial stability allows Johnson Outdoors to continue investing in strategic initiatives and maintain its dividend payments, which could provide some reassurance to long-term investors.

Market Research Analyst

The outdoor recreation industry is facing significant headwinds, as evidenced by Johnson Outdoors' results. The company's performance indicates a broader market slowdown, with consumers pulling back on discretionary spending for outdoor products. This trend is likely affecting competitors as well, suggesting a sector-wide challenge rather than company-specific issues.

The increased focus on promotional activities to drive sales is concerning, as it suggests a highly competitive environment where companies are sacrificing margins to maintain market share. This could lead to a race to the bottom in terms of pricing, potentially impacting the entire industry's profitability in the short to medium term.

However, Johnson Outdoors' commitment to investing in innovation and digital capabilities is a prudent long-term strategy. As the market eventually recovers, companies that have maintained their R&D and digital transformation efforts will likely be better positioned to capture renewed consumer interest and spending.

Retail Industry Expert

The results from Johnson Outdoors highlight the ongoing challenges in the retail sector, particularly for discretionary goods. The company's struggle with inventory management, despite efforts to reduce stock levels, reflects the difficulty in predicting consumer demand in the current economic climate.

The increase in advertising and promotional spending, coupled with a shift towards lower-margin products, suggests a highly competitive retail environment. This trend is likely to continue as retailers vie for a shrinking pool of consumer dollars allocated to outdoor recreation.

However, Johnson Outdoors' focus on cost-saving initiatives and strategic investments in e-commerce capabilities is crucial. As consumer shopping habits continue to evolve, companies that can effectively balance brick-and-mortar operations with a strong online presence will be better positioned for future growth. The company's debt-free status provides flexibility to navigate these challenging times and invest in necessary transformations.

RACINE, Wis., Aug. 05, 2024 (GLOBE NEWSWIRE) -- Johnson Outdoors Inc. (Nasdaq:JOUT), a leading global innovator of outdoor recreation equipment and technology, today announced operating results for the Company’s third fiscal quarter ending June 28, 2024.

“Challenging marketplace conditions, primarily due to lower consumer demand for outdoor recreation products and heavy promotional activity, have impacted our performance. As a result, we are evaluating all aspects of the business to improve our financial results and are working to redeploy resources to enable growth for the future. While we are expanding our cost savings actions to boost our margins and continuing to work on reducing inventory levels, we are committed to investing in revenue and profit-generating initiatives in innovation and digital and ecommerce capabilities to position Johnson Outdoors for long-term marketplace success. Our debt-free balance sheet and cash position continue to enable us to invest in strategic priorities to strengthen our brands and the business,” said Helen Johnson-Leipold, Chairman and Chief Executive Officer.

THIRD QUARTER RESULTS
Total Company net sales in the third quarter declined 8 percent to $172.5 million compared to $187.0 million in the prior year third fiscal quarter.

Total Company operating loss was $0.5 million for the third fiscal quarter versus operating profit of $17.4 million in the prior year third quarter. Gross margin was 35.8 percent, compared to 41.5 percent in the prior year quarter. The decline in gross margin between quarters was primarily due to unfavorable overhead absorption as a result of lower sales volumes between quarters and changes in the product mix toward lower margin products between quarters. Operating expenses of $62.3 million increased $2.2 million from the prior year period, due primarily to increased advertising and promotional spending, partially offset by the impact of lower sales volumes between quarters.

Profit before income taxes was $0.9 million in the current year quarter, compared to $19.8 million in the prior year third quarter. In addition to the decline in operating profit noted above, Other income also declined by approximately $1.0 million due primarily to less favorable market performance of the Company’s deferred compensation plan assets over the prior year quarter. Net income was $1.6 million, or $0.16 per diluted share, versus $14.8 million, or $1.44 per diluted share in the previous year’s third quarter.

YEAR-TO-DATE RESULTS
Fiscal 2024 year-to-date net sales were $487.0 million, a 14 percent decrease over last year’s fiscal nine-month period.  Total Company operating loss declined to $0.7 million compared to profit of $34.3 million in the prior fiscal year-to-date period. Gross margin decreased to 36.2 percent in the fiscal nine-month period versus 38.0 percent in the prior fiscal year-to-date period.  Operating expenses were $176.8 million in the nine-month period ending June 28, 2024, a decrease of $4.6 million from the nine-month period of the prior year due to lower sales volumes year over year, as well as lower incentive compensation and professional services expense, partially offset by increased advertising and promotional spending.

Profit before income taxes for the year-to-date period was $9.8 million versus $47.9 million in the prior year-to-date period.  In addition to the change in operating profit, Other income decreased by $3.5 million year over year.  The main drivers of the decrease were the gain of approximately $6.6 million related to the divestiture of the Military and Commercial Tents product lines in the Camping Segment in the prior year period, partially offset by a gain of approximately $1.9 million on the sale of a building in the current period.

Net income during the first fiscal nine months was $7.7 million, or $0.75 per diluted share, versus $35.5 million, or $3.47 per diluted share, in the prior fiscal year-to-date period.  The Company’s effective tax rate decreased to 21.2 percent in the current year versus 25.9 percent in the prior year nine-month period.

OTHER FINANCIAL INFORMATION
The Company reported cash and short-term investments of $148.4 million as of June 28, 2024. Depreciation and amortization were $14.8 million in the nine-month period ending June 28, 2024, compared to $11.8 million in the prior nine-month period. Capital spending totaled $16.4 million in the current year-to-date period compared with $19.4 million in the prior year period.  In May 2024, the Company’s Board of Directors approved a quarterly cash dividend to shareholders of record as of July 11, 2024, which was payable July 25, 2024.

“Profits remain impacted by lower sales volumes and our ongoing investment in promotional activity.  Additionally, while we’ve been improving our inventory levels, progress has been slowed by the decreased demand,” said David W. Johnson, Vice President and Chief Financial Officer. “As we execute against both short-term and long-term cost savings opportunities for the Company, we remain confident in our ability and plans to create long-term value and consistently pay dividends to shareholders.”

WEBCAST
The Company will host a conference call and audio web cast at 11:00 a.m. Eastern Time on Monday, August 5, 2024. A live listen-only web cast of the conference call may be accessed at Johnson Outdoors’ home page or here. A replay of the call will be available for 30 days on the Internet.

About Johnson Outdoors Inc.

JOHNSON OUTDOORS is a leading global innovator of outdoor recreation equipment and technologies that inspire more people to experience the awe of the great outdoors. The company designs, manufactures and markets a portfolio of winning, consumer-preferred brands across four categories: Watercraft Recreation, Fishing, Diving and Camping. Johnson Outdoors' iconic brands include: Old Town^® canoes and kayaks; Carlisle^® paddles; Minn Kota^® trolling motors, shallow water anchors and battery chargers; Cannon^® downriggers; Humminbird^® marine electronics and charts; SCUBAPRO^® dive equipment; Jetboil^® outdoor cooking systems; and, Eureka!^®camping and hiking equipment.  

Visit Johnson Outdoors at http://www.johnsonoutdoors.com

Safe Harbor Statement

Certain matters discussed in this press release are “forward-looking statements,” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical fact are considered forward-looking statements. These statements may be identified by the use of forward-looking words or phrases such as "anticipate,'' "believe,'' "confident," "could,'' "expect,'' "intend,'' "may,'' "planned,'' "potential,'' "should,'' "will,'' "would'' or the negative of those terms or other words of similar meaning. Such forward-looking statements are subject to certain risks and uncertainties, which could cause actual results or outcomes to differ materially from those currently anticipated. Factors that could affect actual results or outcomes include the matters described under the caption “Risk Factors” in Item 1A of the Company’s Form 10-K filed with the Securities and Exchange Commission on December 8, 2023, and the following: changes in economic conditions, consumer confidence levels and discretionary spending patterns in key markets; uncertainties stemming from political instability (and its impact on the economies in jurisdictions where the Company has operations), uncertainties stemming from changes in U.S. trade policies, tariffs, and the reaction of other countries to such changes; the global outbreaks of disease, such as the COVID-19 pandemic, which has affected, and may continue to affect, market and economic conditions, along with wide-ranging impacts on employees, customers and various aspects of our operations; the Company’s success in implementing its strategic plan, including its targeted sales growth platforms, innovation focus and its increasing digital presence; litigation costs related to actions of and disputes with third parties, including competitors; the Company’s continued success in its working capital management and cost-structure reductions; the Company’s success in integrating strategic acquisitions; the risk of future write-downs of goodwill or other long-lived assets; the ability of the Company’s customers to meet payment obligations; the impact of actions of the Company’s competitors with respect to product development or enhancement or the introduction of new products into the Company’s markets; movements in foreign currencies, interest rates or commodity costs; fluctuations in the prices of raw materials or the availability of raw materials or components used by the Company; any disruptions in the Company’s supply chain as a result of material fluctuations in the Company’s order volumes and requirements for raw materials and other components, or the demand for those same raw materials and components by third parties, necessary to manufacture and produce the Company’s products including related to shortages in procuring necessary raw materials and components to manufacture and produce such products; the success of the Company’s suppliers and customers and the impact of any consolidation in the industries of the Company’s suppliers and customers; the ability of the Company to deploy its capital successfully; unanticipated outcomes related to outsourcing certain manufacturing processes; unanticipated outcomes related to litigation matters; and adverse weather conditions. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this filing. The Company assumes no obligation, and disclaims any obligation, to update such forward-looking statements to reflect subsequent events or circumstances.

JOHNSON OUTDOORS INC.
(thousands, except per share amounts)
	THREE MONTHS ENDED						NINE MONTHS ENDED
Operating results	June 28, 2024			June 30, 2023			June 28, 2024			June 30, 2023
Net sales	$	172,472		$	187,047		$	486,972		$	567,499
Cost of sales		110,650			109,460			310,865			351,798
Gross profit		61,822			77,587			176,107			215,701
Operating expenses		62,328			60,144			176,820			181,396
Operating (loss) profit:		(506	)		17,443			(713	)		34,305
Interest income, net		(1,086	)		(1,205	)		(3,063	)		(2,692	)
Other income, net		(327	)		(1,174	)		(7,468	)		(10,939	)
Profit before income taxes		907			19,822			9,818			47,936
Income tax (benefit) expense		(715	)		5,021			2,085			12,395
Net income	$	1,622		$	14,801		$	7,733		$	35,541
Weighted average common shares outstanding - Dilutive		10,249			10,210			10,232			10,187
Net income per common share - Diluted	$	0.16		$	1.44		$	0.75		$	3.47
Segment Results
Net sales:
Fishing	$	130,537		$	137,460		$	379,637		$	430,842
Camping		10,927			11,658			27,360			36,996
Watercraft Recreation		11,070			15,726			25,611			38,274
Diving		19,861			22,227			54,263			61,594
Other / Eliminations		77			(24	)		101			(207	)
Total	$	172,472		$	187,047		$	486,972		$	567,499
Operating profit (loss):
Fishing	$	5,258		$	18,665		$	24,214		$	51,358
Camping		1,474			2,039			3,541			4,863
Watercraft Recreation		557			1,483			(2,007	)		1,637
Diving		898			2,733			22			4,190
Other / Eliminations		(8,693	)		(7,477	)		(26,483	)		(27,743	)
Total	$	(506	)	$	17,443		$	(713	)	$	34,305
Balance Sheet Information (End of Period)
Cash, cash equivalents and short-term investments							$	148,369		$	149,247
Accounts receivable, net								79,593			94,644
Inventories, net								223,160			235,069
Total current assets								461,005			485,305
Long-term investments								2,237			14,045
Total assets								679,825			705,484
Total current liabilities								99,293			106,670
Total liabilities								181,156			185,040
Shareholders’ equity								498,669			520,444

Johnson Outdoors Inc.
David Johnson		Patricia Penman
VP & Chief Financial Officer		VP – Marketing Services & Global Communications
262-631-6600		262-631-6600

FAQ

What were Johnson Outdoors' (JOUT) Q3 2024 financial results?

Johnson Outdoors reported Q3 2024 net sales of $172.5 million, down 8% year-over-year, with a net income of $1.6 million or $0.16 per diluted share.

How did Johnson Outdoors' (JOUT) gross margin change in Q3 2024?

Johnson Outdoors' gross margin decreased to 35.8% in Q3 2024 from 41.5% in the prior year quarter, primarily due to lower sales volumes and changes in product mix.

What is Johnson Outdoors' (JOUT) cash position as of June 28, 2024?

Johnson Outdoors reported cash and short-term investments of $148.4 million as of June 28, 2024.

How has Johnson Outdoors (JOUT) performed year-to-date in fiscal 2024?

Johnson Outdoors' year-to-date net sales for fiscal 2024 were $487.0 million, a 14% decrease compared to the same period in the previous fiscal year.