Johnson Outdoors Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 5, 2024

There are 5 speakers on the call.

Operator

Hello, everyone, and welcome to the Johnson Outdoors Third Quarter 20 24 Earnings Conference Call. Today's call will be led by Helen Johnson, Leopold Johnson Outdoor's Chairman and Chief Executive Officer. Also on the call is David Johnson, Vice President and Chief Financial Officer. Prior to the question and answer session, all participants will be placed in a listen only mode. After the prepared remarks, the question and answer session will begin.

Operator

This call is being recorded. Your participation implies consent to our recording this call. If you do not agree on these terms, simply drop off the line. I'd now like to turn the call over to Pat Penman from Johnson Outdoors. Please go ahead, Ms.

Operator

Penman.

Speaker 1

Thank you. Good morning and thank you for joining us for our discussion of Johnson Outdoors results for the 2024 fiscal 3rd quarter. If you need a copy of today's news release, it is available on our website at johnsonoutdoors.com under Investor Relations. I also need to remind you that this conference call may contain forward looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance.

Speaker 1

Actual events may differ materially from those statements due to a number of factors, many beyond Johnson Outdoors' control. These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission. If you have any additional questions following the call, please contact Dave Johnson or myself. It is now my pleasure to turn the call over to Helen Johnson Leopold.

Speaker 2

Thanks, Pat. Good morning, everyone, and thank you for joining us. I'll begin by addressing our results and giving perspective on the performance and then I'll share the outlook for the business, Dave will provide more detailed financial review and then we'll take your questions. Sales in our 3rd fiscal quarter ending June 2024 declined 8% to $172,500,000 compared to $187,000,000 in the prior year Q3. Year to date company sales decreased 14% over last year's fiscal 9 month period.

Speaker 2

The company reported an operating loss of approximately $500,000 for the Q3 compared to an operating profit of $17,400,000 in prior year Q3. For the year to date period, total company operating loss declined to approximately $700,000 compared to an operating profit of 34 point $3,000,000 for the prior year to date period. Net income for the 3rd quarter was $1,600,000 or $0.16 per diluted share versus $14,800,000 or $1.44 diluted share in the previous year's Q3. Net income during the fiscal 9 months period was $7,700,000 or $0.75 per diluted share versus $35,500,000 or $3.47 per diluted share in the prior fiscal year to date period. Continued tough marketplace conditions significantly impacted our results for the quarter.

Speaker 2

Consumer demand for outdoor recreation products remained depressed across all of our categories through the peak season. The down market and soft demand required us to significantly increase our investment in promotional activity. As we continue to operate in this challenging environment, we do believe the outdoor marketplace is resilient and attractive over the long term and that our brands will be well positioned once conditions start to even out. We've been evaluating all aspects of the business to improve our financial results as well as working to redeploy resources to enable growth for the future. Improving profitability and strengthening our business operations remains a critical focus area.

Speaker 2

We've been working hard to reduce inventory to more normal levels, although progress has been limited by the lower consumer demand. We are expanding our cost savings actions and evaluating our cost structure for additional efficiency opportunities. While we have seen some progress from these efforts, we have a lot more work to do to boost our margins and improve our financial performance. As we work to reduce costs and increase efficiency where possible, we will invest in mission critical initiatives to drive growth, including innovation, digital and e commerce capabilities. Innovation has always been key to our success and continues to be the imperative to winning in an outdoor recreation marketplace that has been changing at a rapid pace.

Speaker 2

Creating consumer focused products and technology that deliver the best outdoor experiences possible across all of our categories is a strategic priority and we are working on a pipeline of new products to drive success. Enhancing our digital and e commerce capability is one key priority as our online presence provides key consumer touch points for our brands from product research to purchase to post purchase support. Our investment in e commerce and digital sophistication is important to the future of all of our brands and businesses. We are confident this will be a meaningful contributor to accelerating our growth and profitability. While this fiscal year is challenging, we are working hard to improve our financial performance and are committed to investing in revenue generating initiatives that will position our brands for long term growth.

Speaker 2

We feel good about the long term opportunity of the business and we are confident that we'll see benefits from these investments in the future. Now I'll turn the call over to Jay for more details on the financials.

Speaker 3

Thank you, Helen. Good morning, everyone. I wanted to highlight a few items from the quarter. Profits in the Q3 were impacted by lower sales volumes, as well as ongoing investment in promotional activity. While we're gaining efficiency benefits and cost savings in our operations, this was offset by lower overhead absorption and product mix.

Speaker 3

Operating expenses increased 4% or $2,200,000 versus the prior year quarter, due primarily to increased advertising and promotional spending, partially offset by lower sales volumes between quarters. As Helen mentioned, we are expanding our cost savings efforts across all aspects of the business as it's critical that we improve our financial profile. We'll update you on our progress next quarter. We've been working hard to reduce our inventory back to more normal levels, although lower consumer demand has hindered progress. Our inventory balance as of June was $223,000,000 down about $12,000,000 from last year's June quarter and down $26,000,000 from March.

Speaker 3

We expect some inventory reductions to the balance of the fiscal year. Our balance sheet continues to have no debt and our cash position enabled us to invest in opportunities to strengthen the business. We remain confident in our ability to deliver long term value and consistently pay out cash dividends to our shareholders. Now, I'll turn the call over to the operator for the Q and A session. Operator?

Operator

Thank you. At this time, we'll conduct the question and answer session. Our first question comes from the line of Anthony of Sidoti. Your line is now open.

Speaker 4

So Dave, I know you touched on the lower sales volumes impacting the quarter. Can you also comment about pricing, whether that was a factor in the quarterly sales decline?

Speaker 3

In that not really, we've done some discounting in the marketplace. So price increases we've taken have been offset by the discounting we've done to shore up our position in the marketplace.

Speaker 4

Understood. Okay. And then what was the impact of increased advertising spending and promotional activity for operating expenses?

Speaker 3

Yes, I've got that number. It's for the quarter add in promo increased about $4,500,000 versus last year's quarter.

Speaker 4

Okay, got you. Okay, that's helpful. Okay. And then as far as inventory levels at retail, what is your sense of that as far as what's going on there? Are you seeing also just retailers being more careful with replenishments?

Speaker 4

How should we think about that?

Speaker 2

I think the retail inventory situation is getting better, but we still see our retailers being very conservative on the purchasing end of things and trying to maintain a pretty conservative level of inventory going forward.

Speaker 4

Understood. Okay. And then can you also just talk about a little bit more about the cost savings actions that you have taken so far? What was the impact of that in the June quarter? And what else are you planning to do in terms of cost efficiencies?

Speaker 3

Yes. I mean, the focus historically over this year has been on the factories and the operations and getting efficiencies out of that. That's borne some fruit for us. It's been good. It has helped offset some of the absorption issues we're seeing with the lower volume.

Speaker 3

So in that, it's been successful for us. We're going to look everywhere going forward and we're going to try to find more efficiencies and try to drive that margin even further kind of across the board, while we continue to invest in what's important for us.

Speaker 4

Okay. Thanks. That sounds good. And then I guess last question here for me. As you talked about investing in revenue and profit generating activities.

Speaker 4

I know you've always had a strong focus on innovation. It sounds like you do have some things in the pipeline as far as new products. Can you give us any sense of that as to like what I know for competitive reasons, I'm sure you don't want to discuss too many details, but can you just kind of talk about like maybe as far as the magnitude of new product introductions, is that greater than what you've seen recently or maybe other things that you're looking to do to drive the top line to be in better shape in fiscal 2025?

Speaker 2

We don't give details obviously on the future related to new products. But the whole area of innovation has been a key focus and is really our lever to differentiate ourselves. I think the market has changed. It's positive, I think, because

Operator

the

Speaker 2

consumer has got some different needs and different motivations, which opens up the door for innovation. So all I can say is that's been our key to leadership in the past and it's going to be our key going forward. And we feel good about the long term and feel good about our ability to understand the consumer and to be there with the right new products.

Speaker 4

Got you. Okay. Well, thank you very much and best of luck.

Speaker 2

Okay. Thank you.

Operator

Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Helen Johnson Leopold for closing remarks.

Speaker 2

Thank you for joining us today. I hope everybody has a great rest of the day. Thank you.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Powered by Quartr
Earnings Conference Call
Johnson Outdoors Q3 2024
00:00 / 00:00