Johnson Outdoors Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 2, 2025

There are 5 speakers on the call.

Operator

Hello, everyone, and welcome to the Johnson Outdoors Second Quarter twenty twenty five Earnings Conference Call. Today's call will be led by Helen Johnson Leopold, Johnson Outdoors' 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 to these terms, simply drop off the line. I would 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 twenty twenty five fiscal second 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 questions following the call, please contact Dave Johnson or myself. It is now my pleasure to turn

Speaker 2

the call over to Helen Johnson Leopold. Good morning, everyone. Thank you for joining us. I'll begin by sharing perspective on our second quarter performance as well as an update on the strategic priorities for our businesses. Dave will review the financial highlights, and then we'll take your questions.

Speaker 2

Our second quarter results reflect continued market challenges and a cautious retail and trade environment. Despite these results, there are pockets of good news with inroads we are making on our strategic priorities and the necessary changes we have been making for future growth. We saw positive results from new products in our fishing and camping businesses, highlighting the critical importance of our ongoing investment in innovation. In Fishing, our Humminbird brand launched new technology in the first quarter, Megalive two and Explore. In our second quarter, we started shipping those products and demand has been exceeding expectations.

Speaker 2

We are excited about this momentum as we continue to work hard to give anglers the best fishing experiences possible. That includes tournament fishing experiences. We're thrilled that Easton, Father Gil, Minn Kota and Hummingbird sponsored Pro Bass Angler using our equipment with the champion of this year's prestigious Bassmaster Classic tournament. In our Camping and Watercraft business, our Jetboil brand launched the next level of fastboil systems with features building on the lightning fastboil times and fuel efficiencies that the brand is known for. There is enthusiasm among both retailers and consumers for these new products, and orders are outpacing expectations.

Speaker 2

Our Old brand continues to be a strong leader in a very depressed market. During the second quarter, Old Town launched five new watercraft additions. This significant launch, which extends our popular Sportsman line as well as gets us into new recreational categories, was our ocean line. These new additions are equipped with pedal or electric propulsion aimed at giving the best experience as possible on the water for recreational enthusiasts and avid anglers. And I'm excited to share another win from this year's Bassmaster Classic, Old Town sponsored kayak angler Wyatt Hammon won the tournament using a Sportsman Autopilot kayak equipped with both the Minkoto motor and Hummingbird Megalive technology.

Speaker 2

Our diving business continues to face challenging marketplace, very impacted by global economic uncertainties and consumer travel, and we continue to look for ways to drive more operational efficiencies in that business. As I shared last quarter, we have purchased a company that has been a longtime supplier for our ScubaPro brand and is both the catalyst for future ScubaPro innovation and a vertical integration that gives us more efficiency and allows us to accelerate our efforts in simplifying this business. Finally, regarding tariffs. They will impact our business despite the fact that we are an American company with U. S.

Speaker 2

Based manufacturing and operations. Although the current environment remains dynamic, we are focused on multiple strategies to mitigate the potential impact on our business. That includes adjusting our supply chain strategy, looking for operational efficiencies and considering potential adjustments to our pricing strategy. We are also prioritizing our efforts to focus on products that have the most value for our consumers. While tariff situation continues to evolve and while we get more clarity, we will identify additional solutions that address the changing environment.

Speaker 2

As we navigate current and future challenges, our debt free balance sheet and cash position will help us remain resilient, and we will continue to invest and execute on our strategic priorities, innovation, operational efficiency and e commerce. We are confident these are the right things profitable growth. Now I'll turn the call over to Dave for more details on the financials.

Speaker 3

Thank you, Hal, and good morning, everyone. Gross margin in the second quarter was 35%, up slightly from last year's quarter. Our cost savings efforts have helped shore up our gross margin despite continued pricing discounting in the marketplace. Operating expenses decreased $7,700,000 versus the prior year second quarter. And excluding the $3,400,000 decrease from the deferred compensation plan valuation, expenses are down $4,300,000 Lower volume related expenses and decreased promotion expenses contributed to that decline.

Speaker 3

Inventory levels continue to show good progress. Our inventory balance as of March was $180,000,000 down about $69,000,000 from last year's second quarter and was down from our fiscal year end. We'll remain diligent in managing our inventories given the uncertain macro environment. Our cost savings program remains critical in this environment, and we're committed to driving optimal product costs and enhancing operating efficiency across the company. Finally, want to reiterate what Helen said.

Speaker 3

Our balance sheet remains debt free, we have a solid cash position, both of which provide a competitive advantage in uncertain times. We remain confident in our ability and plans to create long term value for shareholders. Now I'll turn the call over to the operator for the Q and A session.

Operator

Thank you. And our first question comes from Anthony Lebiedzinski of Sidoti. Your line is open.

Speaker 4

Thank you, and good morning, everyone. And yes, thanks for taking the questions. It's really great to see the progress with the inventory reductions and great to hear also about the success of the new products. So I guess, first, how does the pipeline look like for new products without you guys sharing too much of the secret sauce? But just wondering how do we think about the new product introductions in the upcoming quarters?

Speaker 2

Well, we launched for this season, and we have launched the new products for both fishing and camping. And so far, they're beating expectations. So we feel good about that. Watercraft has also launched a significant line of new products, which we are hoping to see those results be positive as well. So we keep pushing on innovation, and that's one of our strategic priorities.

Speaker 2

Right now, we're working on the longer term innovation that will hopefully continue into next year's hope. We've always said innovation breaks through a tough market. So that's always a priority for us.

Speaker 4

Understood. Okay, thank you. So given what's happening here in the world as far as just dealing with tariffs and consumer confidence kind of where it is, just understanding that you guys have a seasonal business. But just wondering if you guys could talk about the trends during the quarter, whether there was big changes from January to March. And like maybe if you look at it on a year over year basis, know for the quarter, your sales were down about what, 4%.

Speaker 4

But did you just I'm wondering if there was significant changes, variability on a year over year basis as you progress through the quarter given what's happening

Speaker 2

Dave, can pipe in too. But I would say it's been pretty consistent of a a tough environment, and it's both from the consumer sentiment and from the retailer hesitation. Can you hear me, Anthony? Yes. I'm trying

Speaker 4

I can hear you. Hello?

Operator

Again, please remain on the line. Your conference will resume shortly.

Speaker 4

Can anybody hear me?

Operator

Yes. They're going to reconnect.

Speaker 4

Okay.

Operator

Please stand by.

Speaker 4

Thank you.

Operator

And I see that you've rejoined.

Speaker 1

Hello? Yep. We're here. You may proceed.

Speaker 2

Sorry, Anthony. I think we had a little technical problem. But your question was on trends this year versus what we've seen versus last year. All I can say, it's still from a market standpoint, it's tough. But we do have new products that we are launching that we didn't have last year.

Speaker 2

So again, we're hoping that those will deliver some positive results during the rest of the season.

Speaker 4

Understood. Okay, yeah. Thanks, Helen. Okay, and then just wondering, so since the new tariffs were announced on April 2, obviously, there's been some back and forth, some changes. Just wondering if you've seen any notable change since then in terms of your ordering patterns from retailers.

Speaker 4

What's been the response? Curious to get your at least high level thoughts on that.

Speaker 3

Yeah. I mean, it's still early for us in terms of retailer reaction, I would say. I mean, we came in with the quarter with a good plan in place. And I think the reaction will be the rest of the year. So we haven't seen initially a big pullback from retailers.

Speaker 3

But as Helen alluded to, I think the marketplace is going to be challenged for the balance of the season.

Speaker 4

Thanks, Dave. And then so just thinking about the impact of tariffs, just maybe first, if you could address how much you guys have exposure to China, which is getting hit the hardest in terms of the tariff rates. And then, to just how do we think about the response from you whether I know you guys talked about potential pricing actions. So sounds like those have not yet been implemented. But just maybe walk us through your China and other countries' exposure, just rough estimates.

Speaker 4

And then how do you respond to that? And, you know, just would love to hear your thoughts on that.

Speaker 3

Sure. I mean, as you know, we we manufacture and assemble almost all of our products in The United States Mhmm. Which is great. I mean, I would it's it's we're very proud of that. But we do import, a fair amount of product from China, electronic components and other raw materials from China and Southeast Asia.

Speaker 3

So we do have exposure. I mean, real. It's there. So we are now working. We've been working a few months on mitigation strategies, and we talked about that already.

Speaker 3

So, you know, everything's on the table for us. We're looking at supply chain, you know, getting more efficiencies, pricing where it makes sense. You know, everything's on the table for us to mitigate it, and we're very, very focused on that.

Speaker 4

Thanks, Dave. Okay. And then just following up as far as the quarter that you reported. So part of the gross margin puts and takes were the I guess, on the negative side of discounting, on the positive side of the cost savings program. So can you provide any more details as to how much you suffer from those things?

Speaker 4

You know, the just just wanted to understand the magnitude of that as especially this cost savings program and whether, you know, there's still more to be realized from the cost savings, as we look towards, you know, the key summer months here?

Speaker 3

Yeah. I think I said before that we were looking at cost savings between one and two points benefit for us as we as we came into this year. And that's consistent with the quarter. Okay. So and that helped offset some some discounting that we we did in in the quarter kind of across the board there.

Speaker 3

So that's kind of the magnitude we're looking at. And then importantly, we're looking at expanding that cost savings. So that's it's a critical piece of what we're trying to do going forward.

Speaker 4

Mhmm. Gotcha. Okay. So so do you think it could be more than that one to two points of gross margin when when you're done with this cost savings program?

Speaker 3

Well, the savings program is gonna it's it's a medium term and longer term, you know, program. So I I can't give you any guidance more than what I've already said. But, yeah, we we hope to get more.

Speaker 4

Understood. Okay. Okay. And and then lastly for me, you know, it looks like the the the tax rate in the quarter was unusually high. Can you comment on what happened there, and, what is your outlook for the fiscal year?

Speaker 3

Yeah. I mean, there's a couple of things happening. One is, you know, we've got income and expense in different jurisdictions. And with when you you kinda get down to a smaller number, the the rate kinda looks wonky. But we also had an accrual from some tax audits in Europe that we we took in the quarter that affected that quarterly tax rate.

Speaker 3

So that's kind of a one time one off thing. You know? It's given what's happening with with everything in the macro environment, I you know, I even hesitate to tell you what's what the full year is gonna look like. But, you know, we're we'll be managing pretty carefully.

Speaker 4

Understood. Okay. Well, thank you very much, and best of luck dealing with the crazy world here.

Speaker 3

Thanks, Anthony.

Speaker 2

Thank you.

Operator

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

Speaker 2

Thank you for joining us today, and I hope everyone has a very good day. Thank you.

Operator

This concludes today's conference call. Thank you for participating, and you may now disconnect.

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Earnings Conference Call
Johnson Outdoors Q2 2025
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