Johnson Outdoors Inc. (ticker: NASDAQ:JOUT), a leading provider of outdoor recreation products, reported a decline in sales and operating profit for the third fiscal quarter ending June 2024. The company's sales decreased by 8% to $172.5 million compared to the same period last year, with a reported operating loss of approximately $500,000.
This contrasts starkly with the operating profit of $17.4 million reported in the prior year's third quarter. Net income also fell to $1.6 million, or $0.16 per diluted share, from $14.8 million, or $1.47 per diluted share, in the third quarter of the previous fiscal year.
Key Takeaways
- Johnson Outdoors announced an 8% decline in sales to $172.5 million for the third fiscal quarter of 2024.
- The company experienced an operating loss of about $500,000, compared to an operating profit of $17.4 million in the same quarter last year.
- Net income for the quarter was $1.6 million, or $0.16 per diluted share.
- Year-to-date sales dropped 14%, and the company's operating loss for the nine-month period was approximately $700,000.
- Tough market conditions and decreased consumer demand for outdoor recreation products were significant factors in the downturn.
- Johnson Outdoors increased promotional activity and advertising to address the challenging environment.
Company Outlook
- Despite current challenges, Johnson Outdoors views the outdoor recreation marketplace as resilient and attractive over the long term.
- The company is focused on improving profitability and strengthening business operations.
- Efforts are being made to reduce inventory to more normal levels and to expand cost savings actions.
Bearish Highlights
- The company reported year-to-date sales decreased 14% over last year's fiscal nine-month period.
- Operating expenses increased by 4%, or $2.2 million, primarily due to increased advertising and promotional spending.
Bullish Highlights
- Johnson Outdoors is confident in the long-term opportunity of the business and is committed to investing in revenue and profit-generating initiatives.
- The company is focused on innovation and enhancing digital and e-commerce capabilities to drive future growth.
Misses
- Sales volume and consumer demand did not meet expectations, leading to an operating loss and a decrease in net income.
- The company's efforts to reduce inventory have been hampered by lower consumer demand.
Q&A Highlights
- The company has taken some price increases but has also offered discounts to maintain market position.
- Advertising and promotional spending increased by about $4.5 million compared to the previous year's quarter.
- Retailers are maintaining conservative inventory levels, which affects Johnson Outdoors' sales.
- Cost savings actions are primarily focused on factory and operational efficiencies, with a plan to find further efficiencies across the board.
Johnson Outdoors continues to navigate a challenging fiscal year with a strategic focus on innovation, cost savings, and efficiency improvements to position itself for future growth. Despite the downturn in sales and profitability, the company remains committed to its long-term strategy and is actively investing in areas that will contribute to its success in the evolving outdoor recreation market.
InvestingPro Insights
Johnson Outdoors Inc. (JOUT) has shown resilience in its financial strategy, even amidst a challenging quarter. Here are some key insights based on recent data and InvestingPro Tips:
- The company boasts a strong financial position, holding more cash than debt on its balance sheet, which suggests a stable foundation for weathering current market headwinds. This is particularly noteworthy as it aligns with the company's focus on strengthening business operations.
- A commendable track record of dividend reliability is evident, with Johnson Outdoors having raised its dividend for 11 consecutive years. This consistent return to shareholders underscores the company's confidence in its long-term business outlook and its commitment to shareholder value, even as it navigates short-term challenges.
InvestingPro Data highlights include:
- Market Cap (Adjusted): Johnson Outdoors stands at a market capitalization of $368.26 million, reflecting its size and scale within the outdoor recreation products industry.
- P/E Ratio: The company's price-to-earnings ratio is currently high at 84.83, suggesting that investors have high expectations for future earnings growth despite recent performance.
- Dividend Yield: As of the latest data, the company's dividend yield is 3.65%, which is attractive to income-focused investors and indicates a solid payout amid the industry's fluctuations.
For investors seeking to delve deeper into Johnson Outdoors' financials and strategic outlook, InvestingPro provides additional tips and metrics. Currently, there are 9 more InvestingPro Tips available for JOUT, offering a comprehensive analysis that can be accessed at https://www.investing.com/pro/JOUT.
Full transcript - Johnson Outdoors (JOUT) Q3 2024:
Operator: Hello, everyone, and welcome to the Johnson Outdoors Third Quarter 2024 Earnings Conference Call. Today's call will be led by Helen Johnson-Leipold, Johnson Outdoor 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 Instructions] 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 would now like to turn the call over to Pat Penman from Johnson Outdoors. Please go ahead, Ms. Penman.
Patricia Penman: Thank you. Good morning, and thank you for joining us for our discussion of Johnson Outdoors' results for the 2024 fiscal third 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 guaranteed -- guarantees of future performance. 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-Leipold.
Helen Johnson-Leipold: Thanks, Pat. Good morning, everyone, and thank you for joining us. I'll begin by addressing our results and giving perspective of our performance, and then I'll share the outlook for the business. Dave will provide a more detailed financial review, and then we'll take your questions. Sales in our third fiscal quarter ending June 2024 declined 8% to $172.5 million compared to $187 million in the prior year third quarter. Year-to-date company sales decreased 14% over last year's fiscal nine month period. The company reported an operating loss of approximately $500,000 for the third quarter compared to an operating profit of $17.4 million in prior year third quarter. For the year-to-date period, total company operating loss declined to approximately $700,000 compared to an operating profit of $34.3 million for the prior year-to-date period. Net income for the third quarter was $1.6 million or $0.16 per diluted share versus $14.8 million or $1.47 per diluted share in the previous year's third quarter. Net income during the fiscal nine month period 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. Continued tough marketplace conditions significantly impacted our results for the quarter. Consumer demand for outdoor recreation products remain 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 recreation 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. 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. Creating consumer-focused products and technology that deliver the best outdoor experience as possible across all of our categories as 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 in profitability. While this fiscal year is challenging, we are working hard to improve our financial performance and are committed to investing in revenue and profit-generating initiatives that will position our brands for long-term growth. 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 Dave for more details on the financials.
David Johnson: Thank you, Helen. Good morning, everyone. I wanted to highlight a few items from the quarter. Profits in the third quarter 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. Operating expenses increased 4% or $2.2 million versus the prior year quarter due primarily to increased advertising and promotional spending, partially offset by lower sales volume 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 million, down about $12 million from last year's June quarter and down $26 million from March. We expect some inventory reductions through the balance of the fiscal year. Our balance sheet continues to have no debt and our cash position enables us to invest in opportunities to strengthen the business. We remain confident in our ability to deliver with 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&A session. Operator?
Operator: Thank you. At this time we will conduct the question-and-answer session. [Operator Instructions] Our first question comes from the line of Anthony of Sidoti. Your line is now open.
Anthony Lebiedzinski: Good morning, and thank you for taking the questions. 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?
David Johnson: In that, not really, we've done some discounting in the marketplace. So if price increases, we've taken have been offset by the discounting we've done to shore up our position in the marketplace.
Anthony Lebiedzinski: Understood. Okay. And then what was the impact of increased advertising spending and promotional activity for operating expenses?
David Johnson: Yes, I've got that number. It's -- for the quarter, ad and promo increased about $4.5 million versus last year's quarter.
Anthony Lebiedzinski: Okay. Got you. Okay. That's helpful, okay. 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? How should we think about that?
Helen Johnson-Leipold: 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.
Anthony Lebiedzinski: 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?
David Johnson: 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 help offset some of the absorption issues we're seeing with the lower volume. 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.
Anthony Lebiedzinski: Okay. Thanks. That sounds good. And then I guess last question here for me is, you talked about the investing in revenue and profit-generating activities. 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.
Helen Johnson-Leipold: 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 the consumer is -- 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.
Anthony Lebiedzinski: Got you. Okay. Well, thank you very much and best of luck.
Helen Johnson-Leipold: Okay. Thank you.
Operator: Thank you. I'm showing no further questions at this time. I would now like to turn it back to Helen Johnson-Leipold for closing remarks.
Helen Johnson-Leipold: 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.
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