Johnson Outdoors Inc. (NASDAQ:JOUT) reported a significant earnings miss for the fiscal fourth quarter of 2024, with an actual EPS of -3.35 compared to the forecasted -0.68. Revenue also fell short, coming in at 105.87 million dollars against expectations of 120.54 million dollars. The disappointing results sent the company's stock down 2.5% in pre-market trading, reflecting investor concerns over the company's financial health and operational challenges.
Key Takeaways
- Johnson Outdoors missed EPS expectations by a wide margin.
- Revenue fell short of forecasts, contributing to a stock decline.
- Operating expenses increased, driven by non-cash goodwill impairment and other costs.
- The company maintained a debt-free balance sheet and continued dividend payments.
- Strategic focus remains on innovation and market competitiveness.
Company Performance
Johnson Outdoors faced a challenging fiscal year, with soft consumer demand impacting performance. Despite operational improvements and a debt-free balance sheet, the company's financial results were weaker than anticipated. This performance contrasts with some industry peers who managed to stabilize or grow amid market challenges.
Financial Highlights
- Revenue: 105.87 million dollars, below the forecast of 120.54 million dollars.
- Earnings per share: -3.35, missing the forecast of -0.68.
- Gross margin declined by 2.9 points year-over-year.
- Inventory reduced by 51.7 million dollars, indicating improved inventory management.
Earnings vs. Forecast
The actual EPS of -3.35 fell short of the forecasted -0.68 by a significant margin, a difference of -2.67. This substantial miss marks a departure from previous quarters and highlights ongoing financial difficulties.
Market Reaction
Following the earnings report, Johnson Outdoors' stock dropped 2.5%, moving closer to its 52-week low of 29.98. This decline reflects negative investor sentiment, driven by the earnings miss and operational cost increases.
Company Outlook
Looking ahead, Johnson Outdoors plans to continue investing in strategic priorities like innovation and digital engagement. The company remains committed to maintaining its competitive position in the market, despite current challenges.
Executive Commentary
CEO Helen Johnson Leopold emphasized, "We are committed to investing in the strategic priorities that will position our brands for long-term growth." CFO Dave Johnson noted the advantage of a debt-free balance sheet, stating, "Our balance sheet remains debt-free, which is a strong competitive advantage."
Q&A
During the earnings call, analysts inquired about the impact of promotional pricing, which reduced margins by approximately 2.5 points. The company confirmed unit volume and ASP growth in Q4 and discussed potential strategies to mitigate tariff impacts.
Risks and Challenges
- Supply chain disruptions could further impact operational efficiency.
- Market saturation in the outdoor recreation sector may limit growth opportunities.
- Macroeconomic pressures, such as potential tariff increases, pose additional risks.
- Maintaining innovation and competitiveness in a challenging market environment.
- Managing increased operating expenses amid declining margins.
Full transcript - Johnson Outdoors Inc (JOUT) Q4 2024:
Conference Operator, Johnson Outdoors: Hello, everyone, and welcome to the Johnson Outdoors 4th Quarter 2024 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 listen only mode. After the prepared remarks, the question and answer session will be beginning.
This call is being recorded. All participants implied consent to our recording of this call. If you do not agree to 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.
Penman.
Pat Penman, Investor Relations, Johnson Outdoors: Thank you. Good morning and thank you for joining us for our discussion of Johnson Outdoors results for the 2024 fiscal Q4. If you need a copy of today's news release, it is available on our website atjohnsonoutdoors.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.
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 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.
Helen Johnson Leopold, Chairman and Chief Executive Officer, Johnson Outdoors: Thanks, Beth. Good morning, everyone. Thank you for joining us. I'll begin by addressing our fiscal 2024 performance and then I'll share our plan to address future challenges. Dave will cover some key financials and then we'll take your questions.
I won't rehash the numbers in our Q4 year end earnings announcement. Obviously, it was a tough year. Continued challenging marketplace conditions and competitive pressures significantly impacted our fiscal 2024 performance. Consumer demand for outdoor recreation products across all of our businesses remains soft. While we're not seeing indicators that these challenging conditions are going away anytime soon, we have been aggressively leaning into our critical strategic priorities, innovation, our go to market strategy and operational efficiencies to enable future growth for our brands and businesses.
In this highly competitive outdoor recreation marketplace, our focus on strong innovation cannot be more critical. As a result, we are taking our innovation approach to the next level and investing in the critical elements, including key talent and technologies as well as strengthening our consumer centric innovation approach. Our focus remains on delivering the best outdoor experiences possible across all of our categories. The ever evolving digital landscape requires us to do things differently to engage and stay in front of our consumers. Our online presence provides key consumer touch points for our brands from product research to purchase to post purchase support.
We've been making investments in restructuring the way we go to market to enhance our capabilities and drive growth and we're confident this will be a meaningful contributor to accelerating our sales and profitability. Lastly, as I mentioned in previous quarters, improving profitability and strengthening our business operations continue to be important focus areas. We've worked hard to drive operational cost savings and redeployed resources against our strategic priorities. The cost savings efforts were masked by our results and we recognize there is more work to do. Fiscal 2024 is tough, but we've been through tough times before.
We are committed to investing in the strategic priorities that will position our brands for long term growth, while also working hard to improve our financial performance. We know we have a lot of work to do, but we're 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 financials.
Dave Johnson, Vice President and Chief Financial Officer, Johnson Outdoors: Thank you, Helen. Good morning, everyone. In the midst of our challenging results for fiscal 2024, I wanted to start by highlighting 3 important areas. First of all, our balance sheet remains debt free, which is a strong competitive advantage in today's marketplace and enables us to invest in mission critical strategic priorities Helen just discussed. 2nd, as I've mentioned previously on quarterly calls, we've been working hard to manage our higher than normal inventory levels.
Our inventory balance as of September was $209,800,000 down about $51,700,000 from last year's Q4. Through prudent inventory management, we were able to generate positive cash flow from operations in fiscal 2024. Lastly, we continue to pay a meaningful dividend to our shareholders with the Board approving our most recent dividend, which we announced on December 5. We remain confident in our ability and plan to create long term value for shareholders. Now let's get into some of the numbers from the quarter and fiscal year.
Gross margin in the 4th quarter was negatively impacted by increased promotional pricing, changes in product mix towards lower margin products and increased inventory reserves. For the fiscal year, gross margin declined by about 2.9 points. Our operational cost savings positively impacted gross margin by about 2 points, but did not offset the impact of unfavorable absorption of fixed overhead costs and unfavorable product mix. For the fiscal year, operating expenses increased $12,200,000 versus the prior fiscal year, due primarily to a non cash goodwill impairment charge of $11,200,000 a $2,500,000 increase in bad debt reserves, increased severance costs of $1,500,000 and $3,800,000 of higher deferred compensation expense as a result of marketing plan assets to market value. The increase was partially offset by lower incentive compensation and professional service expenses between the years.
Looking forward, we'll continue to strategically manage our cost structure while protecting investments to strengthen the business. Now, I'll turn the call over to the operator for the Q and A session. Operator?
Conference Operator, Johnson Outdoors: Thank you. Our first question comes from the line of Anthony Lebiedzinski from Sidoti. Your line is now open.
Anthony Lebiedzinski, Analyst, Sidoti: Good morning and thank you for taking the questions. So first, in the Q4, your sales were up in 3 out of the 4 segments. Can you talk about unit volumes versus ASP and what you see as far as inventory levels at the retail level?
Dave Johnson, Vice President and Chief Financial Officer, Johnson Outdoors: Yes. I mean, in terms of the Q4, we did see some a bit of lift in unit volume kind of across the board in the Q4, because last year's Q4 was obviously a challenging quarter.
Helen Johnson Leopold, Chairman and Chief Executive Officer, Johnson Outdoors: Overall,
Dave Johnson, Vice President and Chief Financial Officer, Johnson Outdoors: for the year, we're seeing growth from ASP as well as unit volume, it's both. And in terms of the retail inventory, it's really we're seeing a mixed bag right now. I mean, we're seeing pockets of inventory that's in good shape, but other retailers and trade, there's a little bit of increased inventory there. So and there's still a very cautious perspective from our trade partners.
Anthony Lebiedzinski, Analyst, Sidoti: Got you. Yes. Thanks, Dave. So as far as the gross margin that did come in lower than what we were expecting. Can you provide I don't know if there's any way you can quantify or maybe share more details.
I mean, you called out a few items, but just wanted to get more specifics as to how impactful some of these things were as far as promotional pricing, the mix shift to lower margin items, their inventory reserves. Is there any way you can provide more details about that?
Dave Johnson, Vice President and Chief Financial Officer, Johnson Outdoors: Sure. Yes. I mean, the promotional pricing, the decrease in pricing for the 4th quarter was about a 2.5. Roughly impact versus last year's Q4. So we were down 6 points for the quarter.
So the big chunk of that was just the reduced pricing and promotional pricing for the 4th quarter. Mix was comparable to that. So we just had a lower mix out there and that was most of the rest of the decrease and then inventory reserves were about a point.
Anthony Lebiedzinski, Analyst, Sidoti: That's very helpful. And then in terms of your strategy, so the focus on innovation has been certainly a key factor for Johnson Outdoors as long as I can remember. But can you talk about what if anything you're doing differently and maybe you could touch on the upcoming pipeline of new products?
Helen Johnson Leopold, Chairman and Chief Executive Officer, Johnson Outdoors: Well, we are taking a hard look at our approach to innovation. And we are putting more resources behind it in terms of types of research we do and actual dedicated people helping in that area. But a lot of it is about getting consumer insights and driving those through. We've got we feel good. We've got some good launches that are happening this year.
And it's not about quantity, it's really about quality. So we've got some launches in fishing that our Explore and our MegaLive II product, which are critical to this year for us for that business. We've got launches in watercraft entering the water rec category. We've got Jeff Oil. We've got, I would say, solid new product launches.
But the market gets competitive. It's we've got more competition and that's why we are relooking at our process to make sure that we're approaching it in a way that can make us better and increase the success of our launches.
Anthony Lebiedzinski, Analyst, Sidoti: Got you. Yes, thanks, Helen. So for you guys to execute this strategy, do you think you have the appropriate internal resources for that? Or do you think you need to make an acquisition to improve your capabilities to execute this strategy?
Helen Johnson Leopold, Chairman and Chief Executive Officer, Johnson Outdoors: Well, we're always looking to get better and we don't have a problem leveraging external resources as well as internal. I do think that we can and plan to win in the categories we have today and it's a matter of really understanding the consumer and the consumer has changed, which is I think, a great opportunity for us. But we are looking for the resources we need to do the job we have to do, but innovation is critical to us and it's always changing.
Anthony Lebiedzinski, Analyst, Sidoti: Understood. Okay. And then in terms of the operational efficiencies, can you share more details about the cost savings program? What's been the benefits from on recent results? And how should we think about the future cost savings opportunities?
Dave Johnson, Vice President and Chief Financial Officer, Johnson Outdoors: Yes. We had a very deliberate operational cost savings program we launched over a year ago and that bore fruit for us in fiscal 2024. We really focused on the factories, increasing our efficiencies, reducing our scrap rates, driving down cost of goods, the materials that come into the factory, logistics savings, those are the 4 big areas we really worked on. And it drove about 2 points of benefit on the gross margin for us for fiscal 2024. So we're pleased with that.
Unfortunately, it was masked by the results. We also did a job elimination
Conference Operator, Johnson Outdoors: in the 4th
Dave Johnson, Vice President and Chief Financial Officer, Johnson Outdoors: quarter, which will help us going forward on the operational expense side of things. And just back to the operational cost savings program, we expect to expand that. I mean, we want to keep working on opportunities with sourcing and driving down product costs. So we've got plans in place to continue that effort to expand that effort.
Anthony Lebiedzinski, Analyst, Sidoti: Got you. Okay. Yes. So as far as the severance cost that you guys cited in the press release, was that all in the 4th quarter?
Dave Johnson, Vice President and Chief Financial Officer, Johnson Outdoors: Yes. Most yes, it's basically on the Q4.
Anthony Lebiedzinski, Analyst, Sidoti: Okay. Got you. And I guess lastly for me, I mean, so obviously you guys are predominantly a manufacturer in the U. S. Here, but you guys do use a lot of imported components.
Just wanted to get a sense from you as far as what you think about the impact from potential tariffs coming next year?
Dave Johnson, Vice President and Chief Financial Officer, Johnson Outdoors: Yes. I mean, we've definitely got our ear to the ground on that and we've had discussions preliminary on ways that could mitigate what could happen. So obviously we've been through this before and we had some mitigation strategies before, but, yes, more to come on that.
Anthony Lebiedzinski, Analyst, Sidoti: Understood. Okay. All right. Well, thank you very much and best of luck.
Helen Johnson Leopold, Chairman and Chief Executive Officer, Johnson Outdoors: Thanks.
Conference Operator, Johnson Outdoors: 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.
Helen Johnson Leopold, Chairman and Chief Executive Officer, Johnson Outdoors: Just want to thank everybody for joining us today and I hope everyone has a happy holiday. Thank you.
Conference Operator, Johnson Outdoors: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
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