Johnson Outdoors Inc. (NASDAQ:JOUT) Q2 2024 Earnings Call Transcript May 3, 2024
Johnson Outdoors Inc. misses on earnings expectations. Reported EPS is $0.21 EPS, expectations were $0.5. Johnson Outdoors Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello, and welcome to the Johnson Outdoors Second Quarter 2024 Earnings Conference Call. Today’s call will be led by Helen Johnson-Leipold, Johnson Outdoors’ Chairman and Chief Executive Officer. Also on the call is David Johnson, Vice President and Chief Financial Officer. [Operator Instructions] 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. Penman.
Pat Penman: Thank you. Good morning, and thank you for joining us for our discussion of Johnson Outdoors’ results for the 2024 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 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 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 on the performance, and then I’ll share the outlook for the business. Dave will provide more detailed financial review, and then we will take your questions. Sales in our second fiscal quarter ending March 2024 declined 15% to $175.9 million compared to $202.1 million in the prior year second quarter. Year-to-date, company sales decreased 17% over last year’s fiscal 6-month period. The company reported an operating loss of $250,000 for the second quarter compared to an operating profit of $11.4 million in the prior year second quarter. For the year-to-date period, total company operating loss declined to $200,000 compared to an operating profit of $16.9 million for the prior year-to-date period.
Net income for the second quarter was $2.2 million or $0.21 per diluted share versus $14.9 million or $1.45 per diluted share in the previous year’s second quarter. Net income during the first fiscal six months was $6.1 million or $0.59 per diluted share versus $20.7 million or $2.02 per diluted share in prior fiscal year-to-date period. Continued tough marketplace conditions significantly impacted our second quarter results. While inventory levels at retail are starting to improve, we have been facing increased competitive activity across our categories requiring additional promotion and pricing actions. At the same time, economic uncertainty continues to impact consumer buying behavior, we expect these challenges to continue in the season ahead.
In the midst of this tough environment, we are prioritizing critical investments in our businesses to navigate challenges in the short term and position us for marketplace success in the long term. We have strong brands that are leaders in our categories. We believe in the potential of these categories, and we are looking for opportunities to accelerate growth. Innovation is and always has been key to our success in the marketplace and it remains a strategic priority to create consumer-focused products and technology that delivers the best outdoor experience as possible. We are investing in marketing and promotions and supporting our new product launches like the new Minn Kota Quest Trolling Motor line, which is seeing positive response from the trade.
Strengthening our business operations and improving profitability are also critical focus. We put cost savings program in place, and we are evaluating our cost structure for additional efficiency opportunities. We have been working hard to reduce inventory to more normal levels. We have a lot more work to do, but we are starting to see progress from these efforts. This is a tough time, and we are not satisfied with where we are, but we are taking actions to improve our position in the market, and we will continue to invest in the long-term profitable growth of our brands. Now I’ll turn the call over to Dave for more details on financing.
David Johnson: Thank you, Helen, and good morning, everyone. I want to highlight few items from the quarter. Profits in the second quarter were impacted by reduced overhead absorption from lower volume as well as increases in promotional activity and pricing actions. We continue to take steps to improve our operating margins with an active cost savings program. We are gaining efficiency benefits in our factories and have driven reductions in our logistics costs. We will expand our efforts to reduce our cost and expense structure. Operating expenses decreased 4% or $2.3 million versus the prior year quarter due primarily to lower sales volumes between quarters, lower incentive compensation and professional services expense and was partially offset by increased promotional spending.
As Helen mentioned, we’ve been working hard to reduce our inventory back to more normal levels. Our inventory balance as of March was $249.2 million, up about $12.5 million from last year’s March quarter, but down $18.1 million from December. We expect additional inventory reductions throughout 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 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.
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