Black Diamond Equipment President Neil Fiske thinks retailers will need another six months to work through the extra inventory that has plagued the outdoor industry for the past year or more.
Fiske made the comments during Black Diamond parent company Clarus Corp.’s earnings call last week.
“We see the market continuing to stabilize, with inventory coming more back in line with demand,” Fiske said. “But having said that, I don’t think we’re there yet. We’ve still got another good six months before retailers are at the inventory levels they want and with the right composition of inventory thereafter.”
In Clarus’ outdoor segment, which is mostly comprised of Black Diamond, revenue fell 10% in the second quarter to $36.2 million.
In North America, outdoor wholesale revenue fell 4.7% with less promotional activity compared to the same period last year. For the first half of the year, wholesale revenue grew 1%, boosted partially by the rebuilding of the sales team in North America, Fiske said.
North America DTC fell 15.7% in the second quarter due in part to fewer promotions to drive sales. Digital sales accounted for 20.5% of the region’s revenue in the quarter, while Black Diamond stores accounted for 4.4%
In Europe, wholesale sales improved sequentially with a 5% decline compared to a 17% drop in the first quarter of this year. DTC in Europe grew 7.4% during the quarter.
Revenue from Black Diamond’s international distributor markets fell 7.8%, which was an improvement from the 44% decline in Q1 of this year.
“However, we believe 2024 will continue to be an inventory reset year for most of our distributor markets,” Fiske said. “…Our regions are at varying stages of recovery, but signals point to them all heading in the right direction.”
Anna Glaessgen, a stock analyst with B. Riley Securities, indicated in a note to investors that the outdoor segment came in softer than expected.
“Overall while we’re pleased to see a more disciplined approach to (promotions), we had expected stronger sequential improvement in (sales) trend,” Glaessgen wrote.
Focused on Simplification
Black Diamond continues to focus on its main strategies to turn around the business.
“Actions in Q2 represented our key themes for 2024: simplifying the business to solidify our core, improving profitability and laying the foundation for long-term sustainable growth,” Fiske said.
Clarus Corp. CFO Michael Yates touted the 1% growth in wholesale revenue in the first half of the year as evidence of Black Diamond moving in the right direction.
“We view this as evidence that our strategy of leaning into our best categories with our best customers is working,” he said on the call.
Clarus Corp. Q2 Results
Revenue of $56.5 million fell short of company guidance of $58 million to $62 million.
This shortfall was primarily driven by softness in the European wholesale and North American direct-to-consumer markets in Outdoor, the company said. That was offset by a year-over-year increase in Adventure segment sales, specifically the OEM channel.
Sales in the Adventure segment increased 13.6% to $20.3 million.
Companywide gross margin was 36.1% compared to 39% during the same period last year.
Loss from continuing operations totaled $5.5 million, or 14 cents per diluted share, compared to loss from continuing operations of $4.3 million, or 12 cents per diluted share in the same period last year.
For the full year, the company reaffirmed its revenue guidance of $270 million to $280 million. It lowered its adjusted EBITDA guidance, however, due to increased investment in the Adventure segment to scale the business including new team members, additional marketing, and technology investments.
