Black Diamond Equipment reported an increase in direct-to-consumer e-commerce sales for the second quarter ended June 30. However, macroeconomic factors weighed on the brand and sales fell 24% from the prior-year quarter as the company deals with what it calls a “tough destocking environment.”
Parent company Clarus Corporation’s outdoor segment was negatively impacted by softer consumer demand due to inflation and continued lower open-to-buys as the company’s retail partners rightsized their inventory, according to Warren Kanders, the company’s executive chairman.
“Somewhat offsetting this weakness was a 28% increase in our direct-to-consumer channels, which we believe shows the strength of the Black Diamond brand despite the broader retail environment,” he added.
Clarus does not break out revenue for Salt Lake City-based Black Diamond.
Sales in Clarus’ outdoor segment were down 22.8% to $40.6 million on a constant-currency basis for the quarter.
The company attributed the decrease to declines in the North American and European sales regions, partially offset by strength in the direct-to-consumer channels.
Kanders said the decline in the outdoor segments has reached a low point and he expects to see an improvement in the future.
“We believe that we have reached the trough in our outdoor and adventure segments,” he added in a conference call with investors on Monday. “The quick actions we have taken to rightsize those segments should set us up for more profitable growth in future periods.”
Aaron J. Kuehne, executive vice president and chief operating officer for Clarus, said on the call that their retail partners are “acting conservatively in terms of building back inventory, specifically with weeks of inventory on hand.”
However, purchasing habits are starting to become more normal in the third quarter, according to Kuehne.
“But we do expect it will take until year-end before the market approaches equilibrium,” he added. “Looking ahead for the year, our top priority in outdoor remains seeking to bring supply and demand into better alignment across our regions and channels while reducing our outdoor inventory levels by 15% by the end of this year compared to the end of 2022.”
Clarus Corp. Q2 Financial Results
Overall, Clarus reported sales for the quarter dropped 27% to $83.7 million.
“Our second quarter results were impacted by the continued challenging macroeconomic environment and related headwinds,” said Kanders. “Specifically, a more promotional retail environment and inventory de-stocking headwinds impacted our sales velocity and our ability to protect margins.”
Gross margin was 36.7%, with a net loss of $2.1 million compared to net income of $3.8 million in the prior year’s quarter.
Despite these challenging market conditions, each segment generated positive free cash flow during the second quarter, Kanders added.
The company now expects fiscal year 2023 sales of $385 million to $400 million and adjusted EBITDA of $42 million to $50 million. That’s down from the expected sales of $420 million for the year that the company had projected in May.
In addition, capital expenditures are now expected to range between $6.5 million and $7.5 million and free cash flow is now expected to range between $30 million and $35 million for the full year 2023.