Black Diamond has narrowed its focus to put climbing at the center of everything it does as the brand looks to make a reset, said Brand President Neil Fiske during parent company Clarus Corporation’s investor day Monday.

“The brand had become way over-extended,” he said. “We were trying to do way too many things, go into too many categories with too much complexity. And it’s simply overwhelmed the organization.”

Black Diamond spent the last year narrowing down the sports it serves by removing 30% of its SKUs in the equipment category. It’s planning to take out another 20%, and “really focus on doing fewer things bigger and better,” Fiske said.

During the investor day presentation, Fiske spoke about market projections and how Black Diamond can double down on its brand strengths.

Simplifying the Black Diamond Business

In last week’s earnings report, parent company Clarus Corporation’s revenue totaled $76.5 million in the fourth quarter of 2023, up 3.6%. For full-year 2023, the company’s total revenue was $286 million, down 9.2% compared to last year.

Fiske pointed out that Black Diamond is coming off a year where it did about $204.1 million in sales, down 8% from the prior-year period, with EBITDA dragged down by the amount of clearance and cleanup in its inventory.

The top 5% of Black Diamond’s styles generate 50% of the brand’s revenue, and Fiske wants to funnel resources to those products.

Breaking that down further, the top 17% of Black Diamond’s styles generate 80% of its revenue.

“Do we need 69 different styles of gloves? Probably not,” Fiske said. “You’re going to see this business get really simple and really clear. That’s what drives growth. That’s what drives margin lift. That’s what drives inventory turn. That’s what drives long-term value creation.”

Black Diamond Brand President Neil Fiske. File photo by The Daily.

Fiske added that climbing is the history of the brand, its origin, and its bloodline. Climbing also links to other categories like ski mountaineering, backcountry skiing, snow training in the mountains, trail running, hiking, and trekking.

He also listed the “expansive opportunities” from the various types of climbing, including gym, sport, bouldering, trad, and ice.

“Climbing is core to the brand and connects all the way through the concentric circles of the sports that we serve,” he added. “Climbing is an enormously powerful growing opportunity for us, and it legitimizes everything else that we do.”

Whitespace Ahead for Outdoor Industry Growth

Fiske cited estimates for the size of the industry at $40 billion to $60 billion annually in the categories relevant to Black Diamond.

“This is an industry powered by long tailwinds with a tremendous amount of whitespace,” Fiske said.

The market for technical rock climbing is about a half a billion dollars, he added, and it grows when you add other climbing elements like gym climbing.

Fiske also pointed to estimates that the market for climbing will grow about 11.5% soon, with the overall outdoor market growing at about half that rate.

Regionally, North America, Europe, and APAC comprise about 85% of the whole outdoor market, and each hold about a third of that total, according to Fiske. Black Diamond’s business, on the other hand, is skewed toward North America with good penetration in Europe, leaving “tremendous opportunity in APAC,” he added.

Breaking down the global outdoor market by major category, Fiske said 55% of the market is apparel, about 25% is footwear, and about 20% is equipment.

“We have tremendous opportunity in apparel, we dominate in equipment, and we will be a very niche-focused player in footwear,” he added.

In the U.S., alongside approximately 10 million climbers across disciplines, Black Diamond views the approximately 4 million backcountry skiers as another core consumer group.

Along with those skiers and snowboarders who like to go off-piste, Fiske also sees another demographic of snowsports enthusiasts who want to look like they frequent the backcountry.

Positive Analyst Reaction to Black Diamond Plan

Anna Glaessgen, a financial analyst who covers Clarus Corporation for B. Riley Financial, said that the investor day inspired confidence in the likelihood of a successful turnaround of the business.

“Clear business optimization opportunities,” including rationalizing unprofitable Black Diamond SKUs and widening fit counts in the adventure segment, helped to justify projected sales and margin improvement, she wrote in her analyst’s note.

“Given the extended pathway to success in opportunities such as apparel (originally launched in 2013), we believe investors will likely hesitate to fully underwrite given projections (which came in well ahead of the Street),” Glaessgen wrote.

“That said, we believe early signs of successful execution could be met with outsized (positive) stock reaction, as the estimated likelihood of long-term targets improves.”

Fiske Focuses on Brand Strength

In both Europe and APAC, Black Diamond sees “enormous opportunities to grow,” Fiske said.

Globally by channel, wholesale makes up 75% of the brand’s sales, with DTC on the rise.

By category, mountain makes up about 40% of the business, which includes trekking poles, lighting, and backpacks. Fiske detailed the brand’s plans to keep innovating and releasing new trekking pole options.

Apparel is about 20% of the business, and ski equipment is about 10%. Footwear is about 5% of the business.

In the climbing category, Fiske pointed to Black Diamond’s strength in helmets, carabiners, harnesses, and other equipment, estimating that the brand has 40%-50% market share in those categories.

Fiske also mentioned several key positions that have been filled recently with people who left the company then returned, including Kasey Jarvis as creative director and Doug Heinrich as head of product.

“It’s an incredible ‘get’ for Black Diamond to have those guys back,” he said.

Looking Ahead

The company is projecting revenue of around $185 million for 2024, down slightly from 2023.

Fiske said he doesn’t like the term “shrinking to grow.”

“In fact, our strategy is just the opposite. It’s focused to grow,” he added. “We think we have tremendous opportunity to grow this business.”

Black Diamond expects to generate about $15 million in EBITDA this year. It operates 9,000 wholesale retail doors in 60 countries, with about 390 employees worldwide.

Fiske is betting that the focus on climbing will get Black Diamond back on the “top of the mountain.”

The brand is hoping for a breakout year for its new apparel line. Fiske again cited that 55% of the global market is apparel, and it makes up less than 20% for Black Diamond today.

“We believe that in the next three to four years, apparel should be a $100 million business for us, on the way to $150 million maybe $200 million, but at least $100 million within our 2027 time horizon,” he added.

To achieve that goal, the brand is adding more digital marketing, more athletes, and more expeditions to increase the apparel line’s exposure.

Beyond that, Fiske sees “more than enough opportunity” to sustain steady 8%-10% growth in the future.

He predicts Black Diamond will add at least 400 basis points of gross margin by 2026.

“Our goal is to be undisputedly the No. 1 climbing brand in the world,” Fiske said.