Vista Outdoor, which owns three dozen outdoor and sporting goods brands including Fox, Bell, Giro, and CamelBak, reported a net loss of $294 million for the fourth quarter ending March 31 after taking an impairment charge of $374 million.
Net sales declined 8% during the quarter.
In an earnings call with investors, Gary McArthur, interim CEO of Vista Outdoor, spoke of the economic headwinds the company faced in fiscal 2023, including increasing inflation, decreasing consumer demand, and increasing federal interest rates as some of the causes for the impairment charge.
Together, those factors caused reduced forecasts and increased discounts to move product, according to McArthur.
“Long-term, we remain bullish on the outdoor recreation and shooting sports markets,” he said.
“Participation remains above pre-pandemic levels, a trend we see continuing, and our broad and diverse positioning in the marketplace will enable us to capitalize on tailwinds across our categories.”
Challenges in Outdoor Market, Company Layoffs
McArthur said the outdoor products segment faced a “very challenging market” in the second half of fiscal year 2023 and he expects that to continue through the first half of fiscal 2024.
In April, Vista Outdoor announced a more than $50 million cost savings plan, which included office closures, spending cuts, and layoffs across its brand and corporate teams.
“These tactical and strategic actions position us to achieve meaningful margin improvement as we head into fiscal year 2024,” McArthur said.
Vista Outdoor is also preparing to spin off its outdoor products and sporting products segments into two independent, publicly traded companies this year.
“We continue to believe our spin-off of the outdoor product segments is the best way to unlock shareholder value,” McArthur said.
“Upon completion of the spin-off there will be two independent publicly traded companies, each of which will be among the largest publicly traded companies in the outdoor space.”
The actions “bolster our already solid financial position and ensure a compelling financial profile for each segment on a standalone basis post-spin-off,” McArthur added.
He also pointed to the company paying down $260 million in the back half of the fiscal year as a prime example of the “resiliency of our company and operating model despite challenging market and macro conditions.”
Retail Inventory Levels Improving
The company is seeing better retail inventory levels from quarter to quarter, according to McArthur, despite retailers being cautious with open-to-buy orders and adding more inventory.
And while the record setting snow season in the West was “a boon” for the Giro snow business, “history shows that long snow seasons delay the start of spring and summer camping and outdoor trips. This year is expected to be no different,” McArthur said.
However, he believes Vista’s outdoor business will get better as consumer spending trends recover.
“As the economy improves, we do expect that business to improve,” he added. “Maybe even somewhat faster than some of the other businesses.”
Vista will be providing more information about the new name of the outdoor spin-off in the coming months, as well as updates on its search for a CEO for the new company.
“Our criteria include someone who has a proven track record, has shown the ability to deliver value to shareholders, and is going to advance our mission of stewarding great brands and getting more people into the outdoors,” McArthur said.
FY 2023 Company Financial Results
Sales: Up 1% to $3.1 billion. Organic sales excluding acquisitions were $2.7 billion, down 10%, driven by reduced purchasing across nearly all channels.
Net loss: $10 million versus net income of $473 million in the prior year.
FY 2023 Outdoor Products Results
Sales: Up 1% to $1.3 billion. Organic sales excluding acquisitions were $990 million, down 24%, driven by reduced purchasing across nearly all channels with the exception of direct-to-consumer.
Adjusted EBITDA: Decreased 39% to $125 million. Adjusted EBITDA margin decreased 633 basis points to 9.5%.
Q4 Company Financial Results
Sales: $741 million, down 8%. Organic sales excluding acquisitions were $654 million, down 19%, driven by a decrease in sporting products volume and outdoor products’ organic business volume, partially offset by pricing.
Net loss: $294 million versus net income of $112 million in the prior-year quarter.
Q4 Results for Outdoor Products
Sales: Down 5% to $327 million. Organic sales excluding acquisitions were $241 million, down 30%, driven by a decrease in volume due to high levels of channel inventory and softening replenishment.
Adjusted EBITDA: Decreased 81% to $9 million. Adjusted EBITDA margin decreased 1,138 basis points to 2.9%.