Vista Outdoor’s interim CEO said the company’s seeing “positive signs” for its business, even as it faces macroeconomic headwinds impacting consumer spending and inventory levels.
Gary McArthur, who was named interim CEO Thursday, told analysts in the company’s quarterly update Vista is “operating from a position of strength.”
Although he noted an “encouraging” long-term outlook for the business, McArthur acknowledged the challenges in the current operating environment.
“Taking a step back to look at the broader market, we continue to see macroeconomic pressures impacting consumer purchasing behavior in response to high inflation and higher interest rates,” he said. “We still see consumer purchasing patterns tightening in some categories and many are seeking to buy discounted or promotional items. Overall retailer inventory levels remain high. We are seeing positive signs emerging and we expect retailers to return to more normalized purchasing in the coming quarters, compared to the continuous restocking that we saw in the prior year period.”
McArthur was appointed to the interim position after the board asked Chris Metz to step down from the top spot. The leadership change was due to “the board’s loss of confidence in [Metz’s] leadership” and was not for reasons “involving financial reporting or internal controls,” Vista Outdoor said.
Company executives did not elaborate further on Metz’s resignation during Thursday’s call.
Vista Outdoor, which has a total portfolio of 41 brands, recorded total sales of $755 million in its fiscal third quarter, ended Dec. 25. That was down 5% from the year-ago period.
Net income narrowed from $118.1 million in the third fiscal quarter of 2021 to $65.1 million in the recently ended period.
Sporting, Outdoor Division Comparisons – Giro Sales Up
McArthur cited “strong participation numbers” in outdoor, along with a “strong snow season,” as beneficial to some of the company’s businesses.
Sales for Giro, for example, have risen more than 30% year to date, compared to the year-ago period. Vista Outdoor’s other businesses in hunting and shooting sports have also benefited from growth there, particularly with the increasing number of women entering the space.
Other categories, such as outdoor cooking, have been weighed down by excess inventory and promotions.
Vista Outdoor’s Sporting Products division – which includes brands such as Remington and Federal – recorded a 13% fall in sales to $402 million in the quarter. The underperformance in that division led to the company-wide sales decline in the quarter.
Meanwhile, the Outdoor Productions division – which includes Bell, Giro, and Fox – proved a bright spot, with a 5% increase year-over-year for the quarter to $353 million in sales. That was driven by upticks in Vista Outdoor’s golf business and recently acquired brands, which helped counter the decline the division saw in international, big box, and other wholesale channels.
Retail and Inventory Trends
Interim CFO Andrew Keegan noted an inventory decrease for the Outdoor Products division due to shorter transportation times and what he called more “targeted promotions to move through areas of elevated inventory.”
“We are monitoring inventory levels and strategically levering promotions across all our channels to reduce inventory, while also remaining competitive, protecting our brands, our markets, and our market share for the long term,” Keegan said.
Vista Outdoor expects “retailer purchasing to normalize in the coming quarters as retailers sell through their inventory positions,” he said.
“So, as retailers do start to normalize their purchasing, which we expect over the coming quarters that they are going to do, we’ll see that POS (point of sale) start to increase as we are missing some of the stock-outs and our sell-in will certainly go up as well. So we’re bullish on what will happen once retailers are starting to repurchase.”
Vista executives on Thursday said the company’s plan to split its outdoor and sporting businesses into two publicly traded businesses is still tracking to be completed within this calendar year. A confidential filing on the split was filed with the SEC last year, with the names of the two companies, management team, and board information for each expected to be announced in the coming months.