Vista Outdoor announced a business transformation initiative for its newly created outdoor company Revelyst and reported overall sales were down for the quarter ended Sept. 24.
Company-wide, sales decreased 13% to $677 million compared to the prior-year period.
In October, Vista announced it was selling its sporting products business, which focuses on making and selling ammunition, to Czechoslovak Group for $1.91 billion. It will spin off Revelyst into its own company when the sale closes.
Revelyst’s portfolio of brands includes Fox, Bell, Giro, CamelBak, Camp Chef, Bushnell, and Simms Fishing.
Andy Keegan, vice president and interim CFO of Vista Outdoor, plans to join Revelyst as CFO. Eric Nyman will continue as CEO of outdoor products and become the CEO of Revelyst when the transaction closes.
As part of the restructuring, Nyman said the company may divest certain brands within the Revelyst portfolio.
Revelyst’s Transformation Program
In Vista’s outdoor products segment – the segment that will eventually become Revelyst – sales decreased to $327 million, down 6% compared to the same period last year.
On an earnings call with investors, Nyman announced Revelyst is kicking off a new transformation program called Gear Up to “drive profitability improvements and organic growth.”
According to Nyman, the program is focused on simplifying the business model, delivering increased efficiency and profitability from that simplified structure, and reinvesting in Revelyst’s highest potential brands to accelerate their growth and transformation.
“In the current structure, the business has become increasingly complex over time, with multiple acquisitions, causing brands to become independent of one another and creating inefficiencies across the entire company,” Nyman said. “Through a simplified structure, Revelyst can become an integrated house of iconic, high-performing outdoor brands that work together.”
Part of the initiative is cost savings on real estate. “We have over 21 domestic locations today,” Nyman said. “We expect some significant real estate consolidation.”
Nyman also said the company is considering divesting certain brands within the Revelyst portfolio.
“As we focus intensely on our power brands, that will also mean that we’re taking a look at all that remains in our portfolio,” Nyman said. He listed the “power brands” as Foresight Sports, Bushnell Golf, CamelBak, Fox, Bell, Giro, Simms, and Bushnell.
New Structure for Revelyst
Revelyst is breaking out the brands into three separate categories.
The precision sports and technology group will include Foresight Sports and Bushnell Golf, which is Revelyst’s highest EBITDA margin and highest growth potential business, according to Nyman.
Revelyst’s “well-renowned brands” will make up the adventure sports group, including Fox, Giro, Bell, CamelBak, QuietKat and more.
The outdoor performance category will include Bushnell, Simms Fishing, Camp Chef, Stone Glacier, and more, with a focus on hiking, camping, fishing, and hunting.
“We expect that this effort will streamline our operations and unlock profitability improvements in cost savings beginning in Q4 of fiscal year 2024, with an estimated $100 million of realized annual cost savings by fiscal year 2027,” Nyman said.
This is in addition to the April 2023 $50 million cost restructuring program, of which $25 million in savings was specifically related to Revelyst, for a total of $125 million in expected run-rate cost savings.
In fiscal year 2025, the company expects $25 million to $30 million in realized cost savings.
The company hopes to double Revelyst’s standalone adjusted EBITDA in fiscal year 2025 compared to fiscal year 2024.
Outdoor Products Guidance Lowered
In the outdoor products segment, sales are expected to be approximately $1.28 billion to $1.33 billion for the full year. That’s down from the previous guidance Vista gave in its Q1 results, when it said it expected outdoor products sales to be approximately $1.38 billion to $1.43 billion.
Nyman said Revelyst is working to clear high-priced inventory, which should lead to adjusted segment EBITDA margins in the mid-single digits in the third quarter of fiscal year 2024, with sequential improvement to high-single digits in the fourth quarter.
The outdoor products segment was down about $20 million in inventory for the quarter.
“We intend to utilize strategic promotions to work through the high-priced inventory and continue driving market share gains across categories, regardless of external market factors,” Nyman added. “Our inventory will be right-sized.”
More Details on Vista Outdoor Q2 Results
For Vista Outdoor, sales decreased to $677 million, down 13% compared to the prior-year period.
The company said the decline was driven by lower shipments across nearly all categories in the sporting products segment and lower volume as channel partners are cautious with purchasing due to inventory levels and short-term consumer pressure in the outdoor products businesses.
Gross profit declined 21% to $209 million and gross profit margin decreased 270 basis points to 30.9% due to decreased volume and price in the sporting products segment and decreased volume in the organic outdoor products businesses, partially offset by acquisitions.
Net income decreased to $44 million, down 53% compared to the prior-year period.
Looking ahead, Vista expects sales in the range of $2.72 billion to $2.82 billion for the entire fiscal year.
Bart Schaneman can be reached at firstname.lastname@example.org.