Leadership at Clarus Corporation, parent company of Black Diamond and other brands, said the company is focusing efforts on the outdoor and adventure business after selling off its ammunition segment earlier this month.
“Clarus is now simplified around two traditional outdoor brands without the overhang associated with ammunition,” said Warren Kanders, executive chairman of Clarus, on the earnings call.
In addition to Black Diamond, Clarus owns Australian brand TRED Outdoors, which makes products for overlanding. Clarus bought TRED Outdoors last fall.
The company’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.
Resetting Outdoor and Adventure
Kanders said Black Diamond and TRED are leaders in their core categories and he expects them to rebound as the market stabilizes and reaches a “new normal.”
“We believe that we are at different points in the reset of both segments. But each segment is showing signs that the steps taken thus far are positive,” he added.
Kanders said the outdoor segment saw “great gains” across its footwear and mountain products, with slowness in ski and apparel.
Core climbing was down 4% for the quarter.
“But it’s important to note that we’re seeing repurchasing trends in the first quarter of 2024 to fill shelves back to normalized stock levels,” Kanders said. “I’m excited about our potential to build long-term value in outdoor.”
Kanders pointed to the company’s upcoming investor day next week for more details. Clarus will host an investor day on Monday, March 11, that will feature additional commentary on Clarus’ strategic initiatives and growth opportunities and commentary from the segment leaders, including Black Diamond CEO Neil Fiske.
PFAS a Concern
On the call, Mike Yates, chief financial officer for Clarus, called out PFAS regulations as “an evolving industry issue that we’ll be dealing with throughout 2024.”
With some large retailers no longer accepting or purchasing any products containing PFAS beginning this summer, Clarus is “actively managing the end of life of products containing PFAS in 2024,” according to Yates.
“Depending on our execution and the market reaction to these regulatory changes, we may have further exposure to PFAS inventory during 2024,” Yates said.
Clarus Q4 2023 Results
The company’s fourth quarter sales ending up 3.6% for the quarter was due to strength in the adventure segment on success with OEM customers, according to Clarus. This was partly offset by softness in the outdoor segment in Europe.
Sales in the company’s adventure segment increased 43% to $26.4 million, reflecting increasing sales in the Australian market and the benefit of the TRED Outdoors acquisition.
Sales in the outdoor segment were $50 million on a constant currency basis, down 9.5% compared to the year-ago quarter.
The decline in the outdoor segment primarily reflects continuing challenging market conditions, particularly in Europe, according to Kanders.
Clarus’ European international businesses were challenged in the quarter by warmer weather trends as the winter season opened.
“When zooming into the various selling channels, we began to see signs of stabilization, particularly in North American wholesale, which picked up 2% over the prior comparable period,” Kanders said.
This was driven by increases at national accounts offset by continued challenges in certain key accounts, he added, namely big box partners and the specialty channel.
Gross margin in the fourth quarter was 28.9% compared to 37.2% in the year‐ago quarter. The decrease was primarily due to $4.2 million of inventory reserve increases in the outdoor segment, the company said.
Clarus’ Full-Year 2023 Results
Sales for the year decreased 9.3%, driven by continued softness in outdoor wholesale markets in both North America and Europe as well as lower demand at Rhino-Rack USA compared to the prior year.
Outdoor sales were down 8% to $204.1 million and adventure sales were down 12% to $82.0 million, compared to 2022.
Gross margin in 2023 was 34.1% compared to 34.9% in 2022, primarily due to promotional pricing and increased inventory reserves in the outdoor segment, as well as unfavorable foreign currency exchange movement.
These decreases were partially offset by various factors, primarily related to easing freight costs, in both the outdoor and adventure segments.
2024 Outlook
Clarus expects fiscal year 2024 sales to range between $270 million to $280 million and adjusted EBITDA of approximately $16 million to $18 million.
Capital expenditures are expected to range between $4 million to $5 million and free cash flow is expected to range between $18 million to $20 million for full-year 2024.
