Q1 2023 Johnson Outdoors Inc Earnings Call
Speaker 4: and chief executive officer. Also on the call is David Johnson, vice president and chief financial officer. Prior to the question and answer session, all participants will be placed in a listen only mode. After the prepared remarks, the question and answer session will begin.
Speaker 5: If you'd like to ask a question during that time, please press star, then one one on your telephone.
Speaker 6: This call is being recorded. Your participation implies consent to our recording this call. If you do not agree to these terms, simply drop off the line. I would now like to turn the call over to Pat Penman from Johnson Outdoors. Please go ahead and ask him.
Speaker 7: And this time you might be on mute.
Speaker 8: Let me try that one more time.
Speaker 9: All right, Ms. Penman, your line is off mute. Please go ahead.
Speaker 10: Thank you. Good morning, everyone. Thank you for joining us for our discussion of Johnson Outdoors results for the 2023 fiscal first quarter. If you need a copy of today's news release, it is available on our website at johnsonoutdoors.com under investor relations. I also need to remind you that this conference call may contain forward-looking.
Speaker 11: Certainties include those listed in our press release and filings with the Securities and Exchange Commission.
Speaker 12: If you have additional questions following the call, please contact Dave Johnson or myself. It is now my pleasure to turn the call over to Helen Johnson Leopold.
Speaker 13: Thanks, Pat. Good morning. And thank you for joining us. I'll begin with an overview on the quarter and then I'll share perspectives on the performance and I'll look for businesses. Jade will review financial highlights and then we'll take your questions.
Speaker 14: Sales in our first fiscal quarter ending December 2022 rose 16% to $178.3 million compared to $153.5 million in prior year first quarter.
Speaker 15: And that income for the quarter was $5.9 million or 57 cents per denuded share versus 10.9 million dollars or $1.1 per cent per denuded share in the previous year's first quarter.
Speaker 16: Operating profits decreased 60% to $5.5 million versus $13.8 million in the prior fiscal year first quarter with increases in inventory costs significantly impacting profitability.
Speaker 17: We've been working hard to manage the challenging supply chain environment while evaluating all avenues to mitigate cost pressures including price strategies and cost reduction efforts.
Speaker 18: in our fishing business, supply and component availability continued to ease, allowing us to fill more customer orders.
Speaker 19: We still have a solid pipeline of orders that we're working through and continuing to manage supply chain challenges remains our priority.
Speaker 20: In diving, we continue to see momentum as the market rebounds from the depressed pandemic levels.
Speaker 21: We continue to benefit from our ScubaPro Equity as the most trusted dive brand in the world.
Speaker 22: In our camping and watercraft recreation businesses, we are seeing some softening in market demand and higher inventory levels at retail. The good news is that we continue to have strong brand positions, especially in Old Town and Jeff Boyle.
Speaker 23: Innovation continues to be critically important to our growth and success of our brand. The last few years have brought new participants into our Directoration, which is a good thing for us, our ongoing investment into understanding both new and existing consumers evolving needs.
Speaker 24: and translating the ad into these products' success remains our focus. In all of our businesses, we're working on exciting pipeline of new products.
Speaker 25: While it's still too early to tell how the season will end up, we're monitoring consumer buying behavior and focus on filling customer orders and supporting our brands as we head into our primary selling season. As always, our team takes a long-term view positioning our brands and a business for long-term growth.
Speaker 26: Now I'll turn the call over to Jay for a review of the financial highlights.
Speaker 27: Thank you, Helen. Good morning, everyone. I want to highlight a few items from the quarter.
Speaker 28: As Helen mentioned, we're seeing supply availability continue to improve, allowing us to fill more customer orders, especially in fishing.
Speaker 29: The quarters gross margin of 39.5% is down 4.3 points from last year's first quarter due primarily to the increased cost of sales.
Speaker 30: due to high material and freight costs that are in inventory.
Speaker 31: We're starting to see our costs ease somewhat, but we expect margins to continue to be challenged in the coming months as we work through our higher cost inventory.
Speaker 32: Inflation remains a concern. As Helen mentioned, we continue to evaluate all options to improve profitability.
Operating expenses in the first quarter increased $10.4 million versus the prior year first quarter.
Higher sales volume driven expenses broke some of the increase.
We also experience higher compensation expense and increase in health care costs and higher professional services costs between quarters.
Profit before income taxes was $8.2 million versus $14.6 million in the prior year quarter, driven by the lower gross margin and increased operating expenses.
That income for the first quarter was $5.9 million down 47.
from the prior fiscal first quarter.
The effective tax rate was 28% compared to the prior year first quarter rate of 25.6%.
It's still too early to tell how the season will shake down, but we're focused on monitoring demand and proactively managing our inventory levels.
We continue to have no debt on the balance sheet and our cash position enables us to invest in opportunities to strengthen the business.
We remain confident in our ability to deliver long-term value and consistency.
that we pay out cash dividends to our shareholders.
Now I'll turn the call over to the operator for the Q&A session. Operator.
Thank you. Now at the time if you would like to ask a question please press star then 1, 1 again.
and to take yourself from the queue, press star 1 1 again. One moment for our first question.
No.
Our first question comes from the line of Anthony Levidinsky from Fidoti. Your line is open.
Good morning and thank you for taking the questions.
So first, could you guys expand about the pipeline of unfulfilled orders? Maybe direction, can you just talk about where it is now versus your fiscal year end or versus a year ago? It sounds like it's mostly...
the backlog is mostly for fishing, but maybe if you could just give us additional colors that would be very helpful.
Yeah, we've got a continuing pipeline fishing. As you know, we've.
we are working on our supply availability and as that supply comes in, we're able to continue to meet those orders. You know, it's good momentum, but as far as the season goes going forward...
You know, we're still in the preseason mode, but they're good. They're good.
good solid orders in there that we feel are going to continue to be there as we move forward.
Good treeENNIS end of it
Okay, and as far as are you seeing any order cancellations or maybe some retailers maybe postponing their orders? What are you seeing thus far? I know it's early still in the season. Obviously you are. But no order cancellations are going to stay in the U.K.
Tied to warm weather outdoor recreation. So I guess on the consumer side, it's probably too early to tell, but just wondering as far as what you're hearing from your retailers.
Well, you know, I think it already jellers are being cautious right now and you know, trying to predict the season is a tough one. So there's cautious. If I'm on their side, I think even watercraft and camping, you know, the demand has slowed and they've got...
a pretty valid inventory of retail. So...
you know that's waiting for the season to come and then we can get a read but I think you know there's there's caution out there.
Okay. Understood. So, yes, it sounds like fishing and diving are in better shape versus the two smaller segments. Okay. And then I think you talked about the price increases as well. Can you just talk about how much pricing?
over the last 18 months or so. So I don't have the number for the total price increase effect on this quarter versus last quarter, but you know we did see unit volume up obviously significantly for the quarter just to point that out. And you know as we said I mean we'll look at everything going forward to get our margins back to where we'd like it to be and that would include pricing.
inventory.
Yeah, we expect inventory to.
start to go down, starting with the key selling seasons. It may start in April with our inventory numbers, but we're working to get those down at the back to more balanced, normal levels. We'll start to see, unless we see...
costs start to increase even further and they have moderated and we'll start to see our Rose Marge and start to incrementally improve.
in the coming quarters. So that'll probably take the whole fiscal year to get through, but we'll start to see improvement going into the next quarter.
Okay, that's good to hear. And then on your operating expense side, you talked about higher health insurance and professional services fees and so on. Just wondering, you know, how much did that contribute to the overall increase in expenses in a quarter and...
And going forward, if you back out the sales-driven volume expenses, how should we think about your expense growth for the rest of the fiscal year?
Yeah, I mean, we'll see some moderate increases, the balance of the year and our expenses. I wouldn't expect anything significant. Yeah, in this quarter, a good portion, almost half of that increase in operating expenses was volume related. So...
We're not talking big numbers here for the quarter, but you know, it's... And the compensation expenses, they will probably be incrementally higher this year versus last year just to the head count and Marath and that kind of thing.
Well, that's all I had. Thank you very much and best of luck.
Thank you.
And I'm not showing any further questions in the queue. I'll turn the call back over to Helen Johnson, the airport for any calls or remarks. Your Maker especial webinar session with Helen Johnson.
Okay, well, thank you all for joining us today, and I hope you have a great day.
And this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.
Four.
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Hello everyone and welcome to the Johnson outdoors first quarter 2023 earnings conference call Today's call will be led by Helen Johnson Leopold Johnson outdoors chairman and chief executive officer Also on the call is David Johnson vice president and chief financial officer Prior to the question-answer session all participants will be placed in a listen-only mode
After the prepare remarks, the question answer session will begin. If you would like to ask a question during that time, please press star then one one on your telephone.
This call is being recorded. Your participation implies consent to our recording this call. If you do not agree to these terms, simply drop off the line. I would now like to turn the call over to Pat Penman from Johnson Outdoors. Please go ahead, Ms. Penman. P.P.
Okay, thank you. Good morning, everyone. Thank you for joining us for our discussion of Johnson Outdoors results for the 2023 fiscal first quarter.
If you need a copy of today's news release, it is available on our website at johnsonoutdoors.com under investor relations.
I also need to remind you that this conference call may contain forward-looking statements.
These statements are made on the basis of our current views and assumptions and are not guarantees of future performance.
actual events may differ materially from those statements due to a number of factors.
many beyond Johnson Outdoors control. These risks and uncertainties include those listed in our press release and filings with the securities and exchange.
If you have additional questions following the call, please contact Dave Johnson or myself. It is now my pleasure to turn the call over to Helen Johnson Leopold. Thanks, Pat. Good morning. And thank you for joining us. I'll begin with an overview on the quarter and then I'll share perspectives on the performance in our...
compared to $153.5 million in prior year first quarter.
Next income for the quarter was $5.9 million or 57 cents per denuded share versus 10.9 million dollars or $1.1 per cent at $1.7 per denuded share in the previous year's first quarter.
Operating profits decreased 60% to $5.5 million versus $13.8 million in the prior fiscal year first quarter with increases in inventory costs significantly impacting profitability.
We've been working hard to manage the challenging supply chain environment while evaluating all avenues to mitigate cost pressures including price strategies and cost reduction efforts.
In our fishing business, supply and component availability continued to ease, allowing us to fill more customer orders. We still have a solid pipeline of orders that we're working through and continuing to manage supply chain challenges remains our priority. In diving, we continued to see momentum as the market rebounds from its depressed pandemic level.
and plant positions, especially in old towns and jet oil.
Innovation continues to be critically important to our growth and success of our brands. The last few years have brought new participants into outdoor recreation, which is a good thing for us. Our ongoing investment into understanding both new and existing consumers evolving needs.
and translating the ad into new products and success remains our focus. In all of our businesses, we're working on exciting pipeline of new products.
While it's still too early to tell how the season will end up, we're monitoring consumer buying behavior and focused on filling customer orders and supporting our brands as we head into our primary selling season. As always, our team takes a long-term view, positioning our brands and business for long-term growth.
How I'll turn the call over today for review of the financial highlights. Thank you, Helen. Good morning, everyone. I want to highlight a few items from the quarter.
As Helen mentioned, we're seeing supply availability continue to improve, allowing us to fill more customer orders, especially in fishing.
The quarter's gross margin of 39.5% is down 4.3 points from last year's first quarter due primarily to the increased cost of sales.
due to high material and freight costs that are in inventory.
We're starting to see our costs eat somewhat, but we expect margins to continue to be challenged in the coming months as we work through our higher cost inventory.
Inflation remains a concern. As Helen mentioned, we continue to evaluate all options to improve profitability.
Operating expenses in the first quarter increased $10.4 million versus the prior year first quarter.
Higher sales volume driven expenses grow some of the increase.
We also experience higher compensation expense and increase in healthcare costs in higher professional services costs between reporters.
Proper before income taxes was $8.2 million versus $14.6 million in the prior year quarter driven by the lower gross margin and increased operating expenses.
I didn't come for the first quarter was $5.9 million down 46% from the prior fiscal first quarter.
The effective tax rate was 28% compared to the prior year first quarter rate of 25.6%.
It's still too early to tell how the season will shake out, but we're focused on monitoring demand and proactively managing our inventory levels.
We continue to have no debt on the balance sheet and our cash position enables us to invest in opportunities to strengthen the business.
We remain confident in our ability to deliver long-term value and consistency.
and we pay out cash dividends to our shareholders.
Now I'll turn the call over to the operator for the Q&A session. Operator.
Thank you. At this time, if you would like to ask a question, please press star, then 1-1 again.
and to take yourself from the queue to star one one again. One moment for our first question.
No.
Our first question of the line of Anthony Lebedinsky from Fidelity, your line is open.
Good morning and thank you for taking the questions. So first, could you guys expand about the pipeline of unfulfilled orders, maybe directionally can you just talk about where it is now versus your fiscal year end or versus a year ago? It sounds like it's mostly
The backlog is mostly for fishing, but maybe if you could just give us additional color, that would be very helpful.
Yeah, we've got a continuing pipeline fishing. As you know, we've-
We are working on our supply availability and as that supply comes in, we're able to continue to meet those orders. You know, it's good momentum, but you know, as far as the season goes going forward. You know, we're still in the preseason mode, but
They're good solid orders in there that we feel are going to continue to be there as we move forward.
good solid orders in there that we feel are gonna continue to be there as we move forward. So good shape on that end of it.
Okay, and as far as are you seeing any. Order cancellations or maybe some retailers may be postponing their orders. What are you saying? Thus far? I know it's early still in the season. Obviously you are.
Tied to warm weather, outdoor recreation. So I guess on the consumer side, it's probably too early to tell, but just wondering as far as what you're hearing from your retailers.
Well, you know, I think all retailers are being cautious right now and, you know, trying to predict the season is a tough one. So there's cautious on their side. I think even watercraft and camping, you know, the demand has slowed and they've got to take advantage of ? whom.
a pretty solid inventory of retail. So.
you know, that's waiting for the season to come and then we can get a read. But I think, you know, there's there's caution out there.
Okay. Understood. So, yes, those sounds like, you know, fishing and diving are in better shape versus the two smaller segments. Okay. And then I think you talked about the price increases as well. Can you just talk about how much pricing can...
last 18 months or so. So I don't have the number for the total price increase effect on this quarter versus last quarter, but you know we did see a volume up obviously significantly for the quarter just to point that out. And you know as we said I mean we'll look at everything going forward to get our margins back to where we
say, when you're able to work through the high-cost inventory.
Yeah, we expect inventory to
you know, start to go down, you know, starting with our key selling seasons. That may start in April with our inventory numbers. But we're working to get those down to back to more balanced normal levels.
We'll start to see, unless we see costs start to increase even further and they have moderated, we'll start to see our gross margins start to incrementally improve.
in the coming quarters. So that'll probably take the whole fiscal year to get through, but we'll start to see improvement going into the next quarter.
Okay, that's good to hear. And then on your operating expense side, you talked about higher health insurance and professional services fees and so on. Just wondering how much did that contribute to the overall increase in expenses in a quarter and...
And going forward, if you back out the sales-driven volume expenses, how should we think about your expense growth for the rest of the fiscal year?
Yeah, I mean, we'll see some moderate increases, the balance of the year and our expenses. I wouldn't expect anything significant. Yeah, in this quarter, a good portion, almost half of that increase in operating expenses was volume related. So we're not talking big numbers here for the quarter, but, you know, it's.
And the compensation expenses they will probably be incrementally higher this year versus last year just to the head count and marathon that kind of thing. Got it. Okay. Alright, well that's all I had to thank you very much and the best of luck.
And the compensation expenses, they will probably be incrementally higher this year versus last year just to the headcount and merit that kind of thing. Got it. Okay. All right. Well, that's all I had to thank you very much and the best of luck. Thank you.
And I'm not showing any further questions in the queue. I'd like to turn the call back over to Helen Johnson-Vealport for any closing remarks.
Okay, well, thank you all for joining us today, and I hope you have a great day.
And this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.