Q2 2024 Johnson Outdoors Inc Earnings Call

May 3, 2024

Yeah.

Operator: Hello, and welcome to the Johnson Outdoors second quarter 2024 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 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 Change: Hello, and welcome to the Johnson outdoors second quarter 2024 earnings Conference call today's call will be led by Helen Johnson Leipold, Johnson outdoors, Chairman 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 parts.

Speaker Change: Spence will be placed in a listen only mode. After the prepared remarks. The question and answer session will begin if you'd like to ask a question at that time. Please press star one one on your telephone keypad. This call is being recorded recorded your participation implies consent to our recording this call. If you do not agree.

Operator: If you'd like to ask a question at that time, please press star 11 on your telephone keypad. This call is being recorded. Your participation implies consent to our recording of 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.

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.

Patricia G. Penman: Thank you. Good morning, and thank you for joining us for our discussion of Johnson Outdoors results for the 2024 fiscal second 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 may contain forward-looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future events. Actual events may differ materially from those statements due to a number of factors, many beyond Johnson Outdoors.

Patricia G. Penman: Thank you good morning, and thank you for joining us for our discussion of Johnson outdoors results for the 2020 for our fiscal second quarter. If you need a copy of today's news release. It is available on our website at Johnson outdoors Dot com under Investor Relations.

Patricia G. Penman: Also need to remind you that this conference 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.

Patricia G. Penman: These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission. If you have any 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 Change: These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission. If you have any additional questions. Following the call. Please contact Dave Johnson or myself. It is now my pleasure to turn the call over to Helen Johnson Leipold.

Helen P. Johnson: Thanks, Beth. Good morning, everyone, and thank you for joining us.

Speaker Change: Thanks, Pat Good morning, everyone and thank you for joining us.

Addressing our results and give a perspective.

Speaker Change: And then I will share the outlook for the business, Dave will provide more detailed financial review and.

Speaker Change: We'll take your questions.

Helen P. Johnson: I'll begin by addressing our results and giving perspective on the performance, and then I'll share the outlook for the business. Dave will provide a more detailed financial review, and then we will take your questions. Sales in our second fiscal quarter and in March 2024 declined 15% to $175.9 million compared to $202.1 million in the prior year's second quarter. Year-to-date company sales decreased 17% over last year's fiscal six-month period. The company reported an operating loss of $250,000 for the second quarter compared to an operating profit of $11.4 million in the prior year's second quarter.

Speaker Change: Sales in our second fiscal quarter ended in March 2020.

Speaker Change: <unk> declined 13% to 175 $9 million compared to $202 $1 million in the prior year second quarter.

Speaker Change: Year to date company sales decreased 17% over last year, it's Scott.

Speaker Change: Month's period.

Company reported an operating loss of 250.

For the second quarter compared to an operating profit of $11 4 million in the prior year second quarter for the year to date period total company operating loss declined to $200000 compared to an operating profit of six.

Helen P. Johnson: For the year-to-date period, total company operating losses declined to $200,000 compared to an operating profit of $16.9 million for the prior year-to-date period. Net income for the second quarter was $2.2 million or $0.21 per diluted share versus $14.9 million or $1.45 per diluted share in the previous year's second quarter. Net income during the first fiscal six months was $6.1 million or $0.59 per diluted share versus $20.7 million or $2.02 per diluted share in the prior fiscal year to date period.

Speaker Change: $9 million for the prior year to date period.

Speaker Change: Net income for the second quarter was $2 $2 million of 'twenty one.

Share versus $14 $9 million or $1 45.

Speaker Change: Diluted share in the previous year.

Speaker Change: Second quarter net income during the first six months with $6 $1 million or <unk> 59.

Speaker Change: Sure.

$27 million or $2.

Our diluted share in the prior fiscal year to date period.

Helen P. Johnson: Continued tough marketplace conditions significantly impacted our second quarter results. While inventory levels at retail are starting to improve, we have been facing increased competitive activity across our categories, requiring additional promotion in pricing actions. At the same time, economic uncertainty continues to impact consumer buying behavior. We expect these challenges to continue in the season ahead.

Speaker Change: Continued marketplace conditions significantly impacted our second quarter results, while inventory levels at retail are starting to improve we have been facing increased competitive activity across our categories of acquiring additional promotion and pricing actions at the same time economically.

Certainly you can see the impact.

Speaker Change: Buying behavior, we expect these challenges to continue in this season ahead.

Helen P. Johnson: In the midst of this tough environment, we are prioritizing critical investments in our businesses to navigate challenges in the short term and position us for marketplace success in the long term. We have strong brands that are leaders in our categories. We believe in the potential of these categories, and we are looking for opportunities to facilitate growth. Innovation is and always has been key to our success in the marketplace and remains a strategic priority to create consumer-focused products and technology that deliver the best outdoor experience as possible.

In the midst of this tough environment, we are prioritizing critical investments in our businesses to navigate challenges in the short term and position us for marketplaces, but long term we have strong brands that are leaders in our categories. We believe in the potential of these categories and we are in.

Speaker Change: Looking for opportunities.

Speaker Change: The growth.

Speaker Change: Innovation is and always has been key to our success in the marketplace and it remains a strategic priority to create consumer focused products and technologies that deliver the best outdoor experience possible.

Helen P. Johnson: We are investing in marketing and promotions and supporting our new product launches, like the new Dakota Quest Trolling Motor line, which is seeing positive responses from the trade. Strengthening our business operations and improving profitability are also a critical focus. We put a cost savings program in place, and we are evaluating our cost structure for additional efficiency opportunities. We have been working hard to reduce inventory to more normal levels. We have a lot more work to do, but we are starting to see progress from these efforts.

Speaker Change: We are investing in marketing and promotions and supporting our new product launches like the new code inquest trolling motor.

<unk>, which is a positive response from the trade strengthening our business operations and improving profitability are also critical focus.

Speaker Change: We put cost savings program in place and we are evaluating our cost structure for additional efficiency opportunities.

Speaker Change: We have been working hard to reduce inventory to more normal levels.

Speaker Change: Lot more work to do but we are starting to see private facilities efforts.

Helen P. Johnson: This is a tough time, and we are not satisfied with where we are, but we are taking action to improve our position in the market, and we will continue to invest in the long-term profitable growth of our brand. Now, we'll turn the call over to Dave for more details on the financials.

Speaker Change: Is a tough time and we are not satisfied with where we are but we are taking actions to improve our position in the market.

Speaker Change: We need to invest in the long term profitable.

Speaker Change: Brands now.

Speaker Change: Now I'll turn the call over to Dave for more details.

David W. Johnson: Thank you, Helen. Good morning, everyone.

David W. Johnson: Thank you Helen and good morning, everyone I want to highlight a few items from the quarter.

David W. Johnson: I want to highlight a few items from the quarter. Profits in the second quarter were impacted by reduced overhead absorption from lower volume, as well as increases in promotional activity and pricing. We continue to take steps to improve our operating margins with an active cost savings program. We are gaining efficiency benefits in our factories and have driven reductions in our logistics costs. We will expand our efforts to reduce our cost and expense structure.

David W. Johnson: Profits in the second quarter were impacted by reduced overhead absorption from lower volume.

David W. Johnson: As well as increases in promotional activity and pricing actions.

David W. Johnson: We continue to take steps to improve our operating margins with an active cost savings program.

David W. Johnson: We are gaining efficiency benefits in our factories and have driven reductions in our logistics costs, we will expand our efforts to reduce our cost and expense structure.

David W. Johnson: Operating expenses decreased 4% or $2.3 million versus the prior year quarter, due primarily to lower sales volumes between quarters, lower incentive compensation, and professional services expense, and was partially offset by increased promotional spending. As Helen mentioned, we've been working hard to reduce our inventory back to more normal levels. Our inventory balance as of March was $249.2 million, up about $12.5 million from last year's March quarter, but down $18.1 million from December.

David W. Johnson: Operating expenses decreased 4% or $2 $3 million versus the prior year quarter.

David W. Johnson: Due primarily to lower sales volumes between quarters, lower incentive compensation and professional services expense.

David W. Johnson: It was partially offset by increased promotional spending.

As Helen mentioned, we've been working hard to reduce our inventory back to more normal levels.

David W. Johnson: Our inventory balance as of March was $249 $2 million up about $12 $5 million from last year's March quarter, but down $18 1 million from December.

David W. Johnson: We expect additional inventory reductions throughout the balance of the fiscal year. Our balance sheet continues to have no debt, 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 consistently pay out cash dividends to our shareholders. Now, I'll turn the call over to the operator for the Q&A.

David W. Johnson: We expect additional inventory reductions throughout the balance of the fiscal year.

David W. Johnson: Our balance sheet continues to have no debt 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 consistently pay out cash dividends to our shareholders.

Speaker Change: Now I will turn the call over to the operator for the Q&A session.

Operator: Certainly. One moment for our first question, and our first question comes from the line of Anthony Lebiedzinski from Sidoti and Company. Your question, please.

Speaker Change: Certainly one moment for our first question.

Speaker Change: And our first question comes from the line of Anthony <unk> from Sidoti and company. Your question. Please.

Anthony Chester Lebiedzinski: Good morning, and thank you for taking the questions. So first, can you guys give us at least, you know, maybe some directional comments on how the quarter progressed from January through March and maybe perhaps give us an early indication of how your third quarter is trending so far?

Anthony: Good morning, and thank you for taking the questions.

Anthony: So first off can you guys give.

Anthony: Give us at least maybe some directional comment how the quarter progressed from January through March.

Maybe perhaps give us an early indication of how your third quarters trending so far.

Helen P. Johnson: Well, I, you know, this quarter, as we talked about, I think, you know, it's not as good as last year, but we feel good that our new products are being accepted by the trade. I think there's, you know, as we said, a challenging uncertainty with the consumer, but, you know, it's still reflecting early season activity. And, you know, we're hoping for, you know, a better season going forward. But, you know, I can't give you much of an indication of what's going to happen going forward.

Speaker Change: Well, yes.

Speaker Change: This quarter, we as we talked about I think.

Speaker Change: Sure.

Speaker Change: It's.

Speaker Change: Not as good as last year, but we feel good.

Speaker Change: Our new products are being accepted by the trade I think there is that as.

As we said it's challenging.

Speaker Change: The uncertainty with the consumer but it's still.

Speaker Change: Reflecting early season activity.

Speaker Change: We're hoping.

Speaker Change: <unk>.

A better season going forward.

Speaker Change: Obviously I can't give you much of an indication of what may happen going forward, but as I said I think this is a challenging time.

Helen P. Johnson: But, you know, as I said, I think this is a challenging time, and it's going to continue to be challenging. We have both marketplace conditions and a lot of competitive activity. So I think that's going to continue.

Speaker Change: <unk> continued to be challenging.

Speaker Change: Got both marketplace condition.

A lot of.

Speaker Change: Competitive activity.

Speaker Change: I think that's going to continue.

Speaker Change: Mhm Gotcha, and just to follow up on the last point about the challenges.

Anthony Chester Lebiedzinski: Gotcha. And just to follow up on the last part about the challenges that you're seeing in your business. What is your view as far as, you know, is this more driven by the pull forward that we had during the pandemic, or is it perhaps more because of just macroeconomic uncertainty?

Speaker Change: Are you seeing in your business.

Speaker Change: Yeah.

Speaker Change: What is your view as far as.

Speaker Change: Is this more driven by the pull forward that we had during the pandemic or.

Perhaps more because of just macroeconomic uncertainty.

Helen P. Johnson: Well, I think you've got a lot of variables in the mix, so there's not one specific reason, but across all outdoor categories, you know, we are seeing that demand is depressed. And that's, and some of it is due to the pull-forward that happened during the pandemic.

Speaker Change: Well I think he's got a lot of variables in the mix, which so there's not one specific reason, but across all outdoor categories. We are seeing that the demand is depressed.

Speaker Change: And some of that is due to the pull forward that happened during the pandemic, but I think we're also seeing a lot of.

Helen P. Johnson: But I think we're also seeing a lot of competitors with pricing activity that is putting pressure on, and the trade, I think, is a little bit cautious about overordering. They've been through the inventory situation, and I think that's clearing up. It's still an issue depending on the business you're talking about, but I think it's a combination of a lot of things, which, you know, hopefully, will start to clear up as we get into, you know, the future state when the volatility hopefully gets stabilized, understood.

Speaker Change: Competitors with pricing activity that are putting pressure on it.

Trade at <unk> is a little bit cough.

Speaker Change: Cautious about.

Speaker Change: Over ordering.

Speaker Change: Through the inventory situation.

Speaker Change: Clearing up.

Speaker Change: It's still an issue depending on the business Youre talking about but I think it's a combination of a lot of.

Speaker Change: <unk>.

Speaker Change: Sure.

Speaker Change: Which.

Speaker Change: Hopefully they will start to clear up.

Speaker Change: As we get into.

Speaker Change: The future state when when the volatility.

Speaker Change: <unk> stabilized.

Anthony Chester Lebiedzinski: Okay. Got it. Okay. And then, um, just as far as the quarter that you reported, can you give us a census about unit volumes versus pricing or ASPs?

Speaker Change: Understood. Okay got it Okay and then.

Speaker Change: Just as far as the quarter.

Speaker Change: You reported can.

Speaker Change: Can you give us a sense as to the unit volumes versus pricing or ASP.

Speaker Change: Yes, I mean.

Speaker Change: So with the discounting and promotional activity, we've had that really affected the top line more than unit volume.

David W. Johnson: With the discounting and promotional activity we've had, that really affected the top line more than unit volume. But having said that, depending on the category, unit volume was down versus last year. I don't have precise numbers for you, but certainly, the discounting affected that top line more than anything else.

Speaker Change: But having said that depending on the category unit volume was down versus last year I don't have precise numbers for you.

Speaker Change: But certainly the discounting affected that top line more than anything else.

Anthony Chester Lebiedzinski: Understood. Okay. Thanks, Dave. Okay. And then, Helen, I think you said that, you know, the inventory levels at retail are starting to improve. Is that across the board, or are you seeing... is better than others as far as the inventory levels that you're seeing from retailers?

Speaker Change: Understood. Okay. Thanks, Dave and then how long I think you said that the inventory.

Speaker Change: Tori levels at retail are starting to improve is that across the board or are you seeing.

Speaker Change: Certain pockets of your business.

Speaker Change: This better than others.

Speaker Change: As far as the inventory levels.

Speaker Change: That you are seeing from retailers.

Speaker Change: I think it depends on the business.

Speaker Change: Sure.

Speaker Change: Oh hi.

Speaker Change: In general.

Speaker Change: The inventory levels and will get better.

Speaker Change: Everybody is recognized.

Speaker Change: They were too high and they're working their way through it but depending on that.

Helen P. Johnson: But depending on the category. Some are moving faster than others, I think. Your dog business is a little lagged. We've got some build-up in the dealers. So again, it depends. But in general, I think there isn't an issue with the inventory that people have in stock and are ready to go for the season.

Speaker Change: Category.

Speaker Change: Some are more.

Speaker Change: Moving faster than others I think.

Speaker Change: Our dine in business is a little lag that we've got some.

Speaker Change: Buildup in the dealers.

Speaker Change: Got it.

Speaker Change: But in general I think.

Speaker Change: There isn't.

Speaker Change: With the inventory that you can collapse stock and are ready to go for the season.

Speaker Change: Mhm.

Anthony Chester Lebiedzinski: You talked about seeing good responses from Minn Kota, Quest, and Trolley Motors, which is great to hear. That being said, do you think this will be incremental to your existing line of products, or could we perhaps see some cannibalization from your other product lines? How should we think about that?

Speaker Change: Sure.

Speaker Change: You talked about seeing good response from <unk> Quest Trolling motors, which is great to hear.

Speaker Change: So that being said I mean do you think this will be incremental to.

Speaker Change: To your existing line of products or could we perhaps see.

Speaker Change: Some cannibalization from your other product lines.

Speaker Change: How should we think about that.

Helen P. Johnson: Well, the good thing is a good response. It's really trade oriented. I think innovation in general was a key for this coming season because innovation tends to drive through some of the depressed areas. But this is You know, we did restage our whole brush, our whole Minn Kota line, and we always assume that as you restage a product, you've got some cannibalization of the existing, but this is a different motor for a different target. So I feel good that it should drive some incremental sales.

Well, it's a good is a good response its really trade oriented I think innovation in general is a key for this.

Speaker Change: Come a little seasonal.

Speaker Change: Basically.

Speaker Change: Drive thru.

Speaker Change: The depressed demand.

Speaker Change: But this is.

Speaker Change: Yeah.

Speaker Change: We did restate our.

Speaker Change: Our goal really coda line.

Speaker Change: And we.

Speaker Change: We always assume that as you restage product you've got some cannibalization of the existing but this isn't different.

Speaker Change: Motor or a different target so feel good at it.

Speaker Change: Should drive some incremental sales.

Anthony Chester Lebiedzinski: That's great to hear. Okay, that's what I was looking for. So, and then, you know, thinking about the promotional programs and your efforts to reduce inventory. How should we think about that as it relates to your near-term and longer-term profitability?

Speaker Change: That's good that's great to hear Okay. That's what I was looking for it so.

Speaker Change: Thinking about the promotional programs and your efforts to reduce inventory.

Speaker Change: Should we think about.

Speaker Change: Yes.

Speaker Change: It relates to your near term longer term profitability.

Helen P. Johnson: Well, I think we, you know, we do what it takes to drive volume in the market. And I think this is, this is, we're addressing this.

Well I think we will do what it takes to drive volume in.

Speaker Change: Market and I think.

Speaker Change: This is this is we are addressing this.

Helen P. Johnson: The situation, which is a lot of competition, and when there's softer, you know, demand and the market's not growing as fast, I think, you know, you end up increasing your promotional spend. But, you know, as innovation, innovation should, in normal times, be what drives sales, and you don't have to rely as heavily on promotion. So I think we show that we will do what it takes to drive movement at retail. It's just been a little heavier this year given the circumstances.

Speaker Change: <unk>, which is a lot of competition when there is.

Speaker Change: Softer.

Speaker Change: Demand in the market is not growing as fast I think.

Speaker Change: You end up increasing your promotional spend Budd.

Speaker Change: And the innovation innovation should.

Speaker Change: In normal times be what drives sales and don't have to relies heavily on promotions. So I think we show that we will do what it takes.

Speaker Change: To derive movement.

Speaker Change: At retail.

Speaker Change: It's just been a little heavier this year given the circumstances.

Anthony Chester Lebiedzinski: Yes, okay, but it is encouraging to see the inventory decline on a sequential basis, so I hope you guys can further make progress there. And then lastly, for me, just switching gears to your cost savings program. So it sounds like it helps to offset some of the pressure points in this last quarter and, I think, even a quarter before that. So, but I guess as you look at that cost savings program, I guess you talked about the... [inaudible]

Speaker Change: Gotcha Okay.

Speaker Change: It is encouraging to see the inventory decline on a sequential basis. So.

Speaker Change: I Hope you guys can.

Further make progress there.

Speaker Change: And then lastly for me.

Just switching gears to your cost savings program.

Speaker Change: So it sounds like it helps to offset some of the.

Speaker Change: Pressure points.

Last quarter, and I think we even the quarter before that so but I guess as you look at that cost savings program.

Speaker Change: Talked about the.

Speaker Change: Improving efficiencies of factories.

Speaker Change: Logistics, but I guess, maybe in baseball terms.

Speaker Change: Are you in with that initiative.

Speaker Change: What else are you looking to do to gain further.

Speaker Change: Cost savings.

David W. Johnson: Yeah, I think we're in the middle of it. So, I'll use football: we're at halftime. So I think, yeah, I mean, we started this, you know, pretty robustly six to eight months ago, and we continue to look at how we can improve our profit profile. So I just feel that will continue.

Yes, I think we're in the middle of Us all.

Speaker Change: We're at halftime.

Speaker Change: I think yes, I mean, we.

Speaker Change: <unk> had this pretty robustly six to eight months ago, and we continue to look at how we can improve our profit profile. So that will continue.

David W. Johnson: I do think we are evaluating all options, you know, to look at other cost savings, but it's really about being more efficient and doing things in a more effective and efficient way. And I think that's a heavy focus. We're, you know, looking at all aspects of the business. You know, I think the marketplace. Obviously, the competition is continuing to increase pressure, so we've got to look at this, and we're in the process of doing that.

Speaker Change: David do you think we are we.

David W. Johnson: We are evaluating all options to look at other cost savings and but it's really about.

David W. Johnson: <unk>.

Being more efficient.

David W. Johnson: <unk> doing.

David W. Johnson: <unk>.

David W. Johnson: In a more effective and efficient way and I think.

David W. Johnson: Net heavy focus where we are.

David W. Johnson: Alright.

David W. Johnson: Looking at all aspects of the business.

David W. Johnson: I think the marketplace.

David W. Johnson: Obviously the competition is.

David W. Johnson: Continuing to increase pressures, we've got to look at this.

David W. Johnson: We're in we're in the process of doing that.

Speaker Change: Understood well, thank you very much and best of luck.

Operator: Thank you. One moment for our next question, and our next question comes from the line of Anna Glaessgen from B Riley. Your question, please.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Ana <unk> from B Riley Your question. Please.

Anna Glaessgen: Hi, good morning. Thanks for taking my question. I'd like to go back to some of the questions around margin and understanding that, you know, you have to respond to competitive activity when thinking about pricing, but what's your outlook for promotionality as we think longer term? Is this kind of a new normal as you have to respond to these competitors? Do you see a reversion back to historical levels? Just any more color there would be super helpful.

Ana: Hi, good morning.

Ana: Taking my question.

Ana: I'd like to go back.

Ana: Some of the questions around margin and understanding you have to respond to competitive activity.

Ana: When thinking about pricing, but what's your outlook for promotional D. As we think longer term is this kind of a new normal as you have to respond to these competitors do you see a reversion back to historical levels.

Speaker Change: Any more color there would be super helpful.

Helen P. Johnson: You know, I think it is not going away. I think, you know, we've got some intense competition. It will be going forward. But, you know, we've got to up our game in innovation so promotion doesn't become as critical a factor for us.

Speaker Change: I think.

Speaker Change: I think it is.

Speaker Change: It's not going to go away.

Speaker Change: In healthy competition it will be.

Speaker Change: Going forward, but we.

Speaker Change: Really rely on innovation to drive the price values OLED promotion doesn't become.

Speaker Change: Across for us, but it certainly is necessary to be right in there.

Speaker Change: During the key promotional timeframe as our competitors are promoting as well.

Speaker Change: But.

It's a different ballgame.

Speaker Change: And.

Speaker Change: We've got to up our game in innovation. So promotions of income that is critical.

Speaker Change: Factor for us.

<unk>.

Anna Glaessgen: Got it. And as inventory positions are seemingly improving at retail, do you expect a more balanced, greater balance between sell-in and sell-through, or how do you expect that progressing through the year?

Speaker Change: Got it.

Speaker Change: Inventory positions are seemingly improving at retail.

You expect a more balanced.

Speaker Change: A greater balance between sell in and sell through are how do you expect that progressing through the year.

Helen P. Johnson: Well, yeah, I think that would become more balanced, you know, over the seasons. I, you know, just remember that we are seasonal. So, quarter by quarter, it does change. But yeah, I would definitely expect to see that balance out as inventories improve.

Speaker Change: Yes, I think that would become more balanced.

Speaker Change: Over the seasons.

Speaker Change: Just remember we are seasonal so.

Speaker Change: Quarter by quarter, It does change, but yeah, I would definitely expect to see that balance out as inventories improve.

Anna Glaessgen: Got it. And just last one for me. The inventory on your balance sheet, is that content that you're trying to work down, is that concentrated in any one segment, or is it kind of across the board? It's across the board based on sales.

Speaker Change: Got it and just last one for me.

Speaker Change: The inventory on your balance sheet is that content that you're trying to work down is that concentrated to any one segment or is it kind of across the board.

David W. Johnson: It's across the board based on the sales of the business unit. So obviously, you know, fishing is our biggest business. It's got the most inventory. And every business has been able to reduce their inventory sequentially over the quarter.

It's across the board based on the sales of the business units. So obviously pushes our biggest business has got the most inventory.

Speaker Change: And every business has has been able to reduce their inventory sequentially over the quarter.

Speaker Change: Alright.

Speaker Change: <unk>.

Operator: Thank you. One moment for our next question, and our next question comes from the line of Doug Gacielo from Crawford. Your question, please.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Doug <unk> from Crawford Your question. Please.

Doug Gacielo: Good morning. Thanks for taking my call.

Doug: Good morning, Thanks for taking my call.

Doug Gacielo: At the risk of beating a dead horse, I just wanted to double-click on the competitive intensity question a bit. The press releases are chock-full of commentary on pricing actions and promotional activity, and you called out the Minn Kota quest, Trolling Motor Success. So my question is, and I think I know the answer, but I want to ask it explicitly. Do you think the competitive environment is accelerating in terms of its intensity in this important, you know, seasonal third quarter that you're in now versus a year ago, and also relative to the quarter you just closed?

Doug: At the risk of beating a dead horse I just wanted to double click on the competitive intensity question a bit.

Press releases Truckful commentary on pricing actions and promotional activity and you called out the Minnesota.

Doug: Quest Trolling motor success. So my question is and I think I know the.

Doug: You answered, but I wanted to ask it explicitly.

Doug: Do you think the competitive environment is accelerating in terms of its intensity in this important.

Doug: Seasonal third quarter that you're in now versus a year ago and also relative to the quarter you just closed.

Helen P. Johnson: Well, it depends on which business you're talking about. But I think, you know, across the board, we've got a lot more activity going on from a promotional standpoint. And that usually happens when you're in the market where The demand is a little soft and it just increases I think we've, because of the I think popularity of the outdoor space. We've obviously attracted more competitive players and more competitive activities. You know, and during this kind of timeframe where you've got economic uncertainty, there's also... And we're seeing, depending on the business, but the mix changing a little bit that some of the lower price point products are gaining a little more, you know, traction than some of the premium price, but I would say, in general, outdoor, you know, it's become a good space to be in and You know, I think the reality that we are going to have competition going forward and, you know, pricing and promotions as part of the game.

Well it depends on which business you're talking about but I think.

Across the board we've got.

Doug: A lot more activity going on from a promotional standpoint and that usually happens when you're in a market where.

Doug: The demand.

As a level of thought and then just.

Increases I think we.

Doug: Because of the.

Doug: I think popularity of the outdoor space, we've obviously attracted more competitive.

Players and where competitive activity.

During this kind of timeframe, where you've got economic uncertainties. There is also.

Doug: And we're seeing it depending on the business, but the.

Doug: The mix changing a little bit that some of the lower price point products are in a little more.

Doug: Traction than some of the premium priced.

Doug: I would say in general.

Doug: Outdoor.

Doug: A good space to be in.

Doug: I think the reality that we are going to have competition going forward.

Doug: Pricing and promotions as part of the game.

Doug Gacielo: Great, thank you. I meant fishing specifically, but I think you knew that.

Speaker Change: Great. Thank you Amit fishing, specifically, but I think you can do that and then my last question is just on capital allocation. So I wonder if first if you think about it this way, but what do you think is the most return on invested capital accretive use of $84 million in cash that you have on the balance sheet and the free cash that Youll journey.

Doug Gacielo: And then my last question is just on capital allocation. So I wonder first if you think about it this way, but what do you think is the most return on invested capital accretive? How will you use the $84 million in cash that you have on the balance sheet and the free cash that you'll generate over the next handful of years? Is it dividends, special dividends, share repo, M&A, or perhaps investing more aggressively in R&D and innovation such that you can offset some of this? competitive threat. Thank you. Yeah, I mean it.

Speaker Change: <unk> over the next handful of years is it <unk>.

Speaker Change: Dividend special dividend share repo M&A.

Or perhaps investing more aggressively in R&D and innovation such that you can offset some of this.

Competitive threat. Thank you.

Helen P. Johnson: Yeah, I mean, our preference is to invest that capital to grow the business and grow it profitably and return that, you know, much better than our cost of capital. And that's the plan. Obviously, as you know, there's a risk profile for everything that we look at. So it just depends on what you know, what the project is, and what we're going to look at. But yeah, we want to take that capital and best invest it back into the business, either through organic growth or perhaps acquisition.

Speaker Change: Yes.

Speaker Change: Our preference is to invest that capital to grow the business and grow profitably and earn a return thats.

Speaker Change: Much better than.

Speaker Change: Our cost of capital and that's that's the plan.

Speaker Change: Obviously as you know there is a risk profile of everything that we look at.

Speaker Change: It just depends on what the project is and what we're Gonna look capital, Yes, we want to take that capital invest invest it back into the business either through organic growth or perhaps acquisitions.

Speaker Change: Great. Thank you.

Operator: Thank you. This does conclude the question and answer session for today's program. I'd like to hand the program back to Helen Johnson and Leopold for any further remarks.

Speaker Change: Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Helen Johnson Leipold for any further remarks.

Helen P. Johnson: Thank you all for joining us today. I hope everybody has a great weekend.

Speaker Change: And thank you all for joining us today I hope everybody has a great weekend. Thank you.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Operator: Thank you. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Speaker Change: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

[music].

Speaker Change: Yes.

Operator: ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Hello and welcome to the Johnson Outdoors second quarter 2024 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-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 Change: [music].

Patricia G. Penman: If you'd like to ask a question at that time, please press star-one-one on your telephone keypad. This call is being recorded. Your participation implies consent to our recording of 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.

Speaker Change: Vince will be placed in a listen only mode. After the prepared remarks. The question and answer session will begin if you'd like to ask a question at that time. Please press star one one on your telephone keypad. This call is being recovered recorded your participation implies consent to our recording this call. If you do not agree to.

Speaker Change: 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 Pentland.

Patricia G. Penman: Thank you. Good morning, and thank you for joining us for our discussion of Johnson Outdoors results for the 2024 fiscal second 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 may contain forward-looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future... Actual events may differ materially from those statements due to a number of factors, many beyond Johnson Outdoors.

Thank you.

Patricia G. Penman: Good morning, and thank you for joining us for our discussion of Johnson outdoors results for the 2020 for our fiscal second quarter. If you need a copy of today's news release. It is available on our website at Johnson outdoors Dot com under Investor Relations.

Helen P. Johnson: Thanks, Seth. Good morning, everyone, and thank you for joining us.

Speaker Change: You bet good morning, everyone and thank you for joining us I'll begin by addressing our results and give a perspective on the performance and then I'll share the outlook for the business, Dave will provide more detailed financial review and well thank.

Speaker Change: Take your questions.

Sales in our second fiscal quarter ended in March 2024, and declined 13% to 175 $9 million compared to $202 $1 million in the prior year second quarter.

Speaker Change: Year to date company sales decreased 17% over last year's difficult six month period.

<unk> reported an operating loss of $250000 in the second quarter compared to an operating profit of $11 $4 million in the prior year's second quarter for the year to date period total company operating loss declined to $200000 compared to an operating profit of six.

Speaker Change: $9 million for the prior year to date period.

Net income for the second quarter was $2 $2 million at <unk> <unk> per diluted share versus $14 $9 million or $1 45 per diluted share.

Speaker Change: Previous Years' second quarter net income during the first six.

Thanks.

Speaker Change: $1 million or 59.

Hello.

Speaker Change: Sure.

Speaker Change: $27 million or $2 80 per diluted share in the prior fiscal year to date period.

Speaker Change: Continued marketplace conditions significantly impacted our second quarter results, while inventory levels at retail are starting to improve we have been facing increased competitive activity across our categories, requiring additional promotion and pricing actions at the same time economically.

Speaker Change: Certainly continues to impact we're buying behavior. We expect these challenges to continue in this in the midst of this tough environment. We are prioritizing critical investments in our businesses to navigate challenges in the short term and position us for marketplaces.

Helen P. Johnson: In the midst of this tough environment, we are prioritizing critical investments in our businesses to navigate challenges in the short term and position us for marketplace success in the long term. We have strong brands that are leaders in our categories. We believe in the potential of these categories, and we are looking for opportunities to facilitate growth. Innovation is and always has been key to our success in the marketplace and remains a strategic priority to create consumer-focused products and technologies that deliver the best outdoor experience as possible.

Speaker Change: Long term, we have strong brands that are leaders in our categories. We believe in the potential of these categories.

Speaker Change: We are looking for opportunities to consolidate growth.

Speaker Change: Innovation is and always has been EUR success in the marketplace and it remains a strategic priority to create consumer focused products and technologies that deliver the best outdoor experience possible.

Speaker Change: We are investing in marketing and promotions and supporting our new product launches like the new conquest trolling motor.

Speaker Change: Which is a positive response from the trade strengthening our business operations and improving profitability are also critical focus.

Speaker Change: We put cost savings program in place and we are evaluating our cost structure for additional efficiency opportunities.

Speaker Change: We have been working hard to reduce inventory to more normal levels.

Speaker Change: Lot more work to do but we are starting to see progress from these efforts. This is a tough time and we are not satisfied where we are but we are taking actions to improve our position in the market.

Speaker Change: We need to invest in the long term profitable brands.

Speaker Change: Now I'll turn call over to Dave for more details.

David W. Johnson: Thank you, Helen. Good morning, everyone.

David W. Johnson: Thank you Helen and good morning, everyone I want to highlight a few items from the quarter.

David W. Johnson: Profits in the second quarter were impacted by reduced overhead absorption from lower volume.

David W. Johnson: As well as increases in promotional activity and pricing actions.

David W. Johnson: We continue to take steps to improve our operating margins with an active cost savings program.

David W. Johnson: We are gaining efficiency benefits in our factories have driven reductions in our logistics costs, we will expand our efforts to reduce our cost and expense structure.

David W. Johnson: Operating expenses decreased 4% or $2 $3 million versus the prior year quarter.

David W. Johnson: Due primarily to lower sales volumes between quarters, lower incentive compensation and professional services expense.

It's partially offset by increased promotional spending.

David W. Johnson: As Helen mentioned, we've been working hard to reduce our inventory back to more normal levels.

Our inventory balance as of March was $249 $2 million up about $12 $5 million from last year's March quarter, but down $18 1 million from December.

David W. Johnson: We expect additional inventory reductions throughout the balance of the fiscal year.

Speaker Change: Now I'll turn the call over to the operator for the Q&A session.

Operator: Certainly. One moment for our first question, and our first question comes from the line of Anthony Lebiedzinski from Sidoti and Company. Your question, please.

Speaker Change: Certainly one moment for our first question.

And our first question comes from the line of Anthony <unk> from Sidoti and company. Your question. Please.

Anthony Chester Lebiedzinski: Good morning, and thank you for taking the questions. So first, can you guys give us at least, you know, maybe some directional comments on how the quarter progressed from January through March, and maybe perhaps give us an early indication of how your third quarter is trending so far?

Anthony: Good morning, and thank you for taking the questions.

Anthony: So first off can you guys give us at least maybe some directional comment how did the quarter progress from January to March and.

Anthony: Maybe perhaps give us an early indication of how your third quarter is trending so far.

Helen P. Johnson: Well, you know, this quarter, as we talked about, I think, you know, it's not as good as last year, but we feel good that our new products are being accepted by the trade. I think there's, you know, as we said, challenging uncertainty with the consumer, but, you know, it's still, reflecting early season activity. And, you know, we're hoping for, you know, a better season going forward. But, you know, I can't give you much of an indication of what's going to happen going forward.

Anthony: Well.

Anthony: This quarter, we as we talked about I think.

Anthony: Yes.

Anthony: Not as good as last year, but we feel good.

Anthony: Our new products are being accepted by the trade I think there is that as.

Anthony: As we said it's challenging.

Anthony: The uncertainty with the consumer but still.

Still.

Anthony: Selecting early season activity.

Anthony: How big.

Anthony: A better season going forward.

Anthony: Yeah.

Anthony: Obviously, we can't give you much indication of what may happen going forward, but as I said I think this is a challenging gallon continue to be challenging we got both marketplace.

Anthony: And a lot of competitive activity.

Anthony: I think that's going to continue.

Speaker Change: Mhm Gotcha, and just a follow up on the last part about the challenges that you see.

Speaker Change: Seeing in your business.

Speaker Change: What is your view as far as.

Speaker Change: Is this more driven by the pull forward that we had.

Speaker Change: Or is it perhaps more because of just macroeconomic uncertainty.

Helen P. Johnson: Well, I think he's got a lot of variables in the mix, so there's not one specific reason, but across all outdoor categories, you know, we are seeing that demand is depressed. And that's, and some of it is due to the pull-forward that happened during the pandemic.

Speaker Change: Well I think <unk> got a lot of variables in the mix, which is not one specific reason, but across all outdoor categories.

Speaker Change: We are seeing that the demand is depressed.

Speaker Change: And some of it is due to the pull forward that happened during the pandemic, but I think we're also seeing a lot of.

Helen P. Johnson: But I think we're also seeing a lot of competitors with pricing activity that is putting pressure on, and the trade, I think, is a little bit cautious about overordering. They've been through the inventory situation, and I think that's clearing up. It's still an issue depending on the business you're talking about, but I think it's a combination of a lot of things, which, you know, hopefully, they will start to clear up as we get into, you know, the future state when the volatility hopefully gets stabilized.

Two patent earnings with pricing activity that are putting pressure on that.

Speaker Change: <unk> is a little bit.

Cautious about.

Speaker Change: Over ordering.

Speaker Change: The inventory situation.

Speaker Change: Clearing up.

Speaker Change: It's still an issue depending on the business Youre talking about but I think it's a combination of a lot of.

Speaker Change: Thanks.

Sure.

Speaker Change: Which.

Speaker Change: Hopefully they will start to clear up.

Speaker Change: As we get into.

Speaker Change: The future state when when the volatility.

Speaker Change: Hopefully it stabilized.

Anthony Chester Lebiedzinski: Okay. Got it. Okay. And then, um... Just as far as the quarter that you reported, can you give us a census about unit volumes versus pricing or ASPs?

Speaker Change: Understood. Okay got it Okay and then.

Speaker Change: Just as far as the quarter.

Speaker Change: You reported can.

Speaker Change: Can you give us a sense as to the unit volumes versus pricing or asp's.

Speaker Change: Yes, I mean.

Speaker Change: So with the discounting and promotional activity, we've had that really affected the top line more than unit volume.

Speaker Change: But having said that depending on the category unit volume was down versus last year I don't have precise numbers for you.

But certainly the discounting affected that top line more than anything else.

Anthony Chester Lebiedzinski: Understood. Okay. Thanks, Dave. Okay. And then, Helen, I think you said that, you know, the inventory levels at retail are starting to improve. Is that across the board, or are you seeing it gets better than others as far as the inventory levels that you're seeing from retailers?

Speaker Change: Understood Okay. Thanks, Dave.

And then how long I think you said that inventory.

Speaker Change: Inventory levels at retail are starting to improve is that across the board or are you seeing.

Speaker Change: So certain pockets of your business yes.

Speaker Change: This better than others.

Speaker Change: As far as the inventory levels.

Speaker Change: That you are seeing from retailers.

Helen P. Johnson: I think it depends on the business for sure and so forth, but I think, in general, the inventory levels will get better, and, you know, everybody's recognized it. They were too high, and they're working their way through it. But, depending on the category, some are moving faster than others, I think. Your dogging business is a little lagged. We've got some build-up in the dealers. So again, it depends. But in general, I think, you know, there isn't an issue with inventory. These people have the supplies and are ready to go for the season.

I think it depends on the business for.

Speaker Change: Sure.

Hello.

Speaker Change: I think in general.

Speaker Change: The inventory levels and will get better.

Speaker Change: Everybody is recognized.

Speaker Change: They were too high and they're working their way through it but depending on that.

Speaker Change: Category.

Some are moving faster than others I think.

Speaker Change: Regarding business is a little lag that we've got some.

Speaker Change: Buildup in the dealers.

Speaker Change: But in general I think.

Speaker Change: There isn't.

Speaker Change: Issue with the inventory that you have stock.

Speaker Change: Stock and are ready to go for the season.

Speaker Change: Mhm.

Speaker Change: Okay, and then you talked about seeing good response from <unk> Quest Trolling Motors, which is great to hear.

Speaker Change: So that being said I mean do you think this will be incremental.

Speaker Change: To your existing line of products or could we perhaps see.

Some cannibalization from your other product lines.

Speaker Change: How should we think about that.

Helen P. Johnson: Well, the good response is really trade oriented. I think innovation in general was a key for this coming season because innovation tends to drive through some of the depressed man. But this is. You know, we did restage our whole brush, our whole Lakota line, and we always assume that as you restate a product, you've got some cannibalization of the existing, but this is a different motor for a different target. So I feel good that it should drive some incremental sales.

Speaker Change: Well, it's a good good response its really trade.

Speaker Change: And then I think the innovation in general is a key for this.

Carlos <unk>.

Speaker Change: Basically.

Speaker Change: Drive thru.

Speaker Change: The depressed demand.

Speaker Change: But this is.

Speaker Change: Yes.

Speaker Change: We did restate our whole breast are globally aligned.

Speaker Change: And we.

Speaker Change: We always assume that as you restage product <unk> got little cannibalization of existing but this isn't different.

Speaker Change: Motor or a different target so feel good.

Speaker Change: Should drive some incremental sales.

Anthony Chester Lebiedzinski: That's great to hear. Okay, that's what I was looking for. So, and then, you know, thinking about the promotional programs and your efforts to reduce inventory, how should we think about that as it relates to your near-term and longer-term profitability?

Speaker Change: That's good that's great to hear Okay. That's what I was looking forward so.

Speaker Change: And then.

Speaker Change: Thinking about the promotional programs and your efforts to reduce inventory.

Speaker Change: How should we think about.

Speaker Change: As it relates to your near term Youll.

Speaker Change: Longer term profitability.

Helen P. Johnson: Well, I think we, you know, we do what it takes to drive volume in the market, and I think this is why we're addressing this.

Well I think we.

Speaker Change: We do what it takes to drive volume in.

Speaker Change: Mark and I think.

Speaker Change: This is this is we are addressing this.

Speaker Change: This situation, which is a lot of competition.

Speaker Change: Chris.

Speaker Change: Softer.

Speaker Change: Demand in the market not growing as fast I think.

Speaker Change: You end up increasing your promotional.

Speaker Change: And Budd.

Speaker Change: At the innovation innovation should.

In normal times be what drives sales.

Speaker Change: We have to relies heavily on promotions. So I think we show that we will do what it takes.

Speaker Change: To derive movement.

Speaker Change: At retail.

Speaker Change: It's just been a little heavier this year given the circumstances.

Anthony Chester Lebiedzinski: Yes, okay, but it is encouraging to see the inventory decline on a sequential basis, so I hope you guys can further make progress there. And then, lastly, for me, just switching gears to your cost savings program. So it sounds like it helped to offset some of the pressure points in this last quarter and I think even the quarter before that. So, but I guess as you look at that cost savings program, I guess you talked about the...

Speaker Change: Gotcha Okay.

Speaker Change: It is encouraging to see the inventory decline on a sequential basis. So.

Speaker Change: I Hope you guys can further make progress there.

Speaker Change: And then lastly for me.

Speaker Change: Just switching gears to your cost savings program.

Speaker Change: So it sounds like it helped to offset some of the.

Pressure points.

Last quarter, I think we even the quarter before that so but I guess as you look at that cost savings program.

Speaker Change: Talked about the.

Speaker Change: Improving efficiencies of factories.

Speaker Change: Logistics, but I guess, maybe in baseball terms.

Speaker Change: And are you win with that initiative.

Speaker Change: What else are you looking to do to gain further.

Speaker Change: Cost savings.

David W. Johnson: Yeah, I think we're in the middle of it. So I'll use football. We're at halftime.

Speaker Change: Yes, I think thats about all of us all.

Speaker Change: We're at halftime.

David W. Johnson: So I think, yeah, I mean, we started this, you know, pretty robustly six to eight months ago, and we continue to look at how we can improve our profit profile. So I keep saying that it will continue.

Speaker Change: So I think yes, I mean, we.

Speaker Change: <unk> does pretty robustly six to eight months ago, and we continue to look at how we can improve our profit profile. So that will continue.

Speaker Change: Okay. Thank you. Thank you.

Speaker Change: We are evaluating all options to look at other cost savings.

Speaker Change: But it's really about.

Speaker Change: Being more efficient.

Speaker Change: And doing.

Speaker Change: In a more effective and efficient way and I think.

Speaker Change: That's a heavy focus where we are.

Speaker Change: Looking at all aspects of the business.

Speaker Change: I think the marketplace.

Speaker Change: Obviously the competition is.

Speaker Change: Continuing to increase pressures, we've got to look at this.

Speaker Change: We're in we're in the process of doing that.

Speaker Change: Understood well, thank you very much and best of luck.

Operator: Thank you. One moment for our next question, and our next question comes from the line of Anna Glaessgen from B Riley. Your question, please.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Ana <unk> from B Riley Your question. Please.

Ana: Hi, good morning.

Ana: For taking my question.

Ana: I'd like to go back to that.

Ana: Some of the questions around margin and understanding you have to respond to competitive activity.

Ana: When thinking about pricing, but what's your outlook for promotional D. As we think longer term is this kind of a new normal as you have to respond to these competitors do you see.

Ana: Reversion back to historical levels.

Speaker Change: Any more color there would be super helpful.

Helen P. Johnson: You know, I think it is not going away. I think, you know, we've got some intense competition. It will be going forward. But, you know, we've got to up our game in innovation, so promotions have become a critical factor for us.

Speaker Change: I think.

Speaker Change: I think it is.

Speaker Change: It's not going to go away.

Speaker Change: In healthy competition it will be.

Speaker Change: Going forward, but we.

Speaker Change: Really rely on innovation to drive the price values OLED promotion and other income.

Speaker Change: But it certainly is necessary to be right in there.

Speaker Change: During the key promotional timeframe as our competitors are promoting as well.

But it's a different ballgame.

Speaker Change: And.

Speaker Change: We've got to up our game in innovation sell promotions on E Commerce.

Speaker Change: As critical a.

Speaker Change: <unk>.

Speaker Change: Factor for us so.

Speaker Change: Got it.

Speaker Change: As inventory positions are seemingly improving at retail.

Speaker Change: You expect a more balanced.

A greater balance between sell in and sell through are how do you expect that progressing through the year.

Speaker Change: Yes, I think that would become more balanced.

Speaker Change: Over the seasons.

Speaker Change: Just remember we are seasonal so.

Speaker Change: Quarter by quarter does change, but yes, I would definitely expect to see that balance out as inventories improve.

Anna Glaessgen: Got it. And this last one for me: the inventory on your balance sheet, is that content that you're trying to work down, is that concentrated in any one segment, or is it kind of across the board? It's across the board based on sales.

Speaker Change: Got it and just last one for me.

The inventory on your balance sheet is that content that you're trying to work down its not concentrated to any one segment or is it kind of across the board.

It's across the board based on the sales of the business units. So obviously, our biggest business has got the most inventory.

Speaker Change: And every business has has been able to reduce their inventory sequentially over the quarter.

Speaker Change: Great.

Speaker Change: <unk>.

Operator: Thank you. One moment for our next question, and our next question comes from the line of Doug Gacielo from Crawford. Your question, please.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Doug <unk> from Crawford Your question. Please.

Doug Gacielo: Good morning, thanks for taking my call. At the risk of beating a dead horse, I just wanted to double-click on the competitive intensity question a bit, so the press releases are chock-full of commentary on pricing actions and promotional activity, and you called out the Minn Kota quest, Trolling Motor Success. So my question is, and I think I know the answer, but I want to ask it explicitly. Do you think the competitive environment is accelerating in terms of its intensity in this important, you know, seasonal third quarter that you're in now versus a year ago, and also relative to the quarter you just closed?

Doug: Good morning, Thanks for taking my call.

Doug: At the risk of beating a dead horse I just wanted to double click on the competitive intensity question a bit.

Doug: Press releases Truckful commentary on pricing actions and promotional activity and you called out the Minnesota.

Quest trolling motor success. So my question is and I think I know the answer but I want to ask it explicitly.

Doug: You think the competitive environment is accelerating in terms of its intensity in this important.

Doug: Seasonal third quarter that you're in now versus a year ago and also relative to the quarter you just close.

Helen P. Johnson: Well, it depends on which business you're talking about. But I think, you know, across the board, we've got a lot more activity going on from a promotional standpoint. And that usually happens when you're in the market where The demand is a little soft and it just increases I think we've, because of the I think popularity of the outdoor space, we've obviously attracted more competitive players and more competitive activity, you know, and during this kind of timeframe where you've got economic uncertainty, there's also, And we're seeing, depending on the business, but the mix changing a little bit that some of the lower price point products are gaining a little more you know, traction than some of the premium price.

Well it depends on which business you're talking about but I think.

Doug: Across the board we've got.

Doug: A lot more activity going on from a promotional standpoint and that usually happens when you are in the market where.

Doug: The demand.

Doug: There is a level of thought and then just any.

Doug: Increases I think we.

Doug: Because of the.

Doug: I think popularity of the outdoor space, we've obviously attracted more competitive.

Players and where competitive activity.

Doug: During this kind of timeframe, where you've got economic uncertainties. There is also.

Doug: And we're seeing it depending on the business, but the.

Doug: The mix changing a little bit that some of the lower price point products are a little more.

Doug: Traction than some of the premium price.

Doug: I would say in general.

Helen P. Johnson: But I would say, in general, outdoor, you know, it's become a good space to be in, and You know, I think the reality is that we are going to have competition going forward, and, You know, pricing and promotions are part of the game.

Doug: Outdoor.

Doug: A good space to be in.

Doug: I think the reality that we are going to have.

Doug: Competition going forward.

Doug: Pricing and promotions as part of the game.

Doug Gacielo: Great, thank you. I meant fishing specifically, but I think you knew that.

Speaker Change: Great. Thank you and fishing, specifically, but I think you can do that and then my last question is just on capital allocation. So I wonder if first if you think about it this way, but what do you think is the most return on invested capital accretive.

Speaker Change: Use of $84 million in cash that you have on the balance sheet and the free cash that you'll generate over the next handful of years is it <unk>.

Speaker Change: Dividend special dividend share repo M&A.

Speaker Change: Or perhaps investing more aggressively in R&D and innovation such that you can offset some of this.

Speaker Change: Competitive threat. Thank you.

Helen P. Johnson: Yeah, I mean, our preference is to invest that capital to grow the business and grow it profitably and return that, you know, much better than our cost of capital. And that's the plan. Obviously, as you know, there's a risk profile for everything that we look at. So it just depends on what you know, what the project is, and what we're going to look at. But yeah, we want to take that capital invested and invest it back into the business, either through organic growth or perhaps acquisition.

Yes.

Speaker Change: Our preference is to invest that capital to grow the business and grow profitably and earn a return thats.

Speaker Change: Much better then.

Speaker Change: Our cost of capital and that's the plan.

Speaker Change: As you know there is a risk profile of everything that we looked at so it just depends on what.

Speaker Change: Once the project is and what we're going to look at but yes, we want to take that capital invest invest it back into the business either through organic growth or perhaps acquisitions.

Speaker Change: Great. Thank you.

Operator: Thank you. This does conclude the question and answer session for today's program. I'd like to hand the program back to Helen Johnson and Leopold for any further remarks.

Speaker Change: Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Helen Johnson Leipold for any further remarks.

Helen P. Johnson: Thank you all for joining us today. I hope everybody has a great weekend. Thank you.

Speaker Change: And thank you all for joining us today I hope everybody has a great weekend. Thank you.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Speaker Change: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Q2 2024 Johnson Outdoors Inc Earnings Call

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