Q3 2024 Johnson Outdoors Inc Earnings Call

August 5, 2024

[inaudible]

Operator: Hello everyone and welcome to the Johnson Outdoors third quarter 2024 earnings conference call. Today's call will be led by Helen Johnson, Chairman and Chief Executive Officer of Johnson Outdoors. 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.

Operator: Hello everyone, and welcome to the Johnson Outdoors Third Quarter of 2024 earnings conference call.

Speaker Change: Hello everyone and welcome to the Johnson Outdoors third quarter 2024 earnings conference call. Today's call will be led by Helen Johnson, layup hold, Johnson Outdoors chairman and chief executive officer. Also on the call is David Johnson, vice president and chief financial officer.

Helen Johnson-Leopold: Enhancing our digital and e-commerce capability is one key priority as our online presence provides key consumer touch points for our brands, from product research to purchase to post-purchase support. Our investment in e-commerce and digital sophistication is important to the future of all of our brands and businesses. We are confident this will be a meaningful contributor to accelerating our growth and profitability. While this fiscal year is challenging, we are working hard to improve our financial performance and are committed to investing in revenue and operating initiatives that will position our brands for long-term growth. We feel good about the long-term opportunities in business, and we are confident that we'll see benefits from these investments in the future. I'll turn the call over to Dave for more details on the finances.

Helen Johnson Lay-Upwood: Today's call will be led by Helen Johnson Lay-Upwood, Johnson Outdoors, Chairman and Chief Executive Officer.

David Johnson: Also on the call is David Johnson, Vice President and Chief Financial Officer.

Operator: Prior to the question-and-answers session, all participants will be placed in a listen-only mode. After the prepared remarks, the question and session will begin. If you would like to ask a question during the time, please press star 11 on your telephone keypad.

Speaker Change: 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. If you would like to ask a question during this time, please press star 1-1 on your telephone keypad.

Operator: This call is being recorded. Your participation implies consent to our recording this call.

Speaker Change: This call is being recorded. Your participation implies consent to our recording this call. If you do not agree on these terms, simply drop off the line. I'd now like to turn the call over to Pat Penman from Johnson Outdoors. Please go ahead, Ms. Penman.

Operator: If you're not going to be on this turn, simply drop off the line.

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

Pat Pettman: I'd like to turn the call over to Pat Pettman from Johnson Outdoors. Please go ahead and miss Pettman.

David Johnson: I wanted to highlight a few items from the quarter. Profits in the third quarter were impacted by lower sales volumes, as well as ongoing investment in promotional activity. While we're gaining efficiency benefits and cost savings in our operations, this was offset by lower overhead absorption and product mix. Operating expenses increased 4%, or $2.2 million, versus the prior year quarter, due primarily to increased advertising and promotional spending, partially offset by lower sales volumes between quarters.

Pat Pettman: Thank you.

Pat Pettman: Good morning and thank you for joining us for our discussion of Johnson Outdoors results for the 2024 fiscal third 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 guaranteed guarantees of future performance. Actually, 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 filing with the Securities and Exchange Commission.

Pat Penman: Thank you. Good morning and thank you for joining us for our discussion of Johnson Outdoors results for the 2024 fiscal third quarter. If you need a copy of today's news release, it is available on our website at johnsonoutdoors.com under investor relations.

Speaker Change: I also need to remind you that this conference call may contain forward-looking statements.

Speaker Change: 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.

Speaker Change: These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission

Pat Pettman: If you have any additional questions following the call, please contact Dave Johnson or myself.

Speaker Change: If you have any additional questions following the call, please contact Dave Johnson or myself.

David Johnson: As Helen mentioned, we are expanding our cost savings efforts across all aspects of the business as it's critical that we improve our financial profile. We'll update you on our progress next quarter. We've been working hard to reduce our inventory back to more normal levels, although lower consumer demand has hindered progress. Our inventory balance as of June was $223 million, down about $12 million from last year's June quarter and down $26 million from March.

Helen Johnson Lay-Upwood: It is now my pleasure to turn the call over to Helen Johnson. Thanks, Pat. Good morning, everyone, and thank you for joining us. I'll begin by addressing our results and giving perspective performance in that I'll share the outlook for the business.

David Johnson: We expect some inventory reductions for 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 session. Thank you. At this time, we'll close.

Speaker Change: It is now my pleasure to turn the call over to Helen Johnson Leopold.

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list. Our first question comes from the line of Anthony Acidotti. Your line is now open.

Speaker Change: Thanks, Pat. Good morning, everyone, and thank you for joining us. I'll begin by addressing our results and giving perspectives on the performance, and then I'll share the outlook for the business. Dave will provide more detailed financial review, and then we'll take your questions.

Helen Johnson Lay-Upwood: Dave will provide you a detailed financial review, and then we'll take your questions. Sales in our third fiscal quarter ending June 2024 declined 8% to 172.5 million dollars compared to 187 million dollars in the prior year third quarter. You're the date company sales decreased 14% of the last year's fiscal nine months period. The company reported an operating loss of approximately $500,000 for the third quarter compared to an operating process of 17.4 million dollars in the prior year third quarter. For the year-to-date period, total company operating loss declined to approximately $700,000 compared to an operating process of 34.3 million dollars for the prior year-to-date period.

Anthony Acidotti: Good morning, and thank you for taking the questions. So Dave, I know you touched on the lower sales volumes impacting the quarter. Can you also comment on pricing, whether that was a factor in the quarterly sales decline?

David Johnson: And not really. We've done some discounting in the marketplace, so any price increases we've taken have been offset by the discounting we've done to shore up our position in the marketplace.

Speaker Change: Sales in our third fiscal quarter ending June 2024 declined 8% to $172.5 million.

David Johnson: Okay. And then what was the impact of increased advertising spending and promotional activity on operating expenses?

Speaker Change: compared to $187 million in the prior year, third quarter. Year-to-date, company sales decreased 14% over last year's fiscal nine-month period.

David Johnson: Um, yeah, I've got that number. It's for the quarter. Adam Promo increased about four and a half million dollars versus last year's quarter.

Speaker Change: The company reported an operating loss of approximately $500,000 for the third quarter compared to an operating profit of $17.4 million in prior year, third quarter.

Speaker Change: For the year-to-date period, total company operating loss declined to approximately $700,000 compared to an operating profit of $34.3 million for the prior year-to-date period.

Helen Johnson Lay-Upwood: Now being come for the third quarter with 1.6 million dollars or 16 cents per diluted share versus 14.8 million dollars or 1 dollar and 44 cents per diluted share in the previous year third quarter. Net income during the fiscal nine months period was 7.7 million dollars or 75 cents per diluted share versus 35.5 million dollars or 3 dollars and 47 cents per diluted share in the prior fiscal year-to-date period. Continue to market place conditions significantly impacted our results for the quarter. Consumer demand for outdoor recreation products remain depressed across all of our categories through the peak season.

Speaker Change: Net income for the third quarter was $1.6 million or $0.16 per diluted share versus $14.8 million or $1.44.

Speaker Change: Deluded Share in the previous year's third quarter. Net income during the fiscal nine-month period was $7.7 million or 75 cents per Deluded Share.

Speaker Change: versus $35.5 million or $3.47 per community chair in the prior fiscal year-to-date period.

Speaker Change: Continued tough marketplace conditions significantly impacted our results for the quarter. Consumer demand for outdoor recreation products remained depressed across all of our categories through the peak season.

Helen Johnson Lay-Upwood: The down market and soft demand required us to significantly increase our investment in promotional activity. As we continue to operate in this challenging environment, we do believe the outdoor recreation marketplace is resilient and attractive of the long-term and that our brands will be well-decisioned once conditions start to even out. We've been evaluating all aspects of business to improve our financial results, as well as working to redeploy resources to enable growth for the future. Improving profitability and strengthening our business operations remains a critical focus area. We've been working hard to reduce inventory to more normal levels, although progress has been limited by the lower consumer demand.

Speaker Change: The down market and soft demand required us to significantly increase our investment in promotional activities.

Speaker Change: As we continue to operate in this challenging environment, we do believe the outdoor recreation marketplace is resilient and attractive over the long term, and that our brands will be well-positioned once conditions start to even out.

Speaker Change: We've been evaluating all aspects of the business to improve our financial results, as well as working to redeploy resources to enable growth for the future.

Speaker Change: Improving profitability and strengthening our business operations remains a critical focus area.

Speaker Change: We've been working hard to reduce inventory to more normal levels, although progress has been limited by the lower consumer demand. We are expanding our cost savings actions and evaluating our cost structure for additional efficiency opportunities.

Helen Johnson Lay-Upwood: We are expanding our cost savings actions and evaluating our cost structure for additional efficiency opportunities. While we have seen some progress from these efforts, we have allowed more work to do to boost our margins and improve our financial performance. As we work to reduce costs and increase efficiency where possible, we will invest in mission credit. Critical initiatives to drive growth, including innovation, digital and e-commerce capabilities. Innovation has always been key to our success and continues to be the imperative to winning in an outdoor recreation marketplace that has been changing at a rapid pace, creating consumer-focused products and technology that delivers the best outdoor experience as possible across all of our categories as a strategic priority.

Speaker Change: While we have seen some progress from these efforts, we have a lot more work to do to boost our margins and improve our financial performance.

Speaker Change: As we work to reduce costs and increase efficiency where possible, we will invest in mission-critical initiatives to drive growth, including innovation, digital, and e-commerce capabilities.

Speaker Change: Innovation has always been key to our success and continues to be the imperative to winning in an outdoor recreation marketplace that has been changing at a rapid pace.

Speaker Change: Creating consumer-focused products and technology that deliver the best outdoor experiences possible across all of our categories is a strategic priority and we are working on a pipeline of new products to drive success.

Helen Johnson Lay-Upwood: And we are working on a pipeline of new products to drive success. Enhancing our digital and e-commerce capability is one key priority, as our online presence provides key consumer touch points for our brands from product research to purchase to post purchase support. Our investment in e-commerce and digital specification is important to the future of all of our brands and businesses. We are confident this will be a meaningful contributor to accelerating our growth and profitability. While this fiscal year is challenging, we are working hard to improve our financial performance and are committed to investing in revenue and providing initiatives that will position our brands for long-term growth.

Speaker Change: Enhancing our digital and e-commerce capability is one key priority as our online presence provides key consumer touch points for our brands from product research to purchase to post-purchase support.

Speaker Change: Our investment in e-commerce and digital sophistication is important to the future of all of our brands and businesses. We are confident this will be a meaningful contributor to accelerating our growth and profitability.

Speaker Change: While this fiscal year is challenging, we are working hard to improve our financial performance and are committed to investing in revenue and profit.

Helen Johnson Lay-Upwood: We feel good about the long-term opportunities of business, and we are confident that we'll see benefits from these investments in the future.

Speaker Change: initiatives that will position our brands for long-term growth. We feel good about the long-term opportunities of business and we are confident that we'll see benefits from these investments in the future. Now I'll turn the call over to Dave for more details on the financials.

David Johnson: Now, today for more details on the financials.

David Johnson: Thank you, Helen. Good morning, everyone. I wanted to highlight a few items from the quarter. Profits in the third quarter were impacted by lower sales volume as well as ongoing investment in promotional activity. While we're gaining efficiency benefits and cost savings in our operations, this was offset by lower overhead absorption and product mix. I prefer an expensive increase of 4% or $2.2 million versus the prior year quarter. We primarily to increase advertising and promotional spending, partially offset by lower sales volume between quarters. As Helen mentioned, we are expanding our cost savings efforts across all aspects of the business, as it's critical that we improve our financial profile.

David Johnson: Okay, gotcha. Okay, that's helpful. Okay. Okay, and then as far as inventory levels at retail, what is your sense of that as far as, you know, what's going on there? Are you seeing also just retailers being more careful with replenishments? How should we think about that?

Dave Johnson: Thank You Helen, good morning everyone. I wanted to highlight a few items from the quarter. Profits in the third quarter were impacted by lower sales volumes as well as ongoing investment in promotional activity.

Dave Johnson: While we're gaining efficiency benefits and cost savings in our operations, this was offset by lower overhead absorption and product mix.

Dave Johnson: Operating expenses increased 4% or $2.2 million versus the prior year quarter, due primarily to increased advertising and promotional spending.

Dave Johnson: partially offset by lower sales volumes between quarters.

Speaker Change: As Helen mentioned, we are expanding our cost savings efforts across all aspects of the business as it's critical that we improve our financial profile. We'll update you on our progress next quarter.

David Johnson: We'll update you on our progress next quarter. We've been working hard to reduce our inventory back to more normal levels, although lower consumer demand has hindered progress. Our inventory balance as of June was $223 million, down about $12 million from last year's. 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.

Helen: We've been working hard to reduce our inventory back to more normal levels, although lower consumer demand has hindered progress.

Speaker Change: Our inventory balance as of June was $223 million, down about $12 million from last year's June quarter, and down $26 million from March. We expect some inventory reductions to the balance of the fiscal year.

Speaker Change: 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.

Operator: Now, I'll turn the call over to the operator for the Q&A session. Operator? Thank you. At this time, we'll collect the question and the session. As a reminder to ask a question, you need to press Start 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press start 1-1 again. Please stand by while we compile the Q&A roster.

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

Speaker Change: Thank you. At this time, we will conduct the question and answer session. As a reminder to ask a question, you need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Anthony: Our first question, because from the line of Anthony, a facility, your line is now open. Good morning, and thank you for taking the questions. So Dave, I know you touched on the lower sales volumes, the impacting the quarter. Can you also comment about pricing, whether that was a factor in the quarterly sales decline? In that and that, really, we've done some discounting in the marketplace. So a pricing increase, as we've taken them in, offset by the discounting we've done, to show our position in the marketplace. Understood. Okay.

Speaker Change: Our first question comes from the line of Anthony Acidotti. Your line is now open.

Anthony Acidotti: Good morning and thank you for taking the questions. So Dave, I know you touched on the lower sales volumes.

Anthony Acidotti: impacting the quarter. Can you also comment about pricing, whether that was a factor in the quarterly sales decline?

Dave Johnson: And not really. We've done some discounting in the marketplace, so any price increases we've taken have been offset by the discounting we've done to shore up our position in the marketplace.

Anthony: And then what was the impact of increased advertising, spending, and promotional activity for operating expenses? Yeah, I've got that number. It's for the quarter, Adam from increased about $4.5 million versus the last year's quarter. Okay. Gotcha. Okay. That's helpful. Okay.

Speaker Change: Understood, okay. And then what was the impact of increased advertising spending and promotional activity for operating expenses?

Speaker Change: Yeah, I've got that number. For the quarter, Ad and Promo increased about $4.5 million versus last year's quarter.

Speaker Change: Okay, gotcha, okay, that's helpful, okay. Okay, and then as far as inventory levels at retail, what is your sense of that as far as, you know, what's...

Anthony: And then, as far as inventory levels at retail, what is your sense of that as far as what's going on there? Are you seeing also just retailers being more careful with replenishments? How should we think about that? You know, I think the retail inventory situation is getting better, but we still see, you know, our retail is being very conservative on the purchasing end of things and, you know, trying to maintain a pretty conservative level of inventory going forward. Understood. Okay.

Speaker Change: What's going on there? Are you seeing also just retailers being more careful with replenishments? How should we think about that?

David Johnson: Um, you know, I think the retail inventory situation is getting better, but, um, we still see our retailers being very conservative on the purchasing end of things and, you know, trying to maintain a, you know, pretty conservative level of inventory going forward.

Speaker Change: You know, I think the retail inventory situation is getting better, but we still see

Speaker Change: You know, our retailers being very conservative on the purchasing end of things and, you know, trying to maintain a

Speaker Change: you know a pretty conservative level of inventory going forward.

David Johnson: Okay. And then, can you also just talk a little bit more about the cost savings actions that you have taken so far, you know, what was the impact of that in the June quarter, and what else are you planning to do in terms of cost efficiencies?

Anthony: And then can you also just talk about a little bit more about the cost savings actions that you have taken so far? You know, what was the impact of that in the June quarter, and what else are you playing to do in terms of cost efficiencies? Yeah, I mean, the focus historically over this year has been on the factories and the operations and getting efficiencies out of that. That's borne some fruit for us. It's been good. It has helped offset some of the absorption issues we're seeing with the lower volume. So in that, it's been successful for us.

Speaker Change: Understood okay and then can you also just just talk about a little bit more about the cost savings actions that you have taken so far you know what was the impact of that in the June quarter and what else are you planning to do in terms of cost efficiencies?

David Johnson: Yeah, I mean, the focus historically, you know, this year has been on the factories and the operations and getting efficiencies out of that. That's borne some fruit for us. It's been good. It has, you know, helped offset some of the absorption issues we're seeing with the lower volume. So in that, it's been successful for us. We're going to look everywhere going forward, and we're going to try to find more efficiencies and try to drive that margin even further kind of across the board, while we continue to invest in what's important.

Speaker Change: Yeah, I mean the focus historically, you know, over this year has been on the factories and the operations and getting efficiencies out of that and that's borne some fruit for us. It's been good.

Speaker Change: It has, you know, helped offset some of the absorption issues we're seeing with the lower volume. So in that, it's been successful for us.

Anthony: We're going to look everywhere going forward, and we're going to try to find more efficiencies and try to drive that margin even further across the board while we continue to invest in what's important for us. Okay. Thanks. That sounds good.

Speaker Change: We're going to look everywhere going forward, and we're going to try to find more efficiencies and try to drive that margin even further, kind of across the board.

Speaker Change: while we continue to invest in what's important for us.

Anthony Acidotti: Okay, thanks. That sounds good.

Anthony: And then I guess the last question here for me is, you know, you talked about the investing and revenue and profit generating activities. I know you've always had a strong focus on innovation. It sounds like you do have some things in the pipeline as far as new products. Can you give us any sense of that as to what I know for competitive reasons? I'm sure you don't want to discuss too many details. But can you just kind of talk about like, you know, maybe, you know, as far as the magnitude of new product and productions, you know, is that greater than what you've seen recently or maybe other things that you're looking to do to drive the, the top line to be in better shape in fiscal 25?

Speaker Change: Okay, thanks. That sounds good. And then I guess, you know, last question here for me is, you know, you know, you talked about the investing in revenue and profit generating activities. I know you've always had a strong focus on innovation. It sounds like you do have some.

Anthony Acidotti: And then, I guess, you know, the last question here for me is, you know, you know, you've talked about investing in revenue and profit generating activities. I know you've always had a strong focus on innovation. It sounds like you do have some things in the pipeline as far as new products go. Can you give us any sense of that as to, you know, what, I know for competitive reasons, I'm sure you don't want to discuss too many details, but can you just kind of talk about, you know, maybe, you know, as far as the magnitude of new product introductions is greater than what you've seen recently, or maybe other things that you're looking to do to drive the top line to be in better shape in fiscal 25?

Speaker Change: things in the pipeline as far as new products. Can you give us any sense of that as to like what, I know for competitive reasons, I'm sure you don't want to discuss too many details, but can you just kind of talk about like, you know,

Speaker Change: Maybe, you know, as far as the magnitude of new product introductions, you know, is that greater than what you've seen recently, or maybe other things that you're looking to do to drive the top line to be in better shape in fiscal 25.

Anthony: You know, I'm, we don't give details obviously on the future related to new products. But the whole area of innovation has been a key focus, and it's really our lover to differentiate ourselves. I think the market has changed. It's positive, I think, because the consumer, you know, has got some different needs and different motivations, which opens up the door for innovation. So all I can say is, you know, that's been our key to leadership in the past, and it's going to be our key going forward. And, and, you know, we feel good about the long term and feel good about our ability to understand the consumer and to be there with the right new products.

Helen Johnson-Leopold: You know, we don't give details, obviously, on the future related to new products, but the whole area of innovation has been a key focus and is really our lever to differentiate ourselves. I think the market has changed, which is positive, I think, because the consumer, you know, has got some different needs and different motivations, which opens up the door to innovation.

Speaker Change: You know, we don't give details, obviously, on the future related to new products, but the

Speaker Change: The whole area of innovation has been a key focus and is really our lever to differentiate ourselves. I think the market has changed, it's

Speaker Change: positive, I think, because the consumer, you know, is got some different needs and different motivations, which opens up the door for innovation. So all I can say is, you know, that's been our key to leadership in the past.

Helen Johnson-Leopold: So all I can say is, you know, that's been our key to leadership in the past, and it's going to be our key going forward. And, and, you know, we feel good about the long term and feel good about our ability to understand the consumer and to be there with the right new product.

Speaker Change: and it's going to be our key going forward and and you know we feel good about the long term and feel good about our ability to understand the consumer and to be there with the right new products.

Anthony: Gotcha. Okay.

Anthony: Well, thank you very much, and the best of luck. Okay. Thank you.

Speaker Change: Gotcha. Okay. Well, thank you very much and best of luck.

Speaker Change: Okay, thank you.

Operator: I'm showing off for the questions at this time.

Helen Johnson Lay-Upwood: I'll not like to turn it back to Helen Johnson.

Speaker Change: Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Helen Johnson-Leopold for closing remarks.

Helen Johnson Lay-Upwood: Leopold for close remarks. Thank you for joining us today. I hope everybody has a great rest of the day. Thank you. Thank you for your participation in today's conference.

Helen Johnson-Leopold: Thank you for joining us today. I hope everybody has a great rest of the day. Thank you.

Operator: This is Conclude Program.

Operator: You may now disconnect. Thank you.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Speaker Change: [inaudible]

Speaker Change: www.thevenusproject.com www.thevenusproject.com

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Speaker Change: www.thevenusproject.com

Operator: Hello everyone and welcome to the Johnson Outdoors 3rd quarter 2024 earnings conference call.

Anthony Acidotti: Gotcha. Okay. Well, thank you very much and best of luck.

Helen Johnson: Hello everyone and welcome to the Johnson Outdoors 3rd Quarter 2024 Earnings Conference Call. Today's call will be led by Helen Johnson, Lay Up Hold, Johnson Outdoors Chairman and Chief Executive Officer. Also on the call is David Johnson, Vice President and Chief Financial Officer.

Helen Johnson Lay-Upwood: Today's call will be led by Helen Johnson, Layup Hold, Johnson Outdoor, Chairman and Chief Executive Officer. Also on the call is David Johnson, Vice President and Chief Financial Officer.

Operator: Prior to the question and answer session, all participants will be placed in a listen-only mode. After the prepared remarks, the question answers should begin.

Operator: If you would like to ask a question during this time, please press star 1-1 on your telephone keypad. This call is being recorded. Your participation implies consent to our recording this call. If you do not agree with these terms, simply drop off the line. I'd now like to turn the call over to Pat Penman from Johnson Outdoors. Please go ahead, Ms. Penman.

Operator: If you would like to ask a question during the time, please press Door 11 on your telephone keypad. This call is being recorded. Your participation implies consent to our recording this call.

Operator: If you do not agree on these terms, simply drop off the line.

Pat Pettman: I will not like to turn the call over to Pat Pettman from Johnson Outdoors Peace Call ahead, Miss Pettman. Thank you. Good morning, and thank you for joining us for our discussion of Johnson Outdoors results for the 2024 fiscal third quarter.

Anthony Acidotti: Okay, thank you.

Pat Penman: Thank you. Good morning, and thank you for joining us for our discussion of Johnson Outdoors results for the 2024 fiscal third 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.

Helen Johnson-Leopold: Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Helen Johnson-Leopold for closing remarks.

Pat Pettman: 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 guaranteed guarantees of future performance. Actually, 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 filing with the Securities and Exchange Commission.

Pat Penman: 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 Commission. If you have any additional questions following the call, please contact Dave Johnson or my team. It is now my pleasure to turn the call over to Helen Johnson-Leopold. Thanks.

Speaker Change: I also need to remind you that this conference call may contain forward-looking statements.

Speaker Change: These statements are made on the basis of our current views and assumptions and are not guarantees of future performance.

Speaker Change: 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 Commission.

Pat Pettman: If you have any additional questions following the call, please contact David Johnson or myself.

Speaker Change: If you have any additional questions following the call, please contact Dave Johnson or myself.

Helen Johnson Lay-Upwood: It is now my pleasure to turn the call over to Helen Johnson. Thanks, Pat. Good morning, everyone, and thank you for joining us.

Helen Johnson-Leopold: Thanks, Pat. Good morning, everyone, and thank you for joining us. 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'll take your questions. Sales in our third fiscal quarter ending June 2024 declined 8% to $172.5 million, compared to $187 million in the prior year's third quarter. Year-to-date company sales decreased 14% over last year's fiscal nine-month period.

Operator: Thank you for joining us today. I hope everybody has a great rest of the day. Thank you. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Speaker Change: It is now my pleasure to turn the call over to Helen Johnson Leopold. Thanks Pat. Good morning everyone and thank you for joining us

Helen Johnson-Leopold: The company reported an operating loss of approximately $500,000 for the third quarter compared to an operating profit of $17.4 million in the prior year's third quarter. For the year-to-date period, total company operating losses declined to approximately $700,000 compared to an operating profit of $34.3 million for the prior year-to-date period. Net income for the third quarter was $1.6 million, or $0.16 per diluted share, versus $14.8 million, or $1.44 per diluted share, in the previous year's third quarter. Net income during the fiscal nine-month period was $7.7 million, or $0.75 per diluted share, versus $35.5 million, or $3.47 per diluted share, in the prior fiscal year-to-date period.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Helen Johnson Lay-Upwood: I'll begin by addressing our results and giving perspective performance, and then I'll share the outlook for business, table, providing a detailed financial review, and then we'll take your questions. Sales in our third fiscal quarter ending June 2024 declined 8% to $172.5 million compared to $187 million in the prior year third quarter. Year-to-date company sales decreased 14% over last year's fiscal nine-month period. The company reported an operating loss of approximately $500,000 for the third quarter compared to an operating profit of $17.4 million in the prior year third quarter. For the year-to-date period, total company operating loss declined to approximately $700,000 compared to an operating profit of $34.3 million for the prior year-to-date period.

Speaker Change: 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 more detailed financial review, and then we'll take your questions.

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Operator: Hello everyone, and welcome to the Johnson Outdoors 3rd Quarter 2024 Earnings Conference Call. Today's call will be led by Helen Johnson, Lay Up Hold, 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.

Pat Penman: If you would like to ask a question during this time, please press star 1-1 on your telephone keypad. This call is being recorded. Your participation implies consent to our recording this call. If you do not agree with these terms, simply drop off the line. I'd now like to turn the call over to Pat Penman from Johnson Outdoors. Please go ahead, Ms. Penman.

Speaker Change: Sales in our third fiscal quarter ending June 2024 declined 8% to $172.5 million compared to $187 million in the prior year, third quarter.

Helen Johnson-Leopold: Thanks, Pat. Good morning, everyone, and thank you for joining us.

Dave Johnson: Year-to-date company sales decreased 14 percent over last year's fiscal nine-month period.

Helen Johnson-Leopold: 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'll take your questions. Sales in our third fiscal quarter, ending June 2024, declined 8% to $172.5 million compared to $187 million in the prior year's third quarter. Year-to-date company sales decreased 14% over last year's fiscal nine-month period. The company reported an operating loss of approximately $500,000 for the third quarter compared to an operating profit of $17.4 million in the prior year's third quarter.

Dave Johnson: The company reported an operating loss of approximately $500,000 for the third quarter compared to an operating profit of $17.4 million in prior year third quarter.

Helen Johnson-Leopold: For the year-to-date period, total company operating losses declined to approximately $700,000 compared to an operating profit of $34.3 million for the prior year-to-date period. Net income for the third quarter was $1.6 million or $0.16 per diluted share versus $14.8 million or $1.44 for the previous year's third quarter. Net income during the fiscal nine-month period was $7.7 million, or $0.75 per diluted share, versus $35.5 million, or $3.47 per diluted share, in the prior fiscal year-to-date period. Continued tough marketplace conditions significantly impacted our results for the quarter. Consumer demand for outdoor recreation products remained depressed across all of our categories through the peak season.

Dave Johnson: For the year-to-date period, total company operating loss declined to approximately $700,000 compared to an operating profit of $34.3 million for the prior year-to-date period.

Helen Johnson Lay-Upwood: Net income for the third quarter was $1.6 million per diluted share versus $14.8 million, or $1.44, in the previous year's third quarter. Net income during the fiscal nine-month period was $7.7 million or $75 per diluted share versus $35.5 million or $3.47 per diluted share in the prior year. Continue to market place conditions significantly impacted our results for the quarter. Consumer demand for outdoor recreation products remain depressed across all of our categories through the peak season. The down market and up demand required us to significantly increase our investment in promotional activity.

Dave Johnson: Net income for the third quarter was $1.6 million or $0.16 per diluted share versus $14.8 million or $1.44.

Dave Johnson: Deluded Share in the previous year's third quarter. Net income during the fiscal nine-month period was $7.7 million or 75 cents per deluded share.

Dave Johnson: versus $35.5 million or $3.47 per community chair in the prior fiscal year-to-date period.

Helen Johnson-Leopold: Continued tough marketplace conditions significantly impacted our results for the quarter. Consumer demand for outdoor recreation products remained depressed across all of our categories through the peak season. The down market and soft demand required us to significantly increase our investment in promotional activity. However, as we continue to operate in this challenging environment, we do believe the outdoor recreation marketplace is resilient and attractive over the long term and that our brands will be well-positioned once conditions start to even out.

Dave Johnson: Continued tough marketplace conditions significantly impacted our results for the quarter. Consumer demand for outdoor recreation products remained depressed across all of our categories.

Helen Johnson-Leopold: The down market and soft demand required us to significantly increase our investment in promotional activity. However, as we continue to operate in this challenging environment, we do believe the outdoor recreation marketplace is resilient and attractive over the long term and that our brands will be well-positioned once conditions start to even out. We've been evaluating all aspects of the business to improve our financial results, as well as working to redeploy resources to enable growth for the future, improving profitability and strengthening our business.

Dave Johnson: through the peak season. The down market and soft demand required us to significantly increase our investment in promotional activity.

Helen Johnson Lay-Upwood: As we continue to operate in this challenging environment, we do believe the outdoor recreation marketplace is resilient and attractive of the long term and that our brands will be well positioned once conditions start to even out.

Dave Johnson: As we continue to operate in this challenging environment, we do believe the outdoor recreation marketplace is resilient and attractive over the long term, and that our brands will be well positioned once conditions start to even out.

Helen Johnson Lay-Upwood: We've been evaluating all aspects of the business to improve our financial results, as well as working to redeploy resources to enable growth for the future. Improving profitability and strengthening our business operations remains a critical focus area. We've been working hard to reduce inventory to more normal levels, although progress has been limited by the lower consumer demand. We're expanding our cost savings actions and evaluating our cost structure, traditional efficiency opportunities. While we've seen some progress from these efforts, we have a lot more work to do to boost our margins and improve our financial performance.

Helen Johnson-Leopold: We've been evaluating all aspects of the business to improve our financial results, as well as working to redeploy resources to enable growth for the future. Improving profitability and strengthening our business operations remains a critical focus area. We've been working hard to reduce inventory to more normal levels, although progress has been limited by lower consumer demand.

Dave Johnson: We've been evaluating all aspects of the business to improve our financial results as well as working to redeploy resources to enable growth for the future.

Helen Johnson-Leopold: We are expanding our cost savings actions and evaluating our cost structure for additional efficiency opportunities. While we have seen some progress from these efforts, we have a lot more work to do to boost our margins and improve our financial performance. As we work to reduce costs and increase efficiency where possible, we will invest in mission-critical initiatives to drive growth, including innovation, digital, and e-commerce capabilities. Innovation has always been key to our success and continues to be the imperative to winning in an outdoor recreation marketplace that is changing at a rapid pace, creating consumer-focused products and technology that deliver the best outdoor experiences possible across all of our categories. We are working on a pipeline of new products to drive success.

Helen Johnson Lay-Upwood: As we work to reduce costs and increase efficiency where possible, we will invest in mission credit, critical initiatives to drive growth, including innovation, digital, and e-commerce capabilities. Innovation has always been key to our success and continues to be the imperative to winning in an outdoor recreation marketplace that has been changing at a rapid pace, creating consumer-focused products and technologies that deliver the best outdoor experience as possible across all of our categories as a strategic priority, and we are working on a pipeline of new products to drive success. Enhancing our digital and e-commerce capability is one key priority, as our online presence provides key consumer touch points for our brands, from product research to purchase to post purchase support.

Helen Johnson Lay-Upwood: Our investment in e-commerce and digital sophistication is important to the future of all of our brands and businesses. We are confident this will be a meaningful contributor to accelerating our growth and profitability.

Helen Johnson Lay-Upwood: While this fiscal year is challenging, we are working hard to improve our financial performance and are committed to investing in revenue and providing initiatives that will position our brands for long-term growth. We feel good about the long-term opportunities of business, and we are confident that we'll see benefits from these investments in the future.

David Johnson: Now, I'll turn this call over today for more details on the financials. Thank you, Helen.

David Johnson: Good morning, everyone. I wanted to highlight a few items from the quarter. Profits in the third quarter were impacted by lower sales volume, as well as ongoing investment in promotional activity. While we're gaining efficiency benefits and cost savings in our operations, this would offset by lower overhead absorption and product mix. Operating expenses increase 4% by $2.2 million versus the prior year quarter, to primarily to increase advertising and promotional spending. We are partially offset by lower sales while falling between quarters. As Helen mentioned, we are expanding our cost savings efforts across all aspects of the business, as it's critical that we improve our financial profile.

David Johnson: We'll update you on our progress next quarter. We've been working hard to reduce our inventory back to more normal levels, although lower consumer demand has hindered progress. Our inventory balance as of June was $223 million, down about $12 million from last year's June quarter. And down $26 million from March, we expect some inventory reductions to the balance of the fiscal year. Our balance sheet continues to have no debt, and our cash position enabled us to invest in opportunities to strengthen the business. We remain confident in our ability to deliver a long-term value and consistently pay out cash dividends to our shareholders.

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

Operator: Operator. Thank you. At this time, we'll collect the question and the session. As a reminder to ask a question, you'll need to press Start 1-1 on telephone and wait for your name to be announced. To withdraw your question, please press start 1-1 again. Please stand by while we compile the Q&A roster.

Anthony: Our first question comes from the line of Anthony Asidori. Your line is now...

Anthony: Good morning, and thank you for taking the questions. So Dave, I know you touched on the lower sales volumes, the impacting the quarter. Can you also comment about pricing, whether that was a factor in the quarterly sales decline? And in that, and that really, we've done some discounting in the marketplace. So a price increases, we take them and offset by the discounting. We've done it to shore up our position in the marketplace. Understood. Okay.

Anthony: And then what was the impact of increased advertising spending and promotional activity for operating expenses? Yeah, I've got that number. It's for the quarter; Adam Promo increased about $4.5 million versus the last year's quarter. Okay. Gotcha. Okay. That's helpful. Okay.

Anthony: And then, as far as inventory levels at retail, what is your sense of that as far as what's going on there? Are you saying also just retailers being more careful with replenishments? How should we think about that? You know, I think the retail inventory situation is getting better, but we still see, you know, our retail is being very conservative on the purchasing end of things and, you know, trying to maintain a pretty conservative level of inventory going forward. Understood. Okay.

Anthony: And then can you also just talk about a little bit more about the cost savings actions that you have taken so far? What was the impact of that in the June quarter, and what else are you playing to do in terms of cost efficiencies? Yeah. I mean, the focus historically over this year has been on the factories and the operations and getting efficiencies out of that. And that's born some fruit for us. It's been good. It has helped offset some of the absorption issues we're seeing with the lower volume. So in that, it's been successful for us.

Anthony: We're going to look everywhere going forward, and we're going to try to find more efficiencies and try to drive that margin even further, kind of across the board, while we continue to invest in what's important for us. Okay.

Anthony: Thanks. That sounds good.

Anthony: And then I guess the last question here for me is, you know, you talked about the investing and revenue and profit generating activities. I know you've always had a strong focus on innovation. It sounds like you do have some things in the pipeline as far as new products. Can you give us any sense of that? As to what I know for competitive reasons, I'm sure you don't want to discuss too many details, but can you just kind of talk about, like, you know, maybe as far as the magnitude of new product introductions, you know, is that greater than what you've seen recently? Or maybe other things that you're looking to do to drive the top line to be in better shape and fiscal 25.

Anthony: You know, we don't get detailed, obviously, on the future related to new products, but the whole area of innovation has been a key focus and is really our lever to differentiate ourselves. I think the market has changed. It's a positive, I think, because the consumer has got some different needs and different motivations, which opens up the door for innovation. So all I can say is, you know, that's been our key to leadership in the past and is going to be our key going forward. And we feel good about the long term and feel good about our ability to understand the consumer and to be there with the right new products.

Anthony: Gotcha. Okay.

Anthony: Well, thank you very much, and the best of luck. Okay. Thank you.

Operator: I'm showing off for the questions at this time.

Helen Johnson Lay-Upwood: I'll not like to turn it back to Helen Johnson.

Operator: This is conclude program. You may now just

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