Q4 2024 Johnson Outdoors Inc Earnings Call
Our chairman and Chief Executive Officer also on the call is David Johnson, Vice President and Chief Financial Officer.
Speaker Change: Prior to the question and answer session. All participants will be placed in listen only mode.
Speaker Change: After the prepared remarks, the question and answer session will begin.
If you'd like to ask a question during that time. Please press star 100 telephone keypad. This call is being recorded.
Speaker Change: Participant implies consent to our recording this call. If you don't agree to these terms simply drop off the line I'd like to turn the call over to Pat Penman from Johnson outdoors. Please go ahead and experiment.
Pat Penman: Thank you good morning, and thank you for joining us for our discussion of Johnson outdoors results for the 2020 for fiscal fourth 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.
Pat Penman: Also need to remind you that this conference call may contain forward looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance actual events may differ materially from those statements due to a number of factors many beyond Johnson outdoors control these risks and.
Pat Penman: <unk> include those listed in our press release and filings with the Securities and Exchange Commission. If you have additional questions. Following the call. Please contact Dave Johnson or myself. It is now my pleasure to turn the call over to Helen Johnson Leipold.
Speaker Change: Thanks, Pat and good morning, everyone. Thank you for joining us.
Speaker Change: I'll begin by addressing our fiscal 2020 for performance and then I will share our plans to address future challenges, Dave will cover some key financials and then we'll take your questions.
Speaker Change: I won't rehash the numbers in our fourth quarter and year end earnings announcements, obviously, it was a tough year.
Speaker Change: Continued channel continued challenging marketplace conditions and competitive pressures significantly impacted our fiscal 2020 for performance.
Speaker Change: <unk> demand for outdoor recreation products across all of our businesses remain soft.
Speaker Change: While we are not seeing indicators that a challenging conditions are going away anytime soon we have been aggressively leaning into our critical strategic priorities innovation, our go to market strategy and operational efficiencies to enable future growth for our brands and businesses.
Speaker Change: In this highly competitive outdoor recreation market marketplace, our focus and strong innovation cannot be more critical.
Speaker Change: As a result, we are taking our innovation approach to the next level and investing in the critical elements.
I won't rehash the numbers in our fourth quarter and year end earnings announcement, obviously, it was a tough year.
Speaker Change: Including key talent and technologies as well as strengthening our consumer centric innovation approach our focus remains on delivering the best outdoor experience as possible across all of our categories.
Continued channel continued challenging marketplace conditions and competitive pressures significantly impacted our fiscal 2020 for performance.
Silver demand for outdoor recreation products across all of our businesses remain soft.
Speaker Change: The ever evolving digital landscape requires us to do things differently to engage and stay in front of our consumers.
While we're not seeing indicators that these challenging conditions are going away anytime soon and we have been aggressively leaning in to our critical strategic priorities innovation, our go to market strategy and operational efficiencies to enable future growth for our <unk>.
Speaker Change: Our online presence provides key consumer touch points.
Speaker Change: Brands from product research to purchase to post purchase support.
Speaker Change: We've been making investments.
Speaker Change: Restructuring the way, we go to market to enhance our capabilities and drive growth and we're confident this will be a meaningful contributor to accelerating our sales and profitability.
In some businesses.
In this highly competitive outdoor recreation market marketplace, our focus and strong innovation cannot be more critical.
Speaker Change: Lastly, as I mentioned in previous quarters, improving profitability and strengthening our business operations.
As a result, we are taking our innovation approach to the next level and investing in the critical elements, including key talent and technologies as well as strengthening our consumer centric innovation of approach our focus remains on delivering the best outdoor experience as possible across all of our categories.
Speaker Change: <unk> to be important focus areas.
Speaker Change: We've worked hard to drive operational cost savings and redeployed resources against our strategic priorities.
The cost savings efforts were masked by our results and we recognize there is more work to do.
The ever evolving digital landscape requires us to do things differently to engage and stay in front of our consumers.
Speaker Change: Fiscal 2024, it's tough, but we've been through tough times before.
Speaker Change: We're committed to investing in the strategic priorities that will position our brands for long term growth, while also working hard to improve our financial performance.
Our online presence provides key consumer touch points for our brands from product research to purchase to post purchase support.
Speaker Change: We know we have a lot of work to do but we're confident that we'll see benefits from these investments in the future.
We've been making investments.
Structuring the way, we go to market to enhance our capabilities and drive growth and we're confident this will be a meaningful contributor to accelerating our sales and profitability.
Speaker Change: Now I will turn the call over to Dave for more details on financials.
Dave Johnson: Thank you Helen good morning, everyone.
Dave Johnson: In the midst of our challenging results for fiscal 2024, I wanted to start by highlighting three important areas.
Lastly, as I mentioned in previous quarters, improving profitability and strengthening our business operations continued to be important focus areas.
Dave Johnson: First of all our balance sheet remains debt free which is a strong competitive advantage in today's marketplace and enables us to invest in mission critical strategic priorities Helen just discussed.
We've worked hard to drive operational timetables, and redeploying resources against our strategic priorities.
Dave Johnson: Second as I've mentioned previously on quarterly calls, we've been working hard to manage our higher than normal inventory levels. Our inventory balance as of September was $209 $8 million down about $51 $7 million from last year's fourth quarter.
The cost savings efforts were masked by our results and we recognize there is more work to do.
Fiscal 'twenty 'twenty four is tough, but we've been through tough times before we are committed to investing in the strategic priorities that will position our brands for long term growth, while also working hard to improve our financial performance.
Dave Johnson: Through prudent inventory management, we were able to generate positive cash flow from operations in fiscal 'twenty four.
Dave Johnson: Lastly, we continue to pay a meaningful dividend to our shareholders with the board of proving our most recent dividend, which we announced on December 5th.
We know we have a lot of work to do but we're confident that we'll see benefits from these investments in the future.
Dave Johnson: We remain confident in our ability and plans to create long term value for shareholders.
I will turn the call over to Dave for more details on financials.
Dave Johnson: Now, let's get into some of the numbers from the quarter and fiscal year.
Dave: Thank you al and good morning, everyone.
Dave: In the midst of our challenging results for fiscal 2024, I wanted to start by highlighting three important areas.
Dave Johnson: Gross margin in the fourth quarter was negatively impacted by increased promotional pricing changes in product mix toward lower margin products and increased inventory reserves.
First of all our balance sheet remains debt free which is a strong competitive advantage in today's marketplace and enables us to invest in mission critical strategic priorities Ellen just discussed.
Dave Johnson: For the fiscal year gross margin declined by about two nine points.
Dave: Second as I mentioned previously on quarterly calls, we've been working hard to manage our higher than normal inventory levels, our inventory balance as of September was $209.
Dave Johnson: Operational cost savings positively impacted gross margin by about two points, but did not offset the impact of unfavorable absorption of fixed overhead costs and unfavorable product mix.
Dave: $8 million down about $51 $7 million from last year's fourth quarter.
Dave Johnson: For the fiscal year operating expenses increased $12 $2 million versus the prior fiscal year due primarily to a noncash goodwill impairment charge of $11 $2 million.
Dave: Through prudent inventory management, we were able to generate positive cash flow from operations in fiscal 'twenty four.
Dave: Lastly, we continue to pay a meaningful dividend to our shareholders with the board of proving our most recent dividend, which we announced on December five.
Dave Johnson: $2 $5 million increase in bad debt reserves.
Dave Johnson: Increased severance costs of $1 $5 million and.
Dave: We remain confident in our ability and plans to create long term value for shareholders.
Dave Johnson: And $3 $8 million of higher deferred compensation expense as a result of marketing plant assets to market value.
Dave: Now, let's get into some of the numbers from the quarter and fiscal year.
Dave: Gross margin in the fourth quarter was negatively impacted by increased promotional pricing changes in product mix toward lower margin products and increased inventory reserves.
Dave Johnson: The increase was partially offset by lower incentive compensation and professional service expenses between years.
Dave Johnson: Looking forward, we will continue to strategically manage our cost structure, while protecting investments to strengthen the business.
Dave: For the fiscal year gross margin declined by about two nine points.
Now I'll turn the call over to the operator for the Q&A session operator.
Dave: Operational cost savings positively impacted gross margin by about two points, but did not offset the impact of unfavorable absorption of fixed overhead costs and unfavorable product mix.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and we've remained to be announce to withdraw. Your question. Please press star one again, please standby will compile the Q&A roster.
Dave: For the fiscal year operating expenses increased $12 $2 million versus the prior fiscal year due primarily to a noncash goodwill impairment charge of $11 2 million.
Dave: A $2 $5 million increase in bad debt reserves.
Speaker Change: Again as a reminder to ask a question you will need to press star one on your telephone.
Dave: Increased severance costs of $1 $5 million.
Dave: And $3 8 million of higher deferred compensation expense as a result of marketing plant assets to market value.
Speaker Change: Our first question comes from the line of Anthony Lipinski.
Dave: The increase was partially offset by lower incentive compensation and professional service expenses between the years.
Speaker Change: From Sidoti Your line is now open good morning.
Dave: Looking forward, we will continue to strategically manage our cost structure, while protecting investments to strengthen the business.
Anthony Lipinski: Yes, good morning, and thank you for taking the questions.
Speaker Change: So first.
Speaker Change: Now I will turn the call over to the operator for the Q&A session operator.
Speaker Change: The fourth quarter. Your sales were up three out of the four segments can you talk about unit volumes versus ASP.
Thank you at this time, we will conduct a question and answer session. As a reminder, ask a question you will need to press star one wanting a telephone and we've renamed to pre announce to withdraw. Your question. Please press star one again, please standby will compile the Q&A roster.
Speaker Change: What you see as far as inventory levels at the retail level.
Speaker Change: Yes.
Speaker Change: In terms of the fourth quarter, we did see some.
Speaker Change: A bit of lift in unit volume.
Speaker Change: Across the board in the fourth quarter as last year's fourth quarter was obviously a challenging quarter.
Speaker Change: Again as a reminder to ask a question you will need to press star one on your telephone.
Speaker Change: Overall.
Speaker Change: For the year, we're seeing growth from ESP as well as unit volume it's both.
And in terms of the retail inventories really it's we're seeing a mixed bag right now I mean, we're seeing pockets of inventory is in good shape at other retailers and trade.
Speaker Change: Our first question comes from the lineup Anthony Lipinski.
From Sidoti Your line is now open good morning.
Speaker Change: It was a little bit of increased inventory there so and there is still a very cautious perspective from our from our trade partners.
Anthony Lipinski: Yes, good morning, and thank you for taking the questions.
Anthony Lipinski: So first.
Anthony Lipinski: In the fourth quarter. Your sales were up three out of the four segments can you talk about unit volumes versus ASP.
Speaker Change: Gotcha. Thanks, Dave.
Speaker Change: So as far as the gross margin.
Speaker Change: Come in lower than where we were.
Anthony Lipinski: What you see as far as inventory levels at the retail level.
Speaker Change: We're expecting.
Speaker Change: Can you provide out of the if there's any way you can quantify maybe share more details I mean, you called out a few items, but just wanted to give more specifics as to how impactful some of these things where as far as promotional pricing.
Yes.
Anthony Lipinski: In terms of the fourth quarter, we did see some.
Anthony Lipinski: A bit of lift in unit volume.
Anthony Lipinski: Across the board in the fourth quarter as last year's fourth quarter was obviously a challenging quarter.
Speaker Change: The mix shift to lower margin items. The inventory reserves is there any way you can provide more details about that.
Anthony Lipinski: Overall.
Anthony Lipinski: For the year, we're seeing growth from ESP as well as unit volume it's both.
Speaker Change: Sure Yes.
Anthony Lipinski: And in terms of the retail inventory it's really.
Speaker Change: The promotional pricing.
Speaker Change: Increase in pricing for the fourth quarter it was about.
Anthony Lipinski: We're seeing a mixed bag right now I mean, we're seeing pockets of inventory that is in good shape at other retailers and trade.
Speaker Change: A two five point roughly impact versus last year's fourth quarter, So you're running down six months of the quarter.
Anthony Lipinski: Little bit of increased inventory there so and there is still a very cautious perspective from our from our trade partners.
Speaker Change: So it's a big chunk of that was just the reduced pricing and promotional pricing for the fourth quarter.
Speaker Change: Mix was comparable to that so we just had a lower mix out there and that was that was most of the rest of the decrease in inventory reserves of about a point.
Speaker Change: Gotcha. Thanks, Dave.
Speaker Change: So as far as the gross margin did come in lower than what we were expecting.
Speaker Change: That's very helpful.
Speaker Change: And then in terms of your strategy. So the focus on innovation has been key.
Speaker Change: Can you provide.
Speaker Change: Is there anyway, you can quantify that maybe share more details I mean, you called out a few items, but just wanted to give more specifics as to how impactful some of these things where as far as promotional pricing.
Speaker Change: Factor for Johnson outdoors as long as I can remember, but.
Speaker Change: Can you talk about what.
Speaker Change: What if anything youre doing differently.
Speaker Change: The mix shift to lower margin items. The inventory reserves is there any way you can provide more details about that.
Speaker Change: Maybe you could touch on the upcoming pipeline of new products.
Speaker Change: While we are taking a hard look at our approach to innovation.
Speaker Change: Sure Yes.
Speaker Change: The promotional pricing.
Speaker Change: Decrease in pricing for the portfolio was about two.
Speaker Change: And we are putting more resources behind it in terms of the types of research we do an actual.
Speaker Change: Two five point roughly impact versus last year's fourth quarter. So you weren't down six months of the quarter.
Speaker Change: <unk> indicated.
Speaker Change: There's a big chunk of that was just a reduced pricing and promotional pricing for the fourth quarter.
Speaker Change: Paul helping in that area and a lot of it is about getting consumer insights.
Speaker Change: <unk> was comparable to that so we just had a lower mix out there and that was that was most of the rest of the decrease in inventory reserves of about a point.
Speaker Change: Driving those through <unk>.
Speaker Change: We feel good we've got some good launches that are happening.
Speaker Change: That's very helpful.
Speaker Change: This year.
Speaker Change: And then in terms of your strategy. So the focus on innovation has been key.
Speaker Change: And it's not about quantity, it's really about quality. So we've got some launches in fishing that.
Speaker Change: Factor for Johnson outdoors as long as I can remember, but.
Speaker Change: Our explore NR Mega labs to product, which are critical too.
Speaker Change: Can you talk about.
Speaker Change: What if anything youre doing differently.
Speaker Change: This year for us for that business.
Speaker Change: Maybe you could touch on the upcoming pipeline of new products.
Speaker Change: Scott launches in watercraft.
While we are taking a hard look at our approach to innovation.
Entering that want to wreck category.
Speaker Change: Got jet oil we've got.
Speaker Change: We are putting more resources behind it and in terms of the types of research we do in ex.
I would say solid.
Speaker Change: New product launches, but the market get competitive it's we've got more competition and that's why we are re looking at our our process to make sure that.
Speaker Change: Jackie cases.
Speaker Change: People, helping in that area and a lot of it is about getting the consumer insights and and driving those through.
Speaker Change: We're approaching it in a way that Ken.
Speaker Change: We've got we feel good we've got some good launches that are happening.
Speaker Change: Make us better and increased success of our launches.
Speaker Change: This year.
Speaker Change: Gotcha. Thanks, Helen so so for you guys to execute the strategy do you think you have.
Speaker Change: And it's not about quantity, it's really about quality so.
Speaker Change: Got some launches and issuing debt.
Speaker Change: The appropriate.
Speaker Change: Our explore and our Mega labs to product, which are critical to.
Speaker Change: Internal resources for that or do you think you need to make an acquisition to improve your capabilities to execute this strategy.
Speaker Change: <unk>.
Speaker Change: This year for us for that business, we've got launches in watercraft.
Speaker Change: Well we.
Speaker Change: We're always looking to get better and we don't have a problem leveraging external resources as well as internal.
Speaker Change: Entering the water category.
Jeff oil we've got.
Speaker Change: I would say solid.
I do think that.
Speaker Change: New product launches, but the market get competitive we've got more competition and that's why we are re looking at our our process to make sure that.
We can and plan to win in the categories we have.
Today, and it's a matter of really understanding.
Speaker Change: Standing the consumer and the consumer has changed which is I think a great opportunity for us but.
Speaker Change: We're approaching it in a way that Ken.
Speaker Change: Make us better and increased success of our launches.
Speaker Change: We are looking for.
Speaker Change: Gotcha. Thanks, Helen so so for you guys to execute the strategy do you think you have.
Speaker Change: The resources, we need to do the job we have to do but innovation is critical to us and it's always changing.
Speaker Change: The appropriate.
Speaker Change: Internal resources for that or do you think you need to make an acquisition to improve your capabilities to execute this strategy.
Speaker Change: Understood, Okay, and then in terms of the operational efficiencies.
Can you share more details about the cost savings program whats been the benefits from <unk>.
Speaker Change: Well, we're always looking to get better and we don't have a problem leveraging external resources as well as internal.
Speaker Change: Recent results and the.
Speaker Change: How should we think about the future cost savings opportunities.
Speaker Change: Yes.
Speaker Change: I do think that.
Speaker Change: We had a very deliberate operational cost savings program, we launched over a year ago.
Speaker Change: We can and plan to win in the categories we have.
Speaker Change: <unk> fruit for us in fiscal 'twenty four.
Speaker Change: Today, and it's a matter of.
Speaker Change: We really focus on the factories, increasing our efficiencies, reducing our scrap rates driving down cost of goods the material to come into the factory logistics savings. Those are the four big areas that we've really worked on and it drove about two points of benefit on the gross margin for us for fiscal 'twenty four.
Speaker Change: Understanding the consumer and the consumer has changed which is I think a great opportunity for us but.
Speaker Change: <unk>.
Speaker Change: We are looking for.
The resources, we need to do the job we have to do that.
Speaker Change: We're pleased with that unfortunately, it was masked by the by the results.
Speaker Change: The patient is critical to us and it's always changing.
Speaker Change: We also did a job elimination.
Speaker Change: Understood, Okay, and then in terms of the operational efficiencies.
Speaker Change: The fourth quarter.
Which will help us going forward on the operational expense side of things and just back to the operational cost savings program. We expect to expand that I mean, we want to keep working on opportunities with sourcing and driving down product costs. So we've got plans in place to continue that effort and expand that effort.
Speaker Change: Can you share more details about the cost savings program.
Speaker Change: It's been the benefits from.
Speaker Change: Recent results and.
How should we think about the future cost savings opportunities.
Yes.
Speaker Change: We had a very deliberate operational cost savings program, we launched over a year ago that bore fruit for us in fiscal 'twenty four.
Got you okay. So so.
Far as the severance cost that you guys cited in the press release was that all in the fourth quarter.
We've really focused on the factories, increasing our efficiencies, reducing our scrap rates.
Speaker Change: Yeah, mostly.
Speaker Change: Yes, it's basically all in the fourth quarter.
Driving down cost of good material to come into the factory logistics savings those are the four big areas that we've really worked on it and it drove about two points of benefit on the gross margin for us for fiscal 'twenty four.
Speaker Change: Okay Gotcha.
Speaker Change: And I guess lastly for me. So obviously you guys are predominantly Manny.
Speaker Change: Manufacturer in the U S. Here, but you guys do use a lot of imported components just wanted to get a sense from you as far as what you think about the impacts from potential tariffs coming next year.
Speaker Change: We're pleased with that unfortunately was masked by the by the results.
Speaker Change: We also did a job elimination.
Speaker Change: In the fourth quarter.
Speaker Change: Which will help us going forward on the operational expense side of things and just back to the operational cost savings program. We expect to expand that I mean, we want to keep working on opportunities with sourcing and driving down product costs. So we've got plans in place to continue that effort and expand that effort.
Speaker Change: Yes, I mean, we've definitely got our ear to the ground on that and we've had discussions preliminary.
Speaker Change: That could mitigate what could happen.
Speaker Change: No.
Obviously, we've been through this before and.
Speaker Change: We had some mitigation strategies before.
Speaker Change: Got you, okay. So as far as the severance costs that you guys cited in the press release was that all in the fourth quarter.
Speaker Change: Yes more to come on that.
Speaker Change: Understood Okay.
Speaker Change: Well, thank you very much and best of luck.
Speaker Change: Yeah.
Speaker Change: Thanks.
Speaker Change: Yes, it's basically all in the fourth quarter.
Speaker Change: Thank you I'm showing no further questions at this time.
Speaker Change: Okay Gotcha.
Speaker Change: Ill turn it back to Helen Johnson vehicle for closing remarks.
Speaker Change: And I guess lastly from me. So obviously you guys are predominantly.
Helen Johnson: Just wanted to thank everybody for joining us today and I hope everyone has a happy holiday. Thank you.
Speaker Change: Manufacturer in the U S. Here, but you guys do use a lot of imported components just wanted to get a sense from you as far as what you think about the impacts from potential tariffs coming next year.
Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Yes, I mean, we've definitely got our ear to the ground on that and we've had discussions preliminary on ways that we could mitigate what could happen. So.
Speaker Change: Obviously, we've been through this before and.
Speaker Change: We had some mitigation strategies before.
Speaker Change: Yes more to come on that.
Speaker Change: Understood, Okay, alright, well, thank you very much and best of luck.
Speaker Change: Thanks.
Speaker Change: Thank you I'm showing no further questions at this time I would like.
Speaker Change: Turn it back to Helen Johnson vehicle for closing remarks.
Helen Johnson: Just wanted to thank everybody for joining us today and I hope everybody has a happy holiday. Thank you.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
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Speaker Change: Hello, everyone and welcome to the Johnson outdoors fourth 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.
Speaker Change: Turning to the question and answer session. All participants will be placed in listen only mode.
Speaker Change: After the prepared remarks to question and answer session will begin.
Speaker Change: If you'd like to ask a question during that time. Please press star one on your coastal keypad. This call is being recorded by participant your consent to our recording this call have you done I agree to these terms simply drop off the line.
Speaker Change: I would like to turn the call over to Pat Penman from Johnson outdoors. Please go ahead Ms Penman.
Pat Penman: Thank you good morning, and thank you for joining us for our discussion of Johnson outdoors results for the 2020 for fiscal fourth 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 I also need to remind you that this conference call may contain.
Pat Penman: Forward looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance actual events may differ materially from those statements due to a number of factors. Many beyond Johnson outdoors control. These risks and uncertainties include those listed in our press release.
Speaker Change: <unk> and filings with the Securities and Exchange Commission. If you have additional questions. Following the call. Please contact Dave Johnson or myself. It is now my pleasure to turn the call over to Helen Johnson Leipold.
Speaker Change: Thanks, Pat Good morning, everyone. Thank you for joining us.
Speaker Change: By addressing your fiscal 'twenty 'twenty four performance and then I will share our plans to address future challenges, Dave will cover some key financials and then we'll take your questions.
Speaker Change: Rehash the numbers in our fourth quarter and year end earnings announcement.
Speaker Change: Obviously, it was a tough year.
Continued channel continued challenging marketplace conditions and competitive pressures significantly impacted.
Fiscal 2020 for performance.
Speaker Change: Silver demand for outdoor recreational products across all of our businesses remain soft.
Speaker Change: While we're not seeing indicators that is challenging conditions are going away anytime soon we have been aggressively leaning into our critical strategic priorities innovation, our go to market strategy and operational efficiencies to enable future growth for our brands and businesses.
Speaker Change: In this highly competitive outdoor recreation market marketplace, our focus and strong innovation cannot be more critical as.
Speaker Change: As a result, we are taking our innovation approach to the next level and investing in the critical elements, including key talent and technologies as well as strengthening our consumer centric innovation and approach our focus remains on delivering the best outdoor experience as possible across all of our categories.
Speaker Change: The ever evolving digital landscape requires us to do things differently to engage and stay in front of our consumers.
Speaker Change: Our online presence provides the key consumer touch points.
Speaker Change: Brands from product research to purchase.
Speaker Change: <unk> purchased support.
Speaker Change: We've been making investments.
Speaker Change: Restructuring the way, we go to market to enhance our capabilities and drive growth and we're confident this will be a meaningful contributor to accelerating our sales and profitability.
Speaker Change: Lastly, as I mentioned in previous quarters, improving profitability and strengthening our business operations.
Speaker Change: <unk> to be important focus areas.
We've worked hard to drive operational cost savings and redeployed resources against our strategic priorities.
Speaker Change: The cost savings efforts were masked by a result, and we recognize there is more work to do.
Speaker Change: Fiscal 2024, it's tough, but we've been through tough times before.
Speaker Change: We're committed to investing in our strategic priorities that will position our brands for long term growth, while also working hard to improve our financial performance.
Speaker Change: We know we have a lot of work to do but we're confident that we'll see some of these investments in the future.
Speaker Change: Now I'll turn the call over to Dave for more details on <unk>.
Speaker Change: Yeah.
Dave Johnson: Thank you Helen good morning, everyone.
Dave Johnson: In the midst of our challenging results for fiscal 2024, I wanted to start by highlighting three important areas.
First of all our balance sheet remains debt free which is a strong competitive advantage in today's marketplace and enables us to invest in mission critical strategic priorities Helen just discussed.
Dave Johnson: Second as I've mentioned previously on quarterly calls, we've been working hard to manage our higher than normal inventory levels. Our inventory balance as of September was $209 $8 million down about $51 $7 million from last year's fourth quarter.
Dave Johnson: Through prudent inventory management, we were able to generate positive cash flow from operations in fiscal 'twenty four.
Dave Johnson: Lastly, we continue to pay a meaningful dividend to our shareholders with the board approving our most recent dividend, which we announced on December 5th.
Dave Johnson: We remain confident in our ability and plans to create long term value for shareholders.
Dave Johnson: Now, let's get into some of the numbers from the quarter and fiscal year.
Dave Johnson: Gross margin in the fourth quarter was negatively impacted by increased promotional pricing changes in product mix toward lower margin products and increased inventory reserves.
Dave Johnson: For the fiscal year gross margin declined by about two nine points.
Dave Johnson: Operational cost savings positively impacted gross margin by about two points, but did not offset the impact of unfavorable absorption of fixed overhead costs and unfavorable product mix.
Dave Johnson: For the fiscal year operating expenses increased $12 $2 million versus the prior fiscal year due primarily to a noncash goodwill impairment charge of $11 $2 million.
Dave Johnson: $2 $5 million increase in bad debt reserves.
Dave Johnson: Increased severance costs of $1 $5 million.
Dave Johnson: And $3 $8 million of higher deferred compensation expense as a result of marketing plant assets to market value.
The increase was partially offset by lower incentive compensation and professional service expenses between years.
Dave Johnson: Looking forward, we will continue to strategically manage our cost structure, while protecting investments to strengthen the business.
Speaker Change: Now I will turn the call over to the operator for the Q&A session operator.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby will compile the Q&A roster.
Speaker Change: Again as a reminder to ask a question you will need to press star one on your telephone.
Speaker Change: Our first question comes from the line of Anthony Lipinski.
Anthony Lipinski: From Sidoti Your line is now open good morning.
Anthony Lipinski: Yes, good morning, and thank you for taking the questions.
Anthony Lipinski: So first.
Anthony Lipinski: In the fourth quarter. Your sales were up in three out of the four segments can you talk about unit volumes versus a S. P.
Anthony Lipinski: What you see as far as inventory levels at the retail level.
Yes.
Anthony Lipinski: In terms of the fourth quarter, we did see some.
Anthony Lipinski: A bit of lift in unit volume.
Anthony Lipinski: Kind of across the board in the fourth quarter as last year's fourth quarter was obviously a challenging quarter.
Overall.
Anthony Lipinski: For the year, we're seeing growth from ESP as well as unit volume it's both.
Anthony Lipinski: And in terms of the retail inventories really.
Anthony Lipinski: We're seeing a mixed bag right now I mean, we're seeing pockets of inventory is in good shape at either other retailers and trade.
Anthony Lipinski: Little bit of increased inventory there so and there is still a very cautious perspective from our from our trade partners.
Mhm Gotcha, Thanks, Dave.
Speaker Change: So as far as the gross margin that did come in lower than what we were expecting.
Speaker Change: Can you provide that out of the if there's any way you can quantify maybe share more details I mean, you called out a few items, but just wanted to give more specifics as to how impactful some of these things where as far as promotional pricing.
Speaker Change: The mix shift to lower margin items. The inventory reserves is there any way you can provide more details about that.
Speaker Change: Sure, Yes, I mean.
Speaker Change: The promotional pricing the decrease in pricing for the fourth quarter was about.
Speaker Change: Two five point roughly impact versus last year's fourth quarter. So you weren't down six months of the quarter.
Speaker Change: There's a big chunk of that was just the reduced pricing and promotional pricing for the fourth quarter <unk>.
Speaker Change: <unk> was comparable to that so we just had a lower mix out there and that was that was most of the rest of the decreases in inventory reserves of about a point.
Speaker Change: That's very helpful.
Speaker Change: And then in terms of your strategy. So the focus on innovation has been sort of the key.
Speaker Change: Factor for Johnson outdoors as long as I can remember, but.
Speaker Change: Can you talk about.
What if anything youre doing differently.
Speaker Change: Maybe you could touch on the upcoming pipeline of new products.
Well, we are taking a hard look at our approach to innovation.
Speaker Change: And we are putting more resources behind it in terms of the types of research we do an actual dedicated.
Speaker Change: People, helping in that area and a lot of it is about getting the consumer insights and and driving those through.
Speaker Change: We've got we feel good we've got some good launches that are happening.
Speaker Change: This year.
Speaker Change: And it's not about quantity is really about quality so.
Speaker Change: Cancel launches and issuing debt.
Speaker Change: Our explore and our Mega labs to product, which are critical too.
Speaker Change: This year for us for that business, we've got launches in watercraft.
Speaker Change: Entering that want to wreck category, we've got jet oil we've got.
Speaker Change: I would say followed.
Speaker Change: New product launches, but you know the market get repetitive. It's we've got more competition and that's why we are re looking at our our process to make sure that.
Speaker Change: We're approaching it in a way that Ken.
Speaker Change: Make us better and increased success of our launch it.
Speaker Change: Gotcha. Thanks, Helen so so for you guys to execute this strategy do you think you have.
The appropriate.
Speaker Change: Internal resources for that or do you think you need to make an acquisition to improve your capabilities to execute this strategy.
Speaker Change: Well, we're always looking to get better and we don't have a problem leveraging external resources as well as internal.
Speaker Change: I do think that.
Speaker Change: We can play.
Plan to win in the categories we have.
Speaker Change: Today, and it's a matter of.
Speaker Change: Really understanding the consumer and the consumer has changed which is I think a great opportunity for us but.
<unk>.
Speaker Change: We are looking for.
Speaker Change: The researches we need to do the job we have to do but innovation is critical to us and it's always changing.
Speaker Change: Understood, Okay, and then in terms of the operational efficiencies.
Speaker Change: Can you share more details about the cost savings program whats been the benefits from <unk>.
Speaker Change: Recent results and the.
Speaker Change: How should we think about the future cost savings opportunities.
Speaker Change: Yes.
We had a very deliberate operational cost savings program, we launched over a year ago.
Speaker Change: More fruit for us in fiscal 'twenty four.
Speaker Change: We really focus on the factories, increasing our efficiencies, reducing our scrap rates driving down cost of good material to come into the factory logistics savings those are the four big areas that we've really worked on it and it drove about two points of benefit on the gross margin for us for fiscal 'twenty four.
Speaker Change: We're pleased with that unfortunately, it was masked by the by the results.
Speaker Change: We also did a job elimination.
The fourth quarter.
Speaker Change: Which will help us going forward on the operational expense side of things and just back to the operational cost savings program. We expect to expand that I mean, we want to keep working on opportunities with sourcing and driving down product costs. So we've got plans in place to continue that effort and expand that effort.
Speaker Change: Gotcha, Okay yeses, so as far as the severance cost that you guys cited in the press release was that all in the fourth quarter.
Speaker Change: Yeah, mostly.
Yes, it's basically all in the fourth quarter.
Speaker Change: Okay Gotcha.
And I guess lastly for me. So obviously you guys are predominantly.
Speaker Change: Manufacturer in the U S. Here, but you guys do use a lot of imported components just wanted to get a sense from you as far as what you think about the impacts from potential tariffs coming next year.
Speaker Change: Yeah, I mean, we've definitely got our ear to the ground on that and we've had discussions preliminary.
Speaker Change: Ways that we could mitigate what could happen so.
Speaker Change: Obviously, we've been through this before and we.
Speaker Change: We have some mitigation strategies before.
Yes more to come on that.
Speaker Change: Understood, Okay, alright, well, thank you very much and best of luck.
Speaker Change: Thanks.
Speaker Change: Thank you I'm showing no further questions at this time.
Speaker Change: Ill turn it back to Helen Johnson Leipold for closing remarks.
Just wanted to thank everybody for joining us today and I hope everybody has a happy holiday. Thank you.
Speaker Change: Thank you for your participation in today's conference to it does conclude the program you may now disconnect.
Speaker Change: Okay.