Q2 2025 Johnson Outdoors Inc Earnings Call
Helen Johnson, Leipold, Johnson outdoors, Chairman and Chief Executive Officer.
So 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 a listen only mode. After the prepared remarks. The question and answer session will begin if you would like to ask a question during that time. Please press Star then one one on your telephone keypad. This call is being recorded.
Hello, everyone and welcome to the Johnson outdoors second quarter 2025 earnings Conference call.
Speaker Change: Participation implies consent to our recording this call. If you do not agree to these terms simply drop off the line.
Today's call will be led by Helen Johnson, Leipold, Johnson outdoors, Chairman and Chief Executive Officer also on the call is David Johnson, Vice President and Chief Financial Officer. Prior to the question and answer session. All participants will be placed in a listen only mode. After the prepared remarks.
Speaker Change: I would now 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 2025 fiscal second quarter.
Pat Penman: You need a copy of today's news release. It is available on our website at Johnson outdoors Dot com under Investor Relations.
The question and answer session will begin if you would like to ask a question during that time. Please press Star then one one on your telephone keypad.
Pat Penman: I also need to remind you that this conference call may contain forward looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance actual events may differ materially from those statements due to a number of factors many beyond Johnson outdoors control these risks and.
Speaker Change: Call is being recorded your participation implies consent to our recording this call. If you do not agree to these terms simply drop off the line I would now like to turn the call over to Pat Penman from Johnson outdoors. Please go ahead Ms Penman.
Speaker Change: Certainties include those listed in our press release and filings with the Securities and Exchange Commission. If you have any questions. Following the call. Please contact Dave Johnson or myself. It is now my pleasure to turn the call over to Helen Johnson Leipold.
Pat Penman: Thank you good morning, and thank you for joining us for our discussion of Johnson outdoors results for the 2025 fiscal second quarter.
Pat Penman: 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 forward looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance.
Speaker Change: Good morning, everyone. Thank you for joining us I'll begin by sharing our perspective on our second quarter performance as well as an update on our strategic priorities for our businesses.
Speaker Change: Dave will review the financial highlights and then we'll take your questions.
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 questions. Following the call. Please contact Dave Johnson or myself. It is now.
Speaker Change: Our second quarter results reflect continued market challenges and a cautious retail and trade environment.
Speaker Change: Despite these results there are pockets of good news with inroads, we are making on our strategic priorities and the necessary changes, we've been making for future growth.
Speaker Change: We saw positive results from new products in our fishing and camping businesses highlighting the critical importance of our ongoing investment in innovation.
Speaker Change: My pleasure to turn the call over to Helen Johnson Leipold.
Speaker Change: Good morning, everyone. Thank you for joining us I'll begin by sharing our perspective on our second quarter performance as well as an update on our strategic priorities for our businesses.
Speaker Change: And fishing are hummingbird brand launch new technology in the first quarter Mega line, two and explore in our second quarter, we started shipping those products and demand has been exceeding expectations.
Speaker Change: Dave will review financial highlights and then we'll take your questions.
Speaker Change: Our second quarter results reflect continued market challenges and a cautious retail and trade environment.
Speaker Change: We are excited about this momentum as we continue to work hard to give anglers the best fishing experience as possible.
Speaker Change: Despite these yourself there are pockets of good news with the inroads, we are making on our strategic priorities and the necessary changes, we've been making for future growth.
Speaker Change: That includes tournament fishing experiences, we're thrilled that eastern father, Gil <unk>, Kota and hummingbird sponsored pro bass angler using are using our equipment with the champion of this year's prestigious fast Master Classic tournament.
Speaker Change: We saw positive results from new products in our fishing and camping businesses highlighting the critical importance of our ongoing investment in innovation.
Speaker Change: In our camping and watercraft business, our gift oil brand launched the next level of fast oil systems with features building on the lightning fast boil time and fuel efficient teams that the brand is known for.
Speaker Change: And fishing are hummingbird brand launched new technology in the first quarter Mega life.
Speaker Change: Two and explore in our second quarter, we started shipping those products in demand has been exceeding expectations were.
Speaker Change: There is enthusiasm among both retailers and consumers from these new products and.
Speaker Change: We are excited about this momentum as we continue to work hard to give anglers the best fishing experience as possible.
Speaker Change: And orders are outpacing expectations are.
Speaker Change: Our <unk> brand continues to be a strong leader in a very depressed market during the second quarter all that much five new watercraft additions.
Speaker Change: That includes tournament fishing experiences, we're thrilled that eastern either Gil.
Speaker Change: And how many birds sponsored pro bass angler using are using our equipment with the champions just curious prestigious best Master Classic tournament.
Speaker Change: Difficult launch, which extends our popular sportsman line as well as gets us into new recreational categories with our Ocean line.
Speaker Change: In our camping and watercraft business.
Speaker Change: Oil brand launched the next level of fast boil system with features building on the lightning fast boil time and fuel efficient it seems that the brand is known for it.
Speaker Change: These new additions are equipped with pedal our electric propulsion aimed at giving the best experience as possible on the water for recreational enthusiasm and avid anglers.
Speaker Change: And I am excited to share another win from this year's best metric Classic old town sponsored kayak Angler Wyatt Camden won the tournament using a sportsman autopilot kayak.
Speaker Change: There is enthusiasm among both retailers and consumers for these products and orders are outpacing expectations are old town brand continues to be a strong leader in a very depressed market during the second quarter old town much find new watercraft additions this year.
Speaker Change: Both <unk> Kota motor and <unk> Mega Lab technology.
Speaker Change: Our diving business continues to face challenging marketplace.
Speaker Change: You can't launch, which extends our popular sports mainline as well it gets us into new recreational categories with our Ocean line.
Speaker Change: Very impacted by global economic uncertainties, and consumer travel and we continue to look for ways to drive more operational efficiencies in that business.
Speaker Change: New additions are equipped and pedal our electric propulsion aimed at giving them the best experience as possible on the water for recreational enthusiasm and avid anglers.
Speaker Change: As I shared last quarter, we have purchased a company that has been long time supplier for scuba program and as both the catalyst for future scuba pro innovation and our vertical integration that gives us more efficiently efficiency and allows us to accelerate our efforts in simplifying the business.
Speaker Change: And I am excited to share another win from this year's best match Classic old town sponsored kayak Angler Wyatt Hamlin won the tournament using a sportsman autopilot kayak equipment, both you mean, Kona motor and Mega life technology.
Speaker Change: Finally regarding tariffs they will impact our business. Despite the fact that we are an American company with U S based manufacturing and operations.
Speaker Change: Our diving business continues to face challenging marketplace.
Speaker Change: Very impacted by global economic uncertainties, and consumer travel and we continue to look for ways to drive more operational efficiencies in that business.
Speaker Change: Although the current environment remains dynamic we are focused on multiple strategies to mitigate the potential impact on our business.
Speaker Change: That includes adjusting our supply chain strategy looking for operational efficiencies.
Speaker Change: As I shared last quarter, we have purchased a company that has been a long time supplier, Chris Cooper brand.
Speaker Change: And considering potential adjustments to our pricing strategy.
Speaker Change: It's both the catalyst for future scuba pro innovation and our vertical integration that gives us more efficiently efficiency and allows us to accelerate our efforts in simplifying the business.
Speaker Change: We are also prioritizing your effort to focus on products that have the most value for our consumers.
Speaker Change: While tariff situation continues to evolve.
Speaker Change: Finally regarding tariffs.
Speaker Change: While we get more clarity, we will identify additional solutions that address the changing environment.
Speaker Change: They will impact our business. Despite the fact that we are an American company with U S based manufacturing and operations.
Speaker Change: As we navigate current and future challenges our debt free balance sheet and cash position will help us remain resilient and we will continue to invest and execute on our strategic priorities.
Speaker Change: Although the current environment remains dynamic we are focused on multiple strategies to mitigate the potential impact on our business that includes adjusting our supply chain strategy looking for operational efficiencies.
Speaker Change: Innovation operational efficiency and e-commerce.
Speaker Change: We are confident these are the right things to position us for future healthy profitable growth.
Speaker Change: And considering potential adjustments to our pricing strategy.
Dave Johnson: Now I'll turn the call over to Dave for more details on the financials.
Speaker Change: We are also prioritizing your effort to focus on products that have the most value for our consumers.
Dave Johnson: Thank you Hal and good morning, everyone.
Speaker Change: The tariff situation continues to evolve I mean, while we get more clarity, we will identify additional solutions that address the changing environment.
Dave Johnson: Gross margin in the second quarter was 35% up slightly from last year's quarter.
Dave Johnson: Our cost savings efforts have helped shore up our gross margin despite continued pricing discounting in the marketplace.
Speaker Change: As we navigate current and future challenges our debt free balance sheet and cash position will help us remain resilient and we will continue to invest and execute on our strategic priorities.
Dave Johnson: Operating expenses decreased $7 $7 million versus the prior year second quarter and.
Dave Johnson: And excluding the $3 $4 million decrease from the deferred compensation plan valuation expenses are down $4 $3 million.
Speaker Change: Innovation operational efficiency and e-commerce.
Speaker Change: We are confident these are the right things to position us for future healthy profitable growth.
Dave Johnson: Lower volume related expenses and decreased promotion expenses contributed to that decline.
Dave Johnson: Now I'll turn the call over to Dave for more details on the financials.
Dave Johnson: Inventory levels continued to show good progress our inventory balance as of March was $180 million down about $69 million from last year's second quarter.
Dave Johnson: Thank you Hal and good morning, everyone.
Dave Johnson: Gross margin in the second quarter was 35% up slightly from last year's quarter.
Dave Johnson: And was down from our fiscal year end.
Dave Johnson: Our cost savings efforts have helped shore up our gross margin despite continued pricing discounting in the marketplace.
Dave Johnson: We will remain diligent in managing our inventories given the uncertain macro environment.
Dave Johnson: Our cost savings program remains critical in this environment, and we're committed to driving optimal product costs and enhancing operating efficiency across the company.
Dave Johnson: Operating expenses decreased $7 $7 million versus the prior year second quarter and excluding the $3 4 million decrease from the deferred compensation plan valuation expenses are down $4 $3 million.
Dave Johnson: Finally, I want to reiterate what Helen said, our balance sheet remains debt free and we have a solid cash position both of which provide a competitive advantage in uncertain times.
Dave Johnson: Lower volume related expenses and decreased promotion expenses contributed to that decline.
Dave Johnson: We remain confident in our ability and plans to create long term value for shareholders now I'll turn the call over to the operator for the Q&A session.
Dave Johnson: Inventory levels continued to show good progress our inventory balance as of March was $180 million down about $69 million from last year's second quarter.
Dave Johnson: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please stand by while we compile the Q&A roster.
Dave Johnson: And was down from our fiscal year end.
Dave Johnson: We will remain diligent in managing our inventories given the uncertain macro environment.
Dave Johnson: Our cost savings program remains critical in this environment, and we're committed to driving optimal product costs and enhancing operating efficiency across the company.
Speaker Change: And our first question comes from Anthony <unk> of Sidoti Your line is open.
Dave Johnson: Finally, I want to reiterate what Helen said, our balance sheet remains debt free and we have a solid cash position both of which provide a competitive advantage in uncertain times we.
Speaker Change: Thank you and good morning, everyone and thanks.
Speaker Change: Thanks for taking the questions.
Speaker Change: It's really great to see the progress with inventory reductions.
Dave Johnson: We remain confident in our ability and plans to create long term value for shareholders now I will turn the call over to the operator for the Q&A session.
Speaker Change: Quaker here also about the success of the new products of so I guess first.
Dave Johnson: Thank you as a reminder to ask a question. Please 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, while we compile the Q&A roster.
Speaker Change: How does the pipeline look like for new products without you guys showing too much of the secret sauce, but.
Speaker Change: Just wondering how do we think about the new product introductions in the upcoming quarters.
Speaker Change: Well.
Dave Johnson: Yeah.
Speaker Change: We.
Speaker Change: And our first question comes from Anthony <unk> of Sidoti Your line is open.
Speaker Change: We launched for the season, and we have launched the new products for both.
Speaker Change: Fishing and camping and so pricing.
Anthony <unk>: Thank you and good morning, everyone.
Speaker Change: They are beating expectations. So we feel good about that watercraft has also launched.
Speaker Change: For taking the questions.
Anthony <unk>: Great to see the progress with the inventory reductions.
Speaker Change: A significant.
Anthony <unk>: Great to hear also about the success of the new products. So I guess first.
Speaker Change: Line of new products, which we are hoping to see those results be positive as well so.
Speaker Change: How does the pipeline look like for new products without you guys sharing too much of the secret sauce, but.
Speaker Change: We keep pushing on innovation.
And that's one of our strategic priorities.
Speaker Change: Just wondering how do we think about the new product introductions in the upcoming quarters.
Speaker Change: Right now we're working on the longer term innovation that will hopefully continue into next year as hoped.
Speaker Change: Well we.
Speaker Change: We've always said innovation breaks through a tough market. So that's always a priority for us.
Speaker Change: We launched this season and we have launched the new products for both.
Speaker Change: Fishing and camping and so.
Speaker Change: Understood. Okay. Thank you.
Speaker Change: So given what's.
Speaker Change: There are beating expectations. So we feel good about that watercraft has also launched.
Speaker Change: What's happening here in the world as far as just dealing with some consumer confidence kind of where it is it's just just.
Speaker Change: A significant.
Speaker Change: Line of new products, which we are hoping to see those results be positive as well so.
Speaker Change: I understand that you guys have a seasonal business, but just wondering if you guys could talk about the <unk>.
Speaker Change: We keep pushing on innovation.
Speaker Change: During the quarter, whether there was.
Speaker Change: And that's one of our strategic priorities.
Speaker Change: No.
Speaker Change: Big Big changes from January to March.
Speaker Change: Right now we're working on.
Speaker Change: Maybe if you look at on a year over year basis for.
Speaker Change: The longer term innovation that will hopefully continue into next year as hoped.
Speaker Change: For the quarter your sales were down about 4%, but.
Speaker Change: We've always said in the patient breaks through a tough market. So that's always a priority for us.
Speaker Change: Just wondering if there was significant.
Speaker Change: There's variability for on a year over year basis, as we progress through the quarter given.
Speaker Change: Understood. Okay. Thank you.
Speaker Change: So given what's happening here in the world as far as just dealing with the power of some consumer confidence kind of where it is this just just.
Speaker Change: Sure.
Dave Johnson: And Dave you can pipe into but I.
Dave Johnson: I would say it's been pretty consistent.
Dave Johnson: Tough environment, and it's both from a consumer sentiment and from the retailer.
Speaker Change: Thinking that you guys have a seasonal business, but just wondering if you guys could talk about.
Speaker Change: The trends during the quarter, whether there was.
Dave Johnson: Hesitation.
Speaker Change: Big changes from January to March.
Anthony: Can you hear me Anthony.
Dave Johnson: Yes, sorry.
Speaker Change: If you look at it on a year over year basis.
Speaker Change: Sorry, Ann and I think we had a little technical problem, but.
Speaker Change: For the quarter your sales were down about 4%, but.
Dave Johnson: Question was on track.
Speaker Change: Just wondering if there was significant.
Dave Johnson: Trends this year versus what we've seen.
Dave Johnson: Yes versus last year.
Speaker Change: There's variability for on a year over year basis, as we progressed through the quarter give us.
Dave Johnson: All I can say, it's still from a March.
Dave Johnson: From a market standpoint, it's tough.
Speaker Change: Sure.
Speaker Change: And Dave you can pipe into but I.
Dave Johnson: We do have new products that we are.
Speaker Change: I would say it's been pretty consistent.
Dave Johnson: Launching that we didn't have last year or so.
Speaker Change: Tough environment, both from a consumer sentiment and from the retailer.
Dave Johnson: Again, we're hoping that those will deliver.
Dave Johnson: Deliver some positive results during the rest of the season.
Speaker Change: Hesitation.
Dave Johnson: Understood Okay. Thanks.
Anthony <unk>: Can you hear me Anthony.
Speaker Change: Yes.
Dave Johnson: Okay, and then I'm just wondering so since.
Speaker Change: Yes.
Speaker Change: I'm trying to I can hear you.
Dave Johnson: The new tariffs were announced on April 2nd obviously, there's been some back and forth some changes.
Dave Johnson: I'm just wondering if you've seen any notable change since then in terms of your.
Speaker Change: Yeah.
Speaker Change: Ordering patterns.
Dave Johnson: Retailers whats been the response.
Speaker Change: Hello.
Dave Johnson: Curious to get your high level thoughts on that.
Speaker Change: Please remain on the line your conference will resume shortly.
Dave Johnson: Yes, I mean, it's still early for us in terms of retailer reaction I would say.
Speaker Change: Yes.
Dave Johnson: We came in with.
Speaker Change: Yeah.
Dave Johnson: The quarter was a good plan in place and I think the reaction will be the rest of the year. So we haven't seen initially a big pullback.
Speaker Change: Okay.
Speaker Change: Yes.
Dave Johnson: From retailers.
Dave Johnson: But as Helen alluded to I think the marketplace is going to be challenged for the balance of the season.
Speaker Change: Again, please remain on the line your conference will resume shortly.
Speaker Change: Thanks, Dave and then just thinking about the.
Dave Johnson: Impact of tariff so just.
Dave Johnson: Maybe.
Speaker Change: First if you could address how much you guys have exposure to China, which is getting hit the hardest in terms of the tariff rates.
Dave Johnson: And then just how does.
Dave Johnson: Do we think about the response from you whether I know you guys talked about potential pricing actions. So it sounds like those have not yet been implemented but.
Dave Johnson: Just maybe walk us through you know of.
Dave Johnson: Your China and other countries exposure just rough estimates of them.
Dave Johnson: <unk>.
Dave Johnson: Respond to that.
Speaker Change: Can anybody hear me.
Dave Johnson: Just would love to hear your thoughts on that.
Speaker Change: Okay.
Speaker Change: Yes, theyre going to reconnect.
Sure I mean as you know.
Dave Johnson: We manufacture and assemble almost all of our products in the United States.
Speaker Change: Okay. Please standby.
Speaker Change: Thank you.
Dave Johnson: Which is great.
Dave Johnson: We're very proud of that but we do import a fair.
Dave Johnson: Fair amount of product from China, electronic components, and other raw materials from China and Southeast Asia. So we do have exposure I mean, it's real it's there.
Dave Johnson: So we are now working.
Dave Johnson: We've been working on a few months on mitigation strategies, and we've talked about that already so ever.
Dave Johnson: <unk> is on the table for us, we're looking at supply chain getting more efficiencies.
Dave Johnson: Where it makes sense everything's on the table for us to mitigate it and we're very very focused on that.
Thanks, Dave.
Dave Johnson: And then just following up as far as.
Dave Johnson: Quarter that you reported.
Dave Johnson: So part of the gross margin puts and takes where the.
Dave Johnson: I guess on the negative side of the discounting on the positive side of the cost savings program. So.
Dave Johnson: Can you provide any more details as to how much you saw from both of them.
Dave Johnson: Those things.
Dave Johnson: But just wanted to understand the magnitude of that is especially these cost savings program and weather.
Dave Johnson: There is still more to be realized from the cost savings as we look.
Dave Johnson: Towards the key summer months here.
Dave Johnson: Yes, I think I said before that we were looking at cost savings between one and two points of benefit for us as we as we came into this year and that's consistent with the quarter.
Dave Johnson: So that helped to offset some some discounting that we did in the quarter kind of across the board. There. So that's kind of the magnitude. We're looking at and then importantly, we're looking at expanding that cost savings. So it's a critical piece of what we're trying to do going forward.
Speaker Change: Again, please remain on the line your conference will resume shortly.
Dave Johnson: Mhm gotcha. Okay. So do you think it could be more than that 1% to two points of gross margin when youre going with this cost savings program.
Dave Johnson: Well the savings program is going to it's a medium term and longer term programs. So I can't give you any guidance more than what I've already said, but yes, we hope that more.
Speaker Change: Understood. Okay. Okay, and then lastly for me it looks like the tax rate in the quarter was unusually high could.
Speaker Change: Can you comment on what happened there and what is your outlook for the fiscal year.
Speaker Change: Yes, I mean, there's a couple of things happening one is.
Speaker Change: We've got income and expense in different jurisdictions, and when you kind of get down to a smaller number the right talents wonky.
Speaker Change: But we also had an accrual from some tax audits in Europe that we took in the quarter that affected that quarterly tax rate. So that's kind of a one time one off thing.
Speaker Change: No.
Speaker Change: It's.
Speaker Change: Given what's happening with with everything in the macro environment, even hesitate to tell you what the full year's going to look like but.
Speaker Change: We'll be managing pretty carefully.
Speaker Change: Understood. Okay, well, thank you very much and the best of luck are dealing with.
Speaker Change: This crazy World here.
Anthony: Thanks, Anthony Thank you.
Speaker Change: Thank you I'm showing no further questions at this time I would like to turn it back to Helen Johnson Leipold for closing remarks.
Speaker Change: Thank you for joining us today and I hope everyone has a very good day. Thank you.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.
We have exposure to China, which is getting hit the hardest in terms of the tariff rates.
And then just how does how do we think about the response from you whether I know you guys talked about potential pricing actions. So it's not it sounds like those have not yet been implemented but.
Just maybe walk us through you know of your China and other countries.
Helen Johnson-Leopold: Today's call will be led by Helen Johnson-Leopold, Johnson Outdoors Chairman and Chief Executive Officer.
Sure I mean, as you know, we manufacture and assemble almost all of our products in the United States.
Operator: 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. If you would like to ask a question during that time, please press star, then 1-1 on your telephone keypad. This call is being recorded. Your participation implies consent to our recording this call.
Which is great.
We're very proud of that but we do import.
A fair amount of product from China, electronic components, and other raw materials from China and Southeast Asia. So we do have exposure.
It's real it's there.
So we are now working with.
We've been working on a few months on mitigation strategies, when we talked about that already so everything's on the table for us we're looking at supply chain getting more efficiencies.
Operator: If you do not agree to these terms, simply drop off the line.
Pricing, where it makes sense everything's on the table for us to mitigate it and we're very very focused on that.
Patricia Penman: I would now like to turn the call over to Pat Penman from Johnson Outdoors. Please go ahead, Ms. Penman. Thank you.
Thanks, Dave.
And then just following up as far as.
Patricia Penman: Good morning, and thank you for joining us for our discussion of Johnson Outdoors results for the 2025 fiscal second quarter. If you need a copy of today's news release, it is available on our website at johnsonoutdoors.com under Investor Relations.
Quarter that you reported.
So part of the gross margin puts and takes no worthy.
I guess on the negative side the discounting on the positive side of the cost.
Savings programs so.
Can you provide any more details.
Patricia Penman: I also need to remind you that this conference call may contain forward-looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance. Actual events may differ materially from those statements due to a number of factors, many beyond Johnson Outdoors' control. These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission.
How much you saw from.
Those things.
Just wanted to understand the magnitude of that is especially these cost savings program and weather.
There is still more to be realized from the cost savings as we look.
Towards the key summer months here.
Yes, I think I said before that we were looking at cost savings between one and two points of benefit for us as we as we came into this year and that's consistent with the quarter.
Patricia Penman: If you have any questions following the call, please contact Dave Johnson or myself.
Helen Johnson-Leopold: It is now my pleasure to turn the call over to Helen Johnson-Leopold. Good morning everyone. Thank you for joining us. I'll begin by sharing perspective on our second quarter performance, as well as an update on the strategic priorities for our business. They will review the financial highlights and then we'll take your questions. Our second quarter results reflect continued market challenges and a cautious retail and trade environment. Despite these results, there are pockets of good news with inroads we are making on our strategic priorities and the necessary changes we have been making for future growth. We saw positive results from new products in our fishing and camping businesses, highlighting the critical importance of our ongoing investment in innovation.
So that helped to offset some some discounting that we did in the quarter kind of across the board. There. So that's kind of the magnitude. We're looking at and then importantly, we're looking at expanding that cost savings. So it's a critical piece of what we're trying to do going forward.
Mhm gotcha. Okay. So do you think it could be more than that 1% to two points of gross margin when youre going with this cost savings program.
Well the savings program is going to it's a medium term and longer term programs. So I can't give you any guidance more than what I've already said, but yes, we hope to get more.
Understood. Okay. Okay, and then lastly for me it looks like the tax rate in the quarter was unusually high can.
Helen Johnson-Leopold: In fishing, our Hummingbird brand launched new technology in the first quarter, Megalive 2 and Explore. In our second quarter, we started shipping those products in demand, has been exceeding expectations. We are excited about this momentum as we continue to work hard to give anglers the best fishing experiences possible. That includes tournament fishing experiences. We're thrilled that Easton, Fothergill, Minn Kota, and Hummingbird sponsored Pro Bass Angler using our equipment with the champion of this year's prestigious Bassmaster Classic Tournament. In our camping and watercraft business, our JetBoil brand launched the next level of fast-boil systems with features building on the lightning-fast boil times and fuel efficiencies that the brand is known for.
Can you comment on what happened there and what is your outlook for the fiscal year.
Yeah, I mean, there's a couple of things happening one is.
We've got income and expense in different jurisdictions, and when you kind of get down to a smaller number the right catalyst wonky.
But we also had an accrual from some tax audits in Europe that we took in the quarter that affected that quarterly tax rate. So that's kind of a onetime one off thing.
No.
<unk>.
Given what's happening with with everything in the macro environment, even hesitate to tell you what the full year's going to look like but that will be managing pretty carefully.
Understood. Okay, well, thank you very much and the best of luck are dealing with.
The Crazy World here.
Thanks, Anthony Thank you.
Helen Johnson-Leopold: There is enthusiasm among both retailers and consumers for these new products, and orders are outpacing expectations. Our Old Town brand continues to be a strong leader in a very depressed market. During the second quarter, Old Town launched five new watercraft additions. This significant launch which extends our popular sportsman line, as well as gets us into new recreational categories with our ocean lines. These new additions are equipped with pedal or electric propulsion aimed at giving the best experiences possible on the water for recreational enthusiasts and avid anglers. And I'm excited to share another win from this year's Bassmaster Classic.
Thank you I'm showing no further questions at this time I would like to turn it back to Helen Johnson Leipold for closing remarks.
Thank you for joining us today and I hope everyone has a good day. Thank you.
This concludes today's conference call. Thank you for participating and you may now disconnect.
Okay.
[music].
Yeah.
Okay.
[music].
Helen Johnson-Leopold: Old Town Sponsored Kayak Angler, Wyatt Hammond, won the tournament using a Sportsman Autopilot Kayak equipped with both a Minn Kota motor and Hummingbird MegaLide technology. Our diving business continues to face challenging marketplace, very impacted by global economic uncertainties and consumer travel. And we continue to look for ways to drive more operational efficiencies in that business. As I shared last quarter, we have purchased a company that has been a long-time supplier for our ScubaPro brand and is both the catalyst for future ScubaPro innovation and a vertical integration that gives us more efficiency and allows us to accelerate our efforts in simplifying this business.
Helen Johnson-Leopold: Finally, regarding tariffs, they will impact our business, despite the fact that we are an American company with U.S. based manufacturing and operations. Although the current environment remains dynamic, we are focused on multiple strategies to mitigate the potential impact on our business. That includes adjusting our supply chain strategy, looking for operational efficiencies, and considering potential adjustments to our pricing strategy. We are also prioritizing our efforts to focus on products that have the most value for our consumers. While the tariff situation continues to evolve, while we get more clarity, we will identify additional solutions that address the changing environment.
Helen Johnson-Leopold: As we navigate current and future challenges, our debt pre-balance and cash position will help us remain resilient and we will continue to invest and execute on our strategic priorities, innovation, operational efficiency, and e-commerce.
Helen Johnson-Leopold: We are confident these are the right things to position us for future healthy, profitable growth.
David Johnson: Now I'll turn the call over to Dave for more details on the training. Thank you, Helen. Good morning, everyone. Gross margin in the second quarter was 35%, up slightly from last year's quarter. Our cost savings efforts have helped shore up our gross margin despite continued pricing discounting in the marketplace. Operating expenses decreased $7.7 million versus the prior year's second quarter and excluding the $3.4 million decrease from the Deferred Compensation Plan valuation, expenses are down $4.3 million. Lower volume related expenses and decreased promotion expenses contribute to that decline. Inventory levels continue to show good progress. Our inventory balance as of March was $180 million down about $69 million from last year's second quarter and was down from our fiscal year-end.
David Johnson: will remain diligent in managing our inventories given the uncertain macro environment. Our cost savings program remains critical in this environment, and we're committed to driving optimal product costs and enhancing operating efficiency across the company.
David Johnson: Finally, I want to reiterate what Helen said, our balance sheet remains debt free and we have a solid cash position, both of which provide a competitive advantage in uncertain times. We remain confident in our ability and plans to create long-term value for shareholders.
Operator: Now I'll turn the call over to the operator for the Q&A session. Thank you. As a reminder, to ask a question, please 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 Lebiedzinski: And our first question comes from Anthony Lebiedzinski of Sidoti, your line is open. Thank you and good morning, everyone. And yeah, thanks for taking the questions. So, you know, it's really great to see the progress with the inventory reductions and great to hear also about the success of the new products.
Helen Johnson-Leopold: So, I guess, you know, first, how does the pipeline look like for new products without you guys sharing too much of the secret sauce? But the, you know, just wondering, how do we think about the new product introductions in the upcoming quarters? Well, we've... You know, we launched for this season and we have launched the new products for both fishing and camping and so far they're beating expectations. So we feel good about that. Watercraft has also launched a significant line of new products which, you know, we are hoping to see those results be positive as well.
Helen Johnson-Leopold: So, you know, we keep we keep pushing on innovation. And that's one of our strategic priorities. You know, right now, you know, we're working on the longer term innovation that will hopefully continue into next year's hope. You know, we've always said innovation breaks through a tough market. So that's always a priority for us. Okay, thank you.
Anthony Lebiedzinski: So, given what's happening here in the world as far as just dealing with tariffs and consumer confidence, kind of where it is, just understanding that you guys have a seasonal business, but just wondering if you guys could talk about the trends during the quarter, whether there was big changes from January to March. Maybe if you look at on a year-over-year basis, I know for the quarter, your sales were down about, what, 4%, but just wondering if there was significant changes, variability on a year-over-year basis as you progress through the quarter, given what's happening in the world out there.
Helen Johnson-Leopold: You know, and Dave, you can pipe in too, but I would say it's been pretty consistent of a tough environment, and it's both from the consumer sentiment end, from the retailer invitation. Can you hear me Anthony? Yes. Sorry, Anthony, I think we had a little technical problem, but you know, your question was on, you know, trends this year versus what we've seen, you know, versus last year. I, all I can say, you know, it's still from a market standpoint, it's tough, but we do have new products that we are launching that we didn't have last year.
Anthony Lebiedzinski: So, again, we're hoping that those will deliver some positive results during the rest of the season. Understood. Okay. Yeah. Thanks, Helen. Okay.
Anthony Lebiedzinski: And then just wondering, so since the new tariffs were announced on April 2nd, obviously there's been some back and forth, some changes. Just wondering if you've seen any notable change since then in terms of your ordering patterns from retailers? What's been the response? Curious to get your at least high level thoughts on that. Yeah, I mean, it's still early for us in terms of retailer reaction, I'd say I mean, we, you know, we came in with the quarter with a good plan in place. And, you know, I think the reaction will be, you know, the rest of the year.
David Johnson: So we, we haven't seen initially a big pullback from retailers. But as Helen alluded to, I think the marketplace is going to be challenged, you know, for the balance of the season. Thanks, Dave.
Anthony Lebiedzinski: So just thinking about the impact of tariffs, so just maybe first, if you could address how much you guys have exposure to China, which is getting hit the hardest in terms of the tariff rates. And then how do we think about the response from you? I know you guys talked about potential pricing action. So it sounds like those have not yet been implemented. But just maybe walk us through your China and other countries' exposure, just rough estimates. And then how do you respond to that? And just would love to hear your thoughts on that. Sure.
David Johnson: I mean, as you know, we manufacture and assemble almost all of our products in the United States, which is great. I mean, we're very proud of that, but we do import, you know, a fair amount of product from China, electronic components and other raw materials from China and Southeast Asia, so we do have exposure. I mean, it's real, it's there. So, you know, we are now working, you know, we've been working on a few months on mitigation strategies, and we talked about that already. So, you know, everything's on the table for us. We're looking at supply chain, you know, getting more efficiencies, pricing where it makes sense, you know, everything's on the table for us to mitigate, and we're very, very focused on that.
David Johnson: Thanks, Dave. Okay.
Anthony Lebiedzinski: And then just following up, as far as, you know, the quarter that you reported, so part of the gross margin puts and takes, you know, were the, I guess, on the negative side, the discounting on the positive side, the cost savings program. You know, can you provide any more details as to how much you suffer from from those things? You know, just wanted to understand the magnitude of that, especially this cost savings program and whether, you know, there's still more to be realized from the cost savings as we look. towards the key summer months here.
David Johnson: Yeah, I think I said before that we were looking at cost savings between one and two points of benefit for us as we as we came into this year. And that's consistent with the quarter. So and that helped offset some some discounting that we we did in in the quarter, kind of across the board there. So that's kind of the magnitude we're looking at. And then importantly, we're looking at expanding that cost savings. So that's it's a critical piece of what we're trying to do going forward. Mm-hmm. Gotcha. Okay. So do you think it could be more than that one to two points of gross margin when you're done with this cost savings program?
David Johnson: Well, the savings program is gonna it's a medium term and longer term, you know, program. So I can't give you any guidance more than what I've already said. But yeah, we hope to get more. Understood, okay.
Anthony Lebiedzinski: Okay, and then lastly for me, you know, it looks like the the tax rate in the quarter was unusually high Can you comment on what happened there? And what is your outlook for the fiscal year? Yeah, I mean, there's a couple of things happening. One is, you know, we've got income and expense in different jurisdictions. And when you kind of get down to a smaller number, the rate kind of looks wonky. But we also had an accrual from some tax audits in Europe that we took in the quarter that affected that quarterly tax rate. So that's kind of a one-off thing.
David Johnson: You know, given what's happening with everything in the macro environment, I even hesitate to tell you what the full year is going to look like. But, you know, we'll be managing pretty carefully. Understood. Okay.
Anthony Lebiedzinski: Well, thank you very much and best of luck dealing with the crazy world here. Thanks, Anthony. Thank you.
Operator: I'm showing no further questions at this time.
Helen Johnson-Leopold: I'd like to turn it back to Helen Johnson Leopold for closing remarks. Thank you for joining us today, and I hope everyone has a very good day. Thank you.
Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.