Vista Outdoors’ cycling labels Bell and Giro have posted what the CEO described as “one of the better quarters we’ve had in years” in Q1.
CEO Chris Metz was bullish about the brand’s progress despite an overall decline in sales across the portfolio. Vista has notably been shifting its position with its firearms business in the wake of a turbulent few years where calls to boycott have been loud and clear in the wake of ongoing mass shootings in the USA.
The company sold off its Savage firearms brand last month, a move that prompted multiple REI to resume sales of Vista goods.
“We’ve now completed the first phase of Vista Outdoor’s turnaround,” said Vista Outdoor Chief Executive Officer Chris Metz. “By divesting our Eyewear business and now our Savage firearms business, we’ve right-sized our portfolio to brands who are, or can be, market leaders in their space. While we continued to see softness and challenges in our markets in the first quarter of Fiscal Year 2020, I remain confident in our plan to restore our brands to greatness. We are mitigating unprecedented challenges while making continued progress to a more growth-centric Vista Outdoor.”
Total sales were down $460 million in Vista’s first quarter, ended June 30th, representing a decline of 13%.
Bell and Giro’s growth stemmed largely from specialist retailers, according to Metz who also said on Thursday that Giro surpassed Oakley to become the snow sports market’s second largest company.
In the conference call Metz outlined a strategy to invest in the brands prior to a long-term vision to sell the labels.
“Bell and Giro is a business that we felt like we could improve and drive better value for when we do eventually sell the business,” said Metz. “We have some great folks in that business that are longtime industry veterans that really help us drive the innovations and share positions that we have in the marketplace. I wouldn’t say we are pleased with the current performance, that’s why we are holding on to it and improving it, but we will continue to evaluate it as we go forward.”
Overall sales in the action sports segment were down $67.9 million for the quarter, or 5% like-for-like.
Gross profit for the business as a whole was $95 million, down 16 percent from the prior year quarter, down 8 percent on an adjusted organic basis, excluding results from the sale of our Eyewear brands.
Vista Outdoor’s updated guidance for FY20 to reflect the sale of Savage Arms is as follows:
- Sales in a range of $1.79 billion to $1.89 billion, compared to $1.94 billion to $2.03 billion
- Interest expense of approximately $40 million, compared to $45 million to $50 million
- Tax rate reported of 140 percent and adjusted of approximately (25) percent, compared to a tax rate reported and adjusted of approximately 5 percent
- Earnings per share in a range of $(0.03) to $0.12 and adjusted earnings per share of $0.10 to $0.25, compared to earnings per share of $0.28 to $0.38
- Capital expenditures of approximately $40 million, compared to $45 million to $50 million
- Free cash flow in a range of $30 million to $40 million, compared to $55 million to $65 million
In the UK, ZyroFisher distributes many of Vista’s cycling brands.