Having released is financial results for the period ended July 1st, Vista Outdoor has indicated that its cycling brands are unlikely to be among the first to be divested, as previously hinted.
In a call to investors and subsequent announcement the CEO suggested that plans to divest the Bell, Blackburn and Giro brands were actually on the discussion table prior to a much publicised boycott movement. This came in the wake of social outcry over Vista’s links with the firearms industry and financial donations to the National Rifle Association following the horrific shootings at the Parkland High School in February.
This announcement was seen by many as a victory of sorts, with large accounts such as REI putting business with Vista on hold until further notice.
CEO Chris Metz told investors that sales had not been significantly impacted by the boycott, something the conference call did not mention specifically.
On the call to investors he said Vista would sell brands off in a “sequential manner”, starting with Savage and Stevens, two of the group’s firearms labels.
Vista has subsequently sold off the Bollé, Cébé and Serengeti brands in a deal worth $158 million, though only the former operates in the cycling market.
In terms of trading, sales did decline 6.6% in Vista’s first financial quarter (ended July 1st).
Sales declined by around $40 million like-for-like and were valued at $529 million across the group. Specifically within the outdoor segment, sales dropped from $290 million in the same quarter last year to $271 million.
The dip in trade was attributed largely to softer sales of hunting and shooting accessories, as well as lower sales in hydration and protection goods.
“Vista Outdoor’s first quarter results exceeded expectations despite continuing headwinds and market challenges,” added Metz. “The company generated strong free cash flow, primarily driven by improved working capital management, which we used to pay down $33 million of long-term debt. Our focus on improved profitability is delivering results, we are driving operational excellence through cost savings initiatives and procurement strategies, and we continue to introduce innovative new products into the market.
“Our strategic transformation plan, which we announced in May 2018, is also tracking well. The transformation will allow the company to drive shareholder value by reducing leverage, improving financial flexibility and the efficiency of our capital structure, and providing additional resources to reinvest in our core product categories: ammunition, hunting and shooting accessories, hydration solutions, and outdoor cooking.”
Looking forwards, Vista Outdoor is likely to see some impact on its trade thanks to the ‘trade war’ tariffs causing headaches for many in the bicycle business.
With metal prices so closely tied to the business and its ammunition segment in particular, Vista was already struggling with increased costs before the latest round of announcements. Metz said that the lowest possible prices were locked in early to attempt to offset damages.
It is the third round of tariff proposals – tallied at around $200 billion in Chinese trade – that could impact the firm’s cycling division most.
Helmets feature on the 25% proposals, which will impact Bell and Giro significantly.
Metz told investors: “I’m led to believe that just about everyone in the world sources helmets from China. It’s hard for us to believe our Government would want to put a tariff on a safety product, but it’s anybody’s guess as to what the administration is going to do.”
For more specific financial information, see the report here.