Johnson Outdoors Inc. (NASDAQ:JOUT), a leading global manufacturer and marketer of branded seasonal outdoor recreation products, has reported its financial results for the second quarter of fiscal 2024. The company's performance reflects the challenges faced in the current market environment, as it navigates through increased competition and softening consumer demand.

Business Overview

Johnson Outdoors is a leading global manufacturer and marketer of branded seasonal outdoor recreation products used primarily for fishing, diving, paddling, and camping. The company's portfolio of well-known consumer brands, including Minn Kota, Humminbird, Cannon, Eureka, Jetboil, Old Town, Ocean Kayak, and SCUBAPRO, have attained leading market positions through continuous innovation, marketing excellence, product performance, and quality.

The company operates in four primary business segments: Fishing, Camping, Watercraft Recreation, and Diving. The Fishing segment, which includes the Minn Kota, Cannon, and Humminbird brands, is the largest contributor to the company's revenue, accounting for approximately 79% of total net sales in the second quarter of fiscal 2024. The Camping segment, which includes the Eureka and Jetboil brands, contributed 6% of total net sales, while the Watercraft Recreation segment, which includes the Old Town and Ocean Kayak brands, contributed 6%. The Diving segment, which includes the SCUBAPRO brand, contributed 9% of total net sales.

Financials

For the second quarter of fiscal 2024, Johnson Outdoors reported net sales of $175,856, a decrease of 13% compared to the same period in the prior year. This decline was primarily driven by continued "challenging marketplace conditions" across the company's key product categories. The Fishing segment, which accounts for the largest portion of the company's revenue, saw a 11% decrease in net sales to $138,608. The Camping and Watercraft Recreation segments also experienced declines of 23% and 25%, respectively, during the quarter.

Despite the top-line pressures, Johnson Outdoors reported a net income of $2,156, or $0.21 per diluted share, for the second quarter. This compares to a net income of $14,861, or $1.45 per diluted share, in the same period of the prior year. The decrease in profitability was largely attributable to lower sales volumes, unfavorable overhead absorption, and increased promotional and pricing actions taken to remain competitive in the market.

For the first six months of fiscal 2024, Johnson Outdoors reported net sales of $314,500, a decrease of 17% compared to the same period in the prior year. Net income for the six-month period was $6,111, or $0.59 per diluted share, compared to $20,740, or $2.02 per diluted share, in the prior year.

Helen Johnson-Leipold, Chairman and Chief Executive Officer of Johnson Outdoors, commented, "The second quarter results reflect challenging marketplace conditions. In the season ahead, the company is investing in marketing and promotions and supporting new product launches, like the new Minn Kota Quest trolling motor line that is seeing positive response from the trade. The company is also continuing to work hard to improve its cost structure and reduce inventory levels."

Financial Highlights

Johnson Outdoors' financial position remains strong, with a debt-free balance sheet and ample liquidity. As of March 29, 2024, the company had $84,270 in cash, cash equivalents, and short-term investments, compared to $107,648 as of March 31, 2023. The company's debt-to-total capitalization ratio was 0% as of March 29, 2024, unchanged from March 31, 2023.

The company's gross profit margin for the second quarter of fiscal 2024 was 34.9%, compared to 37.3% in the same period of the prior year. The decline in gross margin was primarily due to unfavorable overhead absorption resulting from lower sales volumes, as well as increased promotional and pricing actions taken to remain competitive.

Operating expenses decreased by 4% to $61,684 in the second quarter of fiscal 2024, compared to $63,945 in the prior year period. The decrease was primarily driven by lower sales volumes, reduced incentive compensation, and lower professional services expenses, partially offset by increased promotional spending.

For the six-month period ended March 29, 2024, Johnson Outdoors reported an operating loss of $207, compared to an operating profit of $16,862 in the same period of the prior year. The company's net income for the six-month period was $6,111, or $0.59 per diluted share, compared to $20,740, or $2.02 per diluted share, in the prior year.

Liquidity

Johnson Outdoors' strong financial position and liquidity provide the company with the flexibility to navigate the current market challenges and invest in strategic initiatives. As of March 29, 2024, the company had $84,270 in cash, cash equivalents, and short-term investments, compared to $107,648 as of March 31, 2023.

Cash Flows

During the six-month period ended March 29, 2024, the company used $51,764 in cash from operating activities, compared to $18,095 in the same period of the prior year. The increase in cash used for operations was primarily due to decreased sales volumes and higher inventory purchases.

Cash provided by investing activities totaled $7,031 for the six-month period ended March 29, 2024, compared to $992 in the prior year period. The current year cash provided by investing activities reflects the maturity of $15,000 in investments, as well as proceeds of $2,234 from the sale of fixed assets, predominantly a building.

Cash used for financing activities, which primarily consisted of dividend payments, was $6,945 for the six-month period ended March 29, 2024, compared to $6,710 in the prior year period.

Outlook

Johnson Outdoors acknowledged the continued "challenging marketplace conditions" and expects these challenges to persist in the season ahead. The company is focused on navigating the current environment through strategic investments in marketing, promotions, and new product launches, such as the Minn Kota Quest trolling motor line, which has received positive feedback from the trade.

Additionally, the company is actively working to improve its cost structure and reduce inventory levels, which have been elevated due to the softening consumer demand. David Johnson, Vice President and Chief Financial Officer, stated, "The company is gaining efficiency benefits in its factories and has driven reductions in its logistics costs. The company will expand its efforts to reduce its cost and expense structure."

Despite the near-term headwinds, Johnson Outdoors remains committed to its long-term growth strategy. The company continues to invest in innovation, which it believes is key to maintaining its market-leading positions and driving future success. The company's strong brand portfolio, diversified product offerings, and financial flexibility position it well to navigate the current challenges and capitalize on opportunities as the market environment stabilizes.

Risks and Challenges

Johnson Outdoors operates in a highly competitive and seasonally-driven industry, which exposes the company to various risks and uncertainties. The company faces competition from both established players and new entrants in its key product categories, which can impact pricing, market share, and profitability.

The company's performance is also heavily influenced by consumer spending patterns, which can be affected by macroeconomic conditions, such as changes in disposable income, consumer confidence, and discretionary spending. The ongoing uncertainty surrounding the global economy and its impact on consumer behavior could continue to pose challenges for the company.

Additionally, the company's operations are subject to various regulatory requirements, including environmental, health, and safety regulations, which could result in increased compliance costs or operational disruptions.

Conclusion

Johnson Outdoors' second quarter and year-to-date fiscal 2024 results reflect the challenges faced in the current market environment, as the company navigates increased competition and softening consumer demand for its outdoor recreation products. While the near-term outlook remains uncertain, the company is taking proactive steps to improve its cost structure, reduce inventory levels, and invest in strategic initiatives, such as new product launches and marketing efforts, to position itself for long-term success.

Despite the headwinds, Johnson Outdoors' strong brand portfolio, diversified product offerings, and financial flexibility provide a solid foundation for the company to weather the current storm and capitalize on opportunities as the market environment stabilizes. Investors should closely monitor the company's progress in executing its strategic initiatives and its ability to adapt to the evolving competitive landscape.