JOUT - Earnings call transcript Q2 2022

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Operator

Hello and welcome to the Johnson Outdoors Second Quarter 2022 Earning 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. 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. now from turn Johnson would to call I Penman Pat Outdoors. instructions] like the to over [Operator Please go ahead, Ms. Penman.

Patricia Penman

XXXX Outdoors Thank you. for for Johnson us for you quarter. the results Good morning our everyone. discussion Thank fiscal second joining of

assumptions of statements. today's on that If release, not current available the differ may listed this many those our risks are and www.johnsonoutdoors.com Securities number due guarantees Investor conference it and These Actual at of the need also include forward-looking news Relations. you with factors, events call website materially copy to in I Exchange Commission. our future These our may to and is beyond of statements made control. uncertainties performance. a under Johnson need press basis Outdoors' statements from of are on remind release those views and filings contain you a and

following or the now please have call, contact additional you over to Johnson call pleasure questions my Helen Johnson-Leipold. David If is the to It myself. turn

Helen Johnson-Leipold

continued year-to-date prior quarter to for review also Total morning six year, operating Thanks then was of Sales second perspectives profit an X% million the mark fiscal businesses. take fiscal halfway you with compared us. total XXXX of news year-to-date challenges, begin persist challenged continue to quarter The million seeing period. uncertainties. Ongoing I'll the issues products we is our the the and fiscal the last great and on manage declined fill be At margins the quarter to component environment prior At in people will hard finished and time, fiscal year disruptions geopolitical your $XX focused to inflationary $XX.X overview issues and versus continue declined delays We're the and supply compared thank Pat. performance businesses. for ability that product month orders. the outlook continue to profits In continue X% and company fishing same the quarter. remain are possible April year's period. as outdoors these second and and prior robust in all the In fiscal the product then to sales to Dave company current second operating across our six XX, midst I'll down best month of anglers supply the declined over Fishing, we in Johnson issues demand on to complete year, to and our products. supply on to year many financial for prioritizing working unprecedented demand share and expect ending look for highlights joining Good questions. across strong. our year's we'll and chain quarter this slowing with the want and remain these build, we're chain recreate our the create experience lines dynamics. and ship Outdoors for chain supply to global

market strength our and the is activities. benefit be from Recreation, Camping, very to and positioned Both Watercraft oil, to is line Super participation outperforming is growth team Watercraft double-digit continue remain work segment challenging we're get sales as we to us In year Stash on products to components, that and with This consumers demand excited the see finish Stoves growth receive invested In [indiscernible] the continued doing market. in products stove have has market. in high strong Kayak for continues sports We so that on and demand to for the help businesses market. Camping momentum remaining about Light Fishing businesses and the hard the difficult very continue its are jet in I'm parts. a in our Recreation the the building innovative of available continues as both Eureka surgeon proud we're to in environment. second and shown in in

business, Diving, in are markets signs our recovery. Dive Finally, most global showing of

to work great that support our for SCUBAPRO's as the to this e-commerce, team seeing outdoors dive efforts, sustained brand hard navigating to promote get world. take including local summary, working our and we're want future demand Johnson focused challenging priority build businesses growth. have view, the digital brands remains global the to Our presence, to and focused along customers. more helped with trusted In product in people and strong working most the news position innovation diving position and is remain our to In the maximize these the positive continued We enhance meantime, ensure conditions growth. and our uncertainties long-term this shipments for Outdoors, and on we and is products. to At the on

for a the of Dave to over financial call the turn review I'll Now highlights.

David Johnson

I wanted highlight few from the morning, year. and Good everyone. Helen. to you, Thank quarter a the items

As strong Helen our to demand disruptions chain. remains mentioned, in face the continuing business we're and supply across

our to in business. the being for fishing result, demand ability especially a meet impacted, As is our products

As these costs, our gross of increases we're margins. result are supply a in shortages, which experiencing impacting

our of of taken increases increases we've offset inputs. While these pricing entirely cost across actions businesses, the not all have

we pressured the be demand. fiscal year We the balance as the meeting strong expect prioritize margins through of to

building inventory strategically levels, been we've primarily in raw Additionally, higher-than-normal materials.

work alternative components We supply all where our for and closely sources with for planning continue to critical of of feasible. vendors

XX.X% year's higher full versus gross $XX.X quarter in mid-XXs. million. rate Net comparable margin. year inbound from points increased be freight for and down and primarily year's due down sales prior material quarter as costs, deferred versus from tax margin a million is The quarter, second last For volume. quarter, to effective in as lower was of decreased and was absorption lower expect of decreased the year-to-date to quarter lower operating primarily the year's quarter variable the the record-setting to due the million, expenses second Quarter's nine $X the income last and in sales compensation quarter down expenses volumes to quarter, the profit rate quarter's to is Operating prior decrease $X.X gross lower well from volume-driven due prior we expense. tax year's XX.X% year the

the to to sheet the dividends We debt have enables cash remain in and our strengthen confident to us no We balance consistently on ability business. to and position continue to value in invest our pay deliver shareholders. long-term opportunities

operator I'll call Q&A the for Operator? session. over turn Now the the to

Operator

from & Company. And Sidoti [Operator question first Instructions] Lebiedzinski our Anthony comes of

Anthony Lebiedzinski

the so Thank you. And good for morning. opportunity thanks have a few questions, here. I do

entirely sales Or do issues? guess think supply this decline, in competitive So chain of perhaps due terms first, to the fishing I the were in any you there quarter? segment was issues

Helen Johnson-Leipold

and This the we've supply back quarter is Demand is got chain. about -- is high, orders. whole story

So supply. it all about -- it's was

Anthony Lebiedzinski

Okay. obviously, so unable And you to were fulfil then here. lot orders a the of

to convert what's as Or these being -- to far you be just them whether lost revenue? produce these it'll on better able your hold do time into and Or them degree -- think orders? of do a wanted you could orders and think sales? can fulfil just you these as be of confidence So to get a sense before matter

Helen Johnson-Leipold

incrementally. in we all actually can is come say Well, orders seen we've

So the needing product. is The are demand customers still still high.

supply this and getting at orders in. we'll these it's on point, hang get supply hopefully, while to about And the so we

Anthony Lebiedzinski

Okay.

the that like So haven't you're cancellations because seen Is that issues having? supply of any order fair? chain you it sounds

Helen Johnson-Leipold

we No, haven't. No.

Anthony Lebiedzinski

what then of average? your terms the took, And plans increases are that the Okay. on remind price And in of were you how can you was? price that timing just the much further increases what for increases? And us

David Johnson

but been terms some that our Yes. of pricing offset at at increases then of incremental, the we've We our I the we pricing got our businesses some cost we into get would of obviously I'd the in fiscal it's April. and not the of took that not some the in took pricing seen. beginning brands, enough year beginning into, rather and of percentage and to say, incremental

Anthony Lebiedzinski

Thanks Got competition increases, Okay. then, how you it. as they far of generally demand? say would describe are so line And you in the as would with elasticity and Dave. price

David Johnson

the increases many price We've Yes. board, got and across of we've kind competitive seen competitors.

they're So it's -- terms of to mixed a in how what doing. compare there's we bag

in seen definitely great what increases It's And it the as demand, the question. consumer would that dynamics into of So I Yes. that's price the are is say, we what elasticity like about we've consideration those looks in just general, industry. the and willing incremental take pay, to we...

Anthony Lebiedzinski

Got you.

or are are as Okay. guess still And then seeing would inventory as how far you far you retail, solid this so describe I quarter, levels you And demand? seeing that? also,

David Johnson

repeat Anthony, a for broke sorry, second. question? your up we Could there you

Anthony Lebiedzinski

Yes, you sure. I didn't either. couple a of seconds for hear

Yes. So

guys. quarter? a seeing Obviously, you -- So the big describe quarter would for seasonal you so far as overall so far is this this demand that you're how

know that on said while So topic, is I demand you strong.

into levels at reiterate far just could now. inventory continuing wanted you if as as I this then quarter just So that's about your and sense whether retail

Helen Johnson-Leipold

The and on getting demand moves continues. stay off. of into What this shelf It's pretty is It -- goes steady, the the long. heart just season. the right doesn't we're

say are that levels at would the I very also light. inventory see So level we store

are things So moving.

Anthony Lebiedzinski

Okay. in us sizable versus you was margin a decline, versus of gross the it cost. Can freight different lack pressures, And decrease. the hear. of rather of obviously, That's then absorption margin deconstruct help good to fixed the given materials terms of buckets gross air the

-- more maybe down detail a as us exact not what numbers, the give little was just better but in past. seen could much certainly than the the little magnitude bit you If more understanding maybe how margin gross -- because we've a of bit Dave,

David Johnson

most due just variance that decrease biggest cost. material Yes. higher XX% to is quarter The Sure. of of the last to is that. Both XX% versus due and after the I'd that is volume year-to-date, the unabsorbed of in for chunk year say overhead. variance the to

We not versus as of freight the It's impacted. on inbound an impact big year-to-date. quarter have seen

overhead. So buckets unabsorbed really, and then the are two big materials

Anthony Lebiedzinski

Got it. Okay.

in you the post air I Okay. as quarter freight, was more And know then case have that the this well? used past,

David Johnson

comparable last been I it's would say year do had a when to of that. to lot we

the wherever in. been can it's find get ability the to product So we

delta what the been it big hasn't So a done in versus we've past.

Anthony Lebiedzinski

you. Okay. Got

comment lockdowns to then China? in of your exposure the on And Okay. China impact and can you

Helen Johnson-Leipold

they've certainly second had supply. impacts Obviously, that lockdowns a and of wave

think of be think this we I lodging I out. see terms impact. has have of latest kind and going what But wait even things in one this difficult until is to to

situation. it's tough So a

Anthony Lebiedzinski

Got you.

Okay.

mentioned, year that as material there you think fair that I issues ago. inventory, as inventory overall, like Dave, of to the there that. double as or from it's I far that obsolescence because up far almost raw mostly that are kind is Is any no as say? increase assume anything with So a

David Johnson

good fair now. Yes. point, we say That's is feel because about have strong, the to so right we this at demand totally inventory

Anthony Lebiedzinski

Okay.

today, could would say know the of year? where end you what you the given inventories So by be fiscal

David Johnson

demand the now. that of Well, because we're seeing profile right say, that's difficult to Anthony, just

I think as the we if what season. the at the kind end down. retail season fill is work start we'll can that to pipeline strong, And of see is the level we

there's we a through. couple there need that just to of So dynamics work

So that months, it would to what predict for six hard be inventory. could happen with me

Anthony Lebiedzinski

for know environment lastly, comment I allocation you Okay. dynamic a still capital sure. and it's And on Understood. then just I fluid could guess, priorities. if

you just dividends could you you rank where If helpful. do two, very If one, versus just versus see be that could M&A kind would four of them kind in rank order, that of three, share buybacks?

David Johnson

to where that we grow do the we that and capital. to have have Yes. we us with want available for company It's capital the same us,

that focus primary the is we company that's the capital grow have. So the with to

sure make a Beyond to that return. big the we is a we'll that strategy. want that, as And things could the to dividend make alternative I other pay. to want but look that shareholder uses that's yes, But We of things robust. we we need that buybacks vehicle and other that the same with good has kind of or the be remains sure cash, at

Anthony Lebiedzinski

of luck. Okay. best Well thank you and

David Johnson

you Thank

Operator

closing [Operator I'm hand would questions. showing now no like Instructions] to I the Helen further Johnson-Leipold call back to remarks. And for

Helen Johnson-Leipold

want thank and have Just to everybody day. us, for a great joining

Operator

concludes gentlemen, today's conference. that's and Ladies

now may disconnect. You

Johnson Outdoors (JOUT) 9 May 222022 Q2 Earnings call transcript