Escalade(US:ESCA)2022-10-29 14:13Financial Data and Key Metrics Changes - Net sales declined by 7.9% year-over-year, totaling $74.9 million for Q3 2022 [12][20] - Gross margin dropped by 432 basis points to 18.2% compared to 22.5% in the prior year period, primarily due to lower sales and unfavorable product mix [12][20] - Net income for the quarter was $3 million, or $0.22 per diluted share, with earnings before interest, taxes, depreciation, and amortization (EBITDA) declining by 35.3% to $5.8 million [20][23] Business Line Data and Key Metrics Changes - Demand for outdoor categories, particularly archery, showed softness, while sales of billiards and pickleball products partially offset this decline [12][14] - The company anticipates introducing selective promotions to reduce finished goods inventory towards historical levels [9][10] Market Data and Key Metrics Changes - Outside of the mass merchant channel, all other sales channels experienced year-over-year sales growth in Q3 [8] - Total inventories increased to $135 million at the end of Q3, up from $130 million at the end of Q2, due to softening consumer demand [18] Company Strategy and Development Direction - The company is focused on managing controllable expenses and addressing supply chain challenges while maintaining value for customers [11][16] - A new partnership with the American Cornhole League was announced, expanding product offerings in growing outdoor lifestyle categories [15] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer demand has slowed but has not completely halted, indicating a transitional period for households [7][10] - The company believes that potential economic downturns may create additional market share opportunities [11] Other Important Information - The company exercised an additional $15 million accordion feature under its senior revolving credit facility, increasing available liquidity to nearly $30 million [17][24] - A quarterly dividend of $0.15 per share was announced, payable to shareholders on December 12, 2022 [24] Q&A Session Summary Question: Discussion on competitive promotional environment and pricing - Management acknowledged that while inflation exists, many competitors have excess inventory, leading to anticipated promotional activity in Q4 [26][27] Question: Update on cost control initiatives and product reengineering - Management confirmed ongoing efforts in cost reduction, with decreases in raw material costs and ocean freight rates expected to continue [28][29]