American Outdoor Brands(AOUT) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales for Q2 were $57.2 million, a decrease of 5% compared to $60.2 million in Q2 last year [17] - Gross margin was 45.6%, down from 48% in Q2 last year, with actions taken to clear slow-moving inventory impacting margins [18][19] - GAAP EPS for Q2 was $0.16 compared to $0.24 last year, while non-GAAP EPS was $0.29 compared to $0.37 last year [19] Business Line Data and Key Metrics Changes - In the outdoor lifestyle category, net sales were $34.6 million, down 5% year-over-year, primarily due to a decrease in meat processing equipment [17] - The shooting sports category saw a 5.1% decline in net sales, driven by decreases in gun cleaning and personal protection products, partially offset by strong sales in the Caldwell brand [17] - Traditional channel net sales increased by 2.3%, while e-commerce net sales decreased by 15.9% compared to last year [18] Market Data and Key Metrics Changes - Domestic net sales, which accounted for approximately 95% of revenue, decreased by $2.4 million, or 4.3%, while international net sales decreased by roughly $600,000 compared to Q2 of last year [18] - Point-of-sale (POS) for November grew approximately 13%, indicating strong performance in the outdoor lifestyle category [13] Company Strategy and Development Direction - The company is focused on innovation and entering new outdoor product categories, which is driving the strength of its Growth Brands [5] - The innovation pipeline has generated nearly $100 million in incremental annual new product revenue over the past five years, with new products driving over 31% of net sales [10][12] - The company is committed to reducing inventory levels over time to improve working capital [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the performance in the second half of the year, despite caution regarding evolving consumer spending patterns and retail order volatility [14][26] - The company expects full fiscal year net sales to decline roughly 13%-14% year-over-year, but underlying net sales decline would be approximately 5% when adjusting for accelerated orders from the prior year [26] - Management believes that the full-year benefit of tariff mitigation actions will provide a clear path to improve profitability in fiscal 2027 [30] Other Important Information - The company ended the quarter with $3.1 million in cash and no debt, maintaining a strong balance sheet [20] - A new $10 million share repurchase program was approved, effective October 2025 through September 2026 [24] Q&A Session Summary Question: Visibility into revenue at POS and brand performance - Management indicated visibility into approximately 60% of revenue through POS, with outdoor lifestyle performing well and Caldwell brand significantly outperforming others [33][34] Question: Disconnect between November performance and quarterly guidance - Management noted that while POS is strong, retailers are managing lower inventory levels and adjusting orders based on available capital [35][37] Question: Mitigating softness in the e-commerce channel - Management highlighted the evolution of sales channels and the need to adapt to changes in consumer behavior and retailer strategies [39][40] Question: Seasonality and margin expectations - Management confirmed that Q2 and Q3 are typically the highest sales quarters, with expected gross margins in the range of 42%-43% for the full fiscal year [42][43] Question: Tariff mitigation and its impact on P&L - Management confirmed that tariff costs are capitalized in inventory and will start to amortize in December, with full mitigation expected by fiscal 2027 [51][52] Question: Insights on Black Friday performance - Management reported strong POS results during Black Friday and November, particularly in direct-to-consumer sales [62][63] Question: New product pipeline and market entry - Management expressed excitement about the innovation pipeline and plans to build on existing ecosystems within brands [66][68] Question: M&A landscape updates - Management noted a more favorable M&A environment with potential opportunities emerging, particularly among family-owned businesses [70]