Just days after a user named “Imperial Dividends” touted the stock as a “value play” on Seeking Alpha, the company released third quarter earnings that were far worse than anticipated and cut guidance going forward.
For the second quarter ended October 1, 2017:
- Sales were $587 million, down 14 percent from the prior-year quarter, including $12 million of additional sales from the acquisition of Camp Chef. Sales were down 16 percent on an organic basis.
- Gross profit was $139 million, down 25 percent from the prior-year quarter. This includes $3 million of additional gross profit from the Camp Chef acquisition, offset by a 27 percent decrease in organic gross profit.
- Operating expenses were $266 million, compared to $81 million in the prior-year quarter. This $185 million difference was primarily due to a $152 million goodwill and intangibles impairment in the current period, partially offset by a $30 million acquisition settlement gain in the prior-year period.
- Fully diluted earnings per share (EPS) was $(2.01), compared to $1.22 in the prior-year quarter. Adjusted EPS was $0.34, compared to $0.74 in the prior-year quarter.
- Cash flow provided by operating activities year to date was $109 million, compared to $10 million in the prior-year period. Year-to-date free cash flow generation was $77 million, compared to free cash flow use of $48 million in the prior-year period, primarily driven by inventory reduction initiatives.
Another Seeking Alpha user, Mark F. S., followed up earnings with a good analysis of the company’s results and why they are so bad.
Bottom line, I consider myself having knowledge about the firearms side of the business where Vista Outdoors declined 18.7% year over year in sales and 37.7% in gross profits. Even though I do participate in many outdoor activities and am a customer and an owner of a number of Vista Outdoor’s Outdoor Products brand’s products, in previous articles I stayed away from commenting. I hoped that the outdoor brands business would balance out the near-certain disappointment of the Shooting Sports division. Unfortunately, the Outdoor Products did poorly as well, with sales and gross profits down over 9% year over year.
The firearms brand may be the sinking boat anchor, but it is not the only thing dragging the company down it seems.
Where this becomes a major issue is in the massive debt the company owes, now at over $1 billion, surpassing the company’s entire market cap of $722 million.