Johnson Outdoors Inc. (NASDAQ:JOUT) stock experienced a significant decline following the release of its fourth-quarter 2024 financial results. The company’s performance fell short of analyst expectations, impacted by market headwinds and shrinking profit margins.
Sales for the quarter reached $105.9 million, a 9.9% year-over-year increase, but missed the consensus estimate of $114.99 million. The company reported a loss per share of $3.35, significantly below the anticipated loss of $0.98. A key factor contributing to the disappointing results was a 600 basis point contraction in gross margin, shrinking to 23.5%. This decline was attributed to increased promotional discounts, a shift towards lower-margin products, and inventory reserves for obsolete or slow-moving stock. Consequently, gross profit decreased by 12.4% to $24.87 million.
The company’s operating loss widened to $42.8 million compared to $22.6 million in the same period last year. This was largely due to a goodwill write-off, resulting in a pre-tax loss of $39.7 million, a significant increase from the $22.1 million loss in the prior year quarter.
Despite the negative earnings results, Johnson Outdoors maintained a strong cash position with $162.0 million in cash and investments as of September 27, 2024, a $9.5 million increase year-over-year. Notably, the company reported carrying no debt.
For the full fiscal year 2024, revenue declined by 11% to $592.8 million compared to $663.8 million in fiscal 2023. This decrease was attributed to broader market challenges and reduced demand across all business segments. The company ended the fiscal year with a net loss of $26.5 million, or $2.60 per diluted share, a stark contrast to the net income of $19.5 million, or $1.90 per diluted share, reported in the previous fiscal year. Gross margin for the year also contracted to 33.9% from 36.8% due to factors such as lower sales volume, unfavorable fixed cost absorption, and the aforementioned shift to lower-margin product offerings.
David W. Johnson, Vice President and Chief Financial Officer, highlighted the company’s focus on generating positive cash flow from operations through strategic inventory management and cost-saving initiatives. He further emphasized the company’s commitment to cost management and strategic investments aimed at strengthening the business in fiscal 2025.
In Tuesday’s trading session, JOUT shares reacted negatively to the earnings announcement, declining by 5.68% to $32.49. The market’s response reflects investor concern over the company’s near-term prospects in the face of ongoing market challenges and margin pressures. Johnson Outdoors’ ability to successfully navigate these challenges and execute its strategic initiatives will be crucial for its future performance.
