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American Outdoor Brands Inc Reports Modest Sales Growth Amid Market Challenges

  • Net sales increased to $57.9 million, up by 6.4% year-over-year.

  • Gross margin declined to 45.7%, a decrease of 200 basis points from the previous year.

  • GAAP net income stood at $77,000, while non-GAAP net income was $3.3 million.

  • Company maintains a strong balance sheet with $8.4 million in cash and no debt.

On November 30, 2023, American Outdoor Brands Inc (NASDAQ:AOUT) released its 8-K filing, detailing the financial outcomes for the second quarter of fiscal year 2024, which ended on October 31, 2023. The company, a leading provider of products for outdoor enthusiasts, reported a 6.4% increase in net sales, reaching $57.9 million, compared to $54.4 million in the same quarter of the previous year. This growth exceeded expectations and marked a significant 21.3% increase over pre-pandemic levels in fiscal 2020.

Financial Performance Overview

Despite the rise in net sales, American Outdoor Brands Inc experienced a contraction in gross margin, which fell by 200 basis points to 45.7%. The company's GAAP net income was reported at $77,000, or $0.01 per diluted share, a decrease from the $370,000, or $0.03 per diluted share, recorded in the same quarter last year. Non-GAAP net income also saw a decline, coming in at $3.3 million, or $0.25 per diluted share, compared to $4.0 million, or $0.29 per diluted share, in the prior year's quarter.

Non-GAAP Adjusted EBITDAS was $5.2 million, or 9.0% of net sales, a decrease from $6.4 million, or 11.8% of net sales, in the comparable quarter last year. These non-GAAP financial measures are used by the company to provide a clearer understanding of underlying performance trends by excluding items like acquired intangible amortization, stock compensation, and technology implementation costs.

Strategic Developments and Management Commentary

President and CEO Brian Murphy commented on the quarter's performance, noting the solid net sales growth and capital management, as well as progress against long-term strategic objectives. He highlighted the slight decline in shooting sports category sales, which was offset by growth in the outdoor lifestyle category, now representing nearly 60% of total net sales. Murphy also emphasized the importance of retail expansion, citing the partnership with Academy Sports + Outdoors to introduce the MEAT! Your Maker brand to new customers.

Our second quarter results reflect solid performance in net sales and capital management, as well as ongoing progress against our long-term strategic objectives, said Brian Murphy.

Chief Financial Officer Andrew Fulmer expressed confidence in the company's positioning to capitalize on positive long-term consumer outdoor participation trends. He underscored the company's strong balance sheet, with $8.4 million in cash and no debt, and the continuation of the share repurchase program.

We believe our brands remain well positioned to capitalize on positive, long-term consumer outdoor participation trends, Andrew Fulmer stated.

Balance Sheet and Cash Flow

The consolidated balance sheet shows that American Outdoor Brands Inc maintained a robust financial position, with total assets equating to $243.65 million, consistent with the previous fiscal year-end. The company's cash and cash equivalents decreased from $21.95 million to $8.38 million, while inventories increased to $109.12 million from $99.73 million. The equity stood at $185.99 million, slightly down from $191.86 million at the end of the previous fiscal year, reflecting the company's ongoing stock repurchase efforts.

Looking Forward

While the company navigates market uncertainties, including cautious inventory management by retailers and reduced consumer demand, it remains optimistic about its growth prospects. Management believes that net sales for fiscal 2024 could exceed the previous fiscal year's sales by up to 3.5%. The company plans to continue investing in its business, returning capital to shareholders, and pursuing identified growth opportunities.

For a detailed reconciliation of GAAP to non-GAAP financial measures and further insights into American Outdoor Brands Inc's financial performance, readers are encouraged to review the full earnings release and financial statements.

Explore the complete 8-K earnings release (here) from American Outdoor Brands Inc for further details.

This article first appeared on GuruFocus.