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Vista Outdoor CEO on raising prices: ‘inflation is real’

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Yahoo Finance’s Brian Sozzi and Emily McCormick speak with Vista Outdoor CEO Chris Metz about the company’s latest earnings report, outlook, and more.

Video Transcript

BRIAN SOZZI: Shares of Vista Outdoors are hovering around a 52-week high as the consumer out-- as the outdoor products maker sees strong sales of ammo and golf equipment. The company is also getting good marks by the Street for the recent acquisitions of a golf tech business and another that sells wood pellets. Chris Metz is Vista Outdoor CEO and joins us now. Chris, good to see you here.

We'll talk about the quarter. But I want to talk about the repositioning of your company here. You've been making some recent acquisitions. Why are you making some of these purchases, especially in the golf space?

CHRIS METZ: Well, first of all, as it relates to acquisition, so we've grown about $1 billion in sales over the past two years. And it's really broadly spread, both organically and inorganically, through acquisitions. We've closed on six acquisitions in the past 14 months. And we're sitting at about one-time leverage right now. So we've got a great balance sheet generating over $300 million in free cash flow.

So we see it as a great opportunity to leg into some of these high-growth acquisitions. So take golf, for example. The fastest-growing segment of golf right now is collecting data and using that data to improve your golf game. So Foresight is the leader, has the majority share of the top PGA golfers. And we're able to take that technology, continue to grow with the high end of the market, but also bring it into a more affordable price point for consumers with Bushnell Golf.

Another fast-growing segment is outdoor cooking. And we've got one of the leading brands in Camp Chef. And we bought Fiber Pellet-- well, it's not Fiber Pellet. It's called Fiber Energy. The wood products are formed into pellets which then fuel these outdoor pellet grills. And just a super fast-growing market, something that we're really excited about for our Camp Chef business. So two high-growth industries that complement our overall sports businesses.

BRIAN SOZZI: Is there another category that you're eyeing that you're not in and would like to get in?

CHRIS METZ: Well, I'll tell you, so we just got into electric bikes, too, with the leading off-road bike company called QuietKat. So we see that as another kind of hyper-growth category, if you will. And we're evaluating all of our platforms and where we play today. And those are, first and foremost, the categories that we want to continue to grow in.

And then we're also looking at near adjacencies. So you look at the categories that we participate in today. And those that are closest to it really play off the strengths and the competencies within Vista Outdoor.

And one of the things we did when I joined is we created these centers of excellence. And so we've created centers of excellence, where we can bring in world-class expertise in things like digital commerce and things like supply chain and procurement, where any of our individual 40 brands wouldn't otherwise be able to do themselves. So the latest one we've done, about a year and a half ago we added an M&A capability. And we've really built that muscle up. So we've got a strong pipeline of potential acquisition targets that we're looking at to continue the growth that we're seeing today.

EMILY MCCORMICK: Chris, this is Emily. You mentioned on your earnings call that production was hampered by raw material shortages and logistic challenges. I'm wondering, where are you seeing the most pressure? And how long do you expect these pressures to last?

CHRIS METZ: So, Emily, it's a good question. And honestly, we're seeing pressure across the board. So we're seeing everything from raw materials and the key inputs to our products, whether it be precious metals, whether it be chips that go in our Bluetooth-enabled pellet grills or our laser range finders for our golf technology. We're really seeing it across the board.

And then where we source product and partner with some of our contract manufacturers, all the logistics challenges that you read about, whether it be containers, shipping shortages, rail shortages, port shortages. And all of this is because of the demand that we're seeing in the industry. And how long does this go? At least for the next couple of quarters before it gets to a more normalized environment is what we're seeing.

BRIAN SOZZI: Have you had to raise prices, Chris?

CHRIS METZ: Well, we have. And so the inflation that exists today is-- it's real. I mean, we've got input pressures, whether it be labor costs or what have you that we have to offset.

Now, fortunately, we've got some of the most powerful brands in the industry. In fact, we've got 10 brands that in of themself are over $100 million in sales. So it gives us a bit of pricing power, if you will. But we're very, very careful that we don't want to drive prices to the point that it affects demand. So we have taken prices where we've seen input costs increase.

BRIAN SOZZI: Record quarter for you and another strong quarter, I should say, in ammo. Are people hoarding ammo? And why would they be doing that?

CHRIS METZ: You know, we don't believe so. We believe that consumption is off the charts. And what's happened here is, boy, the amount of users that have come into the industry over the past couple of years is up 30%.

And so that is evidenced by the diversity of users. We're seeing young people come in. We're seeing gender diversity. We're seeing more people of color really creating a more inclusive type of industry.

We're seeing hunting licenses grow to the highest level since 1958. And you know people are rediscovering or discovering for the first time the joys of being out in the field and harvesting your own game for field-to-table or out participating in clay shooting and other sporting activities that really consume a broad variety of ammunition.