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Johnson Outdoors Is Off To A Rough Start In FY 2015

Feb. 12, 2015 5:33 AM ETJohnson Outdoors Inc. (JOUT)
William Bias profile picture
William Bias


  • Johnson Outdoors has tough competition on the pricing front.
  • Promotional spending propped up demand in FY 2014.
  • Soft international markets impacted demand for Johnson Outdoors’ products.

On Feb. 6, "global outdoor recreation company" Johnson Outdoors (NASDAQ: NASDAQ:JOUT) came out with its Q1 FY 2015 earnings announcement and 10-q. In the most recent quarter, revenue declined 11% year-over-year and net loss expanded 91%. However, its free cash flow deficit shrank 13% year-over-year due to lower capital expenditures. Johnson Outdoors' balance sheet remains in excellent shape with its $57.5 million in cash and equivalents equating to a whopping 30% of stockholder's equity. Its long-term debt comes in at miniscule 17% of stockholder's equity well below my personal threshold of 50%.

What happened??

Red ink is typical during the winter quarters for recreational companies such as Johnson Outdoors. However, lower relative demand impacted results further than typical. Despite popular belief competition is bad for business from a business (shareholder) perspective. Management highlighted lower demand for its Hummingbird depth finder due to a lack of promotional effort and "competitive pricing actions". Unfavorable terms abroad also impacted demand for the Hummingbird. Johnson Outdoors' outdoor gear sales and diving sales were also impacted by international weakness. Its Watercraft sales also declined due to lower production in New Zealand.

Thoughts on the future

I am encouraged by management's discourse on product innovation and balance sheet focus. They clearly understand that having a strong balance sheet is key to self-financing innovation and making strategic acquisitions. I also realize that a company can't be judged on the basis of one quarter, which management also emphasized.

However, the company needs to come up with some products that can be sold without heavy marketing. What good is selling product X when all of your profitability gets eaten up by marketing dollars? Favorable macro-economic factors should contribute to revenue gains. However, profitability remains unlikely if Johnson Outdoors has to prop up its products with marketing.

What now?


This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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