Vista Outdoor’s stock sinks after earnings report

Vista Outdoor stock plunged more than 20 percent Thursday — down $1.59 — after company officials reported poor earnings during the first quarter of fiscal year 2020.

The company that manufactures ammunition and outdoor products reported its overall sales were down 13 percent, sales of ammunition were off 1.5 percent and gross profit was down 16 percent.

Vista Outdoor, one Lewiston’s largest employers, has performed poorly over the past few years. It reported a loss of $648 million in fiscal year 2019, $60.2 million in ’18 and $274 million in ’17.

“The end markets for our ammunition and hunt/shoot accessories businesses remains soft,” Vista Outdoor CEO Chris Metz said. “While we had a good quarter in general in our ammunition business — only being down 1.5 percent year over year versus a market we estimate is down mid-to-high single digits — we continue to face unprecedented challenges.”

Those challenges include the bankruptcy of the South Carolina-based Ellett Brothers in June, the burgeoning trade war with China, a cold and wet spring that stalled sales of outdoor products and continued soft demand for ammunition.

Ellett Brothers distributed firearms and shooting accessories. The company bet big on Hillary Clinton winning the 2016 presidential election, according to news reports, and was caught with a burdensome inventory when Donald Trump secured a surprise victory.

A Clinton win was expected to spur fears of stricter gun laws and high demand for guns and ammunition. Trump’s victory made gun owners feel more secure and softened demand. The election outcome played a large role in Ellett Brothers’ troubles, but has also affected companies like Vista Outdoor and demand for its ammunition.

Metz said the bankruptcy further softened demand for many Vista Outdoor products by giving consumers going-out-of-business prices on Ellett Brothers’ inventory.

“This move flooded the market with vastly discounted products in June, affecting both our ammunition and hunt/shoot accessories businesses in (the first quarter),” Metz said. “We also saw continued soft demand for rimfire, putting even more pressure on our ammunition business. As a clear market leader in rimfire, the downturn in this ammo category is hitting us fairly hard.”

Metz said the ongoing trade war with China is also taking a toll.

“Another headwind we continue to deal with is the effect of tariffs on products being shipped in from China,” Metz told investors in a conference call. “As you probably realize, much of the outdoor products industry sources goods or components from China.”

He said many retailers have delayed or canceled orders in an effort to see how the trade war shakes out and that customers are “becoming more cautious with their buying.”

To make matters worse, Metz said Trump’s recently announced 10 percent tariff on an additional $300 billion of Chinese goods set to take effect on Sept. 1 will hit the company harder than earlier rounds of tariffs. The tariffs will apply to products such as bicycle helmets sold under the company’s Bell and Giro brands and water bottle components used by its Camelbak brand, which were previously excluded.

“Unfortunately, this impacts Vista Outdoor brands and most of our competitors in a much more meaningful way than previous tariffs have,” he said.

Metz said the second quarter is expected to be just as bad if not worse. Despite the bad news, Metz said there is reason for optimism. The company, through the sale of Savage Arms, reduced its debt from $738 million to $581 million. In addition, he said the company secured ammunition contracts with the Los Angeles Police Department and Saudi Arabia, and it continues to make progress on the goal of becoming more efficient while also developing new product lines and reducing expenses.

He said the company is expecting to perform better in the third and fourth quarters of this fiscal year.

Barker may be contacted at ebarker@lmtribune.com or at (208) 848-2273. Follow him on Twitter @ezebarker.