How Vista Outdoor Is Replacing Tumbling Ammo Sales

Vista Outdoor Inc. (NYSE: VSTO) reported second-quarter fiscal 2020 results before markets opened Thursday. The ammunition and outdoor products company posted adjusted diluted earnings per share (EPS) of $0.00 on revenues of $445 million. In the same quarter a year ago, Vista reported EPS of $0.05 on revenues of $546.6 million. The consensus estimates for the latest quarter called for a loss of $0.01 per share and $452.3 million in revenue.

Gross profit declined by 17% year over year to $90 million. Operating expenses dropped from$128 million to $89 million on a GAAP basis and from $94 million to $81 million on an adjusted basis. Cash flow from operations fell to negative $8 million from a positive $58 million for the first half of Vista’s fiscal year. Free cash flow for the year to date tumbled from $55 million a year ago to a −$23 million this year.

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CEO Chris Metz said:

We have had a good start to the first half of the year, and have delivered a solid second quarter of results. While we were presented with several significant new challenges in the second quarter, particularly within our Ammunition business unit, we have continued to make progress on our profitability and de-leveraging goals.

In its guidance for the 2020 fiscal year, Vista lowered its sales estimate from a prior range of $1.79 to $1.89 million to a new one of $1.75 to $1.85 billion. In its first estimate for 2020 sales, Vista had projects sales of $1.94 to $2.03 billion. The company’s EPS estimate remained unchanged at a range of $0.10 to $0.25. The full-year free cash flow estimate remained at $30 million to $40 million, although that had been lowered at the end of the previous quarter from $55 million to $65 million.

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Sales in the company’s shooting sports segment dropped by 6% year over year to $211 million, excluding the firearms business the company sold in July. Adjusted gross profit tumbled from $47.1 million to $28.78 million.

Sales in the outdoor products segment were down 7% to $234 million year over year, but gross profit was essentially flat at $61.49 million, compared to $61.67 million a year ago. Adjusted gross profit fell from $64.39 million to $62.03 million year over year.

The company did not provide fiscal second-quarter guidance. Analysts are projecting EPS of $0.16 on sales of $432.25 million. In the third quarter of last year, adjusted EPS totaled $0.09 on sales of $468 million.

Vista has concentrated on reducing debt and now carries about $575 million in long-term debt, down from a peak of $1.176 billion. Interest expense fell by about $4.5 million year over year in the quarter, and that helped the company’s results. But Vista has to figure out a way to lift its shooting sports segment’s contribution to sales and profits.

Vista’s shares closed down about 1.4% on Wednesday, at $6.90 in a 52-week range of $4.30 to $14.11, and were inactive in Thursday’s premarket. The 12-month consensus price target is $8.70.

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