Black Diamond Parent Q3 Hurt by Outdoor Channels, Product Line Simplification Strategy | SGB Media Online

Clarus Corporation, the parent of the Black Diamond, Rhino-Rack, Maxtrax, and Tred Outdoors brands, saw sales in the third quarter fall to $67.1 million compared to $81.3 million in the year‐ago third quarter. The decrease was said to be primarily driven by softness across all selling channels in Outdoor and the effect of the company’s product line simplification strategy.

The decrease was driven further by lower Adventure segment sales, specifically in the OEM channel and challenging global wholesale markets, partially offset by the benefit from the company’s Tred Outdoors acquisition.

Outdoor segment (Black Diamond) sales were $49.3 million in the third quarter, compared to $61.1 million in the year-ago quarter.

Sales in the Adventure segment (Rhino-Rack, Maxtrax and Tred Outdoors) decreased 11.9 percent to $17.8 million, or $17.5 million on a constant-currency basis, compared to $20.2 million in the year-ago quarter.

Gross margin in the third quarter was 35.0 percent of net sales, compared to 33.6 percent in the year‐ago quarter. The increase was primarily due to a favorable product mix in the Outdoor segment from product simplification and SKU rationalization efforts and a favorable channel mix due to lower OEM sales and higher Maxtrax revenue in the Adventure segment. This was partially offset by an increase in Polyfluoroalkyl substances (PFAS)- related inventory reserve expenses in the Outdoor segment and sales return reserve and rebate expenses in the Adventure segment.

Adjusted gross margin reflecting the PFAS-related inventory reserve was 37.8 percent for the quarter.

In the third quarter, selling, general and administrative (SG&A) expenses were $27.9 million compared to $28.4 million in the year‐ago third quarter. The decrease was said to be primarily a result of lower retail expenses due to store closures and other expense reduction initiatives to manage costs in the Outdoor segment. These decreases were reportedly partially offset by investments in global marketing and e-commerce initiatives to accelerate growth in the Adventure segment and incremental SG&A from the Tred Outdoors acquisition.

Net loss, which includes the impact of discontinued operations, of $3.2 million, or a loss of 8 cents per diluted share, compared to net loss of $1.3 million or 3 cents per diluted share.

The net loss from continuing operations in the third quarter of 2024 was $3.2 million, or8 cents per diluted share, compared to a loss from continuing operations of $2.2 million, 6 cents per diluted share in the year-ago quarter. Loss from continuing operations in the third quarter included $0.4 million of charges relating to legal costs and regulatory matter expenses and $1.9 million of PFAS inventory reserves.

Adjusted income from continuing operations in the third quarter of 2024 was $1.9 million, or 5 cents per diluted share, compared to adjusted income from continuing operations of $1.8 million, or 5 cents per diluted share, in the year-ago quarter. Adjusted income from continuing operations excludes legal costs and regulatory matters expenses, PFAS inventory reserves, restructuring charges and transaction costs, as well as non-cash items for intangible amortization and stock-based compensation.

Adjusted EBITDA from continuing operations in the third quarter was $2.4 million, or an adjusted EBITDA margin of 3.6 percent, compared to adjusted EBITDA from continuing operations of $3.6 million, or an adjusted EBITDA margin of 4.5 percent, in the same year‐ago quarter.

Net cash used in operating activities for the three months ended September 30, 2024, was $8.3 million compared to net cash provided by operating activities of $0.1 million in the prior year quarter. Capital expenditures in the third quarter of 2024 were $1.1 million compared to $1.2 million in the prior year quarter. Free cash flow for the third quarter of 2024 was an outflow of $9.4 million compared to an outflow of $1.1 million in the prior year quarter.

“While macroeconomic headwinds have continued to limit consumer demand in the near-term, our focus in the third quarter was on advancing our strategic plan to position Clarus for long-term profitable growth,” said Warren Kanders, executive chairman of Clarus Corporation. “Specifically, in the Outdoor segment we continued to improve the quality and composition of our inventory to focus on the best and most profitable styles across categories. In line with our stated strategic objective, inventory was down 4 percent year-over-year. Our Adventure business performed in line with expectations for the first two months of the quarter, but results were ultimately affected by market softness in September in both North America and Australia/New Zealand.”

Kanders added, “There remains significant work outstanding to execute our multi-year growth initiatives, but we believe we are on track at Outdoor as we continue to simplify the business operationally and drive SKU rationalization, despite the challenging global market conditions. Our objective to scale the Adventure segment to a global footprint has not yet come to fruition. We have established a strategic roadmap that we are executing on and remain confident that the significant investments we have made in 2024 will enable our Adventure businesses to accelerate traction, particularly in the US and international markets, and strengthen our global OEM initiatives. All of this is supported by a debt-free balance sheet, to take the next steps in our turnaround.”

Image courtesy Black Diamond