Shown: Bushnell Engage binocular
Vista Outdoor issued its first quarter of fiscal year 2018 report on Aug. 10, and the figures confirm the “new norm” in consumer purchases of firearms, accessories and ammunition. Despite sales down 10 percent from the previous year, however, “We are pleased with our performance in the quarter," said Vista Outdoor Chief Financial Officer Stephen Nolan. "Our working capital reduction efforts are delivering results, with strong cash performance in a quarter when traditionally the company has had a net cash use.”
One of the reasons the company continues to thrive is because it recognized a slowdown was approaching and responded with the business acumen you expect from a publicly traded firm. “Operating expenses were $107 million, compared to $112 million in the prior-year quarter,” the report explains.
Streamlining overhead is painful, but Vista’s approach isn’t random budget slashing. Operational efficiency was apparently inspected closely, as evidenced by the plant opened recently in Lewiston, Idaho.
CCI and Federal’s 37,000-square foot facility is already producing .22 rimfires, which is good news for shooters, but probably even better for investors in Vista Outdoor. The system in place churns out fodder faster than the old one and minimizes expensive backlogs/stocks of material that can accumulate during the manufacturing process or when an unexpected market slowdown arrives.
That “inventory,” whether raw materials or completed cartridges, ties up critical funds. Minimizing that cash-flow paralysis maximizes the chances of a firm surviving a market’s peaks and valleys. Efficiency has always been key, but in an industry steeped in tradition, oftentimes overlooked.
And consumers have changed their spending habits. In a conference call last month, Michael Callahan, interim chairman and CEO of Vista Outdoor, said, “The market, as you know, is really evolving right now. I'm not sure I'd call it an apocalypse, but certainly the retail market is in a turmoil. What we're seeing and what a lot of companies have to do is adapt now to how consumers want to shop and where they want to shop.”
With Sports Authority and other large retailers gone—historically big outlets for the diverse array of products Vista’s firms produce—the company is rethinking its approach to reaching purchasers. Websites selling direct to consumers, according to comments made during that analyst’s call, are going to be a component in the future.
Whether that’s true for ammo and accessories has yet to be seen, but there’s no doubt the return to a “new norm,” has started an evolution of thinking for most companies in the industry.