Johnson Outdoors (JOUT) Q2 2026 earnings call transcript

I would now like to turn the call over to Allison Kitsarow from JOHNSON OUTDOORS. Please go ahead, Ms. Kitsarow.

Good morning, and thank you for joining us for our discussion of JOHNSON OUTDOORS results for the 2026 fiscal second quarter. If you need a copy of today's news release, it is available on our website at www. johnsonoutdoors. com under Investor Relations. I also need to remind you that this conference call may contain forward-looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance. Actual events may differ materially from those statements due to a number of factors, many beyond JOHNSON OUTDOORS' control. These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission. If you have any additional questions following the call, please contact Dave Johnson or Pat Pemmins.

It is now my pleasure to turn the call over to Helen Johnson-Leopold.

Thanks, Allison. Good morning, everyone. I'll begin by sharing perspective on our second quarter and year-to-date results, as well as give an update on each business. Dave will review the financial highlights, and then we'll take your questions. Improved retail conditions and ongoing success of our product innovation helped drive a 15.5% revenue growth in the second quarter, with all business segments contributing to the improvement. Operating income for the second quarter was much improved versus the prior year second quarter due to the increased sales volume and our cost savings initiatives continuing to boost profitability as well. Year-to-date, our net sales are 21.5% higher than last year's fiscal six-month period, with operating income and gross margin also up for the fiscal year-to-date period.

We are pleased with our second quarter and year-to-date results and are particularly proud of our market-leading brands, which continue to resonate with consumers and reinforce our leadership positions across our portfolio. Our fishing business delivered strong results in the second quarter, driven by improved trade conditions, continued robust demand for Hummingbird's Explore Series and Megalive 2 Fish Finders and Minn Kota's full lineup of trolling motors, as well as pricing actions. These factors combine to reinforce our momentum and position in the marketplace.

We remain focused on investing in innovation to deliver fishing technology that sets the standard for anglers worldwide. In camping and watercraft, growth during the quarter was supported by our expanding digital and e-commerce capabilities, with Old Town and Jetboil maintaining their leadership position in competitive categories. During the quarter, Jeff Boyle also launched Trail Cook, a new innovation designed to expand the brand beyond boiling water into broader backcountry cooking. In both brands, we will continue to build on our strengths to drive sustained growth through innovation and deeper engagement with outdoor enthusiasts.

Lastly, in our diving business, improved conditions across the global markets and continued growth in e-commerce helped drive a solid increase in second quarter sales. Digital engagement continues to play an increasingly important role enhancing connectivity between our SCUBA PRO brand retail partners and consumers As we continue to lean into digital channels and strengthen our global footprint we are optimistic about SCUBA Pro ability to grow and further reinforce its position in the market Overall we are pleased with the quarter and year results by investing in and executing our strategic priorities consumer innovation digital and e excellence and operational efficiencies We are strengthening our market position and taking the right steps to navigate macroeconomic uncertainty while building long-term resistance.

Now I'll turn the call over to Dave for more details on the financials.

Thank you, Hal. Good morning, everyone. Our strategic cost savings program remains critical and continues to deliver meaningful benefits to our bottom line. Gross margin for the second quarter improved to 38.8%, up 3.8 points from the prior year quarter. Overhead absorption from higher volumes and cost savings were the main drivers of the improvement in gross margin. Year-to-date gross margin is 37.9%, up 4.9 points from the prior year-to-date period.

Second, operating expenses increased $11.2 million from the prior year second quarter, due primarily to increased sales volume-related costs as well as increased variable compensation costs. Profit before income taxes for the second quarter was $10.2 million compared to $4.2 million in the previous year quarter, driven mostly by the improvement in operating income. As we prepare for the upcoming selling season, we modestly increased inventory levels. Our inventory balance at the end of the second quarter was $186.9 million, up about $6.8 million from the previous year's second quarter.

Our balance sheet remains debt-free, and we continue to pay a meaningful dividend to shareholders, with the board approving our most recent dividend announced in February. Looking ahead, despite ongoing economic uncertainties, we remain firmly focused on financial discipline and actively managing the business to balance near-term pressures while continuing to invest in priorities that support sustainable growth.

Now I'll turn the call over to the operator for the Q&A session.

Yeah, I mean, we saw strong unit volume growth in our business, so that was a big driver for the quarter. Pricing certainly helped, and we're also seeing just really strong demand for the broad line of trolling motors that we have.

You know, the market is very hard to predict, but I think, you know, we have innovation that is really driving, continues to drive purchase. And I do think there will be I think consumers are a little cautious with all the things going on but innovation still is the catalyst to get things moving We hoping that this is the beginning of an upward trend but I think it going to be challenging and innovation will be the key going forward Got you Thanks for that So as far as the other two segments you highlighted the increased sales through e So can you expand on that a little bit and then maybe give us if possible some numbers as it relates to the growth that you saw in the quarter And how are you thinking about the rest of F26 as it relates to diving and watercraft and camping Well, there's a few questions in there, but, you know, e-commerce is one of our, you know, growth initiatives, and we put a hardcore press on that, and it does reach a much broader consumer base.

So we're really excited about it, and not to mean that our bricks and mortar aren't important. I think they both complement each other. You know, we are just, we've been up and running on a true, you know, digital mode for only about, actually, it was a year. And so it's early on, and we've got a lot to learn, but it's a good opportunity to reach a broader audience. You know, I think it will continue to grow. It's a smaller piece of the pie than our other sales, but I think from a growth standpoint, it is helping us. I think, again, we don't do a lot of forward-looking, but as we looked at the third quarter, the signs in the second are good, and they're better than they've been in the past.

But again, the world is complicated and the consumers have a lot going on. But again, it's back to the product line, the brand, the positioning in the market, and we feel really good about where we are as a brand and as a company. And, you know, we're hoping that the markets also, you know, cooperate as well. So it's good to have a quarter that feels very strong. So hopefully I answered your question.

I mean, I would say not yet. Anthony, we haven't seen a direct impact, but like a lot of companies, we're looking at inflationary pressure, higher input costs.

And worried consumers. Consumers that their confidence levels are down. So I think so far it's okay. We haven't seen a direct impact, but we're looking at things kind of in a neutral fashion over the next couple of quarters.

Yeah so you know most of the improvement was operating leverage so fixed cost absorption but our cost savings program is critical to helping that as well We seeing cost pressure going forward I think like a lot of companies the electronic industry component costs are dynamic for us and so that something we got our eye on and we monitoring So I just think going forward, that'll be something that'll be a little bit of a headwind for us maybe over the next coming quarters, if you will. So it's a good thing we have our cost savings efforts in place now to help try to offset that.

Yeah, I mean, a decent portion was volume-related, and probably, I can't give you the numbers, but, you know, let's say maybe a third was volume-related, and then we had some variable compensation accruals, adjustments in there that made up about a third. And then there's some other cats and dogs in there, too, that we didn't call out, but there's other costs that we have in that operating expense, like some healthcare costs and some other consulting expense. But the two big ones were the volume-related and then the variable compensation.

Well, I think the expense structure will settle down probably a little bit. I mean, obviously the volume drives some of that, but, you know, in terms of kind of where we are in terms of our spending and our ability to manage, I think we'll kind of settle down probably going forward over the next couple of quarters.

So I would say it's good spend, and it may not be long-term, but there, you know, as Dave said, it will settle down. But I feel we're investing in the right things to set us up for success long-term, and that will eventually, it will get more efficient on the other side of this.

Yeah, I mean, because we have the valuation allowance on the U. S. income right now, the tax rate is going to kind of be up and down. So it just depends on the mix of profits that we're seeing in the quarter in what we're forecasting for the full year. So, I mean, I think, you know, the way to think about that is probably, you know, a $4 to $5 million tax expense for the year. And how we divvy that up over the quarter just kind of depends on the mix of profits. So it's just hard for me to give you a rate quarter by quarter just because of that mix.

Thanks, Anthony.

Okay, well, thank you, everybody, for joining us today. And questions, you can call Dave or Pat, but have a good day. Thank you.