Shares of Vista Outdoor Inc. plunged to a record low in active trade Thursday, after the ammunition and outdoor recreation products seller missed sales expectations and cut its outlook, with Chief Executive Chris Metz indicating he didn’t know when the weakness would end.
“This period of soft demand has persisted longer than any previous market cycle in recent history,” Metz said on the post-earnings conference call with analysts, according to a transcript provided by FactSet. “There’s simply no precedent for this trend.”
He said the company has studied a series of data points in an attempt to get a read on the trend, including National Instant Criminal Background Check System (NICS), point-of-sale data, consumer surveys and federal excise tax data. But whatever metric you choose, “we see a continued challenge,” Metz said.
The stock VSTO, -0.89% tumbled 15.3% to close at a record low of $8.95. Trading volume ballooned to about 1.8 million shares, or more than four times the full-day average of about 432,000 shares.
The shares have shed 41.6% over the past 12 months, and 83.0% since the March 4, 2016 record close of $52.87. In comparison, the S&P 500 index SPX, +0.07% has gained 0.9% over the past year.
Metz said he expects soft demand to continue, particularly for hunting and shooting-related products, but he can’t be sure for how long.
“It may take a few more quarters to begin to show sales growth,” Metz said.
He said that what he did know “with surety” was that inventory in the ammunition segment has been coming down across the board. “What we didn’t know and what we still don’t fully know is how much inventory consumers are sitting on.”
Checks with shooting ranges and surveys of people who are hunting suggest shooting hasn’t diminished, Metz said. During the years of inventory build up, however, people apparently bought “thousands and thousands of rounds” of ammo. They were just sitting on a lot of inventory, he said, and are just now shooting through it.
“So we like the industry trends and health of shooting today, and we know at some point in time here soon, people are going to be back at the registers purchasing to replenish their stock,” Metz said. “We just can’t say with certainty exactly when that’s going to happen.”
Analysts say the regulatory environment is among the biggest drivers of demand for guns and ammunition, as fears of tighter regulation have boosted gun sales and share prices in the past.
Meanwhile, the company reported before Thursday’s open earnings that beat expectations, and Metz said the sale of its Savage Arms brand was “within our sights,” with the proceeds planned to pay down debt.
Vista reported a net loss of $514.6 million, or $8.94 a share, for the fiscal third quarter ended Dec. 30, after earnings of $53.7 million, or 94 cents a share, in the same period a year ago. Excluding non-recurring items, such as charges to write down goodwill, adjusted earnings per share came to 9 cents, above the FactSet consensus of 6 cents.
Sales fell 19.5% to $467.8 million, missing the FactSet consensus of $505.4 million, as shooting sports sales fell 15.7% and ammunition sales dropped 17.3%. Firearms revenue declined 7.8% because of softer-than-anticipated holiday season sales.
Looking ahead, the company affirmed its full-year fiscal 2019 adjusted EPS outlook of 20 cents to 35 cents, but cut its sales guidance range to $2.00 billion to $2.05 billion from $2.10 billion to $2.16 billion.
“While we are lowering our sales guidance due to continued market challenges, we are pleased to be able to hold our adjusted EPS guidance range through a continued focus on our cost savings initiatives,” said Chief Financial Officer Mick Lopez.