Black Diamond reported a minimal increase in sales from continuing operations during the third quarter to $39.4 million from $39.3 million a year ago, up by 3 percent in constant currencies.
European sales exceeded expectations, with a better response to at-once and replenishment orders from strategic accounts. Bookings from the region are strong for some of BD's new products including its first full-body harness for children, a rechargeable headlamp, updated trekking poles and additional accessories for gym climbers.
Increased at-once orders were reported from foreign distributors. Dedicated BD shop-in-shops have been set up at three indoor climbing gyms in the U.K., two in Sweden and one in Germany. Another one is being set up in Beijing. New POS imaging has been installed in several European stores.
Sales have gone up in North America, where BD won several product awards, following the company's reintroduction of climbing ropes and the launch of new headlamps, skis and poles. Good sales of backcountry ski packs, Pieps micro beacons and an updated avalance probe contributed to the growth. Additional lighting products will come out in 2017.
The gross margin contracted to 31.3 percent from 36.0 percent, due in part to the repatriation of some production from China to the U.S., but it would have reached 33.2 percent if currency level had remained the same, as 40 percent of the company's sales are outside the U.S.
Adjusted Ebitda went up by 61 percent to $1,693,000, thanks to the restructuring measures implemented in Europe and elsewhere, which helped to cut back SG&A expenses by 19 percent. Net losses were reduced to $405,000 from $49,695,000 a year ago, when the company booked an extraordinary $49.9 million tax-related charge. Adjusted net earnings before non-cash items and the cost of transferring production from China to the U.S. rose to $1,716,000 from $680,000.
The management predicted flat to 4 percent higher sales for the full financial year, with Ebitda rising by 16 percent. The management would like to take the Ebitda margin up to 10 percent of sales.
The downsizing of the apparel range will lead to a sales decline in the fourth quarter, but BD's new chief executive, John Walbrecht, said that apparel remains a long-term opportunity for further development, with some new types of products expected to come out by spring 2018.
He also confirmed that BD was interested in using its big cash pile to invest in assets with an enterprise value of between $250 million to $500 million a year. The company wants to invest outside the outdoor sector in order to diversify its business, but it plans to discuss with retailers the option of investing in “adjacent segments” to climbing and other mountain sports. Walbrecht pointed out that BD is looking for high-quality assets that are a durable source of cash-flow.