Clarus Corporation, the parent company of Black Diamond and Sierra Bullets, posted revenues for the first quarter that exceeded analysts' expectations, led by its ammunition and apparel segments.
The group paid $79 million last September for Sierra Bullets, a highly profitable U.S. firm whose proprietary manufacturing process is said to give it the tightest tolerances in the ammunition market. The management said that it has continued to make significant progress integrating Sierra into the Clarus business and is well underway with its plan to maximize the Sierra brand's full potential.
Clarus' total revenues were up by 28 percent to $53.3 million, or by 24 percent in constant currencies. Excluding the Sierra acquisition, sales increased by 8 percent. Net income reached $0.4 million, as compared to a net loss of $1.5 million for the year-ago quarter. Adjusted to exclude non-cash items, net income grew to $3.8 million from $0.4 million. Adjusted Ebitda reached $4.3 million, as compared to $0.6 million for the same period a year ago.
Clarus said it gained momentum across all of its key growth drivers at Black Diamond, with strong increases in sales, gross margins and adjusted Ebitda. It attributed these results to product innovation, aggressive marketing, on-time deliveries, strong fulfillment and ease of doing business with it. The Black Diamond brand benefited from an increase of 17 percent in pre-season orders. This was partially offset by a drop of 43 percent in the amount of discontinued merchandise sold, reflecting improvements in supply chain and inventory management.
The climbing category grew by 20 percent due to the continued rise in the popularity of gym climbing, led by new climbing shoes and the continued growth in harnesses, ropes, helmets, and climbing accessories. Clarus also experienced a growth of 45 percent in apparel. This was driven by a strong market reaction to its new rainwear line, as well as its bottoms and sportswear programs.
By region, sales in Europe jumped by 30 percent due to a strong winter, which drove demand in its ski and snow safety business. Given the dry winter in much of North America, Clarus was able to allocate some of the inventory to Europe to satisfy the resulting significant spike in demand. The items included its Beacons and JetForce products.
In North America, sales increased by 21 percent, but declined by 6 percent excluding Sierra Bullets.
The company's independent global distributor market, which covers key regions outside of Europe and North America, including large markets in Asia, recorded a sales increase of 57 percent. Excluding the impact of the Sierra acquisition, the independent global distributor market was up by 24 percent.
Overall, the group's gross margin jumped by 3.9 percentage points to 33.5 percent, reaching 33.8 percent excluding Sierra. The increase was primarily due to a favorable mix of higher-margin products and distribution channels, the stabilization of the company's sourcing strategy, and more normalized levels of discontinued merchandise. Excluding a fair value inventory step-up associated with the Sierra acquisition, the adjusted gross margin in the first quarter soared by 5.8 percentage points to 35.4 percent.
The management said that product innovation for the remainder of 2018 will be highlighted by key introductions across all of Black Diamond's primary categories, including the first full season of its rock shoe collection and its new rainwear apparel line. At Sierra, it expects to drive continual product innovation and strengthened sales and marketing efforts, as it looks to increase the exposure and momentum of the brand.
Clarus continues to anticipate full-year sales to grow by 17 to 20 percent to around $200-$205 million. It also continues to expect the adjusted Ebitda margin to stand at approximately 8 percent.