The new year started well for Black Diamond. Sales were up by 9 percent in dollars and local currencies for the first quarter, reaching a level of $41.6 million, with growth in each of the company's main product categories: climb, mountain and ski. Strong sales were recorded for carabiners, protection, trekking poles, gloves, skis and snow safety equipment, triggering also some reorders.
In particular, BD's European operations recorded an 8 percent sales increase in hardgoods during the quarter, the first one since the fourth quarter of 2015, and sales to foreign distributors jumped by 18 percent, thanks in part to greater product availability from the company.
Sales went up also in the U.S., rising by 8.7 percent to $19.6 million. John Walbrecht, the recently appointed president of BD, said that U.S. retailers “took the foot off the pedal,” ordering products from the company. He added that those with which it works in the mountaineering, climbing and ski sectors have apparently not suffered from the recent disruption of the American outdoor retail market.
Walbrecht indicated that the sales increase was made possible by a good response to new products and the company's ability to better satisfy the demand, following improvements made in the supply chain. The repatriation to Utah of some of the production, which now represents about 20 percent of the turnover, has been an important factor, and it should be completed in the second half of this year, the management indicated.
Another positive factor has been the deployment of e-commerce in the U.S., which led to a 30 percent increase in direct-to-consumer revenues in the first quarter. The management is optimistic about the results from the introduction of e-commerce in Europe, which took place in the first quarter, triggering a positive initial response.
BD also registered higher sales and orders in the U.S. and Europe for its re-engineered apparel line, which currently represents more than 10 percent of the turnover.
A more favorable sales mix, due to higher-margin products and retail channels, led to an improvement of 0.9 percentage points in the quarterly gross margin, which grew to 28.7 percent. The management continues to expect an even bigger improvement of three to four full percentage points to between 32.5 percent and 33.5 percent for the whole financial year.
Operating losses were reduced to $276,000 from $3,873,000 in the year-ago period, thanks to a 12 percent cut in SG&A expenses, which was partly offset by higher spending on R&D and e-commerce. Excluding extraordinary items, BD reached a positive adjusted Ebitda level of $622,000 compared with a loss of $2,352,000. The company still posted a net loss of $1,455,000 for the quarter, down sharply from the year-ago loss of $4,013,000, but excluding special items it had a net profit of around $500,000 compared with a loss of $2.2 million.
Despite the good quarter, the management is sticking to its previous sales forecast of $154 million to $159 million for the full year, which implies growth of only between 4 and 7 percent in local currencies, but is more bullish for 2018.
Along with a host of new products in rainwear, poles, harnesses and other categories, BD plans to announce new investments in “more disruptive marketing” at its international sales meeting later this month, on May 15. The goal is to reach one billion consumer impressions.
BD has cleaned up its balance sheet by paying down a $22.6 million credit note, which has made it debt-free, but is still keeping a $20 million credit facility for working capital requirements.
BD can still capitalize on net operating loss carryforwards of $172 million for U.S. tax purposes in case of an acquisition, but the company indicated it has nothing on the radar for the moment.