REI has just placed its first order for Camelbak products, after excluding the brand from its assortment since March 2018 in reaction to the tragic mass shooting a high school in Parkland, Florida. The big American outdoor retailer said it would resume doing business with Camelbak's parent company, Vista Outdoor, after it announced the sale of its firearms business in July, consisting of the Savage and Stevens brands, for $170 million.
Unlike some other American outdoor retailers, REI doesn't sell firearms or ammunition. Vista has decided to continue to sell ammunition and hunting accessories under various brand names as well as its outdoor products, which include brands like Camelbak, Camp Chef and Blackhawk. It divested its brands of sunglasses – Bollé, Cébé and Serengeti – but decided to retain Giro helmets and some other brands after trying to find a buyer for them.
Another big American retailer, Walmart, has decided to halt sales of some of Vista's ammunition calibers, but will continue with its shooting accessories and its outdoor brands. The move will shave about $40 million from Vista's revenues during the current fiscal year, ending next March 31, leading the company to revise its guidance to a range from $1.75 billion to $1.85 billion for the year, but it will not have a big impact on profits as its ammunition business with Walmart was not particularly profitable.
The contraction of the American ammunition market after the election of President Trump has already reduced Vista's revenues from this segment to an annual level of around $900 million from a peak of about $1.2 billion in 2006. The segment's gross margin has declined to about 15 percent from 27 percent in 2016/17. In contrast, the outdoor brands segment has seen its revenues decline only slightly to around $1.0 billion, generating stable gross margins of between 23 and 24 percent.
Vista told investors at a recent meeting that it wants to return to an Ebitda margin of at least 10 percent by 2022. As part of this plan, it seeks to divest additional assets with annual revenues of about $300 million, but the management declined to elaborate.
Vista's current overall Ebitda margin is only 6.3 percent, which it says compares badly with a broad outdoor industry median of 14.5 percent. It is far behind the ratios of more than 23 percent achieved by top companies in the sector such as the Thule Group, which has also gone through a major transformation, or Yeti and Shimano.
In spite of the management's arguments, Standard & Poor's subsequently lowered Vista Outdoor's credit rating from B+ to B, anticipating continued weak profitability for the group for this year and citing soft sales of outdoor products, among other things.
Meanwhile, Bollé Brands, the new company that owns Bollé and Vista's former eyewear brands, has acquired a well-known American brand of action sports eyewear, Spy Optic (more in SGI Europe and Eyewear Intelligence).