Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Vista Outdoor Are Plunging Today

By Lou Whiteman - Aug 8, 2019 at 2:56PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

An earnings miss and lowered guidance sends investors running for the hills.

What happened

Shares of Vista Outdoor (VSTO -1.50%) traded down more than 20% on Thursday after the maker of outdoor recreation equipment reported a worse-than-expected quarterly loss and lowered its full-year outlook. It's a time of transition for the company, which only recently divested its firearm business, but investors don't seem interested in waiting around to see how the turnaround plays out.

So what

Vista Outdoor on Thursday morning reported a fiscal first quarter loss of $0.08 per share on revenue of $459.77 million, falling short of analyst expectations for a $0.06 loss on sales of $464 million. Revenue was down 13% from the prior-year period, and gross profit was down 16% year over year.

A backpack and hiking poles sitting in a mountainous landscape

Image source: Getty Images.

Following the divestitures, Vista owns a portfolio of about 50 brands including Bell, Bushnell, CamelBak, Giro, and Camp Chef that span bicycling, camping, and hiking, but CEO Chris Metz said in a statement that the company "continued to see softness and challenges in our markets."

With the firearms business now out of the way, the company reset its estimates for the full year. Vista Outdoor said it expects full-year fiscal 2020 earnings of between $0.10 to $0.25 per share, down from a range of between $0.28 and $0.38 per share, and cut its revenue guidance to $1.79 billion to $1.89 billion from $1.94 billion to $2.03 billion. Analysts were expecting something of a cut, with the consensus estimate going into the release calling for $0.20 per share in earnings on $1.85 billion in sales.

Now what

There was some good news in the release. The sale of the firearm division allowed Vista Outdoor to cut its debt by $150 million, bringing the total long-term debt balance down to about $590 million. That's down nearly 50% from the company's peak long-term debt balance of $1.176 billion.

In the statement, Metz called the divestitures "the first phase of Vista Outdoor's turnaround," adding, "I remain confident in our plan to restore our brands to greatness."

Prior to the firearm divestiture, Vista Outdoor was caught up in the national debate on gun control, with retailers including REI last year announcing it would cease buying from Vista following the Parkland school shooting. Vista Outdoor now has a clean slate to pursue new business. But if the results announced on Thursday are any indication, the company has a tough climb ahead of it.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Vista Outdoor Inc. Stock Quote
Vista Outdoor Inc.
VSTO
$37.51 (-1.50%) $0.57

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
331%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/20/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.