American Outdoor Brands (AOUT) stands to gain from increased interest in outdoor activities

Shares of American Outdoor Brands Inc. (NASDAQ: AOUT) were up 3% on Friday. The stock has gained 52% since the beginning of this year and 11% over the past one month. The company reported earnings results for the third quarter of 2021, smashing analysts’ projections, and raised its outlook for the full year of 2021.

Strong growth in digital sales and an increased interest in outdoor activities were behind the strong quarterly performance and the company believes most of these trends are likely to continue over the coming months providing it with substantial room for growth.

Quarterly performance

Net sales rose nearly 91% to $82.6 million in Q3 compared to the same quarter a year ago, driven by growth in both traditional and e-commerce sales channels. Adjusted EPS more than tripled year-over-year to $0.82.

Digital growth

The early investments that American Outdoor made in its digital platform paid off during the pandemic when ecommerce saw a boom. In Q3, the ecommerce channel delivered sales of $36.5 million, reflecting an increase of 129% YoY and comprising 44% of total net sales. The company’s ecommerce channels include its direct-to-consumer sales as well as sales to retail customers who do not have their own physical store but generate most of their sales on their own retail websites. American Outdoor believes both its digital and traditional channels will work hand in hand to drive growth over the long-term. Net sales from the traditional channels were up 68% YoY in Q3.

Strong outdoor trends  

American Outdoor has witnessed an increased interest in outdoor activities and believes these trends are likely to continue in the near term. The company expects to benefit from the higher customer engagement that this trend will bring over the coming months.

On its quarterly conference call, AOUT stated that participation in camping had increased by 28% in 2020, with 8 million people participating for the first time, based on data from the Outdoor Industry Association. The majority of this growth came from millennials, of which 19% were first-time campers.

The company said there was a 7.5% growth in hunting license sales last year based on estimates from the National Shooting Sports Foundation (NSSF) and Southwick Associates. The Recreational Boating and Fishing Foundation also reported that 3 million more fishing licenses were sold in 2020 versus 2019, reflecting a growth of 40% YoY.

AOUT also stated that, according to the NSSF, firearms ownership witnessed strong participation with 8 million new entrants in 2020. This points to a likely rise in participation in shooting sports and a possible rise in demand for related products and accessories. All these aforementioned trends are likely to drive higher demand for the company’s products within the camping, hunting and fishing gear categories.

Outlook

Based on its Q3 performance and its Q4 growth outlook, American Outdoor raised its guidance for the full year of 2021. Net sales are expected to grow 60-62% YoY to a range of $268-272 million. GAAP EPS is estimated to be $1.07-1.14 while adjusted EPS is projected to be $2.08-2.15.

Click here to read the full transcript of American Outdoor Brands Q3 2021 earnings conference call