Stock Story -
Outdoor lifestyle and equipment company Clarus (NASDAQ:CLAR) fell short of analysts' expectations in Q2 CY2024, with revenue down 2.5% year on year to $56.48 million. The company's full-year revenue guidance of $275 million at the midpoint also came in 1.2% below analysts' estimates. It made a non-GAAP loss of $0.03 per share, down from its loss of $0.01 per share in the same quarter last year.
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Clarus (CLAR) Q2 CY2024 Highlights:
- Revenue: $56.48 million vs analyst estimates of $59.34 million (4.8% miss)
- EPS (non-GAAP): -$0.03 vs analyst estimates of $0
- The company reconfirmed its revenue guidance for the full year of $275 million at the midpoint
- Gross Margin (GAAP): 36.1%, up from 8.6% in the same quarter last year
- Market Capitalization: $231.3 million
Initially a financial services business, Clarus (NASDAQ:CLAR) designs, manufactures, and distributes outdoor equipment and lifestyle products.
Leisure ProductsLeisure products cover a wide range of goods in the consumer discretionary sector. Maintaining a strong brand is key to success, and those who differentiate themselves will enjoy customer loyalty and pricing power while those who don’t may find themselves in precarious positions due to the non-essential nature of their offerings.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Over the last five years, Clarus grew its sales at a weak 5.1% compounded annual growth rate. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Clarus's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 21.1% annually.
This quarter, Clarus missed Wall Street's estimates and reported a rather uninspiring 2.5% year-on-year revenue decline, generating $56.48 million of revenue. Looking ahead, Wall Street expects sales to grow 3.7% over the next 12 months, an acceleration from this quarter.
Operating MarginOperating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Clarus's operating margin has been trending up over the last year, but it still averaged negative 20.7%. Its large expense base and inefficient cost structure mean it still sports inadequate profitability for a consumer discretionary business.
This quarter, Clarus generated an operating profit margin of negative 14.4%, down 5.1 percentage points year on year. This contraction shows it was recently less efficient because its expenses increased relative to its revenue.
Key Takeaways from Clarus's Q2 Results We struggled to find many strong positives in these results. Its revenue unfortunately missed and its EPS fell short of Wall Street's estimates. Despite this, the company reaffirmed full year revenue guidance. Overall, this was a weaker quarter for Clarus. The stock remained flat at $5.77 immediately following the results.
