Clarus (CLAR) – The Climb to Tokyo
Jaguar clients are familiar with this outdoor performance retailer as we first covered it last year in the July 29th Weekend Research when the stock was trading at $8.45. Shares are up just over 60% since that time, and we recently received a question on it in the latest JaguarWebinar.
Research is somewhat limited, but Stifel analyst Jim Duffy as well as Roth Capital’s Dave King have provided commentary in the last couple of weeks.
Cross Sector Insights Conference
After hosting President John Walbrecht and CFO Aaron Kuehen for a Q&A Session, Stifel offered the following highlights:
The 2018 major motion pictures “Dawn Wall” and Oscar winner “Free Solo” are inspiring climbing participation much like “A River Runs Through It” drove participation in fly fishing in the 1990’s. Climbing Business Journal reports that the climbing gym industry grew at a 12% rate in 2018. There were 50 new gyms that opened in the U.S. alone with bouldering-only facilities responsible for much of the growth. In addition, with climbing set to be an Olympic sport at the 2020 Olympics in Tokyo, global momentum is likely to continue to build. Specific growth categories within the industry include entry level climbing shoes, harnesses, and lifestyle apparel with the most notable beneficiary being Clarus’ Black Diamond, who is the market share leader across climb categories.
Outdoor Retailer Show
This past week, the Outdoor Retailer Show took place in Denver, Colorado and President John Walbrecht presented to investors their Black Diamond product lineup for Spring 2020. Both Stifel and Roth Capital had the following takeaways:
-140 new products in Climb and Mountain are set to launch for Spring 2020.
-Black Diamond will have 34 first to markets with REI in Spring ’20 vs. just two in 2018 .
–Growth in Climb remains strong and they expect to build on this into Tokyo 2020 with the U.S. Olympic favorite Adam Ondra a sponsored athlete.
–Brand momentum, marketing, and resulting awareness is helping them speak to a wider audience (40mn hikers in the U.S. vs. 5mn climbers).
-Spring 2020 will see footwear expand from climb shoes into approach and lifestyle shoes (4 styles men’s and women’s).
-SkinNourishment** will launch rebranded in the Fall 2019 with an opportunity for the product to be in all 4,500 Black Diamond accounts.
**On November 9th, 2018, Clarus announced the acquisition of the assets of SKINourishment, which offer organic, 100% food-grade, plant-based skin products that are safe and effective, with distribution across 37 countries.
Clarus’ Institutional Investor & Analyst Meeting was very well attended and focused on the Black Diamond brand’s Spring 2020 lineup, including new approach shoes, higher-margin carabiners, and ClimbOn skincare products. The company continues to benefit from successful new product launches, its focus on high-margin categories like gloves and apparel (including newer rainwear and pants), and a strong climbing end market with increasing participation.
However, Roth did note a lackluster Q2 for several outdoor retailers and some larger brands, which they believe resulted in more limited open-to-buy and slower revenue growth for Black Diamond. It also noted a challenging end market for Sierra’s bullet business and a slower-than-expected launch into ammunition.
The analyst came away believing Clarus is likely to meet or slightly exceed conservative Q2 estimates and reiterate its perhaps previously-conservative guidance for the year.