Q1 2026 Earnings Call Contradictions Emerge on Tariff-Driven Pricing, Sourcing Diversification, and Inventory Management Amid Innovation Strategy Shifts

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 4, 2025

Financials Results

• Revenue: $29.7M, down 28.7% YOY (vs $41.6M); on a combined Q4+Q1 six-month basis, up 4.2% YOY; adjusted for Q4 pull-forward, Q1 would have been down ~5% and traditional channel +15%.
• EPS: $-0.54 per diluted share (GAAP), vs $-0.18 prior year; non-GAAP $-0.26 vs $0.06.
• Gross Margin: 46.7%, up 130 bps YOY

Guidance:

• Q2 FY26 net sales expected to decline ~15% YOY.
• Premature to provide full-year guidance; management remains optimistic given strong POS and new products (incl. SCORETRACKER LIVE).
• Aim to maintain gross margins via pricing, supplier concessions, redesigns; control costs.
• Inventory targeted at ~$125M in Q2–Q3, decreasing to ~$120M in Q4.
• FY26 diluted share count expected ~12.9M (ex buybacks).
• CapEx FY26 expected $4–$4.5M.
• Total available capital up to $108M; no debt.
• Long-term EBITDA contribution model 25%–30%.

Business Commentary:

• Sales Performance and Inventory Management:
• American Outdoor Brands reported $29.7 million in net sales for Q1, a decrease of 28.7% compared to the previous year.

• This decline was due to accelerated orders by retailers in the previous quarter to avoid tariff-related price changes.

• Consumer Demand and New Product Performance:

• New products represented nearly 29% of net sales during the first quarter.

• The strong performance of new products like the Caldwell ClayCopter and BUBBA Smart Fish Scale Lite indicates the power of the company's innovation engine despite a seasonally light period.

• Supply Chain Adaptability and Tariff Management:

• The company managed supply chain challenges by shifting production of certain products outside China and securing cost-sharing arrangements with suppliers.

• This proactive approach enabled American Outdoor Brands to preserve product quality, protect margins, and maintain supply continuity.

• E-commerce Channel Challenges:

• E-commerce net sales declined by 35.2% year-over-year due to adjustments by a large e-commerce retailer to align with ongoing tariff impacts.
• Despite this decline, traditional retailers experienced increased e-commerce sales, offsetting some of the decline in the company's e-commerce channel.

Sentiment Analysis:

• “Net sales in Q1 were $29.7 million… a decrease of 28.7%.” “Gross margin was 46.7%, up 130 basis points.” “Accordingly… we expect to see a year-over-year decline in net sales for our second quarter of approximately 15%.” Yet, management said POS remains strong and they “remain optimistic about the year on the whole,” citing new products and SCORETRACKER LIVE.

Q&A:

• Question from Douglas Lane (Water Tower Research LLC): It sounds like some excess retailer inventory has been worked off; do you still have excess tariff-related inventory at retail partners?
  Response: No; Q4 pull-forward in key categories caused timing noise, not excess inventory at retailers.

• Question from Douglas Lane (Water Tower Research LLC): Elaborate on pricing actions—how much, timing, and whether one-and-done?
  Response: They’re offsetting costs via supplier concessions, product redesigns, selective price adjustments, and new-product mix; pricing will be calibrated over time, not one-and-done.

• Question from Douglas Lane (Water Tower Research LLC): Is product innovation more or less important now, and what’s the ROI?
  Response: Innovation is critical; they time launches to avoid promotional noise, maximizing ROI and higher-margin mix over time.

• Question from Matt Koranda (ROTH Capital Partners): When does order choppiness settle and return to normal cadence?
  Response: Timing is uncertain; as tariffs and inventories normalize, retailer orders should realign with strong POS during FY26.

• Question from Matt Koranda (ROTH Capital Partners): Which brands show the strongest POS versus weaker areas?
  Response: Caldwell (ClayCopter), BUBBA (Smart Fish Scale Lite, subs), BOG, Grilla, and MEAT! lead; other brands are softer but outperform category peers.

• Question from Matt Koranda (ROTH Capital Partners): Update on M&A funnel and pipeline?
  Response: Fewer quality targets; seeing more distressed assets; they’re patient and may enter categories via organic brand launches.

• Question from Alex Sturnieks (Lake Street Capital Markets): Are buyers trading down or still choosing premium innovation?
  Response: Premium/enthusiast customers continue buying; lower/middle-income consumers are pulling back; AOUT is less exposed to entry price points.

• Question from Alex Sturnieks (Lake Street Capital Markets): Key factors that could push gross margin outlook higher or lower?
  Response: Tariff trajectory plus levers—vendor cost concessions and measured, category-specific pricing—will drive margins; approach is fluid.

• Question from Alex Sturnieks (Lake Street Capital Markets): How much production remains in China and what are the trade-offs?
  Response: Sourcing has diversified, but complex tech products remain in China for quality/cost; further shifts depend on tariff stability and supplier readiness while preserving quality.

• Question from Alex Sturnieks (Lake Street Capital Markets): Strategy to broaden e-commerce beyond the largest partner?
  Response: Traditional retailers’ online sales are growing (10%–30% of their sales), capturing mix; AOUT focuses on being present wherever consumers shop, reducing reliance on any single e-commerce partner.