Johnson Outdoors - Deep dive

The history of Johnson Outdoors is not straightforward. In fact, I think I actually confused myself a few times when researching it. One could look at it as a big success or a complete failure. I prefer ‘scrapper’.

The Start

The original Johnson Outdoors was Initially thought of in the late 1960’s and executed in the early 70’s by multinational corporation S.C. Johnson & Son Inc. As was similar to other diversification programs that were being carried out at the time, the plan was similar to modern day internet aggregator strategies. That is, to acquire a group of SME’s which designed and manufactured recreational products with reasonably recognizable brand names and turn them into a whole division. The selection of the category was primarily as a result of the owner, Sam Johnson (named after the company’s founder and his great grandfather), being an avid outdoorsman. And the initial purchases, presumably as a result of his interest in fishing. These very first acquisitions were a small electric motor boat and fishing reel manufacturer located in Minnesota.

As the division got off to a great start, it seems there was a greater drain than expected on the larger parent’s resources. As there was a confidence among management and the Johnson family that it could stand on its own two feet, Johnson Worldwide Associates was spun off, by leveraged buyout directly to Sam Johnson and the wider family for $66m, in which the family maintained a 42% investment interest but a 72% voting ‘say’. That was a shrewd piece of planning.

Within two years, the company had established itself in the fishing equipment and camping equipment markets, and the Johnson family thought an initial public offering (IPO) was the next step in its growth. In 1987, just a relatively short time after its spinoff from Johnson Wax, the small but growing Johnson Worldwide Associates went public in order to have access to the capital market and to establish a market value for the company's stock. That initial stock price was $15.50 and allowed the company to raise $25m quickly, which was subsequently used to reduce debt. Its noteworthy that the stock market crashed one week after the IPO, which saw the company lose 50% of its value. The fact that the company was able to make another public offering 10 months later speaks to the solid product range it was building.

By the late 1980’s the company was making the Johnson fishing reels, ‘Minn Kota’ electric fishing motors, Old Town canoes, Eureka! Tents, and Camp Trail backpacking gear, all through acquisition. Minn Kota, in particular, was performing well capturing a 70% of its segment and hitting $70 in sales in 1989 (the group hit $232m in total that same year). Scubapro - the groups diving equipment brand - was thriving. This led to the firm investing heavily in distributing the marine and diving equipment into Europe. An interesting stat is that through its first five years operating profits increased at 35% annually. So that early strategy was sound.

Part of the European strategy was to acquire European companies. The first was Mitchell Sports - a highly regarded fishing reel manufacturer revered by hardcore fishermen. Indeed, the Mitchell 300 became one of the firm’s best selling products ever as as result of ‘re-packaging’ for a US audience. They ‘Americanized’(!) it. So they began to help their overseas acquisitions gain a foothold in the US market. You could say a Win-Win, as the European brands gave the company a physical presence in Europe which obviously helped with distribution, and the potential set-up headaches. And yours truly can vouch for the latter!

Revenues rose to $334m in 1992. A key metric here is that 43% of these sales came from outside the US. But did this diversification of geographies have a negative effect on the US sales? I wonder. Anyway, the Group bought Jack Wolfskin in 1991 and that German facility became an ideal European hub, serving the market with the group’s brands. At this stage the marine and diving wings were producing over 70 of their revenues from outside the US. And here’s whare the group hits a speed bump - literally. The acquisitions were costly and quick. It resulted in over-extension. Earnings dropped significantly and in came decision time - and the inevitable restructuring in the early to mid 90’s..

That began with the ‘marking’ business that had (inexplicably) developed within the company. Bar coding systems and the outdoors just don’t go together, especially in this type or an organization that had performed so well in one key market - the outdoors. And its strength lay in compatibility and knowledge, at the top level. This distraction was, in my opinion, a mistake. Anyhow, the whole part of the business was sold. And, in fairness, Sam Johnson saw his mistake, held up his hand, and adjusted course.

As a result the company refocused on sports/outdoors products and clothing. By 1995 figures and earnings had rebounded and the company management clearly began to focus on innovation rather than trying to buy market share. We’ve seen time and again this is a much more sound strategy. Roger Whittaker took over to guide this development process and as a result, by the end of 1997, the company's focus had been narrowed to five core product markets, including: “fishing rods, reels, and lures; electric boat motors, speedometers, marine and automotive compasses, and weather instruments; diving equipment and accessories such as regulators, masks, fins, wet and dry suits, gloves, dive belts, dive computers, snorkels, and buoyancy compensators; outdoor equipment such as camping tents, backpacks, commercial tents, bicycling gear, sleeping bags, field compasses, and outdoor clothing; and watercraft, including canoes, kayaks, paddles, and oars.”

1997 saw a respectable revenue of over $300m and management started to, counter intuitively, think towards acquisitions again. This started with the purchase of Plastiques L.P.A. Limitée and Ocean Kayak, and Uwatec AG. At least this time they stayed in the industry and on brand. The period that followed saw a huge amount of chopping and changing of brands in the portfolio. In came Pacific Kayak, Necky Kayaks, and Lendal paddles - among many others, (there was obviously a big bet on the kayaking niche, and with good merit as it was growing rapidly) and out went Mitchell Reels, Johnson lures and Jack Wolfskin. In 1999 Helen Johnson-Leipold, daughter of Sam Johnson, took over after spending her apprenticeship in SC Johnson & Son. She still holds the position today. The family tried to take the company private again in 2005 but failed.

By 2000 revenues had grown, albeit modestly, to $347m, while posting a loss due to a write down because of the sale of fishing. The market hated it, and share prices dropped. Investors wanted a sale of the company but the family had enough voting rights retained to avoid that.

The intervening years have been up and down. Revenues dropped to $316m by 2003. Military cold weather tent sales have become a very lucrative part of the business, and the part which originally piqued my interest in Johnson/Eureka!. They had risen to $407m by 2011 and $430m by 2015. Nothing spectacular, but solid. By 2020 the group had 1,200 employee in 20 facilities worldwide. Revenues by then were $594m a net income of $55m. Again, slow and steady, but consistent. In 2023, these figures hit $664m and 1,400 employees, in 18 facilities.

Conclusion

This is a fascinating case study. The company was born into privilege - with a much bigger older brother. But it certainly has lost its way over the decades. And I’ve seen this time and again. Acquisition and diversification to achieve growth. But this often sacrifices the focus that made them good in the first place. We’ve seen that too - in a much smaller scale of course - but a lack of focus can kill an organization. Especially when it’s set-up to excel in one thing. After the pare back, their more recent acquisitions have made more sense. Although, not all of their business has. In a way, Johnson has appeared much more immature than it should be. One lesson is for sure. Stick to what you know, and where you know it. Look at Yeti. The value-add of the outdoor recreation economy accounted for 2.2 percent ($563.7 billion) of current‐dollar gross domestic product (GDP) for the USA in 2022. Plenty there. No need to diversify and try to buy share in different markets and geographies. Even Walmart have tried and failed with this. Think Moosejaw. It’s a strategy that’s fraught with danger. Johnson seems to be on a clearer path now. It’ll be interesting to see if the ‘lure of the meander’ takes over again…

Amazon - Outdoors category

You can see here from Jungle Scout, that the category is, literally, middle of the road, with exactly no change in sellers YoY.

A little off topic, but below is an interesting insight into how other categories are performing - best and worst. Pssst - top right is the place to be!

2 interesting facts:

89% of buyers agree that they are more likely to purchase a product on Amazon than other ecommerce sites (Oberlo)

And

Amazon has a large market share across different categories. The categories include electronics (89.9%), home improvement (83.8%), food (81.8%), sports, fitness & outdoors (89.6%), household essentials (88.8%), and health/medicines (92%). (Feedvisor)

I don’t believe we can afford not to have good Amazon listings. Learn to play their game. It sucks in some ways, but learn.

But, please don’t lose the wood from the trees here. These are recent historicals, and they help. But should never replace the development of a solid product, regardless of the category.

Anyhow, hopefully you get some value from the newsletter. Thanks for reading and please pass it on to anyone you think will benefit.

Until next Tuesday, and chapter 6, Go n-éirí leat!

Derek.