American Outdoor Brands Q1 Sales Drop

American Outdoor Brands(NASDAQ:AOUT) reported fiscal first quarter 2026 results on September 4, 2025, revealing GAAP net sales of $29.7 million (down 28.7% year-over-year) and a non-GAAP EPS loss of $0.26, weighed by tariff-induced retailer order timing and a 35.2% year-over-year decline in the e-commerce channel. Despite a challenging environment, gross margin (GAAP) improved to 46.7% (up 130 basis points year-over-year), and new products contributed 29% of net sales, while the balance sheet remained debt-free with $17.8 million in cash after $2.5 million in share repurchases. The fiscal year for the company ends April 30, 2026; all quarterly references are to fiscal periods unless otherwise noted.

Gross margin expands despite sales contraction

Gross margin increased 130 basis points year-over-year to 46.7%, even as overall net sales (GAAP) fell due to retailer order pull-ins from the fiscal first quarter into the fiscal fourth quarter 2025 and a 35.2% year-over-year e-commerce channel drop, primarily attributable to one large partner adjusting purchasing on tariff impacts. Operating expenses on a GAAP basis declined modestly to $20.7 million, while on a non-GAAP basis, they were stable at $18.2 million. The company utilized a fully diluted share count of 12.7 million, with 12.9 million fully diluted shares projected for the year in the absence of further buybacks.

"As Brian indicated, we continued to proactively manage our supply chain in the face of changing tariff rates, including migrating certain products to more advantageous countries of origin, and securing cost-sharing arrangements from our supplier partners. In addition, we're preserving margins by making strategic pricing adjustments as necessary, redesigning certain products and processes to lower tariff impacts, and maintaining new product velocity. Which allows us to feather in new, higher-margin products. In all cases, our priority is clear, to preserve product quality, protect margins, and maintain supply continuity. These actions, along with our disciplined approach to managing operating expenses, give us confidence that our operating model will continue to yield 25% to 30% EBITDA contribution in the long term. For Q1, gross margin was 46.7%, up 130 basis points compared to Q1 last year."
-- H. Andrew Fulmer, CFO

The company’s multidimensional approach to tariff mitigation and supply chain agility enables it to offset revenue pressures with improved mix and operating discipline, sustaining EBITDA margin targets even in volatile conditions.

American Outdoor Brands drives innovation-led retail POS and brand strength

Management highlighted that, adjusted for the fiscal fourth quarter retailer order acceleration (about $10 million), traditional channel net sales would have increased 15% year-over-year, and point-of-sale (POS) performance for key innovation-led brands (Caldwell, Bubba, BOG, Gorilla, Meet Your Maker) outperformed peers. New product launches, such as the Caldwell Claycopter and Bubba SmartFish Scale Lite, accounted for a substantial 29% of net sales, and Bubba SmartFish Scale Lite is positioned to drive upcoming subscription revenue streams through platform partnerships.

"In fact, new products represented nearly 29% of our net sales during the first quarter. Purchasing activity from our retailers during Q1 reflected replenishment cycles that were periodically turned on and off on a retailer-by-retailer basis. As each one sought to optimize pricing, product mix, and cash flows tailored to their specific situation. We are seeing a continuation of this behavior in Q2 and would expect it to continue as long as the tariff situation remains fluid. These ordering patterns created a year-over-year net sales decline in Q1. However, if we adjust for the acceleration of orders by our retailers into Q4, total first-quarter net sales would have declined just 5%. A favorable result given the environment. And net sales in our traditional channel would have increased by about 15%. This tells us our strategy is effective and that coupled with our POS performance, our brands are winning at retail."
-- Brian Daniel Murphy, President and CEO

This performance demonstrates the effectiveness of the company’s innovation strategy and its ability to drive retail success even amid macroeconomic and tariff-related headwinds.

American Outdoor Brands maintains strong capital structure and M&A flexibility

The balance sheet ended the quarter with $17.8 million in cash, no debt, and total liquidity of $108 million, including an undrawn $75 million credit line, even after $2.5 million in share repurchases. Inventory is targeted to remain at roughly $125 million for the fiscal second and third quarters to prepare for the seasonal build and tariff-driven sourcing timing, with a planned reduction to $120 million by the fiscal fourth quarter. Capex remains tightly controlled ($370,000 in the quarter, with $4 million to $4.5 million budgeted for the year), supporting an asset-light model.

"We continue to maintain a strong balance sheet, ending the quarter with $17.8 million in cash and no debt. After repurchasing $2.5 million of our common stock. Inventory increased $21.1 million in the quarter. The bulk of the increase supports our seasonal inventory build, as we prepare for hunting and holiday seasons. The balance is largely tariff-related and includes the following. First, recall that in our Q4, tariffs on Chinese imports were as high as 145%. We paused inventory purchases at that time to avoid those high rates. Once those tariffs were lowered to 30% in Q1, we resumed purchases, allowing us to avoid significantly higher tariffs while maintaining healthy service levels with our retail partners. Second, we are now experiencing higher embedded costs in inventory from IEPA and Section 232 tariff rates that now include virtually every country of origin. And lastly, as we migrate certain products to more advantageous countries of origin, we are building strategic inventory reserves. To provide flexibility and service continuity. For the remainder of the year, our inventory management will be focused on maintaining our service levels, and being a reliable partner to our retailers. As such, we are targeting inventory to remain at roughly $125 million for Q2 and Q3 and then decreased to around $120 million for Q4. Our balance sheet remains strong and debt-free. We ended the year with no balance on our $75 million line of credit, so as of Q1, we have total available capital of up to $108 million."
-- H. Andrew Fulmer, CFO

This robust cash and liquidity position, coupled with prudent inventory management, allows continued capital deployment, including share repurchases and selective M&A, and operational resilience amid tariff and supply chain volatility.

Looking Ahead

Management expects a year-over-year net sales decline of approximately 15% in the fiscal second quarter, driven primarily by ongoing retailer caution and tariff uncertainties. No full-year guidance was provided given continued macro and tariff-related unpredictability; however, management expressed optimism for the year based on strong POS trends, a robust pipeline of new products, and the spring 2026 launch of the ScoreTracker Live subscription platform. The company intends to maintain gross margin levels in future quarters, dynamically offsetting tariff headwinds through cost concessions, pricing, and product innovation.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.