Shares of Fox Factory Holding, a company specializing in manufacturing bicycle and ATV components, took a significant hit as sales plummeted due to various factors. The stock experienced a steep decline of over 36% to $52.96. This drop compounds the already 9% decrease in shares seen earlier this year.
Fox Factory, based in Duluth, Ga., reported a 19% decrease in sales during the third quarter, totaling $331.1 million. This figure fell short of the projected sales of $399.5 million, as estimated by analysts surveyed by FactSet.
The company situated its sales decline primarily on the nearly 59% drop in revenue from its specialty-sports unit, specifically serving bicycle manufacturers. CEO Mike Dennison explained that many bike manufacturers are grappling with excess inventory following a surge in demand triggered by the pandemic, which has now cooled off. Dennison expects the inventory issues to persist into the first half of next year, forcing some bike makers to halt production in an attempt to balance their stock levels.
Dennison also acknowledged that the strikes carried out by the United Auto Workers impacted sales during the third quarter and will continue to affect performance in the fourth quarter.
As a result of these challenges, Fox Factory revised its full-year sales guidance downward, anticipating sales on the lower end of the $1.43 billion to $1.47 billion range. This adjustment marks a significant decrease from the previous outlook of $1.67 billion to $1.70 billion in sales.
Despite these setbacks, Fox Factory announced its acquisition of Marucci Sports, a baseball bat manufacturer, in a deal valued at $572 million. During a conference call, analysts pressed for clarification on how Marucci Sports would align with Fox Factory's operations. Dennison responded by highlighting the potential synergies between the two companies, particularly in terms of leveraging their respective manufacturing capabilities in metal-based products.
By Will Feuer. Originally published on Wall Street Journal.
