American Outdoor Drops 11.5% on Poor Q3 Revenue

Shares of outdoor products and accessories provider American Outdoor Brands, Inc. (AOUT) dropped about 11.5% post-market on Thursday, after the company reported lower than estimated revenue for the third quarter. It also announced the acquisition of Grilla Grills for $27 million.

Q3 Earnings

AOUT reported revenue of $70.1 million as compared to analysts’ expectations of $72.6 million. It had generated $82.6 million in revenue for the comparable year-ago period. Earnings per share at $0.52, on the other hand, came in better than the Street’s estimates of $0.46.

The drop in revenue was attributed to lower traditional brick-and-mortar channel net sales. The decline was also driven by lower net sales in the shooting sports category.

Grilla Grills Acquisition

Additionally, AOUT has agreed to acquire Grilla Grills for a cash consideration of $27 million. The latter provides barbecue grills, Wi-Fi-enabled wood pellet grills, smokers, accessories, and modular outdoor kitchens.

The move allows AOUT to enter the U.S. barbecue grill market, which is estimated to be worth $7 billion in size.  AOUT expects the acquisition to propel growth in its outdoor lifestyle product category. Impressively, Grilla has clocked ~50% compound annual net sales growth over the past five years.

Management Weighs In

The President and CEO of AOUT, Brian Murphy, commented, “Expanding our outdoor lifestyle category is an important component of our long-term strategic plan, and today, we are excited to welcome Grilla Grills into the American Outdoor family of brands. We look forward to leveraging our Dock & Unlock strategy to take Grilla to the next level by further expanding its innovative and high-quality product line, broadening its loyal consumer base, and delivering sustainable future growth.”

The transaction, structured as an asset acquisition is expected to be immediately accretive to AOUT’s top line as well as bottom line.

Analysts’ Take

Recently, B. Riley Financial analyst Eric Wold reiterated a Buy rating on the stock alongside a price target of $37, implying a massive potential upside of 140.6% for the stock.

Hedge Fund Activity

According to TipRanks data, Wall Street’s top hedge funds have decreased holdings in American Outdoor by 239.1 thousand shares in the last quarter, indicating a very negative hedge fund confidence signal in the stock based on activities of 2 hedge funds.

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