Reading the earnings call transcript, it is pretty clear what Vista's strategy is. They're concerned with maximizing value for shareholders, not solving the industries' supply and demand problems. They clearly appreciate the position they're in with the current supply and demand scenario. I don't think you would get any interest from (any) justice dept on antitrust action for this little market niche that affects practically nobody - in political terms. From Vista's perspective, consolidation enables them to actually be profitable and persist.
Supply chain issues - and COVID - is what every company says in relation to whatever prevents them from hitting their targets now. Vista isn't limited by inputs so much as production capacity, which they've been reluctant to increase meaningfully. But if any one of us were running that company, we'd have been reluctant to expand too much in 2020/2021. Supply chain issues -like copper - would have been just one indicator saying this is bad time to build or expand. Everything has been harder to get done, more expensive.
It does appear that they're investing in equipment or tooling to increase efficiency and flexibility but that'll likely just make the work flow better. If anything it might make them more resilient to labor crunches related to Omicron or whatever is next on the horizon. It will allow them to switch product lines more quickly. That's good news. The feast or famine program blows.
Prices won't be going down any time soon. Vista said on their earnings call that the market will support current pricing levels for the foreseeable future. Lots of good news for Vista shareholders. It is only logical that prices increase over time, but hopefully we'll see some relief as inflation and supply chain issues subside. I think we'll see rebates or sales at some point, rather than reduce prices. As someone previously noted, whipsawing prices is not going to improve their profitability. They won't be lowering prices in 2022. Not as long as current issues persist and the 12 million new shooters added to the market are looking to feed their new firearms. The next decade is going to be right interesting in this market.
Here's a good excerpt:
And as we've talked previously, because of some of the consolidation we've done with Remington, even if you look long term, we don't see the same type of price compression the industry may have experienced in previous times. In terms of the ammo backlog, our ammo backlog continues to be at an all-time level. And if you look at the consumption data and if you look at some of the other industries that are out there, it suggests that demand continues to be very, very strong, and that's evidenced in our backlog. In terms of the channels, backlog is still minimal. And I will say that if you do retail checks and you look at the inventory on the shelves, what's remarkable is they're carrying significantly less inventory. And inventory they're carrying is honestly multiple facings in a lot of the same calibers. And we know that the other calibers are in demand, but just can't be produced yet. That's the rationale behind some of the machinery and equipment we're purchasing now to expand our capacity to really give our ammunition factories the flexibility to be able to meet a broad set of demand within the calibers. And a lot of this is being driven by the increases in hunting, which is at its highest level since 1958. And a lot of it is being driven by the growth in [new sports] and a lot of the other shooting sports activities.
-Christopher T. Metz - Vista Outdoor Inc. - CEO & Director
