JOUT - Johnson Outdoors: Competition Will Always Limit Its Growth
2023-03-21 01:41:43 ET
Summary
- Johnson Outdoors is a leading global manufacturer of innovative outdoor recreational products, including fishing, diving, and paddling equipment.
- The company has done well for its investors over the past ten years.
- If I have to be an investor from here, I would like to see some moat.
I like Johnson Outdoors ( JOUT ) as a business. It is family owned and operated, has diligently worked to expand its business, and takes care of its shareholders. It has also been quite careful with its use of debt and is in fact debt-free. I want to invest in this business but it's in an industry that is cyclical and has competitors going after the same market share. So I would like to examine how well it fares against its competition and what kind of differentiation it provides against its competitors. The results are mixed. The company shows strength in certain areas and weakness in other areas. My conclusion is that there is no clear winner, its differentiation may not always provide the company its edge and its growth will always be under attack by its competitors.
Latest year wrap-up
For its fiscal year 2022, the company had almost $750M in net sales in 16 product categories across 80 countries. Topline was relatively stable, with only a 1% decrease from the previous year's record high, operating profit decreased by 40%, and net income fell by 47% compared to the prior fiscal year. Its gains were from Diving (up 14% from the prior year), camping (up 12% from the prior year), and watercraft (up 2% from the prior year). The biggest effect came from fishing which saw a 5% decline in revenues (fishing is its biggest business bringing in almost $500M)
Competition
Johnson Outdoors faces competition in every product category. But the lion's share of revenues comes from fishing (almost 70%) so it would be most beneficial for us to know what we are up against in this particular segment. It manages three brands in fishing - Minn Kota, Humminbird, and Cannon.
Minn Kota
This is its electric trolling motors business and its primary competitors are brands owned by Brunswick Corporation (BC) and Garmin (GRMN). Let us first compare Brunswick's brands Motorguide and Lowrance against Minn Kota.
Minn Kota versus Motorguide
Multiple comparisons have Minn Kota coming out slightly on top of Motorguide. Regarding quality, both brands are equal, but Motorguide provides more value for money. However, Minn Kota has a much richer feature set with their motors having more well-thought-out design elements and features. When it comes to customer service, Minn Kota is more liberal with their customers and the same freedom cannot be expected from Motorguide (But both of them have excellent customer service centers)
Minn Kota versus Lowrance
When it comes to speed and thrust, Lowrance wins with its variable voltage and higher thrust numbers. Both brands offer a wide variety of features and each product appeals to a different type of customer.
Features Comparison (Tiltfishing Website)
When it comes to overall functionality, Lowrance is the clear winner as its power and stealth are not equally matched by Minn Kota. But one thing most comparison sites agree on again is the unmatched customer support of Minn Kota.
Minn Kota versus Garmin
Garmin Force is a relatively new trolling motor, released just a couple of years ago whereas Minn Kota's product has been in the business for a long time and is known for its reliability. Multiple websites have comparisons where Garmin's product is coming in much ahead of Minn Kota. Garmin has a much richer feature set and covers a wide range of functionalities (Ex: Works in saltwater, powerful and efficient motors, etc.) But Garmin Force is a premium product and Minn Kota's product works for most anglers. But for some individuals, the premium price tag could be worth it and justified for the advanced features provided by Garmin.
Minn Kota Raptor versus Power-Pole
Power-Pole is Minn Kota's main competitor in the shallow water anchor business. Both products are almost neck and neck in terms of their utility and features offered. The choice between the two anchors will depend on the specific needs and preferences of the boat owner.
Min Kota's product versus Power-Pole (Trolling Motor Pro Website)
Humminbird
Humminbird is a Johnson Outdoors brand when it comes to onboard electronics. These electronics relate to sonar imaging, mapping, and GPS technology. Its main competitors are again Garmin and Lowrance.
| Category |
| Humminbird |
| Garmin |
| Lowrance |
| Reputation |
| Strong history with fishing technology and the first to introduce ground-breaking features. They are popular with anglers across the world and their product is met with great reviews |
| Its recent features have propelled the brand and it also has a good history with its GPS technology |
| Lowrance has a great reputation among the recreational and tournament fishing crowd and generally met with positive reviews from its users |
| Key Features |
| Has standard features and its biggest strength is a user-friendly interface. Its latest new feature gives the user likely fish locations depending on data (Ex: Weather conditions) |
| Has standard features and pioneered new features such as Panoptix and Livescope transducers |
| Lowrance is customized for recreational fishers and may not include certain advanced radar and navigation capabilities necessary for offshore fishing in the open ocean. However, most of their other features are comparable to what is provided by their competitors |
| Mapping System |
| Integrated mapping system in their GPS unit can lack detail in some instances, and buying a mapping package is recommended |
| Multiple systems can be used BlueChart, Navionics cards or LakuVu which can provide incredible detail on water bodies |
| Built in mapping package is limited and buying a mapping packaged such as Navionics is recommended |
| Innovation |
| Has good fish finder technology with their imaging having fish finder depth up to 200 feet and 360-degree view with good clarity on display. |
| They have features that can tell you the way fishes are moving and functions that give a detailed feature-packed 3D view of the area |
| Lowrance offers high-quality imaging technology and some models feature FishReveal technology that enhances sonar returns for clearer separation of fish in schools. They also have LiveSight technology, which allows anglers to track their lures or fish movement in real-time over a wider coverage area and at greater distances. |
Cannon
This is the Johnson Outdoors brand for the downriggers market. Competition is based on ease of operation, speed, and durability. Its main competitors in this segment are Walker and Scotty.
For Cannon, based on the model, it offers fast retrieval, easy mount and set up, simple installation, good warranty, and affordability. For Scotty, its strengths lie in offering low power consumption, and a swivel base. Its downsides are trickier installation and a bigger mounting footprint. The top-line model offers easy installation but the obviously cost becomes a factor.
Walker's model can be relied on for its quality and durability, small footprint, and added features such as positive-ion fish attraction with its main downside being lower line capacity against competing products.
Conclusion
All of Johnson Outdoors products face stiff competition in the market which will keep the company on its toes. There is some differentiation between products that cater to the individual needs/preferences of customers but there is also significant overlap between competing products. Heavy competition means the company has to continue to spend to differentiate its products and in cases where it cannot differentiate through features, it will have to spend on marketing to increase its brand awareness. I would like to see evidence of the company developing or increasing its moat before being an investor. Therefore, I am rating this as a Hold for now.
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Johnson Outdoors: Competition Will Always Limit Its Growth