Jim Duffy: Very good. Thank you, Mike.
Michael Yates: Okay. Thanks Jim.
Operator: One moment for the next question. And your next question comes from the line of Mark Smith with Lake Street. Your line is now open.
Mark Smith: Hi, guys. First question for me, as we look at the uptick in direct-to-consumer, how much of that maybe was due to promotions and did that hurt kind of the profitability of that business?
Michael Yates: Well, like I mentioned earlier, Mark, for the quarter we did just a little under $9 million in our D2C business at Outdoor, e-comm a true D2C business, it was up 1.2 million, margin kind of held up though. There was some promotion, but we did have a sale around Labor Day. But the business held up. Our bigger profit challenges have been moving older inventory, moving discontinued merchandise, right? And we’ve made good progress on that, and especially as we — we missed some opportunity because we didn’t have the right inventory where the demand existed. And I think we referred to that as a mismatch in inventory compared to demand that — that’s where revenue could have even been better. But on D2C basis, revenue was up and we looked at to that to really kind of look at the health of the brand.
Mark Smith: Okay. And then you talked at length about inventory issues continuing throughout the channel, within the Precision segment. Can you talk about within Outdoor and maybe a bit within Adventure, what you’re seeing from your retail partners, distributors from inventory? Is there continue to be issues, or did you see it improve at all during Q3?
Michael Yates: I mean, there still continues to be issues and there’s pockets of some — pockets of some improvement, but in a whole — at the whole level, it’s still challenging, right? And it’s a mixed bag. When we look at some of our key and national accounts, we do get some weekly sell through data. Some are up, low 20%, some are down 20%, week to week. So it’s still pretty volatile out there with some of our key accounts.
Mark Smith: Okay. And as we look at some continued channel inventory issues, how are you viewing promotional environment here in Q4? I assume this is fully built into your guidance, but do you think that we’ll see improvement in inventory throughout the channel in Q4 or is this something that potentially bleeds further into 2024?
Michael Yates: Yeah. No, so I told — in the prepared remarks I mentioned that inventory at Outdoor around $70 million, I think that will be — that should be in the sixties, come the end of the quarter. We are focused on continuing to right size our inventory, improve the aging, lean into more of what we are calling A products and so we have — so we can meet the demand, right, for the A products, the stuff that the demand’s out there for. And we continue to focus on that. In the fourth quarter, we’re targeting to move $3 million or $4 million of older inventory still at Outdoor. So that will have an impact or that will continue to put pressure on margins, but all in the goal, all in the objective to kind reset the business for 2024, specifically from an Outdoor perspective.
Mark Smith: Outdoor? Are you seeing some of these same issues in the Adventure segment?
Michael Yates: Not so much, no. We’re introducing new products. You saw the margins holding up. I mean, I feel good about what we have going on there. Adventures saw the pressure first, right? That — and Outdoor followed, and now Precision Sports is kind of seeing the pressure from too much inventory in the channel, and Adventures just is the first one to come out of that. And we’re starting to — I don’t see it the same. I do see inventory being pressure at Precision, but we feel confident in being able to hold that finished good ammo because it is — like I mentioned to Jim, it’s in our premium center fire rifle calibers. We’re not going to be super promotional around moving that inventory just to generate cash. That’s not necessary at this point in time.
