Why Vista Outdoor Shares Are Tumbling Today

Vista Outdoor Inc VSTO shares are trading lower by around 20% after the company announced asset sales and lowered its FY24 outlook.  

The company inked a definitive deal to sell its Sporting Products business to Czechoslovak Group a.s. (CSG) for $1.91 billion in an all-cash transaction, subject to customary closing conditions. 

The transaction cost implies 5x enterprise value to Sporting Products FY24 EBITDA, including estimated standalone costs.

The deal is expected to close in the calendar year 2024, subject to stockholders and regulatory approvals and other customary closing conditions.

After the sale completion, VSTO's Outdoor Products business will become an independent publicly traded company, Revelyst, Inc., trading on the New York Stock Exchange under the ticker "GEAR." 

The company has named Eric Nyman, current CEO of Outdoor Products, as CEO of Revelyst.

"This is an important strategic step for our company in creating value through separating our Outdoor Products and Sporting Products segments. The previously announced plan to separate our businesses has positioned us to execute seamlessly on this transaction, which we believe is the best path to maximize value for our stockholders, while better positioning Sporting Products and Outdoor Products for future success," said Gary McArthur, interim CEO of Vista Outdoor.

Outlook: VSTO reduced the outlook for adjusted EPS to $3.65-$4.05 vs. consensus of $4.69 (from $4.50-$5.00) and sales to $2.725 billion-$2.825 billion vs. $2.87 billion (from $2.85 billion-$2.95 billion earlier).

This is due to the challenging economic environment for consumers and market normalization, which resulted in pressures across multiple categories.

The company will announce its Q2 earnings results on November 2, 2023.

Price Action: VSTO shares are down 24.24% at $24.85 on the last check Monday.