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Vista Outdoor (VSTO -24%) was kicked to the curb today after announcing it would sell its Sporting Products segment to Czechoslovak Group a.s. for an enterprise value of $1.91 bln in an all-cash transaction. This valuation represented approximately 5x Sporting Products' FY24 EBITDA. VSTO expects the transaction to close during 2024.

Additionally, VSTO slashed its FY24 (Mar) adjusted earnings and revenue forecasts, citing increasingly challenging economic conditions branching from higher-for-longer interest rates. The company is now targeting sales of $2.725-2.825 bln and adjusted EPS of $3.65-4.05, down from $2.85-2.95 bln and $4.50-5.00, respectively.

• VSTO has been amid restructuring for over a year, announcing in May 2022 that it would separate its Outdoor Products and Sporting Products segments into two independent, publicly traded organizations. The news kicked off an extended period of selling pressure, with shares slipping around 35% since. Today's deal, albeit consistent with VSTO's plan to split the company into two separate entities, did not command much of a premium at 5x FY24 EBITDA and just over 1x FY24 sales. Today's sell-off partly reflects this disappointment.
• Furthermore, macroeconomic headwinds have plagued VSTO for much of the past year. However, management hinted at demand stabilization last quarter, noting that its Sporting Products segment met its financial goals as the market normalized. VSTO continued, stating that given a normalizing market, it expected to return to seasonal buying patterns and anticipated sustained demand for various products across its Sporting Products business going forward.
• Given these remarks, today's guide-down was particularly frustrating. Both of VSTO's segments are facing more formidable challenges than previously anticipated. In Sporting Products, VSTO projects Q2 (Sep) sales of $347-352 mln, markedly below its prior remarks that implied around $375 mln each quarter. Likewise, in Outdoor Products, VSTO's $325-330 mln outlook for Q2 represented a 6.2% drop yr/yr at the midpoint, a dramatic difference from the "approximately flat" growth estimated in Q1 (Jun).

VSTO's Sporting Products business divestiture and slashed FY24 guidance comes as a blow to its shares. While a stubbornly unfavorable economic environment has weighed on VSTO this year, given the consumer loyalty among the several prominent brands housed under its Sporting Products business, investors may have rather seen VSTO receive a better price or even hold onto this segment, spinning it off into a publicly-listed company like it plans to do with its Outdoor Products division.