Solo Brands, parent company of Solo Stove, Oru Kayak, Isle, and Chubbies, posted a significant gain in its wholesale business for the second quarter of the year. Wholesale revenues increased 57% to $31.3 million for the quarter ended June 30.
Solo’s wholesale growth and momentum is coming primarily from the Chubbies and Solo Stove brands, said John Merris, CEO of Solo Brands, in a conference call with investors Thursday morning.
However, direct-to-consumer revenues decreased 14.2% to $99.7 million, leaving the Grapevine, Texas-based company with a decline in net sales of 3.7% to $130.9 million.
“Our omni-channel approach to our business enabled us to lean into the strong momentum we were seeing through our wholesale channel as our brand awareness continues to grow,” Merris said. “Although consumers continue to be selective in choosing which brands they shop, we remain focused on the customer experience and product innovation to help us deliver in this environment.”
Wholesale Momentum
Merris said Solo is “rapidly gaining shelf space” and increasing its door count.
“We have built strong relationships with our retail partners and consumers have reacted enthusiastically to the presentation of our brands at stores across the country,” he said. “We are now part of the normal planning cycle for many of our key retailers which is leading to an increase in door count, additional shelf space, and improved product placement.”
Merris pointed out that the bulk of the wholesale upswing is specifically about Chubby’s and Solo Stove.
“We’re seeing really healthy momentum across the board with our regional partners across those two brands specifically,” he said.
Scheels, Public Lands
Merris pointed to product placement in Scheels as a good example of a successful retail partnership.
“We have created a beautiful in-store Solo Stove shopping experience (at Scheels) that showcases the depth of our assortment,” Merris said.
The enhanced product displays in retailers like Scheels and Public Lands have been in pilot test phases, but Merris said those are moving beyond that. The displays at Scheels have expanded, and Merris said Public Lands is “very close” to expanding past the test display.
“It’s not all happening at once, but we do expect to have more prominent displays in more doors and have better real estate in stores,” he added.
DTC Pullback on Discounting
On the DTC front, the company is focused on aligning itself with its retail partners and has pulled back its use of flash sales, leading to fewer planned promotions.
“As expected, this pullback in promotions and advertising during the quarter led to a moderation in sales trends in our direct channel,” Merris said. “But longer term we believe that this is appropriate to drive consistent messaging and to better reflect the value of our brands.”
TerraFlame
Solo Brands acquired indoor fire products maker TerraFlame in May. Merris said they’ve seen good wholesale business with TerraFlame, particularly at Target, and the company hopes to expand that, but otherwise the sales have come through DTC.
“From a margin perspective, really healthy gross margins flow down through the P&L (for TerraFlame),” he added, also pointing out that TerraFlame is “quite small” compared to the rest of Solo’s brands.
“It’s one that we think has a lot of strength behind it and a big market opportunity, particularly amongst the growing Solo Stove customer base, as we have the opportunity to take the fire inside,” Merris said.
Q2 Numbers
Net income was up 157.9% to $11.5 million for the quarter.
Gross margin decreased 0.3% to 63.4% when compared to the same period a year ago.
Full-Year 2023 Guidance
Solo’s continued momentum in wholesale is leading to a reiterated full-year forecast of a revenue range of $520 to $540 million, with the most likely outcome at the midpoint of the range at $530 million, according to the company.
While the company is reiterating its revenue guidance, it’s also raising its adjusted EBITDA margin target to 17% to 18% for the full year. Previously, the company had forecast a range of 16.5% to 17.5%.
“We are excited about the pipeline of new products we have planned for the back half of the year, and the continued momentum we are seeing in our wholesale channel, with more than half of our sales anticipated in the second half of the year and a significant portion in the fourth quarter,” said Solo Brands CFO Somer Webb. “There is a lot of business in front of us, but we remain optimistic about our ability to deliver in the near and long term.”
