What is the outlook for raw material inflation, particularly for fiscal year 2027, given the Middle East conflict and discussions with upstream suppliers?

Management is watching raw material inflation closely, noting some cost factor inflation for spring '27. They believe the full picture depends on the Middle East conflict's duration and oil flow, and the potential impact hasn't fully materialized yet. “I'd say at this point, we've seen some cost factor inflation coming through for spring '27. But frankly, I think a lot of people are still watching to see if this conflict in the Middle East is prolonged or if oil will start flowing again.”

CLAR

Clarus (CLAR) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Consumer Discretionary· Aug 6, 2026

Source: earnings call transcript

Executive summary

Clarus Q2 FY26 — Tariff Refund Boosts Earnings, Strategic Review Underway

Clarus reported a mixed second quarter, with strong performance in its Outdoor segment and significant margin expansion in Adventure, largely aided by a $6.1 million tariff refund. The company is actively exploring strategic alternatives to unlock shareholder value, while managing ongoing geopolitical uncertainties and raw material inflation concerns for future periods. Legal matters regarding CPSC and DOJ investigations have been closed, reducing future legal expenses.

Highlights

Consolidated sales increased 1.6% year-over-year to $56.2 million.
Outdoor segment revenue grew 9.1% year-over-year, driven by 9.5% growth in its 'big 3' categories.
Adventure segment gross margin improved 420 basis points year-over-year to 41.5%.
Free cash flow was positive $0.6 million in Q2 FY26, compared to an $11.3 million outflow in Q2 FY25.
The company completed a bolt-on acquisition of ONWRD Supply Co., enhancing its portfolio with high-margin accessories.

Concerns

Adventure segment sales were down 11.9% year-over-year, pressured by challenging North American and Australian markets.
Inventory at the Outdoor segment increased 12% year-over-year to $72.2 million.
Full-year 2026 adjusted EBITDA guidance was revised to $12 million to $13 million, with $6 million from tariff refunds and $2 million from eliminated legal expenses.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 Revenue	$245 million to $255 million high materiality	FY26	High
Full-year 2026 Adjusted EBITDA	$12 million to $13 million high materiality	FY26	High
Full-year 2026 Adventure Revenue	approximately $68 million medium materiality	FY26	High
Full-year 2026 Outdoor Revenue	approximately $182 million medium materiality	FY26	High
Q3 2026 Sales	$66 million and $68 million medium materiality	Q3 · FY26	High
Q3 2026 Adjusted EBITDA	approximately $3 million medium materiality	Q3 · FY26	High
Adventure Gross Margin	around 40% medium materiality	H2 FY26	High
Outdoor Gross Margin (ex-tariff)	37% to 37.5% medium materiality	H2 FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Outdoor Revenue, margin, and EBITDA all increased year-over-year. The 'big 3' categories (Mountain, Climb, Apparel) drove 95% of total segment revenues and grew 9.5%. Apparel sales grew for the fifth consecutive quarter, with a healthier full-price business. Inventory increased to build for an expected strong second half. Mountain revenue growth: 7.4%Climb revenue growth: 13.5%Apparel revenue growth: 7.4%Apparel in-line sales growth: 22.9%Apparel clearance sales decline: 61%North America wholesale growth: 0.5%North America digital D2C growth: 5.7%North America digital D2C % of regional revenue: 17.7%EU wholesale growth (dollars): 25.3%EU wholesale growth (constant currency): 16.7%EU digital D2C decline (constant currency): 10.6%EU digital D2C % of regional revenue: 5.3%International distributor channel growth: 10.6%	—	9.1%	—	$9.0 million
Adventure Top line was pressured by challenging North American and Australian markets, but gross margin improved significantly due to pricing actions and cost controls. The business is above breakeven on materially lower revenue. RockyMounts remains a bright spot, and brand penetration is improving in Europe and Asia with double-digit growth in several countries. Gross margin: 41.5%Gross margin improvement YoY: 420 bpsSG&A reduction YoY: $0.6 millionHeadcount reduction: 20%Cost base lighter: 11%	—	-11.9%	—	$0.5 million

Product announcements

Product	Type	Timeline
Rhino-Rack legs	launch	September
MAXTRAX integrated shovel	launch	recently launched
New products across all 4 Adventure brands	roadmap	Northern Hemisphere spring 2027 season

Deals & partnerships

ONWRD Supply Co. Acquisition of certain assets and liabilities of an in-vehicle accessory business.

A bolt-on acquisition of ONWRD Supply Co., which offers high-margin in-vehicle accessories, was completed during the quarter.

Risks & headwinds

Geopolitical and macro uncertainty ongoing

Continued

Mitigation:Focus on operational execution and simplification, maintaining financial strength and flexibility.

Middle East conflict ongoing

Major geopolitical and business risk

Mitigation:Monitoring closely for impact on raw material costs and overall market conditions.

Challenging market conditions in North America and Australia Q2 FY26, expected to continue for remainder of year

Pressured Adventure segment sales, down 11.9% YoY

Mitigation:Driving margin expansion, maintaining cost discipline, improving operational efficiency, and rebasing product initiatives to drive newness and growth.

Potential for warm winter coming winter

Modest dampening effect

Mitigation:Strong fall order book and product lineup expected to overcome impact.

Raw material inflation Spring '27 and beyond

Some cost factor inflation coming through for spring '27

Mitigation:Watching closely, impact depends on Middle East conflict normalization.

What to watch in Q3 FY26

Adventure Segment Gross Margin

H2 FY26

Current 41.5%

Target around 40%

Why it matters

Maintaining strong gross margins in the Adventure segment is crucial for profitability amidst sales pressures and cost discipline efforts.

In my prepared remarks around the Adventure, I mentioned that the 41.5% margins that we realized here in the second quarter, we're doing everything we can to maintain those. So I think it's reasonable to kind of hold around that 40% margin at Adventure.

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Q&A highlights

How are conversations with retail partners regarding potential trimming of wholesale orders due to a potentially warm winter, and is this a concern?

Management stated that while there might be a modest dampening effect, it's not a major concern. They feel good about the fall order book and product lineup, suggesting any impact has been relatively modest and overcome by product strength.

“I'd say overall, there may be a little bit of a dampening effect from last year, but not a major concern for us at this time. We feel good about our fall order book and the sales outlook for the second half and feel good about our product lineup.”

asked by Laurent Vasilescu · answered by McNeil Fiske

1 min read 4 chapters

Detailed narrative

Strategic Review Process

Clarus announced in May that it is exploring a range of strategic alternatives to unlock shareholder value, including the potential sale of all or part of the business or other strategic or financial transactions. The company has retained Jefferies as its financial adviser for this process and will not provide further comments until additional disclosure is appropriate or required.

Legal Updates and Expense Reduction

The company provided updates on several legal matters. The Section 16(b) litigation against HAP Trading, LLC is awaiting a Second Circuit Court decision. A separate Section 16(b) action against Caption Management was resolved via settlement. Importantly, the DOJ closed its criminal investigation into Black Diamond and its executives regarding avalanche transceivers, and the CPSC closed a separate investigation into product recalls.

These closures are expected to eliminate $2 million in estimated legal expenses for the remainder of 2026, contributing to the revised adjusted EBITDA guidance.

Operational Simplification and Cost Discipline

Clarus continues to focus on operational execution and simplification across both segments. The Adventure segment has improved its organizational shape, reducing headcount by 20% and making its cost base 11% lighter. This rigorous cost discipline, combined with targeted investments and pricing actions, has led to significant gross margin improvement even amidst sales pressure.

Product Innovation and Market Expansion

Both segments are driving product innovation and market expansion. Adventure is launching a new series of Rhino-Rack legs and expanding RockyMounts, Rhino-Rack, and MAXTRAX brand penetration in Asia and Europe, with OEM interest from European carmakers. The recently acquired ONWRD Supply Co. will also be introduced to the broader market. Outdoor's revamped apparel offering is resonating, driving sales growth for the fifth consecutive quarter.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.