Sign in

    BRUNSWICK (BC)

    Q1 2024 Earnings Summary

    Reported on Mar 17, 2025 (Before Market Open)
    Pre-Earnings Price$86.13Last close (Apr 24, 2024)
    Post-Earnings Price$83.81Open (Apr 25, 2024)
    Price Change
    $-2.32(-2.69%)
    • Brunswick Corporation is gaining market share in key segments, particularly in engines above 150-horsepower, and expects this trend to continue. They are confident in their ability to outperform the market and take share in these categories.
    • Sales of premium boat brands like Sea Ray and Boston Whaler have been strong, contributing to market share gains on the boat side. Brunswick reports being up 50 basis points so far this year based on SSI data.
    • Freedom Boat Club continues to deliver steady membership sales with churn remaining stable at around 10%, supporting Brunswick's boat business by pulling through additional units.
    • Rising Inventory Levels Indicate Potential Overproduction or Slowing Demand: Brunswick's weeks of inventory on hand are expected to increase from 36 weeks currently to 37 weeks by the end of the year. Increasing inventory levels may suggest that the company is anticipating lower retail demand or is overproducing, which could lead to excess inventory and potential discounting pressures.
    • Decline in Engine Retail Sales Reflects Weakening Demand: The company's engine retail sales were down 9%, which, even after accounting for market share gains, indicates a decline of approximately 6% to 7%. This downturn in engine sales could signify weakening consumer demand in the marine market, potentially impacting Brunswick's revenue and profitability.
    • Disconnect Between Company Optimism and Market Reality Raises Concerns: Analysts highlighted a disparity between Brunswick's positive outlook and the more cautious or negative sentiments from retailers, including the company's largest retailer who lowered guidance for the second consecutive time due to surprising retail weakness. This disconnect suggests that Brunswick may be overly optimistic about retail momentum, which could result in unmet financial expectations if market conditions do not improve.
    1. Retail Trends and Guidance
      Q: What's causing the disconnect between your flat sales and your biggest customer cutting guidance?
      A: Our internal retail is essentially flat year-to-date, including early April. We believe we're gaining market share, up about 50 basis points. Sales of our premium product lines, like Sea Ray and Whaler, have been strong. We can't speak for our customers, but we see our products performing well.

    2. Wholesale Orders and Outlook
      Q: How do you view visibility into second-quarter vs. back-half wholesale orders?
      A: Retailers are cautious about holding more current model year inventory before the changeover in June. We have less visibility for value products but strong orders for our premium products into Q3.

    3. Pricing and Promotions
      Q: Why not be more aggressive with discounts to support dealers and move prior-year models?
      A: We're providing increased discounting compared to the prior year but as planned. We're targeting promotions to specific product lines and segments that require support, while our premium products don't need significant discounting.

    4. Managing Costs Amid Headwinds
      Q: How are you managing costs to offset absorption headwinds from cautious wholesale orders?
      A: We've taken out $11 million of operating expenses compared to last year. All business units are contributing, and we're focused on keeping gross margins strong.

    5. Credit Environment Impact
      Q: Have you seen changes in credit availability or customer creditworthiness?
      A: We're seeing more people with high credit scores returning to the market and financing. Credit tightening hasn't been significant; it's been relatively stable over the past six months.

    6. Guidance and FX Impact
      Q: Given the caution and FX headwinds, was there consideration to lowering the full-year guide?
      A: No, we believe our $7 to $8 EPS guidance provides adequate space. We offset FX headwinds with tax rate benefits and increased share repurchases.

    7. Freedom Boat Club Growth
      Q: Are you seeing a shift from buyers to Freedom Boat Club members, and will growth remain mid-single digits?
      A: We're delighted with Freedom's performance, including mid-single-digit same-club sales growth. We haven't observed a significant shift from buyers to members, but Freedom continues to expand domestically and internationally.

    8. Inventory Levels
      Q: What are your weeks on hand or pipeline levels, and expectations for year-end?
      A: Weeks on hand are currently around 36, and we expect about 37 by year-end.

    9. Interest Rate Expectations
      Q: Do you have internal expectations for interest rate movements this year?
      A: Our expectations change over time, and we don't have specific insights to share.

    10. Engine Retail Performance
      Q: Engine retail is down 9%; how does this track against your expectations?
      A: This performance is in line with our initial expectations. We're confident in our ability to outperform the market and continue gaining share, especially in 150-horsepower and greater categories.

    11. Addressing Affordability
      Q: What are you doing to address affordability in your product lines?
      A: We can adjust base content and offer a broad product line, from boats selling at $1,000 to over $1 million. We might introduce lower base content or new models to make boats more affordable.

    12. Model Year Changeover Timing
      Q: When will model year '25 products be introduced, and will you have an advantage?
      A: We expect to introduce new models early in June. Most in the industry will do the same, so we don't anticipate a significant advantage.

    13. Atlantic Speed Limit Proposal
      Q: Do you have technological solutions for the Atlantic speed limit proposal?
      A: We've been promoting existing and potential technological solutions. The proposed rule is an overreach and ineffective; technology like AIS systems and sonar can be more effective.

    14. Q2 Guidance and Back-Half Weighting
      Q: The Q2 guide is below the Street; are you assuming more back-half weighting?
      A: Yes, factors like FX play a role, and we believe the back half provides a better comparison due to last year's destocking.

    15. Production Rates and Orders
      Q: Over the next six weeks, what are you monitoring closely?
      A: We'll be looking at order rates from OEM customers, production rates, and inventory levels. The timing of the inflection in demand is key.

    16. Parts and Accessories Demand
      Q: With parts sell-in down 3%, what's happening at retail for boats and RVs?
      A: Retail demand remains solid. The decline reflects dealers stocking less inventory because products are readily available.

    17. Affordability Measures
      Q: Do you think pricing needs to adjust to drive unit growth?
      A: We don't believe transaction prices are the main lever right now. Promotions and discounting are already improving affordability, especially for value products.

    18. Marine Industry Outlook
      Q: With the marine industry down 10% in Q1, what's needed for retail to turn positive?
      A: Good weather and clarity in the macro environment would help. Our promotions and new product investments are aimed at driving sales.

    19. How Managing Macroeconomic Factors
      Q: How are you managing potential macroeconomic headwinds?
      A: We're focused on cost control, product innovation, and maintaining balanced inventory levels.

    20. Credit Tightening
      Q: Have you seen any tightening in retail credit?
      A: Credit conditions are relatively stable, and we haven't seen significant tightening.

    Research analysts covering BRUNSWICK.