Brunswick Corporation issues ‘below expectations’ second quarter results

Brunswick says its 2024 second quarter isn’t quite working out how it predicted. Brunswick CEO, David Foulkes believes that significantly slower retail sales in the peak sales months, means the company now expects full year retail unit sales to be down approximately 10 per cent versus the original forecast (of flat).

For the second quarter of 2024, Brunswick reported consolidated net sales of $1,443.9 million, down from $1,702.3 million in the second quarter of 2023. Its propulsion segment reported a 21 per cent decrease in sales.

Brunswick sales were down 22 per cent in the first quarter of 2024.

“With the majority of the retail selling season behind us, it is evident that the 2024 US marine retail market is underperforming in peak season versus our initial expectations and is likely to end the year at unit levels similar to 2010,” says Foulkes.

“The macro-economic environment remains uncertain, and while there is now a higher probability of interest rate relief beginning in September, this would occur after the main selling season and will likely have an immaterial impact on our 2024 results, but potentially provide a tailwind for 2025.

“With high interest rates continuing to pressure consumer budgets and suppress discretionary spending, the introduction of new model year products at the beginning of the important month of June did not catalyse boat purchases as we had anticipated, and our second quarter results were slightly below expectations.”

“Continued slower retail sales, combined with higher levels of discounting and carrying costs, have increased pressure on dealer and channel partner profit margins resulting in ongoing conservative wholesale ordering patterns which, in turn, is causing OEMs to maintain lower boat production rates through the main selling season, impacting propulsion and Navico Group OEM orders.”

Navico Group’s Fathom in action

Foulkes says that as a result of heightened demand stimulation efforts focused on clearing more aged inventory, the remaining field inventory is very fresh, with approximately 85 per cent of field units being current. “Our focus continues on leveraging our new products and adjusting production levels to maintain or gain share in key categories while diligently managing field inventory levels to end the year with weeks-on-hand at appropriate levels and units below prior year.”

Despite the propulsion business delivering lower sales (and operating earnings) versus the second quarter of 2023, year-to-date it’s continued to gain share in outboard engines, with more than 48 per cent overall share of the US outboard market. In addition, propulsion’s controls, rigging, and propeller product category had a strong quarter with operating margins ahead of the same period in
2023.

“With boating participation continuing to be very solid in our major global markets, our engine parts and accessories business had a strong quarter, with sales and operating earnings up versus the second quarter of 2023, as we completed the full transition of engine parts and accessories distribution to our new, state-of-the-art facility in Brownsburg, Indiana,” Foulkes says.

“As anticipated, Navico Group had lower sales and operating earnings versus the second quarter of 2023 due to reduced marine OEM order rates and persistently slow RV orders but continued to show stability, sequential improvement in aftermarket sales, and overall sales and earnings consistent with first quarter results.

“Finally, our boat business had a solid performance given market conditions, with sales and operating earnings below second quarter of 2023, consistent with lower planned production levels. Freedom Boat Club continues to deliver steady membership sales growth and has added two more flagship locations in Denmark and the UK, all while generating exceptionally strong synergy sales across our marine portfolio.

Freedom Boat Club is also located in Puerto Rico

“Despite lower sales and earnings, the resiliency of our portfolio is being demonstrated, with our recurring revenue businesses and channels, including our engine P&A business, propulsion’s repower business, Freedom Boat Club, and Navico Group’s aftermarket sales, contributing more than 50 per cent of our Q2 adjusted operating earnings. In addition, our businesses delivered strong cash flow, enabling $170 million to be deployed for share repurchases year-to-date, further solidifying our focus on returning value to shareholders,” he says.

2024 second quarter financial results for Brunswick Group

As well as Brunswick’s propulsion segment reporting a 21 per cent decrease in sales, the engine parts and accessories segment reported a 2 per cent increase in sales versus the same period last year. The products business sales were up 7 per cent, and distribution business sales were down only slightly, at 1 per cent compared to the prior year.

Navico Group segment reported a sales decrease of 8 per cent, primarily driven by reduced sales to marine OEMs as they balance production levels to match retail ordering patterns, partially offset by strong new product momentum and slightly improved RV sales trends.

Brunswick’s boat segment reported a 23 per cent decrease in sales resulting from softer wholesale orders, as its channel partners continued to order cautiously, and higher incentives and discounting, partially offset by the favourable impact of modest model-year pricing and share gains. Freedom Boat Club had another strong quarter, contributing approximately 10 per cent of segment sales.

Outlook for Brunswick Group in 2024

“With the majority of the retail selling season behind us, it is evident that the 2024 US marine retail market is underperforming in peak season versus our initial expectations and is likely to end the year at unit levels similar to 2010,” says Foulkes. “The macro-economic environment remains uncertain, and while there is now a higher probability of interest rate relief beginning in September, this would occur after the main selling season and will likely have an immaterial impact on our 2024 results, but potentially provide a tailwind for 2025.

“In this environment, our OEM customers and channel partners continue to order cautiously and we do not now foresee this pattern changing significantly through the remainder of this season. In these challenging conditions our resilient, recurring revenue businesses and channels, including the engine P&A business, propulsion’s repower business, Freedom Boat Club, and Navico Group’s aftermarket sales, are demonstrating their earnings and cash flow power.”

Now the plan is to continue to launch new products to support future share gains while focusing on delivering year-end inventory levels in line with historical norms. The company will be investing in its long-term growth initiatives following its strategic plan.

Earlier this month, Brunswick revealed details of Boating Intelligence, a new initiative to incorporate AI features into its products. The plan is to use AI to help deliver simpler, safer, smarter, and more sustainable boating.

Main image courtesy of Freedom Boat Club.

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