“Dealers want more boats,” Brunswick CEO says in analyst report

BMO Capital Markets analyst Gerrick Johnson recently hosted meetings with Brunswick CEO David Foulkes and provided Powersports Business with a research note with takeaways.

“Yesterday we held meetings with the CEO of Brunswick (BC), David Foulkes. True to form, Mr. Foulkes was upbeat and optimistic about the shipping industry and confident in his business. Retail demand would still be strong, with pockets of weakness in northern markets being explained by bad weather (mainly cold). BC remains sold wholesale for the year (and beyond for certain models) with a good part of the boats already sold at retail. Inventory is still extremely lean, with pipelines in the same range as they were at the end of the first quarter.

“Key points

“BC management says they haven’t seen any order cancellations or discounts. Retail demand continues to be constrained only by declining channel inventory (down approximately -40% from historical levels). “All we hear from dealers is that they want more boats,” Mr Foulkes said, “and there’s no indication they can’t sell them.”

“Mr. Foulkes continues to be concerned about overall consumer health, inflation, economic uncertainty and stock market turmoil. But given current demand and channel-filling opportunities, he called these issues of 2023, not headwinds of 2022. Rising gasoline prices and interest rates were also not seen as a significant barrier to demand.

“BC production was unaffected by new supply chain challenges, per se, with the company producing at rates close to the rates initially set at the start of the model year. However, constraints have reduced efficiency, with out-of-sequence work leading to more work hours and rework.

“Pricing has been repeatedly brought up by investors concerned that consumers are being shut out of the market. Management acknowledged that wholesale prices have increased by 25% over two years, but with BC’s wide range of boats, they note there was always something for everyone in a variety of skill levels. of price.

“Mr. Foulkes has always been asked the same question by investors; ‘what is the market wrong?’ He responded by saying that BC is not the same business as it was 20 years ago and has eliminated a lot of fixed costs over the years.Although he is now solely focused on the market from marine, it has diversified into more recurring revenue streams from parts and accessories products, distribution and the Freedom Boat Club.

“In terms of capital allocation, management plans to continue to prioritize stock buyback with opportunistic mergers and acquisitions focused on technology (including power) and companies with recurring revenue streams in the maritime sector.


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