MasterCraft's outlook assumes current retail 'malaise' will continue, but CEO thinks there's upside

By Tomi Kilgore

Powerboat maker said there could be upside to its disappointing full-year outlook -- if the worst days of the economy have passed

Shares of MasterCraft Boat Holdings Inc. tumbled Wednesday but bounced well off their worst levels of the day, as the recreational-powerboat maker suggested there could be upside to its disappointing full-year outlook.

The stock (MCFT) was down 12.8% in afternoon trading, but it had been down as much as 22.9% at its intraday low of $19.25, which was the lowest price seen since Oct. 3, 2022.

The company reported before the opening bell fiscal fourth-quarter profit and sales that beat expectations, but it provided a full-year earnings outlook that was well below Wall Street forecasts.

"Macroeconomic factors, including elevated interest rates as well as tightening credit standards and availability, are creating significant uncertainty which is limiting our retail demand visibility," Chief Executive Fred Brightbill said in explaining the downbeat guidance. "In addition, the general expectation for an economic downturn during fiscal 2024 will likely be a headwind for the industry."

On the conference call with analysts after the earnings report, Chief Revenue Officer George Steinbarger said that retail demand was also being stymied by tightening credit standards as interest rates have increased, leading to higher monthly payments and the inability of some consumers to get financing.

Brightbill explained on the call that the full-year guidance provided represents a scenario in which current conditions continue through next summer's selling season.

"Our plan assumes kind of this continuing malaise, if you will, of not better and not dramatically worse, just kind of continuing to slug along as we are," Brightbill said, according to an AlphaSense transcript.

But in fact, Brightbill said, if the worst of the economy has passed and there's some uptick, and if interest rates stop rising and potentially come down by next summer, "I think we've got upside."

MasterCraft's earnings report and outlook comes a day after rival Malibu Boats Inc. (MBUU) reported fiscal fourth-quarter results that beat expectations but provided a downbeat full-year outlook. The outlook wasn't quite as downbeat as MasterCraft's, as Malibu Boats' stock fell 1.6% on Tuesday before sliding another 4% on Wednesday.

Over the past three months, MasterCraft's stock has slumped 18.5%, while Malibu Boats shares have shed 5.4% and the S&P 500 index SPX has gained 7.2%.

-Tomi Kilgore

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08-31-23 0843ET

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