BRP Earnings: Sales Declines to Rightsize Inventory Leads to Cost Deleverage in Fiscal 2025

Wide-moat BRP is entering fiscal 2025 with a postpandemic hangover as industry sales continue to moderate. Sales in the fourth quarter fell 12.5% to CAD 2,692 million as BRP lapped tough comps in the seasonal category (down 28%) with strong shipments in the prior year as supply chain issues improved in that period. Moreover, unfavorable weather patterns packed a punch to the firm’s seasonal segment, a key factor leading to its 18%-22% sales decline outlook for the coming year. The weakness in sales across multiple segments (marine contracted 32% while parts, accessories, and engines declined 23%) drove massive expense deleverage across line items, with total operating expenses expanding more than 600 basis points as a percentage of sales. Additionally, the firm ceded share across ATVs and marine, while gaining share solely in the side-by-side market.