Brunswick Corp BC

Brunswick Earnings: With Retail Inventory Optimized and Higher Borrowing Fees, Shipments Constrained

Narrow-moat Brunswick continues to face the same headwinds as the rest of its peer set: a fully inventoried dealer network (limits upside from restocking), higher borrowing costs, (hinders floorplan affordability for dealers and financing for consumers), and the conclusion of the model year (creates caution around unit orders). These issues resulted in first-quarter sales that fell 22% to $1.37 billion with pressure across all segments, most significantly in boats (down 26%) and propulsion (down 23%), which combine for 70% of annual sales. Such robust top-line declines invariably led to expense deleverage, resulting in an adjusted operating margin decline of 460 basis points to 10.4%; however, this was still better than the 9.1% we had forecast.