Brunswick confident of its boat sales strategy

Posted on Written by Michael LaBella

The zombie apocalypse for boats? That was the analogy used by Joseph Yurman, an analyst with 1221 Partners LLC, who asked Brunswick Corp. officials during a conference call to discuss first-quarter earnings whether the resurrection of boat brands that continue to fail during the prolonged downturn would eventually shift the business model of Brunswick’s Boat Group.

CEO Dustan McCoy reiterated his position that despite competition for a larger piece of a shrinking pie among roughly the same number of builders, Brunswick’s strategy that relies heavily on the sterndrive cruiser market will not shift.

Yurman said his question stemmed from a speech he heard McCoy give last month. McCoy juxtaposed the engine business with what Yurman called “the dirty and ugly world” of the boat business.

“The thing that really kind of stuck out for me is that the number of brands kind of going into the downturn is the number of brands coming out. So the barriers to continue to operate are pretty low. You described them as zombies stalking the Earth,” Yurman said. “What I’m asking is, do you foresee the composition of the operating income of the boat business ever moving away from the lion’s share coming from these larger boats?”

Currently, the aluminum boat segment is making more money, in part because the company is reducing the pipeline of sterndrive and inboard brands. The aluminum segment has already restructured itself after a decline concurrent with Hurricane Katrina and has recovered better than fiberglass segments, McCoy said.

“So that’s a true change in the structure of our boat business, and a long-term change in the profit-producing activity of our boat business,” McCoy said.

Brunswick would continue to be profitable at wholesale-equals-retail, McCoy said.

“But right now, we’ve been very open in that we’re reducing pipelines. We’re wholesaling fairly significantly under retail, and that is all designed to position this business for future success,” McCoy said. “So the industry dynamics are never going to change, in my view. They’re always going to be difficult, but our guys in the boat business are making all of the adjustments they need in order to compete in the new world.”

The fiberglass cruiser segment will always remain more profitable on a percentage basis, McCoy said.

“But we’ve done a complete review, restructuring, repositioning of our boat business, and we feel pretty confident that we’re going to do well almost in any market conditions over time,” McCoy said.

McCoy alluded to having “a lot coming in our larger fiberglass business.”

“I don’t really want to get into timing because I don’t want to give away any competitive information,” he told analysts.

Click here to listen to a webcast of the conference call.

— Reagan Haynes

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Comments

One comment on “Brunswick confident of its boat sales strategy

  1. Jim

    For many years, and especially now, I’ve wondered why a company like Brunswick, with all it’s overhead, would want to be in the boat business, and certainly in fiberglass runabout business. I wonder, when accumulated, how much money this business has returned to shareholders. I’ll bet it’s a net loss. I think they’re buying the engine business.
    Sell the business. Cut an engine deal with the new buyer(s) and do the shareholders a favor.

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