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Brunswick, West Marine report 3Q weakness

The marine industry’s publicly traded companies reported a drop in sales for the third quarter, which officials attributed to poor economic conditions and uncertainty in the financial markets.

Brunswick Corp. reported a 22 percent drop in net sales, driven by a 28 percent decline in marine sales, for the quarter.

“These are tough times,” said chairman and CEO Dustan McCoy during a recent conference call. “The marine market in the United States is becoming increasingly challenging due to difficult economic conditions, financial market upheaval, and tightening credit availability — on top of the continuing weak housing market.”

Net sales for the third quarter, which ended Sept. 27, totaled $1.04 billion, compared to $1.33 billion in the year-ago quarter. Net loss totaled $591.4 million, or $6.70 per share, compared to net earnings of $1.9 million, or 2 cents per share, in the 2007 third quarter.

Despite the recent downgrade of Brunswick’s debt ratings by Moody’s Investment Services, executives say the company’s liquidity is still in good shape.

Dividend cut
Brunswick also has declared a dividend of five cents a share on its common stock — down from 60 cents last year. McCoy said the cut “is consistent with our objective of conserving cash and maintaining a healthy balance sheet during these uncertain times.”

The dividend is payable Dec. 15 to shareholders of record on Nov. 24.  

McCoy said retail demand for fiberglass boats dropped nearly 40 percent across the industry, and that the slowdown is starting to spread outside the U.S.

The Brunswick Boat Group reported a 36 percent drop in net sales to $392.5 million, from $613.9 million in the year-ago quarter. The segment had a third-quarter operating loss of $537.4 million, compared to a loss of $90.3 million last year. McCoy says the company continued to cut back production to reduce dealer inventory.

Sales for the marine engine segment fell 21 percent to $448.9 million, compared to $566.7 million in the year-ago quarter. The segment had an operating loss of $8.6 million, compared with operating earnings of $47.5 million in the 2007 quarter.

For the nine months ended Sept. 27, net sales fell 9 percent to $3.9 billion, from $4.2 billion for the first nine months of 2007. Brunswick reported a net loss from continuing operations of $584.1 million, or $6.62 per share, compared to net earnings of $104.8 million, or $1.16 per share, in the 2007 period.

West Marine
West Marine reported a moderate decrease in sales and profits for the third quarter, which ended Sept. 27.

Sales were $180.2 million, compared to $188.4 million in the same period of 2007, or a drop of 4.3 percent. Comparable store sales were down 4.7 percent.

Adjusted net income was $4.8 million and 23 cents per share versus $6.2 million and 28 cents per share last year. Gross profit for the third quarter was $49.7 million, a decrease of $8.2 million compared to 2007.

“Our financial results for the third quarter of 2008 reflected continuing sales softness stemming from reduced boating activity, combined with weakness and uncertainty in the economy in general,” CEO Geoff Eisenberg said in a statement.

Company officials say they are on track with restructuring plans, including plans to close about 30 stores by the end of the year. By the end of the third quarter, 14 stores had closed. In some cases, multiple smaller stores in a general area will be replaced by one larger store, and in other cases, underperforming stores are being shut down.

In the third quarter, two profitable stores — one in California and one in Florida — were expanded, while construction continued on flagship stores in Jacksonville, Fla., and Brick, N.J. Those stores are expected to open in the first quarter of 2009.

Year-to-date, net sales were $520.2 million, compared to $561.3 million for the same period of 2007.

Comparable store sales declined 7.1 percent from the corresponding period a year ago.

For the year, reported net loss was $9.8 million and 45 cents per share, compared with net income of $15.6 million and $0.71 per share last year.

This article originally appeared in the December 2008 issue.


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