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Brunswick cites cold weather for drop in 1Q sales

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Brunswick Corp. CEO Dustan E. McCoy and CFO Bill Metzger had one word for analysts and investors listening in to first-quarter earnings calls Thursday — weather.

Lingering and harsh winter conditions into spring took the fall for a drop in engine and boat sales, with a flurry of charts and infographics demonstrating the chilling effects cold weather has on late-winter and early-spring sales.

The company reported Thursday that first-quarter net sales fell 3 percent to $969.2 million. Sales were flat in the marine engine parts and accessories business and engine sales declined. The boat segment saw a 2 percent decline in sales.

“Weather conditions have continued to be adverse in certain key boating states and may consequently affect April retail comparisons, as well,” Metzger said during Thursday’s call. “At this early point in the marine season we believe that retail sales could be deferred to later months.”

Data show that retail demand during the first quarters of 2013 and 2014 was weak, which was inconsistent with prior quarterly trends, Metzger pointed out.

Last spring also was marred by cold and harsh weather, causing a larger overall drop in sales than it did this year, despite worse conditions in 2014.

Fiberglass outboard boats continued to show solid growth, and the aluminum category, the “most vulnerable to cold and ice,” was down modestly, Metzger said.

For Brunswick, the issue has not always been sales, but production and delivery, McCoy said.

“What we’re hearing from dealers is that they’ve got products sitting around, sold, that they’re not able to deliver,” McCoy said. “That’s especially true in the Midwest, where there’s still ice on all the water. That’s a pretty big boating market. That makes us comfortable with demand.”

The new Sea Ray L650 Fly, launched in Miami, as well as the SLX 350 and the 510 Fly, launched in Fort Lauderdale, are all sold through 2014, McCoy said. “So the issue there is not demand, but the ability of our folks to get the product out, and I’m convinced they’ll be able to do it because they’re really good.”

During the next 18 months to two years, followers might see the company looking to acquire “support marine parts and accessories businesses,” McCoy said.

The marine group will continue its focus on affordable boating options, which has been successful “but a bit differently than I would have predicted,” McCoy said.

For example, the 350 SLX, a dayboat costing $150,000 less than a 35-foot cruiser, has surpassed expectations. “So bringing product with exactly the right features into a size segment that transacts for significantly less than same-sized boats with different features is a home run,” McCoy said.

Lund has made strides to grow margins and market share by taking the price of a 19-foot boat down to what an 18-foot boat used to cost, and an 18-foot boat into the 17-foot price range, and so forth.

“What we’re seeing quite interestingly is people moving up in size,” McCoy said. “Folks who used to want a 17 are now buying an 18. So it works, but not quite the way people thought it would,” McCoy said. “People are saying, ‘Shoot, I could have a bigger, better boat.’ With the 350 … they’re saying, ‘Look at this size range, it’s much less, and that’s what I want because I don’t want a smaller boat.’ ”



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