Brunswick Corp. reported somewhat challenged margins in the first quarter, as sales of larger inboard and sterndrive boats softened.
“Our mix this year shifted a little more toward value products,” Brunswick CEO Mark Schwabero told investors and analysts during a conference call on Thursday discussing first-quarter financial results. “From our perspective, there was a bit more competition from European manufacturers. With the strength of the dollar, our ability to sell outside the U.S. is limited.”
Investors showed some concern about the lack of operating leverage, given the boat segment’s 13.6 percent year-over-year revenue growth, Wells Fargo senior analyst Tim Conder said in a report.
Brunswick “is holding share but facing increased competitive headwinds in the 40-foot-plus segment post-Brexit, given foreign exchange pricing pressure,” Conder wrote.
Margin pressure also came from higher sales of more value-oriented pontoon boats, he said, as well as fewer model year 2017 introductions in the boat segment. Wells Fargo remains constructive on shares and maintained “outperform” status for Brunswick stocks.
Sales of fiberglass sterndrive and inboard boats increased, despite anticipated declines in large fiberglass sterndrive/inboard boats, Brunswick said on Thursday.
The decline in operating earnings included higher restructuring, exit and integration charges, the company said.
In addition, comparisons were also affected by a reduction in sales volume and unfavorable reserve adjustments in large fiberglass sterndrive and inboard boats, along with changes in the sales mix and higher commodity costs in the aluminum boat segment.
“These factors more than offset favorable performance in the fiberglass outboard boat business,” the company said.
Brunswick reported a first-quarter net sales increase of 8.4 percent to $1.16 billion, from $1.07 billion last year. The company reported operating earnings of $89 million for the quarter that ended April 1, which included $15.2 million of restructuring, exit and integration charges.
In the first quarter last year Brunswick had operating earnings of $96 million, which the company said included $3.8 million of restructuring, exit and integration charges.