Brunswick Corporation reported consolidated net sales of $1.74 billion for the first quarter of 2023, up 2.8 percent from $1.70 billion in the first quarter of 2022. Diluted EPS for the quarter was down 30.7 percent to $1.56 a share on a GAAP basis but up 1.6 percent to $2.57 a share on an adjusted basis. Sales in each segment benefited from the impact of annualized price increases and new product performance, partially offset by unfavorable changes in foreign currency exchange rates. Operating earnings were said to be “down very slightly” as sales increases and prudent cost control measures across the enterprise were offset by elevated year-over-year input costs and spending on growth initiatives in each segment.
“Our businesses had a strong start to the year, as continued operational strength, benefits from outstanding new products, and prudent cost management in a challenging macro-economic environment resulted in sales, margin, and EPS performance that exceeded expectations for the quarter,” said Brunswick Chief Executive Officer David Foulkes. “We experienced better than anticipated boat show results, indicating a resilient consumer, and boat field inventory levels are healthier as we enter the primary retail season. Additionally, our free cash flow performance improved by $135 million versus Q1 2022, further solidifying our cash position and balance sheet, and enabling higher than planned share repurchases during the quarter.”
Propulsion segment reported a 7 percent increase in sales resulting from strong demand in many international regions and favorable product mix as increased high-horsepower outboard engine production, enabled by recent manufacturing capacity increases, was partially offset by planned reductions in lower horsepower outboard engine and sterndrive engine production. Operating earnings in the quarter were also impacted positively by timing related to capitalized inventory variances.
Engine Parts and Accessories segment reported a 13 percent decrease in sales as solid Product sales in the U.S. were offset by international softness and more seasonal third party Distribution sales. Segment operating earnings were also impacted by start-up costs related to the newly opened distribution center in Brownsburg, Indiana which is expected to be fully online by the end of the second quarter.
Navico Group segment reported a sales decrease similar to the Engine P&A segment, with sales decreasing 11 percent, driven by lower retailer orders primarily in the earlier part of the quarter, together with sharp decreases in sales to RV OEMs as they paused manufacturing. Segment operating earnings declined as a result of the common factors listed above coupled with margin pressures related to a new product launch which were partially offset by planned integration actions, reorganization efforts, and cost reduction measures, which included the announced closure of multiple facilities.
Boat segment reported a 17 percent increase in sales due to increased sales volumes to dealers and the impact of prior year pricing actions, which offset the impact of higher discounts and delayed shipments related to a supplier part recall impacting mainly sterndrive fiberglass boats. Growth in segment operating earnings and operating margin was also enabled by favorable mix toward premium products, and sustained operational efficiency gains. Freedom Boat Club, which is part of Business Acceleration, had another strong quarter, contributing approximately 6 percent of sales to the segment.
2023 Outlook
“While our first quarter performance represents a healthy start to 2023, and we remain optimistic about our ability to continue delivering strong financial results for our shareholders despite a turbulent macro-economic climate, we will continue to take significant actions to lower our structural costs and be prudent with spending without sacrificing the investments needed to drive our strategic plan,” said Foulkes.
The updated 2023 guidance anticipates:
- Net sales of $6.8 billion to $7.2 billion;
- Adjusted diluted EPS between $9.50 and $11.00;
- Share repurchases in excess of $200 million; and
- Second quarter 2023 net sales flat to up slightly versus Q2 2022, and adjusted diluted EPS
between $2.60 and $2.70.
“Finally, we continue to see our investments in new products and technologies, including our Avator electrification platform, which has begun to ship globally, attract strong customer interest, support our business results, and drive further shareholder value,” Foulkes concluded.
