thoward
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This year is shaping up to be the softest for boat sales since 1965, Brunswick Corp. Chairman and CEO Dusty McCoy told a group of investors and others Friday.
That assessment came not long after the Lake Forest, Ill.-based company announced it is lowering boat production in the second half of 2007.
Brunswick has about 1,950 employees at its key Boat Group operation and three Sea Ray boat production plants in the Knoxville area. The company does not have any plans for layoffs or shift reductions in Tennessee, company spokesman Dan Kubera said.
“There are a lot of options before we send anyone out the door,” Kubera said.
While U.S. sales in some cases are down 13 percent, Brunswick’s international sales are up 17 percent over the second quarter of 2006, Kubera said.
In fact, the international market now represents 38 percent of the company’s sales, as opposed to 32 percent last year.
The Brunswick announcement comes a week after East Tennessee-based MasterCraft Boat Co. said for the sixth straight year it had record gains in revenue and boats sold.
MasterCraft attributed the gains for the fiscal year ended June 30 in part to a strong showing at boat shows and “aggressive” introductions of new models.
On Friday, Brunswick said it is lowering production because of “continued weakness in retail markets in the United States.”
In some cases, “preliminary industry data indicates that retail sales are down by as much as 13 percent in our key category of sterndrive and inboard-powered fiberglass boats in the second quarter,” McCoy said.
Brunswick also sharply lowered its earnings estimates for 2007, from a range of $1.65 to $2 down to a range of $1.20 to $1.35. Its second-quarter financial report will be issued Thursday, when the company expects diluted earnings per share from continuing operations to be 64 to 65 cents.
McCoy has noted before that high interest rates, a slumping housing market and fuel prices have decreased boat sales.
The Boat Group is Brunswick Corp.’s largest division, with $2.8 billion of the company’s total $5.7 billion in 2006 net sales. Brunswick also sells marine engines, fitness equipment, and bowling, billiards and other recreational equipment.
The revisions in the Boat Group come in the middle of a choppy 2007.
“Through the first half of the year, wholesale shipments have been significantly below levels in the same period a year ago, as well as below 2007 retail sales,” McCoy said. “Despite our actions, however, with the anemic retail demand for sterndrive and inboard fiberglass boats, we have not made meaningful progress in reducing our pipeline inventories for these products.
“We also see no reason to believe that retail trends will reverse in the second half of the year, which is the slowest period for boat sales. As we go into the 2008 model year, which began July 1, commitments received from our dealers support our view of the retail environment. To ensure the continued health of the company and that of our distribution network, we are reducing further production levels for both boats and engines.”
Kubera said the company intends “to bring pipelines back in order,” referring to matching supply with demand.
“We are going to do our darndest to minimize the effect. This is not about cutting jobs. We don’t want to send experience out the door. We are about quality,” Kubera said.
That assessment came not long after the Lake Forest, Ill.-based company announced it is lowering boat production in the second half of 2007.
Brunswick has about 1,950 employees at its key Boat Group operation and three Sea Ray boat production plants in the Knoxville area. The company does not have any plans for layoffs or shift reductions in Tennessee, company spokesman Dan Kubera said.
“There are a lot of options before we send anyone out the door,” Kubera said.
While U.S. sales in some cases are down 13 percent, Brunswick’s international sales are up 17 percent over the second quarter of 2006, Kubera said.
In fact, the international market now represents 38 percent of the company’s sales, as opposed to 32 percent last year.
The Brunswick announcement comes a week after East Tennessee-based MasterCraft Boat Co. said for the sixth straight year it had record gains in revenue and boats sold.
MasterCraft attributed the gains for the fiscal year ended June 30 in part to a strong showing at boat shows and “aggressive” introductions of new models.
On Friday, Brunswick said it is lowering production because of “continued weakness in retail markets in the United States.”
In some cases, “preliminary industry data indicates that retail sales are down by as much as 13 percent in our key category of sterndrive and inboard-powered fiberglass boats in the second quarter,” McCoy said.
Brunswick also sharply lowered its earnings estimates for 2007, from a range of $1.65 to $2 down to a range of $1.20 to $1.35. Its second-quarter financial report will be issued Thursday, when the company expects diluted earnings per share from continuing operations to be 64 to 65 cents.
McCoy has noted before that high interest rates, a slumping housing market and fuel prices have decreased boat sales.
The Boat Group is Brunswick Corp.’s largest division, with $2.8 billion of the company’s total $5.7 billion in 2006 net sales. Brunswick also sells marine engines, fitness equipment, and bowling, billiards and other recreational equipment.
The revisions in the Boat Group come in the middle of a choppy 2007.
“Through the first half of the year, wholesale shipments have been significantly below levels in the same period a year ago, as well as below 2007 retail sales,” McCoy said. “Despite our actions, however, with the anemic retail demand for sterndrive and inboard fiberglass boats, we have not made meaningful progress in reducing our pipeline inventories for these products.
“We also see no reason to believe that retail trends will reverse in the second half of the year, which is the slowest period for boat sales. As we go into the 2008 model year, which began July 1, commitments received from our dealers support our view of the retail environment. To ensure the continued health of the company and that of our distribution network, we are reducing further production levels for both boats and engines.”
Kubera said the company intends “to bring pipelines back in order,” referring to matching supply with demand.
“We are going to do our darndest to minimize the effect. This is not about cutting jobs. We don’t want to send experience out the door. We are about quality,” Kubera said.
