North America's warmest winter on record put a chill on snowmobile sales at BRP Inc., which saw profits plummet last quarter as a result.
"I have been in the business for a long time and saw several challenging seasons. But it's the first time that I've seen such difficult conditions," said CEO José Boisjoli.
"For us, it's a bad winter."
The Ski-Doo maker plans to cut snowmobile production by 30 per cent this year due to the build-up of inventory languishing in retailers' stockrooms across Canada and the United States.
Profits fell 48.5 per cent year over year in the three months ended Jan. 31, the Valcourt, Que.-based company reported.
BRP posted net income of $188.2 million for the quarter versus $365.1 million a year earlier.
On an normalized basis, the company said it earned $2.46 per diluted share in its latest quarter compared with a normalized profit of $3.85 per diluted share a year earlier.
Seasonal product sales shrank by more than a quarter, "mainly on snowmobile due to unfavourable winter conditions," the company said in its earnings release Thursday. The decrease helped drag down total revenue 12.5 per cent to $2.69 billion from $3.08 billion the year before.
Overstocked inventories also resulted from late shipments of seasonal products the previous year — caused by supply chain kinks — meaning dealers had less need to buy new ones from BRP last year, it said.
Nonetheless, Boisjoli remained upbeat about the treaded, two-ski machines — the original product of Bombardier Inc., from which BRP was spun off in 2003.
"We'll bounce back after," the chief executive said.
"The industry is quite stable. But it remains that we're happy to be more diversified than 20 years ago," he added, pointing to other product lines such as side-by-sides, an off-road vehicle that enjoyed high sales in the company's fourth quarter.
The warmer weather may even be prompting earlier-than-usual purchases of those powersport products.
"Anecdotally, we've had some dealers say, 'You know what, my snowmobile business has slowed down significantly in February, March, but consumers are walking in and buying (off-road vehicle) products instead,'" said chief financial officer Sébastien Martel.
BRP's snowmobile sales decline lined up with an industry-wide decrease, said analyst Robin Farley of UBS.
The company saw its retail sales in North America drop 10 per cent in the fourth quarter year-over-year, roughly twice as much as other powersport manufacturers. However, its full-year retail sales volumes still stood 35 per cent above pre-COVID levels, Boisjoli noted.
BRP also managed to boost its overall market share for powersports in North America by two percentage points last year, he said.
Looking ahead, the company forecast revenue of between $9.1 billion and $9.5 billion for this year, versus $10.37 billion in its 2024 financial year.
It predicted diluted earnings of $7.25 per share to $8.25 per share compared with $11.11 per share in the year just past.
While the forecast figures notched below analysts' expectations, BRP shares rose $4.62 or more than five per cent to close at $90.95 on the Toronto Stock Exchange on Thursday.
The company also raised its dividend, saying it will now pay 21 cents per share each quarter, up from 18 cents per share.
"Although we expect the powersports industry slowdown will persist through much of (fiscal year) 2025, we continue to see BRP gaining market share and introducing new products, which will position the company well for an eventual end market rebound," said National Bank analyst Cameron Doerksen in a note to investors.
This report by The Canadian Press was first published March 28, 2024.
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Christopher Reynolds, The Canadian Press
