BRP Inc. DOO-T said it will further cut production after sagging demand for Ski-Doos pushed the powersport company to its first quarterly loss in eight years.
Chief executive Jose Boisjoli said “unfavourable” conditions last season – the warmest winter on record in Canada and the United States – hurt retail sales, with unsold Ski-Doos accounting for nearly half of the big buildup in overall stock at its dealers.
“Our dealers are very cautious with respect to inventory as uncertain economic conditions and high interest rates are impacting them more than anticipated,” Boisjoli said on a conference call with investors on Friday.
The softer sales coupled with more discounts resulted in a 16 per cent year-over-year revenue drop to $2.03-billion in the quarter ended April 30.
It also prompted BRP to slash production by 15 to 20 per cent for the fiscal year, versus earlier plans for 10 to 15 per cent.
The Sea-Doo maker announced a more modest financial forecast as well. It now projects full-year revenue of $8.6-billion to $8.9-billion compared with a previous prediction of $9.1-billion to $9.5-billion.
“Obviously these one-time headwinds are certainly impacting our financials this year,” Boisjoli said, citing economic uncertainty, competitive pressure and interest rates – new snowmobiles cost between $8,500 and $22,000, making financing essential for most buyers.
The production ramp-down of up to one-fifth will erase as much as $775-million from the company’s projected income statement this year, the chief executive said. That total would amount to eight per cent of last year’s revenue.
On the bright side, sales of side-by-side and all-terrain vehicles rose substantially, BRP said.
As for Sea-Doos, purchase trends are just as tough to predict as for Ski-Doos.
“The big retail season for watercraft is May, June, July. And the watercraft customer, it’s an impulse buy,” said Boisjoli. “It can go very fast up or down depending on the weather.
“We have good momentum in Canada, softer in the U.S.,” he said, but added that “it’s too early to call.”
On Friday, BRP reported a net loss of $7.4-million for its first quarter, down from a profit of $154.5-million a year earlier.
On a normalized basis, the Valcourt, Que.-based company earned 95 cents per diluted share in its latest quarter compared with a normalized profit of $2.38 per diluted share a year earlier.