BRP says consumer demand remains strong despite recession concerns

Ski-Doo and Sea-Doo maker BRP Inc. (DOO.TO) says that demand for leisure products remains strong despite concerns about the recession, as the company raised its full-year guidance after record results.

“Consumer demand remains healthy, despite ongoing macroeconomic concerns,” BRP CEO José Boisjoli said in a conference call with analysts on Wednesday.

“We continue to see a strong level of repurchases. More than 40 percent of our expected North American retail sales (for the fourth quarter) are already pre-sold to consumers. Cancellation rates remain low…retail financing metrics remain relatively good. , demonstrating that our clients are in a strong financial position.”

Many economists predict that there will be a recession In the first half of 2023, rising inflation and rising interest rates weigh on consumer spending, the housing market and labor force participation.

Many businesses, especially retailers, have already begun to feel that discretionary spending among consumers is slowing due to rising inflation. at the beginning of the month US retailer Target said consumer shopping patterns had changed, people spend more on food and household essentials and less on discretionary items. A recent Yahoo/Maru public opinion According to the survey, three-quarters of Canadians (74%) have cut back on spending in the past month to cope with the higher cost of living.

But some consumers appear to be in the market for snowmobiles, off-road vehicles, boats and personal watercraft, according to BRP. Recreational vehicle sales increased 43 percent compared to the same period last year, and the company’s market share in the powersport industry grew two percentage points in North America and global market share increased to more than 30 percent.

While the year-over-year comparison comes from a period marred by supply chain shortages and low inventory levels, National Bank analyst Cameron Doerksen said in a note to clients on Wednesday that “the retail numbers would not suggest that BRP’s overall retail business is weakening. .”

The story continues

Boisjoli acknowledges that traffic has recently slowed at its dealer network in North America and Europe, but says the company has slowed advertising spending and sales are still strong.

“We’re hearing…macroeconomic concerns and interest rates slowing and (rising). With the exception of dealership traffic, we don’t see that (showing up) in our hard numbers,” Boisjoli said.

Strong demand, along with an improved supply chain, led the Quebec-based company to post its strongest-ever quarter for sales on Wednesday, with revenue up 71 percent in the three months ended Oct. 31. Revenue was $2.71 billion. , more than 1,590 billion dollars last year. Net income also increased in the quarter, from $127.7 million, or $1.53 per diluted share, to $141.6 million, or $1.76 per diluted share, last year.

In response to supply chain issues caused by the COVID-19 pandemic, BRP embarked on a strategy of sending incomplete products (missing parts) to its vendors, who then added parts as they became available. Boisjoli says the strategy led to healthier inventory levels, but there are still areas where the company needs to rebuild inventory to bring it to a more optimal level.

“Looking ahead to the year, we are well positioned to maintain our strong momentum as we continue to experience strong demand for our products and as improvements to our supply chain allow us to better utilize our increased capacity and offer more units to our network,” said CFO Sébastien Martel in a press conference. – on the call

“With two months left in the year, we are comfortable increasing both our top and bottom line guidance.”

BRP expects total revenue to rise between 27% and 32% in fiscal 2023, up from 26% to 31% in previous estimates.

Alicja Siekierska is a senior reporter for Yahoo Finance Canada. Follow him on Twitter @alicjawithaj.

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