It is increasingly difficult for consumers to finance the purchase of personal watercraft, boats and other recreational vehicles, which remain longer in dealerships, notes BRP. After shattering records in recent years, more “difficult” months — accompanied by layoffs — now await the company.
“Dealers tell us that there is an increase in credit refusals from customers with lower discretionary income,” observed BRP President and CEO José Boisjoli on Thursday in a conference call to comment on the results. of the third trimester. This clientele has more difficulty financing their purchases due to high interest rates and I believe that banks are more restrictive. »
Stimulated by demand for recreational products since the start of the pandemic, the manufacturer of Ski-Doo, Sea-Doo and Can-Am had accustomed its shareholders as well as analysts to constant growth in its profits and revenues. However, the tide turned between the months of August and October.
A slowdown was observed on the demand side, particularly in markets such as Europe, Asia-Pacific and the Middle East. Result: the company based in Valcourt posted a decline in its net profit as well as its turnover in the third quarter ending October 31 (see table), in addition to revising downwards certain financial targets.
The reaction of investors was quick. On the Toronto Stock Exchange, at close, BRP shares fell 11.8%, or $11.20, to trade at $83.80.
Even the United States — the company’s largest market — is showing signs of slowing despite low unemployment and slowing inflation.
“Consumer confidence has weakened since July and credit card balances are at an all-time high,” Boisjoli said. There are signs of a slowdown in the United States. Combined with international conditions and the two conflicts (Ukraine/Russia and Israel/Hamas), we prefer to remain cautious. »
In this context, the BRP manager said he expected a few “difficult” quarters. Nevertheless, demand remains strong for high-end products, particularly for three-wheeled motorcycles and two-seater autoquads (side-by-side vehicles), says Mr. Boisjoli.
During the third quarter, dealer sales declined in particular for personal watercraft, three-wheel motorcycles and pontoons. This decline was offset by an increase observed in snowmobiles, two-seater ATVs and all-terrain vehicles.
Many financial analysts wondered to what extent the Quebec multinational would be able to continue to exceed expectations despite the economic slowdown. At Scotiabank, Jonathan Goldman believes that the third quarter was somewhat of a drag many anticipated.
“We believe that a large number of investors remained on the sidelines due to concerns over earnings and a possible reduction in forecasts,” the analyst wrote in a note sent to his clients .
The drop in demand nevertheless forces BRP to adapt. The company has adjusted its production downwards to prevent inventories from accumulating at its dealers. At the end of October, inventory was up 52% at dealerships compared to the same period a year ago. This has already resulted in workforce reductions in Mexico, where the company has a strong presence. There will also be adjustments in Quebec in 2024.
“In Mexico, workforce reductions have already taken place through natural attrition and we are looking to see if, over the coming months, additional changes will be necessary,” said Émilie Proulx, spokesperson for BRP. In Valcourt, we announced to our employees temporary layoffs of a few weeks for the spring. »
Ms. Proulx did not want to give details on the extent of the reductions.
In terms of its forecasts, BRP expects to see its annual turnover increase by 4 to 5%. Its earlier forecast called for an increase ranging from 7% to 10%. Adjusted operating profit should remain stable. BRP previously anticipated growth ranging from 9% to 13%.
