Weak boat sales sink Brunswick shares

By Dow Jones Newswires
Posted June 22, 2010 at 3:13 p.m.

Shares of Brunswick Corp. fell Tuesday on worries that boat sales this year may be weaker than previously expected.

Raymond James analyst Joseph Hovorka said his firm’s survey of Florida, Texas and North Carolina — which represent about 23 percent of the U.S. retail boat market — showed retail boat sales fell 26 percent  in May, putting year-to-date sales down 18 percent, less than the industry was expecting.
“With the reported May 2010 declines having accelerated to the downside relative to April, we believe there is little support for an improved marine retail recovery,” Hovorka said, adding the states saw a 16% decline in the first quarter.

The company’s stock closed down nearly 11 percent, at 14.97, Tuesday.

Hovorka said that while June is the largest unit selling month in the quarter for the three states, most  second-quarter retail sales have passed. And with retail sales continuing to falter, there is risk that the bottom hasn’t been reached yet and that sales haven’t begun to recover yet.

A representative from Brunswick wasn’t immediately available to comment.

The stock is down  more than 3 percent in the last three months but has risen four in the last 12.

Sales of big ticket items such as boats have fared poorly in the recession and Brunswick responded with downsizing, lowering output and cutting inventory. Those moves started to pay off for Brunswick; in April the company reported improved sales and a narrower loss for the first quarter.

At the time, the company said that boat manufacturing plants began to ramp up production in the first quarter to address inventory requirements of dealers. Brunswick has been operating on assumptions that the boat retail marketplace would decline by about 10 percent in 2010, much better than the 18 percent year-to-date declines estimated by Raymond James.

In April, Chairman and Chief Executive Dustan E. McCoy said that if the approximate 20 percent decline in first-quarter boat retail sales continued into some or all of the second quarter, “it would put pressure on our current planning assumption.”

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