In a significant announcement this Friday, BRP, the prominent manufacturer of snowmobiles and all-terrain vehicles, has adjusted its full-year outlook based on disappointing fiscal second-quarter results that reflected a year-over-year decline, primarily attributed to persistent demand headwinds. The company now projects normalized earnings per share (EPS) for fiscal 2025 to fall between 2.75 Canadian dollars ($2.04) and 3.25 Canadian dollars ($2.41), a notable reduction from its previous guidance which anticipated earnings within the range of CA$6 to CA$7.
Additionally, overall revenue expectations have been adjusted to between CA$7.8 billion and CA$8 billion, contrasting sharply with earlier projections that estimated revenue of CA$8.6 billion to CA$8.9 billion. Market consensus provided by Capital IQ indicates that analysts had been anticipating normalized EPS of CA$5.88 alongside revenue of CA$8.57 billion.
Commenting on the current retail landscape, Chief Executive Officer Jose Boisjoli remarked, "The retail environment is more challenging with the economic context pressuring consumer demand. As such, our priority is to continue to proactively manage production and inventory levels, which leads us to revise our year-end guidance." When examining the performance for the three-month period ending in July, it becomes clear that BRP faced significant challenges.
The company reported a sharp decline in normalized EPS, which fell to CA$0.61 from CA$3.21 recorded in the same period the previous year. However, this figure surpassed market expectations which had projected EPS at CA$0.44. The revenue figure did not fare as well, dropping a staggering 34% year-over-year to reach CA$1.84 billion, which was also lower than the analysts' estimates of CA$1.9 billion.
According to the company, this decrease was primarily driven by declining volume across most product lines as they continued to work on reducing their network inventory levels. "Our results were in line with expectations and reflect our ongoing focus on reducing network inventory to maintain our dealer value proposition," Boisjoli stated, emphasizing the company's strategic approach in these turbulent times.
The market reaction was swift, with BRP's Nasdaq-listed shares experiencing an 11% drop in premarket trading following the announcement. In terms of regional performance, North American retail sales for powersports products plummeted by 18% year over year, mainly due to a softening demand within the industry.
The total revenue within the powersports segment also declined considerably, dropping to CA$258.3 million from CA$294.2 million the previous year. Further along, revenue from year-round products experienced a significant reduction, falling by 33% year over year to $985 million, while seasonal product revenue faced an even steeper decline of 40%, landing at CA$541.8 million.
The marine segment also didn't escape unscathed, with revenue plunging to CA$59.4 million from CA$126.9 million year over year. The company's gross profit margin has also been adversely affected, decreasing by 470 basis points to 20.4%. This decline is primarily a result of lower volumes sold coupled with increased sales program expenses, among other contributing factors.
Conversely, operating expenses saw a slight reduction, falling to CA$302.1 million from CA$318.8 million in the corresponding quarter of the previous year. As the market adjusts to these new revelations, BRP's shares are notably priced at 59.05, reflecting a change of -7.03, which indicates a percent change of -10.64..