Sea-Doo maker BRP Inc. Halted production at factories from Australia to Mexico during the coronavirus lockdown. Now it’s rushing to crank them back up, to capture rising demand for all-terrain vehicles and other toys for the outdoors.
BRP says sales were up 35% in the first three weeks of May across its global dealers network as people look for ways to stay busy while remaining socially distant. Yet the company still expects a 40% drop in revenue in the three months through July. Production won’t fully resume till next week, leaving it unable to fully replenish inventories until later in the quarter.
“We totally understand and accept why we needed to do it but when you see now that customers want to buy and we have difficulty to ramp up, it’s definitely a frustration,” Chief Executive Officer Jose Boisjoli said in an interview. “Our factory will be loaded from June 1 until the end of the fiscal year.”
Shutdowns curtailed about two months of production capacity, according to Boisjoli, also hurting shipments in the quarter that ended April 30, when revenue dropped 7.8%. The Valcourt, Quebec-based company was forced to scale back investment plans and said it would end its unprofitable production of outboard motors for boats, laying off 650 people in the U.S.
Shares of BRP, which is partly owned by Bain Capital, fell 4.1% in New York Thursday. While they’re down 22% this year, they’ve more than doubled from a March low. The recent gains led RBC Capital Markets analyst Steven Arthur to downgrade his rating to sector perform from outperform Friday.
In the U.S., shares of Thor Industries Inc. And Winnebago Industries Inc., the two largest publicly-traded recreational vehicle makers, have also more than doubled since hitting bottom in March. Cooped-up consumers looking for recreation — but fearing the coronavirus — have flocked to campers and trailers that let them travel while staying away from others.
The U.S. Is BRP’s strongest market, followed by Canada and Europe, Boisjoli said. Brazil and Mexico are still in more acute phases of the pandemic, he said.
All-terrain vehicles have been popular while demand for watercraft products such as the Ski-Doo recently saw a spike, Boisjoli said. An internal survey showed 30% of North American customers in the past month were new to its products, compared with 20% usually.
While record high unemployment and sinking consumer confidence may jeopardize the momentum, Boisjoli touted the vehicles as ideal for social distancing.
“We’re not happy with this global crisis but we could be an industry that is favored by the situation,” he said.(Updates with RBC downgrade in fifth paragraph.)
–With assistance from Michael Bellusci.