BRP Inc. (DOOO) shares are taking a hit in Friday’s pre-market trading, plummeting by over 7% after the company released its second-quarter financial results and adjusted its full-year 2025 guidance downwards. The company reported a decline in adjusted earnings per share (EPS) to C$0.61, a significant drop from C$2.60 in the same period last year. While this translated to $0.45 in USD, it still fell short of analyst expectations of $0.33.
Revenue also experienced a steep decline, dropping 33.7% year-over-year to C$1.841 billion (or $1.34 billion in USD), falling short of the anticipated $1.39 billion. BRP attributed this revenue slump primarily to lower sales volume across all product lines, a consequence of their strategic efforts to reduce inventory levels and stimulate demand.
Looking at the specific segments, Year-Round Products (accounting for 54% of total revenue) saw a 32.6% decrease in revenue to C$985 million, primarily due to lower sales volumes, partially offset by a more favorable product mix and favorable foreign exchange rates. Seasonal Products, contributing 29% of revenue, experienced a 39.6% drop to C$541.8 million, primarily due to reduced sales volume, again partially offset by favorable product mix and foreign exchange gains. Powersports PA&A and OEM Engines (14% of revenue) saw a 12.2% decline to C$258.3 million, attributed to high network inventory and lower retail demand, partially offset by favorable exchange rates. Finally, the Marine segment (3% of revenue) experienced a significant 53.2% decrease to C$59.4 million, primarily due to high dealer inventory, softer consumer demand, and increased sales programs.
The company’s gross profit also took a hit, decreasing by 46% to C$376.5 million, with the gross margin contracting by 470 basis points to 20.4%. Normalized EBITDA saw a 58% decrease to C$198.5 million, reflecting the lower gross margin, although partially offset by reduced operating expenses.
In terms of cash flow, BRP generated C$253 million in net operating cash flows for the six months ending July, a significant decrease from the C$748.2 million generated in the same period last year. This decline was attributed to lower profitability and unfavorable working capital changes.
On September 5, 2024, BRP declared a quarterly dividend of C$0.21 per share, payable on October 11, 2024, to shareholders of record at the close of business on September 27, 2024.
Looking ahead, BRP revised its FY25 revenue guidance downwards, now expecting revenues of C$7.8 billion to C$8 billion, compared to the previous guidance of C$8.6 billion to C$8.9 billion. This revised guidance also falls short of analyst consensus expectations of C$8.66 billion.
The company’s adjusted earnings per share guidance was also revised downwards to C$2.75 to C$3.25, compared to the previous guidance of C$6 to C$7. This revised guidance also falls short of analyst consensus expectations of C$6.24.
The market reacted negatively to the news, with DOOO shares plummeting in pre-market trading. The company’s struggles to navigate the current economic landscape, including supply chain disruptions and fluctuating consumer demand, have clearly impacted their financial performance.
