Brunswick Responds to Market Uncertainties
by Craig Ritchie
Revenues down but in line with expectations in quarter marked by ‘challenging macro environment’.
Brunswick Corp released its 2025 first quarter financial results early Thursday reporting lower year-over-year revenues against what the company describes as the second best Q1 cash flow in more than a decade.
For the quarter ended March 29, 2025, Brunswick reported net consolidated sales of US$1.22bn, which fell 11% below the $1.36bn reported for the first quarter of 2024.
First quarter sales were below prior year as the impact of continued lower wholesale ordering by dealers and OEMs and prudent pipeline management, was only partially offset by modest annual price increases and benefits from well-received new products.
Sales Down Across Key Segments
Reporting by segment, propulsion sales of $487.0m fell by 16% YoY from the $578.2m earned in the first quarter of 2024. Engine parts and accessories revenues dipped by 3% YoY to $255.3m while Navico Group revenues of $208.2m were roughly flat to the prior first quarter. Boat Group reported Q1 revenues of $372.1m, falling 13% behind the $425.7m reported for the prior year period.
Sales in the US, representing 67% of Brunswick’s total, dropped by 11% in the first quarter while Canada sales, representing 5% overall, dipped by 5% YoY. Sales in Europe, marking 15% of total revenues, fell by 10% during the quarter while Asia-Pacific sales, representing 7% of total revenues, decreased by 8% YoY. Sales through the rest of the world, representing 6% of total revenues, came in 15% below Q1 2024 figures.
Cost of sales for the first quarter was reported as $918m cost of sales, down from the $991.4m reported for the prior Q1 by 7% as a result of aggressive cost control initiatives.
A slight increase in YoY selling general and administrative expenses offset by lower R&D and restructuring expenses led to Q1 operating earnings of $56.3m, trailing the $110.6m reported one year ago. Operating earnings were impacted by lower sales, lower absorption from decreased production levels, and the negative impact of changes in foreign currency exchange rates, partially offset by new product momentum, annual price increases, and ongoing cost control measures.
Operating margin for the quarter dipped by 350 basis points to 4.6%.
Q1 net income was reported as $20.2m, which trailed the $68.0m reported for the first quarter of 2024.
Brunswick chair and CEO David Foulkes said that the first quarter results came in ahead of the company’s initial expectations despite a challenging macro environment.
“Year to date unit retail sales for our core and premium boat brands and product-lines are in-line with our expectations for a second-half biased year, but we are seeing some weakness in entry-level products, prompting us to consider streamlining our product offerings in the entry-level space while growing Freedom Boat Club as an alternative participation model,” said Foulkes. “Early season boat shows are essentially complete, with retail performance at shows flat to prior year and in line with expectations, while overall retail performance in the quarter resulted in appropriate boat field inventory levels as we enter the primary retail season.”
He added that effective cost control measures and production output adjustments paid off in Q1. “We had outstanding free cash flow generation in the quarter, leveraging the inventory reduction and other working capital initiatives started last year, resulting in the second best first quarter cash flow on record, and a $160 million improvement versus Q1 2024,” said Foulkes. “Despite the uncertain market conditions for Brunswick, our customers, and our channel partners, we’re very pleased about our overall start to the year which exceeded our expectations back in January.”
Foulkes added that continuing uncertainty related to tariffs has the company keeping a close eye on consumer sentiment and the trajectory of interest rate reductions.
“The abrupt introduction of the tariffs in early April and subsequent policy confusion, in addition to the capital market turmoil, have certainly introduced new reasons for short-term consumer hesitancy,” said Foulkes. “Brunswick has the benefit of producing the large majority of our products in the US for the US market, and we have significantly reduced our exposure to China-based suppliers since the initial imposition of Section 301 tariffs in 2017. However, at current tariff rates, we have the potential to incur up to $100m - $125m of incremental net tariff costs in 2025. We continue to prepare for a range of scenarios and have many short- and long-term mitigating actions already underway, including continued migration of our supply base, inventory staging, pricing, and optimization of our facilities, but this remains a very dynamic situation.”
Moving forward, Foulkes said that tariff uncertainty is expected to continue to temper consumer spending in the near-term, with Q2 market conditions expected to look similar to those of the first quarter. Accordingly, Brunswick revised its 2025 full year guidance to anticipate revenues in the range of %5.0bn to $5.4bn, while still achieving its goal of generating $350m of free cash flow for the year.