From factory closures to the Suez Canal logjam and the global chip shortage, Sea-Doo manufacturer BRP Inc. was caught in all the supply-chain headaches of the past 15 months. But there’s been an upside, according to its chief executive officer: “a complete reset” of the industry that’ll mean fewer price promotions.
The pandemic, with its restrictions on travel and close contact, sent consumers rushing to buy recreational products such as snowmobiles, all-terrain vehicles and personal watercraft. Growing demand, combined with supply-chain hurdles, cut inventory at BRP’s North American dealer network to about 80 days, on average, in the fiscal year that ended Jan. 31, down from 170 days the previous year. That’s giving dealers pricing power they didn’t have before.
The Canadian company’s inventory was 73% lower in the quarter that ended April 30 than it was a year earlier. While that’s a little too low for comfort, the situation has helped reduce discounts to a trickle, CEO Jose Boisjoli said in an interview. The company now aims to permanently reduce the number of inventory days, especially for non-seasonal “off-road” products, such as ATVs you’d drive in the woods.
The goal is to go to as low as two-and-a-half months of inventory for off-road products, from about four months in pre-crisis times, Boisjoli said.
“We’re going through a complete reset of the industry. All dealers sold out everything: old units, new units, parts, clothes, accessories,” he said. “We have a unique opportunity to do things differently.”
The pandemic at first hurt business for BRP, a former unit of plane maker Bombardier Inc., with mandatory shutdowns curtailing two months of production capacity and leaving it unable to ship enough products to dealers. Revenue has since roared back: The pandemic caused a jump in first-time buyers that the company now hopes to turn into lifetime clients.
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Source: Bloomberg
At the same time, the Valcourt, Quebec-based company may tweak its “just-in-time” approach to components, an industrial strategy in which parts arrive only as they’re needed for production.
The company, which operates 11 sites from Austria to Mexico, is feeling the pinch from semiconductor scarcity and said this month that deliveries this quarter and next may be pushed back. Boisjoli expects the semiconductor market to return to a balance within 18 months.
“Will we see more inventory for some products, will we go back to vertical integration in some areas?” he said. “It’s worth a reflection.”
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For now, raw material woes and concerns over post-pandemic demand have held down the company’s stock price. BRP shares have fallen 22% since April 26, even as the company reported earnings that beat expectations and raised its financial guidance for the year.
Boisjoli said the delivery delays may have prompted short-term investors to cash out of the stock, which closed at C$92.90 on Friday, up 87% from a year earlier.
“They may prefer to sell shares at C$90 and invest elsewhere,” he said. “Long-term ones will stay with us.”
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June 14, 2021 at 07:28PM
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Sea-Doo Maker Says Pandemic Boom Offers Industry a Reset - Bloomberg
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