Brunswick Corporation (NYSE: BC) has reported results for the first quarter of 2023. “Our businesses had a strong start to the year, as continued operational strength, benefits from outstanding new products, and prudent cost management in a challenging macro-economic environment resulted in sales, margin, and EPS performance that exceeded expectations for the quarter,” said Brunswick CEO David Foulkes.
Foulkes commented in full:
We experienced better than anticipated boat show results, indicating a resilient consumer, and boat field inventory levels are healthier as we enter the primary retail season. Additionally, our free cash flow performance improved by $135 million versus Q1 2022, further solidifying our cash position and balance sheet, and enabling higher than planned share repurchases during the quarter.
Our propulsion business delivered exceptional results, with increased high-horsepower outboard engine production, enabled by the recent capacity expansion, allowing us to increase shipments to many international customers and OEM partners. In the last five years, Mercury Marine has gained over 600 basis points of share in 150 horsepower and above outboard engine categories in the U.S., which was once again demonstrated by significant gains in the share of high-horsepower Mercury outboards on display at the large saltwater boat shows in the quarter. Strong product mix coupled with operating efficiencies resulted in record first quarter operating earnings and margins.
Our engine parts and accessories businesses delivered a steady quarter, but as expected, saw sales and earnings declines versus the record first quarter of 2022, although sales were up 35 percent versus first quarter of 2019. First quarter sales in the U.S. Products portion of the business were ahead of Q1 2022, while sales through our third-party Distribution businesses were down versus 2022 as dealers and retailers right-sized inventories.
As anticipated, Navico group had a challenging start to the quarter, with lower sales into the retail channel and unfavorable foreign currency exchange rates leading to top-line declines early in the quarter but with notable improvement in March. Operating earnings declined versus prior year as lower sales coupled with higher material inflation and temporary margin pressures related to a new product launch were partially offset by the positive impact of major restructuring actions and cost reduction measures implemented in the quarter which we anticipate will yield full benefit in subsequent periods.
Finally, our boat business posted robust top-line and earnings growth, with double-digit adjusted operating margins for the fourth consecutive quarter. As expected, our internal retail units were down in the quarter against a strong Q1 2022 comparison, but March retail was slightly ahead of prior year. Freedom Boat Club had strong same store membership sales in the quarter, and now has more than 380 locations, and nearly 55,000 membership agreements covering 87,000 members network-wide, all while generating exceptionally strong synergy sales across our marine portfolio.
2023 First Quarter Results
For the first quarter of 2023, Brunswick reported consolidated net sales of $1,743.6 million, up from $1,695.7 million in the first quarter of 2022. Diluted EPS for the quarter was $1.56 on a GAAP basis and $2.57 on an adjusted basis. Sales in each segment benefited from the impact of annualized price increases and new product performance, partially offset by unfavorable changes in foreign currency exchange rates. Operating earnings were down very slightly as sales increases and prudent cost control measures across the enterprise were offset by elevated year- over-year input costs and spending on growth initiatives in each segment. In addition, versus the first quarter of 2022:
Propulsion segment reported a 7 percent increase in sales resulting from strong demand in many international regions and favorable product mix as increased high-horsepower outboard engine production, enabled by recent manufacturing capacity increases, was partially offset by planned reductions in lower horsepower outboard engine and sterndrive engine production. Operating earnings in the quarter were also impacted positively by timing related to capitalized inventory variances.
Engine Parts and Accessories segment reported a 13 percent decrease in sales as solid Product sales in the U.S. were offset by international softness and more seasonal third party Distribution sales. Segment operating earnings were also impacted by start-up costs related to the newly opened distribution center in Brownsburg, Indiana which is expected to be fully online by the end of the second quarter.
Navico Group segment reported a sales decrease similar to the Engine P&A segment, with sales decreasing 11 percent, driven by lower retailer orders primarily in the earlier part of the quarter, together with sharp decreases in sales to RV OEMs as they paused manufacturing. Segment operating earnings declined as a result of the common factors listed above coupled with margin pressures related to a new product launch which were partially offset by planned integration actions, reorganization efforts, and cost reduction measures, which included the announced closure of multiple facilities.
Boat segment reported a 17 percent increase in sales due to increased sales volumes to dealers and the impact of prior year pricing actions, which offset the impact of higher discounts and delayed shipments related to a supplier part recall impacting mainly sterndrive fiberglass boats. Growth in segment operating earnings and operating margin was also enabled by favorable mix toward premium products, and sustained operational efficiency gains. Freedom Boat Club, which is part of Business Acceleration, had another strong quarter, contributing approximately 6 percent of sales to the segment.