Briggs & Stratton’s fourth quarter (April/May/June) net sales of $502 million were down 6% before currency impacts compared to one year ago. The company cites cooler than normal spring weather across North America and Europe as the primary factor.
For its entire 2016 fiscal year, net sales of $1.81 billion were off 3.4%. Briggs points to a $25 million reduction in jobsite products sales, the lower sales caused by that cool spring weather in North America and Europe, as well as economic uncertainty in many international markets, including Europe.
Spring comes late?
According to Todd Teske, the chairman, president and CEO of Briggs & Stratton, industry shipments were down significantly in April and May. But things appeared to be turning around once summer hit.
“We believe that retail sell-through has improved in the latter part of June and into July in both regions such that elevated channel inventories at the end of our fiscal year are reducing to more normal levels," Teske explained. "Compounding this was the impact of global economic uncertainty, which has challenged consumer confidence and made goods exported to international markets relatively more expensive, also impacting demand.”
U.S. lawn and garden a welcome bright spot
“In the U.S., commercial lawn and garden continues to be a bright spot for our business," Teske said. "Our Ferris brand of commercial mowers and Billy Goat both achieved record sales and we grew our commercial engine sales as well. Our team has delivered superior products during a time when higher-end residential and multi-family housing has experienced strong growth. While we have observed slower growth of entry-level housing to date, we have positioned ourselves well by delivering new and innovative products with features to attract new homebuyers as they enter the market and to encourage existing home owners to replace their equipment to make work easier."
Looking ahead to fiscal 2017, Briggs & Stratton is estimating sales of $1.84 billion to $1.89 billion.
The company expects that the U.S. residential lawn and garden market improves by 1% to 4% including expected improvements in the housing market and more seasonal spring weather in key markets. Briggs & Stratton also expects that international regions will exhibit less growth than the U.S. in light of economic uncertainty. Sales of jobsite products are expected to modestly improve as channel inventories gradually subside.
The company expects operating margins to improve from their 5% level this year to 5.4% to 5.7% in fiscal 2017. Operating margins are expected to improve due to product margin expansion, manufacturing cost reductions, and higher equity in earnings of unconsolidated affiliates. That said, the improvement in operating margins is anticipated to be tempered by incremental pre-tax expenses of $7 million to $9 million ($0.11 to $0.14 per diluted share) for Briggs’ ERP upgrade and commercial mowing capacity expansion projects.