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Yahoo Finance’s Julie Hyman, Myles Udland, and Brian Sozzi speak with Brunswick Corporation CEO David Foulkes about boat sales amid COVID-19.
JULIE HYMAN: Boat maker, Brunswick Corporation reported its earnings last week. And the fourth quarter sales were up about 26.5%, just over $1 billion. And the company predicted that net sales for this year will be between $4.75 billion to $5 billion. So in other words, the sale of boats is going pretty well. The stock's up about 14% year to date. Dave Foulkes, the CEO, is joining us right now to talk more about it. Dave, thank you so much for being here.
As I said, the sale of boats is going well. You guys sell a lot of boat engines, as well. That's a big proportion of your business. Who's buying boats right now, and at what price point? I'm curious what the character of the boat market looks like right now.
DAVID FOULKES: And good morning. Yes, certainly retail is extremely strong. And as you probably know, it really became strong in the second half of the second quarter last year. And that momentum was carried through the whole year in 2020, and then continued into early 2021. I think you know, we had more first time buyers than typical in the market last year. So about 40% of the boats we were selling in the middle of last year were to first time boaters. First time boat buyers I would say because they're often boaters who have boated with family or friends before.
If you look across our portfolio, we have a lot of brands. We sell boats from about $10,000 to a million dollars. People are coming in at the lower end. I would say that about 80% of the boats we sell for less than $50,000. So I'd say there's a broad range of people entering at different price points, typically at a slightly lower price point than average, I would say.
BRIAN SOZZI: David, you mentioned on your earnings call several brands are sold out into 2022. Really, that was a pretty stunning stat to me. So what does it mean as a consumer? If I want to buy a Boston Whaler right now, I couldn't get that boat until next year?
DAVID FOULKES: In a lot of cases, that is true. Boston Whaler in particular is a very strong brand. Sea Ray is another of our brands that's strong that's really sold out most of this year and some models into 2022. A lot of people who buy a Whaler, though, already own one, so they're prepared to wait. It's a very prestigious brand. But you're right. I would place an order right now. And then obviously, we'd fulfill it as soon as we can.
One of the things we are doing, you may have seen that we announced a very large expansion to Boston Whaler manufacturing capacity. We're bringing online a whole new plant-- 225,000 square feet on top of the 550,000 square feet that we have already dedicated to Boston Whaler. So we recognize that very high demand for this very prestigious brand. We will continue and we're bringing on as much production as we can.
BRIAN SOZZI: How many people will you hire this year just to meet this demand?
DAVID FOULKES: We're trying to hire about 1,000 right now. We hired about 3,000 in the back half of last year. Obviously, in the COVID environment, that is tougher than normal. Virtual job fairs, is not as straightforward as possible. But we have COVID safe protocols in all our facilities, and we're doing it-- maintaining the quality of our products and maintaining quality of our hires and talent, and being cautious. But we're being-- we need to be pretty rapid to meet this kind of demand. So about new 1,000 new jobs this year based on our understanding and demand.
MYLES UDLAND: And you know, Dave, you mentioned how that order book pretty solid really through next year. How different is that environment than the kind of runway that you guys often have? The visibility, I guess you would call it, into what future demand looks like, and how are you-- I mean, certainly you're ramping up investment now. But how wary are you of having overcapacity in a couple of years if the market maybe levels out?
DAVID FOULKES: The capacity that we're bringing on right now will progressively add about 10% to our total capacity. So it's not a huge amount. And we do it at a very efficient investment level. So of the three plants that we're investing in right now, really two of them don't require brick and mortar. It's just more machining capacity and other things inside the facility. And then, we're actually-- the new plant that we're bringing on is a plant that was idle. So we're not buying a plant there, we're simply reactivating it. So we're very conscious of maintaining efficient investment level even as we bring on production capacity.
I think one of the things that we're looking at here is even running full out in this year, we will not restock the pipeline. We won't even make a big dent in it. So it's going to be a multi-year cycle to rebuild wholesale pipelines in the field. They're depleted by about 40% at the moment versus where they were a year ago. So that is going to be-- that's going to require all the capacity we bring online for some period of time. And I think we're investing efficiently and appropriately to achieve that.
JULIE HYMAN: You know, Dave, it feels like we're talking on a near daily basis here about the various technological innovations in the car industry, right? Electrification, autonomous driving, lasers to help them navigate. Whereas, when I have my mental image of a boat, it's, you know, the footage we've been showing with the motor on the back. What's happening on the technological level in the boating industry, and what are you guys expecting in the next few years?
DAVID FOULKES: A lot of the trends that you see in the automotive industry are carrying through to marine. Our boats are pretty sophisticated already. They have-- if they're a larger boat, they have radar, they have sonar, they have GPS, and chart plotting. So actually, a lot more sensing the most typical cars have. But you're seeing some progress towards autonomy or driver assistance in our field just as you are in automotive.
We demonstrated an auto docking system last year that we're progressing productionization of. We're investing more and more in electrification. Electric is a little tricky in marine. The physics are more difficult. We don't have brakes to regenerate energy. It takes more power to push a boat through the water than it does to move a car on a road. But there is going to be a progressive move to electrification in some parts of marine.
And then interestingly on connectivity, which is another big technology play in automotive, all of our boats above a certain size now go out as connected products. So when you get the boat delivered, you also have an app on your phone that allows you to remote monitor and do various actions remote from the boat, understand the status of the boat. So a lot of the same things on technology are happening in marine are happening in automotive.
Another kind of-- not really a technological trend, but more of a business model trend is happening for us as well is shared access. You know, we own Freedom Boat Club, which is the biggest shared access business model in marine. 253 locations now, 38,000 members. You join at a club in your local area, you book on an app. It's very, very convenient. So whether it's technology or business model trends, you're seeing the same things evolve in marine as you do in automotive and other spaces.
JULIE HYMAN: All right, interesting stuff. Thank you so much, Dave. Good to see you. Dave Foulkes is the CEO of Brunswick Corporation. Appreciate your time this morning.
DAVID FOULKES: Thank you very much.