Last updated on May 12th, 2020 at 12:20 pm
Wauwatosa-based Briggs & Stratton Corp. estimates the onset of the COVID-19 coronavirus cost it around $40 million in sales during its fiscal third quarter and sales were down 30% in April to start the fourth quarter.
If that decline continued in May and June, it would add up to a more than $140 million drop in revenue for the maker of small engines and lawn and garden products.
Even amidst the challenges, however, the company’s executives have seen some bright spots. Todd Teske, chairman, president and chief executive officer of Briggs, said that April’s sales decline skewed towards the company’s engines segment as many original equipment manufacturers shut down facilities to comply with shelter-in-place orders.
“On the products side and specifically on the mass retail side, we saw strong demand relative to what we maybe thought it was going to be,” Teske said.
He said the company would expect higher levels of unemployment and the disruption in housing sales caused by social distancing to hamper many of its markets, but projections are complicated by people spending more time in their homes and less money on travel and entertainment.
“This change in behavior could lead to more home improvement projects this spring, including lawn and garden projects that could positively impact many of our categories,” Teske said.
He said there was encouraging retail activity in the southeast to start spring, particularly for walk-behind mowers and a strong start to server and repair activity. Online ordering of products like pressure washers also increased.
Teske said anecdotally retail stores were seeing a lot of activity and he pointed to people spending more time outside in his own neighborhood as an encouraging sign.
“It appears to us that people are wanting to take care of their homes now that they are at home that much more,” he said.
Despite the potential for more home improvement spending, Briggs does face other challenges. The company saw revenue drop nearly $107 million or 18% in the third quarter. The company swung from net income of $8 million last year to a $144 million loss.
Much of the loss came from a $67 million non-cash goodwill impairment charge and a $70 million non-cash valuation allowance against deferred tax assets.
Briggs reported an adjusted net loss of $10.8 million for the quarter compared to adjusted net income of $14.6 million last year.
In early March, Briggs announced a strategic repositioning plan that, among other things, called for selling much of its products business and turn its focus to power application. The businesses to be sold included the company’s U.S. turf business along with pressure washer and portable generator product lines.
The asset sales were intended in part to cover around $195 million in debt maturing in December.
Teske said in March the company had seen strong initial interest in the assets but the emergence of the coronavirus has made a sale more challenging. He said the company still expects to generate more than $200 million in proceeds from the sale.
“Whether the market allows for that in the timing that we talked about is a different situation,” he said. “We continue to make sure that we’re going to get paid for the value that we’ve created through that business.”
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