Briggs & Stratton anticipates $30 million hit in fiscal 2019 from Sears bankruptcy

Uncertainty about retailer's operation leads to guidance cut

Uncertainty surrounding the future of Sears retail stores was among the factors that led Briggs & Stratton Corp. to cut its fiscal 2019 revenue guidance by 2.5 percent after two quarters.

Briggs & Stratton headquarters

The Briggs & Stratton headquarters in Wauwatosa.

The Wauwatosa-based manufacturer of small engines and lawn and garden products said the retailer’s pending bankruptcy action would lead to an estimated $30 million drop in revenue.

“At this point in time there’s just a lot of uncertainty as to whether Sears will emerge and how it will emerge,” said Mark Schwertfeger, chief financial officer of Briggs.

Despite the Sears challenges, Briggs reported revenue of $505 million in the second quarter, a 13 percent increase from last year. Briggs has increased its focus on commercial equipment markets in recent years. Sales to commercial markets are up 18 percent over the last 12 months.

The company narrowed its net loss in the second quarter from $16.3 million last year to $2.6 million this year. Adjusted net income, however, decreased from $10.7 million to $8.4 million.

In addition to Sears, Briggs is anticipating $40 million in lower revenue because of unfavorable weather in Australia and Europe. Generator sales are expected to be up an extra $20 million during the first half of the year because of hurricanes Florence and Michael.

Sears filed for bankruptcy last fall and its chairman, Eddie Lampert, has made a $5.2 billion bid to keep it open. A judge still has to sign off on the deal, however.  ]

Schwertfeger said before the bankruptcy Sears accounted for around 10 percent of the residential home and garden market. If the company does continue operating, it would likely be with less than half the amount of the stores it had previously. It is also unclear what products the stores will carry and whether consumers will return to its stores, he said.

Most of the revenue Briggs is losing out on would have come from engine and service part sales in the fiscal third quarter, which the company is currently in.

The hearing to approve the sale of Sears to Lampert will not take place until Feb. 1. Todd Teske, chairman, president and chief executive officer of Briggs & Stratton, said the retailer is missing out on the opportunity to stock up ahead of the spring selling season because it has to wait for court approval.

The delay means OEMs that Briggs supplies engines to are not making products for Sears, Teske said. He added that Briggs believes Sears will use what inventory it does have in distribution centers to stock its stores initially if the deal is approved.

“I know that they’re not building for Sears right now,” Teske said of the OEMs. “The question is: when will they slot them in for production?”

Briggs executive previously said Sears accounted for less than 3 percent of the company’s forecasted revenue, representing around $60 million. Schwertfeger said the guidance reduction does not account for all of the Sears revenue in part because the company expects consumers will go to other retailers that Briggs supplies.

Uncertainty surrounding the future of Sears retail stores was among the factors that led Briggs & Stratton Corp. to cut its fiscal 2019 revenue guidance by 2.5 percent after two quarters.

Briggs & Stratton headquarters

The Briggs & Stratton headquarters in Wauwatosa.

The Wauwatosa-based manufacturer of small engines and lawn and garden products said the retailer’s pending bankruptcy action would lead to an estimated $30 million drop in revenue.

“At this point in time there’s just a lot of uncertainty as to whether Sears will emerge and how it will emerge,” said Mark Schwertfeger, chief financial officer of Briggs.

Despite the Sears challenges, Briggs reported revenue of $505 million in the second quarter, a 13 percent increase from last year. Briggs has increased its focus on commercial equipment markets in recent years. Sales to commercial markets are up 18 percent over the last 12 months.

The company narrowed its net loss in the second quarter from $16.3 million last year to $2.6 million this year. Adjusted net income, however, decreased from $10.7 million to $8.4 million.

In addition to Sears, Briggs is anticipating $40 million in lower revenue because of unfavorable weather in Australia and Europe. Generator sales are expected to be up an extra $20 million during the first half of the year because of hurricanes Florence and Michael.

Sears filed for bankruptcy last fall and its chairman, Eddie Lampert, has made a $5.2 billion bid to keep it open. A judge still has to sign off on the deal, however.  ]

Schwertfeger said before the bankruptcy Sears accounted for around 10 percent of the residential home and garden market. If the company does continue operating, it would likely be with less than half the amount of the stores it had previously. It is also unclear what products the stores will carry and whether consumers will return to its stores, he said.

Most of the revenue Briggs is losing out on would have come from engine and service part sales in the fiscal third quarter, which the company is currently in.

The hearing to approve the sale of Sears to Lampert will not take place until Feb. 1. Todd Teske, chairman, president and chief executive officer of Briggs & Stratton, said the retailer is missing out on the opportunity to stock up ahead of the spring selling season because it has to wait for court approval.

The delay means OEMs that Briggs supplies engines to are not making products for Sears, Teske said. He added that Briggs believes Sears will use what inventory it does have in distribution centers to stock its stores initially if the deal is approved.

“I know that they’re not building for Sears right now,” Teske said of the OEMs. “The question is: when will they slot them in for production?”

Briggs executive previously said Sears accounted for less than 3 percent of the company’s forecasted revenue, representing around $60 million. Schwertfeger said the guidance reduction does not account for all of the Sears revenue in part because the company expects consumers will go to other retailers that Briggs supplies.

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