BRP Inc. Navigates Headwinds with Precision: A Buy on Inventory Turnaround and Premium Growth

BRP Inc. (TSX: DOO) has emerged as a standout performer in the volatile powersports industry, leveraging disciplined inventory management, premium product dominance, and strategic innovation to position itself for a strong rebound in the latter half of 2025. Despite macroeconomic headwinds and tariff-related uncertainties, the company's proactive steps to right-size inventory and its focus on high-margin segments are creating a compelling investment case. Here's why investors should take notice now.

Inventory Reduction: A Strategic Masterstroke

BRP's most critical achievement in 2025 has been its aggressive inventory reduction program. By Q1 2025, North American network inventory had already dropped by 21% year-over-year, with dealer credit line usage plummeting to 70%—the lowest in over two years. This reflects a disciplined approach to aligning wholesale shipments with retail demand, a strategy that has alleviated dealer financial pressures and positioned the company to capitalize on improving demand in the second half of the year.

The inventory cleanup is nearing completion, with management stating Q2 2025 will mark the final quarter of significant reductions. By year-end, seasonal product inventories (e.g., snowmobiles, personal watercraft) are expected to be 20% lower year-over-year. This leaner inventory posture not only reduces balance sheet risks but also ensures BRP can quickly respond to demand spikes, a stark contrast to competitors still grappling with excess stock.

Premium Products Outperform in a Slowing Market

While the broader powersports market faces challenges—North American retail sales for BRP's Powersports segment fell 18% year-over-year—the company's premium offerings are proving resilient. Notably, Marine Products surged 35% in retail sales, outpacing industry declines and highlighting the appeal of BRP's high-end boat and personal watercraft models.

BRP's focus on Year-Round Products (e.g., ATVs, side-by-sides) also shows promise. Despite a low-teens percentage drop in retail sales, the segment's performance outperformed industry declines, underscoring its brand strength in off-road recreation. This resilience is further amplified by upcoming launches, including the Can-Am Outlander 850/1000R ATVs and Sea-Doo FishPro Apex, which target high-margin, niche markets with advanced technology and design.

A key differentiator is BRP's entry into the electric motorcycle market with the Can-Am Pulse and Origin models. These launches not only diversify its product portfolio but also tap into growing demand for eco-conscious, high-performance vehicles—a segment largely untapped by competitors.

H2 Growth Catalysts: Why Now Is the Time to Buy

BRP's strategic moves set the stage for a double-digit top-line rebound in the second half of 2025. With inventory reductions largely complete, the company can accelerate shipments to match retail demand, particularly in seasonal categories like Marine and Snowmobiles. Management has explicitly tied this operational flexibility to its revised revenue guidance of $7.8–8.0 billion, which assumes stronger back-half performance.

Additionally, 2026 model-year product launches—including advanced electric and connectivity features—will drive sales momentum. The company's R&D investments, highlighted by its electric motorcycle push, position it to capture emerging trends in sustainability and tech-driven recreation.

Risks and Financial Resilience

The near-term outlook isn't without challenges. Tariff disputes and economic uncertainty have prompted BRP to defer FY2026 guidance, while profitability remains pressured. Gross margins contracted to 20.4% in Q2, down from 25.1% a year earlier, due to lower volumes and promotional spending. However, the company's $740 million in operating cash flow (despite a decline from prior years) and disciplined capital allocation—$277 million returned to shareholders via dividends and buybacks—demonstrate financial discipline.

Conclusion: Buy BRP for the Turnaround and Long-Term Growth

BRP's inventory management success, premium product dominance, and innovation-driven pipeline make it a standout play in the powersports sector. With the balance sheet stabilized and growth catalysts aligned for H2, the stock's 10.7% surge post-earnings hints at investor recognition of its turnaround trajectory.

Buy Rating: Target price $40–$45 (based on FY2025 EPS guidance and peer valuations). Key triggers for upside include stronger-than-expected Marine sales, successful electric motorcycle adoption, and resolution of tariff-related uncertainties.

Investors seeking exposure to a company with clear operational progress and high-growth adjacencies should act now—BRP's best days are ahead.