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Cash Flow, CARES Act are Top of Mind

Dealers with high fixed expenses fear extended closures.
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With the covid-19 pandemic hitting the economy hard, two-thirds of marine dealers say they have about two months of cash on hand, and more than half say at least 50 percent of their costs are fixed, highlighting the need for assistance through the CARES Act.

Nearly all of the 120 dealers that responded to the monthly Pulse Report survey said they were operational in some capacity and indicated some hope for boat sales, despite the upheaval that covid-19 has caused.

“The stay-at-home economy could devastate cash-strapped dealers and related organizations that were counting on a strong retail season,” Baird Research stated in the report. Baird conducts the survey that produces the Pulse Report, in conjunction with the Marine Retailers Association of the Americas and Soundings Trade Only.

Some dealers expressed optimism for boating activity to pick up, with social distancing, but Baird predicted that the economic response to the pandemic “will cause significant damage” to the discretionary and seasonal marine industry.

Many dealers said they had laid off some employees or reduced their hours, while others said they continue to pay staff and are hoping for payroll protection. “Kept paying wages, can’t afford to lose them,” said one dealer who responded to the survey.

“We are staying open on reduced hours, have communicated with customers, and have taken precautions and procedures with staff,” another dealer said.

Nearly a third said they could withstand a shutdown that lasted more than three months, and 44 percent said they could last between one and two months. Around a quarter of dealers said they could not go a month without revenue, making the CARES Act vital to their businesses.

Many dealers hadn’t fully grasped the nature of the support, but those that reviewed the program cited small business loans and payroll assistance as critically important. “Paying employees for 10 days and hope to continue to pay them through the payroll assistance program,” one retailer said.

Many dealers said they had been positioned for a strong selling season, with some having record first-quarter sales. In early April, however, 78 percent of dealers considered new-boat inventory too high, an increase from recent levels, and they worried that closures would make it especially difficult to work through boats in stock. Some indicated that floorplan lenders were deferring curtailments, but others worried it wouldn’t be enough to offset the damage.

“Territory agreements will officially go by the wayside this year,” one dealer predicted. “Too much inventory in the field. There will be a smaller buyer pool, and dealers will fight for survival. He who runs out of boats first, wins. Interest will end up eating some dealers alive, even with the temporary deferment.”

Since retailers are on the front lines of varying local government responses to the pandemic, there were wildly fluctuating comments, but even those in better condition acknowledged the potential challenges. “We have enough supplies, boats and parts to reopen once the government allows us to open, but I am extremely worried about the supply chain’s ability to replace what we have sold,” one dealer said. “I see a huge slump about 30 days after we reopen because it will take at least that long to ramp up again and get product moving. As far as I can see, the entire 2020 season is shot, and a lot of people in this business will be done forever.” 

This article originally appeared in the May 2020 issue.

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