Industry Remains Confident, Despite Conflicting Indicators

Despite lower boat registrations in December, analysts are upbeat about 2019.
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New-boat registrations in December were down 11.3 percent, dropping 12.2 percent in the main powerboat categories. While disappointed for the month, industry analysts seemed encouraged that 2018 would finish 3 to 4 percent ahead of 2017. Year-to-date sales were up 3.4 percent in the main categories and 3.2 percent overall.

The fiberglass outboard segment declined again, dropping more than 16 percent, and the aluminum fishing segment dropped 9 percent, according to preliminary data from Statistical Surveys, taken from 29 states and representing almost 56 percent of the industry. “We’re still on target for seven straight years of growth,” says SSI sales director Ryan Kloppe. “Hopefully this is just a blip, and 2019 starts off strong.”

Market fluctuations, tariff concerns and the government shutdown took a toll on consumer confidence in December after it had dropped in November. “The headline registration numbers are certainly not compelling and cap a relatively uninspiring fall retail season,” SunTrust Robinson analyst Michael Swartz wrote, noting the same was true of nearly all big-ticket discretionary items. “That said, the year came in largely as expected, with several categories continuing to drive the majority of industry growth — pontoon, aluminum fish, larger offshore fishing boats above 30 feet and ski/wake. We believe the industry will continue to grind higher in a lower- or mid-single-digit range in 2019, outside of any potential macro hiccups.”

Growth was seen in pontoons, which were up 4.2 percent; towboats, up 22.7 percent; and PWC, up 10.9 percent. Those, Kloppe says, are the “same segments that have been carrying the industry.”

The towboat segment was poised to be 2018’s leader, with year-over-year growth of 22.7 percent and year-to-date growth of 10.1 percent. Aluminum fish and pontoons grew 5.1 percent and 5 percent year-to-date, respectively. Coast Guard data was incomplete because of the government shutdown, which likely affected a relatively insignificant number of larger boats, Kloppe says.

Six of eight highly correlated powerboat retail indicators are decelerating, says Wells Fargo analyst Tim Conder. Conder remained optimistic in light of growing small-boat retail, the fact that U.S. consumer leverage is at nearly 40-year lows, that dealer inventory turns are flat year-over-year, and that there’s a favorable long-term replacement cycle.

“Last week, we attended the Houston and Atlanta boat shows,” BMO Capital analyst Garrick Johnson wrote. “And while we remain bullish on the boat industry heading into 2019, dealer enthusiasm was more muted than at these shows last year, as well as the Fort Lauderdale show in November.

“Dealers, though, have positive outlooks and don’t appear to be concerned about recent stock market volatility,” he added. “Inventory levels seem appropriate, and we believe the industry is poised to benefit from a strong economy.”

This article originally appeared in the March 2019 issue.

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