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Inventory, Interest Rates and Stock Market Create Drag

Dealers are more pessimistic than ever about business and the industry’s long-term outlook. Sentiment was around neutral on current conditions, 55 out of 100, and the 3- to 5-year outlook dropped into the red for the first time in the Pulse Report survey’s history. Baird launched the survey with the Marine Retailers Association of the Americas in 2013.

“With the stock market gyrating like a Hula doll on the dash of a Yugo with a bent wheel, it appears the money guys are not sure where the economy is headed,” said one respondent. “As I travel around and see the RV and marine retailers lots overflowing with new product, it appears the dealers were more optimistic about the economy than what the consumer is feeling. The summer of 2019 cannot come soon enough, or maybe when it gets here, we will wish it had not. The suspense will end soon.”

The volatile stock market took some potential buyers out of the market, said one dealer, adding that a customer “who went cold” said, “I could have bought two of these boats with what I’ve lost in the market drop.”

Other retailers remain more optimistic about 2019. “The December stock market fluctuation has created a loss of confidence in the economy,” said one dealer. “Most other indicators are still strong. This is no time to panic. Stay the course. We don’t need any self-fulfilling prophesies.”

“It’s not all gloom and doom for the marine industry,” said another. “As more boomers retire, they want their grandchildren to experience the joys that boating offers, and they are a large, driving force in new-boat sales.”

More than half of dealers (57 percent) reported too much new-boat inventory in December, versus just 7 percent who thought it was too low. “Hoping for a strong show season,” said one dealer. “With dealer inventories being up, if sales don’t start out at a good pace, it could be a long year.”

During the off-season, dealers typically focus on managing costs related to inventory levels, and higher interest rates present a new pressure. “Similar to our RV coverage, we expect investors to entertain more pessimistic scenarios in order to gauge downside should a recession occur,” Baird analysts said.

“Higher interest rates and large price jumps on 2019 models are not helping sales,” said one dealer.

Lack of outboards in popular horsepower ratings was costing some dealers sales. One wrote that a seven- to 12-month wait “does not cut it.” Others said they were closing deals with alternate engine brands.

“With the exception of a few large, high-profile markets, where the buyers are extremely well-funded, the recreational marine market is collapsing outside of PWC, pontoon and extreme center consoles,” said one dealer. “Discretionary income is the lowest I have ever witnessed.”

The high pace of merger and acquisition activity in the industry might also be weighing on dealers. Sixty percent believe it will be the dominant trend in 2019, beating higher-horsepower outboards (19 percent), technology in manufacturing (16 percent), and autonomous docking (5 percent).

This article originally appeared in the February 2019 issue.

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