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Dealer survey: Retail loans a big problem, but many expect to see sales growth in ’10

Although it's still a challenging climate for dealers, inventory levels have improved significantly from last year, and growth expectations are more positive than a year ago, according to a recent survey conducted by RBC Capital Markets, an investment bank.

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The Fall Dealer Survey polled 144 marine dealers from the United States and Canada as part of RBC's analysis of Brunswick Corp. Among the results, the survey found that most said business conditions remain difficult. More than 50 percent of those surveyed rated business weak, and 20 percent said conditions were very weak. In 2008, about 35 percent called conditions weak, with 30 percent describing them as very weak. RBC notes that last year's survey was conducted immediately after the failure of Lehman Brothers, so dealers had not yet experienced the full impact of the recession.

From this year's results, RBC estimates new boat sales were tracking down 20 to 30 percent versus last year. About 22 percent of dealers - the highest percentage noted - said new-boat sales were off 30 percent during the last three months compared to the same period of 2008. Most dealers also said margins on new boats were down significantly compared to last year.

The biggest challenges facing dealers include low consumer confidence, tighter lending standards, competitor discounting, and poor showroom traffic. Unlike 2008, high oil and gas prices were not considered a major challenge.

"I believe there are a lot of potential buyers waiting to see more positive signs of a recovery," notes one dealer surveyed. "The biggest concern I have is the current liquidation of inventory, which is seriously affecting profit margins."

About 42 percent of dealers said they were very concerned about retail financing. Less than 5 percent said they were not concerned. In 2008, about 37 percent said they were very concerned, with about 5 percent unconcerned. More than 60 percent said they were very concerned about the cost and availability of floorplan financing. That question was not a part of the 2008 survey.

On a positive note, 35 percent surveyed said inventory levels were about right, with more than 35 percent saying levels were too low or way too low. Concerns over aged inventory remain high, but that has eased some since last year.

"On average, inventory turns have improved for most dealers," the survey states. "Notably, a higher percentage of dealers find themselves at the extreme compared to last year." The majority of dealers said they had a six-month or less supply of new boats.

Overall, growth expectations are more positive than last year, with 37 percent of dealers expecting sales growth versus 19 percent a year ago. However, more than 35 percent reported "minimal" assistance from manufacturers. RBC notes that Brunswick seems to be "throwing much more money at the problem than its competitors."

While most non-Brunswick dealers said their manufacturers had minimal rebates or promotions to help sell boats, Brunswick dealers, in many cases, reported a high amount of incentives. "As an exclusive Sea Ray and Boston Whaler dealership, we cannot say enough good things about the financial support we have received from Brunswick over the past 12 months," one Brunswick dealer notes. "It has been extraordinary and beyond expectation."

To help them weather the challenges, more than 80 percent said they plan to cut expenses, while more than 60 percent will cut orders. About 10 percent believe they need to exit the business. "The industry is eight to 10 years from returning to pre-2008 levels," one dealer says. "The boating industry is always the first to get hurt and the last to come back," another dealer notes. "This will be no different."

This article originally appeared in the November 2009 issue.

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