MarineMax eyes light at the tunnel’s end

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The dealer seeks more value-oriented boat lines and a way to educate consumers on financing

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MarineMax is taking creative measures to deal with the downturn. The franchise dealership is looking to take on new brands at some locations and acquire properties and dealerships, president and CEO William McGill says.

Additionally, MarineMax is looking for more value-oriented lines to give frugal customers what they want, McGill says. The new brands should be announced soon, he says.

"We're looking, at these times, to make our company better, and if that means the addition of some properties or some product lines or some dealerships, that's what we're going to do," he says.

MarineMax brands include Azimut Yachts, Boston Whaler, Cabo Yachts, Grady-White, Hatteras Yachts, Meridian Yachts and Sea Ray.

Though fewer new boats are being sold, McGill remains hopeful. "The good news is people are boating; the bad news is the uncertainty has them sitting on the edge of their chairs," he says.

That prompted MarineMax to seek some more affordable options for price-conscious consumers, McGill says.

"We don't forecast the future with Wall Street, but I believe it's going to be a challenge for a little while," he says. "I don't think it will be a quick recovery. I also don't think there will be a double-dip [recession], but a lot of customers worry that there will be."

In response to the downturn, MarineMax went from 93 locations to 56. Most of those consolidations or closings occurred before September 2009, the month when MarineMax's fiscal year ended, McGill says.

"We made that tough decision and we had to do it," he says. "But from everything bad, there's something good if you can find it. From the stores we closed, we moved premium team members to other stores."

As a result, he says, sales teams are stronger and MarineMax employees are excited about the future. "Except for just a few markets, really what we did is we pulled in some of the smaller ancillary type of locations into a main location," McGill says. "The 56 stores we have open, when you go back to when MarineMax was doing $1.2 billion ... $1 billion of that was in stores that are still open."

However, it's still a tough market, McGill notes. In remarks that accompanied MarineMax's third-quarter earnings statement, he says that about 1,400 dealerships have failed during the recession and that some industry insiders believe another 1,400 will fail next year.

"That was a number we've heard several times," McGill says. "These are hearsay type of numbers, but we've heard there could be that many that could fail by this time next year. I think this summer has been disappointing for most all dealers out there."

McGill continues: "Customers are still kind of locked up. As a result, cash is king, and if you're not generating enough cash during boating season, then you're going to have a hard time getting through the winter in many of the markets."

McGill says MarineMax is hearing from dealers who are asking for help through partnerships or buyouts. "It's a shame because ... dealers who made it to this point are pretty good dealerships," he says.

GE Finance also noticed MarineMax's trimmed bottom line, a key factor in the two striking a floorplan financing deal, which was helpful in the health of the franchise, McGill says. "They looked at our balance sheet and they also looked at our strategies in the company and the people and put it all together, and that's the reason we structured the deal we did," he says. "They've been absolutely great partners. We had [six] other opportunities, other roads we could've taken, but GE was the best road there."

McGill says the retail finance crunch is also easing. "And, of course, that's one of the advantages we have," he says. "We have access to many, many retail opportunities, so we can better serve our customers. We're finding that we're putting together deals that, as an independent, we probably wouldn't get done. We're helping many independents get deals done [through] the independent arm of the company, a finance company that is part of MarineMax."

While downsizing has made a lot of sense, MarineMax is also poised to take advantage of future dealer failures, McGill says.

"We're looking at opportunities in this and trying to capitalize on every opportunity," McGill says. "We're working on some [opportunities] right now. Some are new brands - and we need new brands to better leverage our stores - and in some cases it's acquisitions, whether it be properties or dealerships."

One of the biggest hurdles today is getting the word out to potential buyers that purchasing a boat is more affordable and less complicated than they think, McGill says. "The hassle is what most people fear," he says.

As a result, MarineMax continues to provide education about the boats and the logistics, such as financing. "Most people don't know they can get a loan for 10 or 15 years," he says. "So getting that message out there is critical."

McGill adds: "If you have the water gene, you've got it. We've just got to do whatever we can to help people realize it's easier than they think."

This article originally appeared in the October 2010 issue.

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