MarineMax reported seeing softness in the 60-foot-and-above boat market during its third quarter and pointed to inaction in Washington, D.C., as a leading cause for seeing that market weaken for the first time since the Great Recession — as well as cool, rainy weather in the Northeast.
The company remained confident, based on several positive big-picture fundamentals, that those factors will not affect long-term buying trends, MarineMax chairman and CEO William McGill told investors and analysts on a call Thursday to discuss the company’s financial results for the quarter that ended June 30.
The company reported Thursday that third-quarter revenue declined from $345.6 million in 2016 to $329.8 million this year. Net income rose to $14.2 million, or 57 cents a diluted share, from $13.8 million, or 56 cents a share, in the quarter last year.
“The thing that impacts our business the most is called uncertainty,” McGill said during the call. “What’s going on in Washington right now, everything they’re trying to get done is a pushback by the Democrats and a few of the Republicans, and that creates uncertainty — is this administration and president going to be able to execute on things that were promised to people who went to the polls and voted them in and voted on Congress?”
The ongoing discussion over potential Russian ties to the Trump administration “confuses people and makes them feel uncertain about what they’re going to do,” McGill said. “You’ve got people saying they’re going to impeach our president, and that makes people concerned. The business is doing just fine, the big-boat business — it’s taking a little longer to get it done. And when you're selling multimillion-dollar boats, between one quarter and the next … it makes a huge difference. I think that's what got us caught this quarter.”
A cool and rainy May and June in the Northeast also had an impact on sales; activity had picked up in the last few weeks as temperatures in the region soared, McGill said.
In the third quarter of 2016, MarineMax pointed to strength in sales of boats larger than 60 feet as contributing to 44 percent same-store sales growth in that quarter.
“We said over half the growth was driven by an increase in average unit selling price,” McGill said. “By comparison, when we exclude the Northeast and our business over 60 feet, our same-store sales is about 11 percent, and most of the regions outside of the Northeast were up in total revenues, regardless of size.”
Although the company sells few units of boats 60 feet and larger, annual revenue from those sales is about $100 million, CFO Mike McLamb said, or about 10 percent at the top line — it’s a smaller percentage at the bottom line because margins at that size range shrink.
“That specific segment has been fairly hot since the recession ended,” McLamb said. “This is the first time there's been somewhat of a pullback since probably 2010 or 2011, that us and others in the industry believe will be short-lived once things in Washington get moving in one direction or the other. It doesn't all have to be rosy. It just needs to move on to wherever it is going to be and get done.”
MarineMax's stock dropped Thursday, closing at $14.90 a share after closing at $19.75 a day prior. The 52-week high is $23.65.
The company emphasized that the underlying industry trends are strong — small to mid-size ranges of boats are strong, and new and used inventory is tight leading into the new model year. Although the absence of some new models has cost sales, McGill emphasized that new product is driving the industry and that people should always expect a ramp-up period after new-model introductions.
In addition, MarineMax is building its backlog and has been busy in the first weeks of July — particularly in the Northeast and somewhat in that 60-foot-and-above segment — and has not seen discounting or incentives offered by competing dealers, McGill said.