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MarineMax ties 2Q results to lag time of new Sea Rays

MarineMax saw reduced margins in the June quarter because the company “largely didn’t have the new models to sell,” according to CFO Mike McLamb. However, the company was able to realize one of its best unit growth quarters since before the recession with encouraging gains in sterndrive sales.

MarineMax executives were disappointed that the company couldn’t hold margins higher while awaiting new products, notably from Sea Ray, MarineMax CEO Bill McGill said in a call to investors and analysts Thursday.

“If we’d had new products …two years ago, the company would look entirely different today,”McGill said. “But we made a conscious decision to stick with the No. 1 brand in the world called Sea Ray and new products take time to do. Decisions to not invest in new product that were made years back—we’ve had to pay the price for that. But that being said, we’re going to get all the rewards when we do get new products.”

The 350SLX is an example of a new Sea Ray product that has been in high demand, but has not been easily obtained.

“We’re getting incredible margins on the product. It’s in demand,”McGill said, adding that MarineMax has sold more than 60 and has only received about 20. “As we get the new products from our primary brand called Sea Ray, life for us will sure be a lot more fun and these calls will be a heck of a lot more fun, too.”

The company had to yield some of the margin increase that was the result of MarineMax’s “one-price approach” to selling.

“We didn’t get away from our one-price selling,” McGill said. “We just lowered the one price, understanding that Sea Ray was in there helping us with that or our margins would have even been lower. The real opportunity here is the new product as it comes, and they’ve been a little slow in doing it, but the product is dead on what we need and it’s going to be a game changer in a lot of cases and get a lot of these customers wanting to trade even more.”

In a separate conference call, Brunswick CEO Dusty McCoy acknowledged the lag time between the sale and delivery of some new Sea Ray product and said the company is addressing the problem.

“We’re going to be careful getting this new product into the marketplace, especially with big Sea Ray product …We waited a while to get great big new SR product into the marketplace,” McCoy told analysts. “We knew we were going to be losing share as we went through a careful planning, development process. Now we need to make sure that when we get it into the field, it’s really good, high-quality product with no issues. As we look into the future years of this brand, this is one of the big foundations for future growth. If we ever err, it will be on being slower, making sure it’s right, rather than pushing it out trying to get revenue.”

The impact of the nation’s poor spring weather continued to drag through May, but the company still was able to “generate healthy increases each month of the quarter,”finishing with a strong June, McGill said.

MarineMax saw 22 percent revenue growth in the quarter on top of 16 percent growth last year.

The weather challenges prompted the company to be more aggressive with marketing and “to a degree, with pricing, and both ended up contributing to our strong results,”McGill said.

“Despite the industry choppiness, based on the preliminary share information, MarineMax produced meaningful share increases in most geographic markets and categories,”McGill said. “But most exciting is that it was one of the best unit growth quarters we had seen since before the recession began.

“What is also encouraging is that of all the categories in which we operate, we saw the greatest unit strength in sterndrive boats, which has been behind other industry categories during the recovery. It certainly would be nice to see this trend continue.”


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