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MarineMax’s downward revision of 2019 expectations prompts sell-off

Weather and the transition away from larger Sea Rays contributed to MarineMax’s lower-than-expected profitability in the second quarter, but the company does not see overall economic trends having a significant impact on more widespread consumer buying patterns.

The company mentioned softness in lower-priced boats, echoing statements made during Brunswick Corp.’s first-quarter earnings call Thursday, but said more aggressive promotions seemed to be helping spur customer demand.

“We saw inconsistencies on whether we could say it was [due to] weather or not,” said MarineMax CEO Brett McGill during a call Thursday to discuss quarterly results. “If there’s something else out there, I don’t know what it is.”

Thus far, it doesn’t seem to be related to higher-than-usual price increases from manufacturers who are working to manage tariffs and increased labor costs.

“We are not hearing concerns from customers,” said CFO Mike McLamb. “The customers we are talking about are here looking for a boat to enjoy the boating lifestyle.”

It’s the prospective boat buyers that dealers aren’t hearing anything from that seems to be causing the issue, said McGill.

“Our boat show traffic, it wasn’t a: ‘Here’s all the reasons we are not buying this boat,’” said McGill. “We didn't see that buyer as heavily in the shows as maybe we had in the past.”

“Clearly, this year has probably had greater price increases than any recent year, but that's across the board, whether it's lower-price-point boats or not,” added McLamb. “I think the industry and all of us need to be as sensitive to that as possible, but it's just inconclusive.”

Given the choppy data, coupled with increasingly improving boat shows, MarineMax took a proactive approach to try to stimulate additional sales through increased promotional efforts, said McLamb.

That expense was combined with the company’s transition away from larger Sea Ray boats.

“I think working through the Sea Ray product, moving the product, but yet continuing to keep customers in our family and put them in the other products we carry, it does take an enormous effort,” said McGill. “So it's not just about the inventory. It's about getting these customers on our events and Get-Aways with marketing and getting them to move into these other products that we carry.”

MarineMax said its current backlog is up "significantly" versus last year and that it expects April comparable sales, in units and dollars, to finish ahead of year-ago levels.

Although the quarterly revenues of $303.6 million came in ahead of estimates of $290.5 million, with a same-store sales gain of 12 percent, it came at a price since management spent more promotional activities in the quarter to drive sales that still fell short of expectations, wrote B. Riley analyst Eric Wold in a report discussing the earnings call.

Gross margins of 24.4 percent also fell short of the 25.6 percent reported in the second quarter of 2018.

Still, the sell-off in shares “seems excessive,” wrote Wold.

“While we understand the disappointment with the second quarter earnings-per-share miss and the fiscal year 2019 guidance revision, this reaction looks overdone to us,” echoed SunTrust analyst Michael Swartz. “Certainly, the choppy retail numbers over the past six months and MarineMax’s commentary suggesting softness in smaller boats does create a bit more uncertainty.”

MarineMax lowered fiscal year same-store sales guidance from 5 to 10 percent growth to 5 to 8 percent, and reduced the earnings-per-share guidance from $1.85-1.95 to $1.75-1.85.


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