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Boat sales volume is playing catch-up - Trade Only Today

Boat sales volume is playing catch-up

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Persistently cold early-spring weather hurt sales at MarineMax and other dealers.

Persistently cold early-spring weather hurt sales at MarineMax and other dealers.

Lingering cold slowed early-spring boat demand in parts of the country, but builders and analysts expect those lost sales to be recouped as data point to the strongest first quarter in four years.

In fact, that has already begun to happen, according to Info-Link Technologies. It’s still early in the boat-buying season, but April numbers show signs that the bad-weather slump is largely behind the industry and sales are on the upswing. April sales are typically the first that the industry reviews to take the overall selling season’s pulse.

“We’re on a continued upswing,” says Info-Link managing director Jack Ellis. “April has essentially demonstrated what we as an industry had been predicting or hoping. We’re going to come out the other end of this brutal winter, and people will start buying boats again, even though it’s a little later than last year.”

On a 12-month rolling basis, outboard boats continued to drive the industry’s growth, with about a 10,000-unit increase from May 2013 through April 2014, Ellis says. Unit sales of powerboats had continued their five-year momentum, edging up over the 140,000 mark.

New-boat registrations from Info-Link Technologies’ bellwether states indicate the industry had its strongest first quarter since at least 2010. Sales slightly outpaced those of 2012, a year characterized by a mild winter and an early spring. Info-Link says its bellwether states are geographically dispersed and represent about half of the U.S. boat market.

Sales of outboard boats have been driving industry growth, Info-Link Technologies data show.

Sales of outboard boats have been driving industry growth, Info-Link Technologies data show.

Statistical Surveys reported that sales in the industry’s main powerboat segments edged higher during the first quarter, rising by 212 boats, or 0.9 percent, to 23,684, from the quarter a year earlier in 48 states that represent 99 percent of the nation’s boat market.

Industrywide sales rose by 824 boats, or 2.5 percent, to 34,341, from the 2013 quarter. Only Maine and Hawaii, which report sales once a year, were not included in the report.

Statistical Surveys said the top sales states for the quarter were Florida (5,125), Texas (3,493), Louisiana (2,036), Alabama (1,432) and North Carolina (1,338), all of which reported higher sales than they did for the first quarter last year.

Ryan Kloppe, Statistical Surveys’ national marine sales manager, says the data bear out reports from exhibitors at boat shows that they were seeing significant numbers of interested and qualified buyers.

“I think pent-up demand helped us through the bad weather,” he says. “As we hit the summer months in this country, I think you’ll see the sales gains continue.”

About a third of first-quarter sales always occur in warm-weather states such as Florida, Louisiana and Texas, Ellis says.

“All those places are doing well,” he says. “What that tells me is that though there is probably going to be a bit of a lag in the northern states, states that are not cold are doing pretty well. So hopefully when we come out the other end, in April or May, it will pick up again.”

First-quarter sales on a three-month rolling basis this year significantly outperformed those of 2013, a year that also brought cold weather in many parts of the country well into the spring months.

“If you recall, early 2012 saw a really mild late winter and early spring and had rising sales,” Ellis says. “So last year, people were like, ‘What’s happening? Sales are down,’ but last year was a terrible winter that dragged out and they were comparing it to a great early spring and late winter the year prior. Yet this year the winter is even worse and sales are about equal to where they were in 2012, when everyone was saying, ‘Rah rah, rah, look at how boat sales are going, and it’s still only the first quarter.’ ”

MarineMax CFO Mike McLamb says company stores were closed on more days during the March quarter this year than ever before.

“The persistent cold weather that enveloped the industry negatively impacted sales,” CEO Bill McGill said during a conference call to announce earnings. “The 2014 winter turned out to be one of the coldest since records began. Amazing, because we thought last year was cold.”

McLamb says large inboard boats seemed to be “showing the best consistency for sustained improvement.”

Pent-up demand

Brunswick Corp. and West Marine also believe that sales lost because of unfavorable weather could be recouped in the late spring and early summer.

“Weather conditions have continued to be adverse in certain key boating states and may consequently affect April retail comparisons, as well,” Brunswick CFO Bill Metzger said during a first-quarter earnings conference call. “At this early point in the marine season we believe that retail sales could be deferred to later months.”

Boat sales in the first quarter account for 18 percent of the year’s overall sales, Ellis says, which means the data come as good news. “We still have 82 percent of the year to go,” he says. “Despite a really harsh winter, we’re doing just as well as in 2012, when there was a really warm summer and early spring.”

B. Riley’s analysis of the marine industry produced a largely positive outlook for all four of the companies it covers — Brunswick, MarineMax, Marine Products Corp. and West Marine — despite the fact that early spring sales have lagged somewhat because of cold weather in much of the country. Poor weather prompted the firm to revise its guidance downward for MarineMax and West Marine, although analyst Jimmy Baker says MarineMax is well positioned to outpace an overall marine recovery.

“I would agree that January and February are borderline insignificant months in terms of registrations and sales,” Baker says. “What’s more compelling to me when I’m talking to dealers, though, is it’s more qualitative. It sounds like dealers attending shows where weather wasn’t severely impacting [traffic] saw orders and leads rise significantly. And they are converting leads into sales.”

Baker says that led to a “pretty good backlog in late spring,” which McGill says would keep MarineMax busy delivering boats through the late spring and early summer. “That gives me some consolation that although early sales were depressed by weather, those buyers who are serious or compelled to buy new product, they are going to shows, placing new orders and we should see that, getting into selling season.”

Overall sales were up from last year on a three-month rolling basis, from about 23,000 to 25,000, according to Info-Link data. They were just under 25,000 in 2012, when spring came early and sales began to pick up momentum in the late winter months.

Outboard-powered boats, which account for the lion’s share of all boat sales over 15 feet, rose from about 21,000 in 2012 to about 22,000 in 2014. Last year the number was closer to 20,000. Inboards also grew slightly. Sterndrives continued their incremental decline, from a little over 6,000 in 2012 to about 5,000 in 2014. Jetboat sales declined from 2012, but stayed flat with 2013 first-quarter sales.

Housing decline

One economic concern that was growing in the late winter, along with the effects of poor weather, was the housing market. New-home sales plummeted 14.5 percent in March, according to the Census Bureau.

Perhaps most concerning was that the drops did not seem to follow a weather pattern, at least for new-home sales, which rose 12.5 percent in the Northeast, but plunged 16.7 percent in the West, a region that did not suffer harsh conditions. Sales also declined 21.5 percent in the Midwest and 14.4 percent in the South. Meanwhile, the median price of new homes sold in March was $290,000 — 13 percent higher than in the same month last year, the Census Bureau says.

More encouraging was that pending home sales rose 3.4 percent in March, according to the National Association of Realtors, after nine months of stagnation. Existing-home sales are expected to total slightly more than 4.9 million this year, below the 2013 figure of nearly 5.1 million. However, with ongoing inventory shortages in much of the country, the national median existing-home price is expected to grow between 6 and 7 percent in 2014.

Analysts speculate that a strain on mortgage lending, along with rising home prices, have signaled a massive shift from ownership to renting, and they say rising rental prices have made it difficult for some renters to save for a down payment. Others speculate that a shift by millennials away from suburban living and toward urban living creates less desire for home ownership.

Manufacturing gains

There was better news on the manufacturing front, with the United States poised to be more economically attractive than China for manufacturing costs by 2018. A study issued by the Boston Consulting Group showed that only seven of the 25 largest exporting countries had lower manufacturing costs than the United States.

Since 2004, U.S. manufacturers have improved their competitiveness, compared with every major exporter except India, Mexico and the Netherlands. For example, manufacturing in China cost 14 percent less in 2004 than it did in the United States. By this year, the China advantage had narrowed to 5 percent. If the trends continue, Boston Consulting found, U.S. manufacturing will be less expensive than China’s by 2018.

During the past decade, labor costs, adjusted to reflect productivity gains, shot up 187 percent at factories in China, compared with 27 percent in the United States. The value of China’s currency has risen more than 30 percent against the U.S. dollar during the past decade. Stronger quarterly earnings reports from companies such as General Electric and Caterpillar indicated that large companies were beginning to invest in equipment and expansion for the first time since the recession.

This article originally appeared in the July 2014 issue.

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