Dealer optimism drops in November - Trade Only Today

Dealer optimism drops in November

Index falls seven points as Pulse Report survey finds uncertainty about tax reform hurting sales
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Marine dealers say government inaction was the single biggest factor in demand for new boats as the industry awaits tax reform — however, dealers didn’t rank it as impactful as they did last year or in 2015.

“Favorable tax legislation, if passed, should improve consumer confidence. If not, it could produce a negative impact,” said one dealer in the monthly Pulse Report conducted by the Robert W. Baird firm, the Marine Retailers Association of the Americas, and Soundings Trade Only.

“If Washington does their job, maybe we’ll see another boost this spring,” said a second dealer that participated in the November survey.

Dealers said that although they’d like to see favorable tax reform, the uncertainty of what will happen in regard to taxes was hurting sales.

Marine retailer sentiment based on conditions decreased sequentially, from 77 to 70, and dropped from 76 last year. The 3- to 5-year outlook also dropped, from 78 to 75, and relative to last year, when it was 80.

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New-boat retail growth moderated in November, but remained positive as 35 percent of retailers reported growth and 26 percent reported a decline.

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Used-boat retail trends in November were consistent with the prior month, as 31 percent of retailers reported growth, compared with 35 percent in October and 29 percent in November last year.

November represents only about 3 percent of annual retail sales, so the trends are not particularly relevant, Baird analysts said in the report.

In November, more dealers considered new-boat inventory “too high,” with 38 percent saying they believed they had too much product versus 8 percent who said they didn’t have enough.

“We believe inventory levels are appropriate, but marine retailers prefer less inventory during winter months,” Baird analysts said in the report.

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Profit expectations for 2017 were high, with 75 percent of marine dealers surveyed expecting better profitability in 2017 than in 2016.

Although most dealers reported volume growth, some dealers commented on margin pressure, leading to lower profits.

Dealer comments around profitability varied greatly, with some saying they expected large increases and others saying they expected to be flat or down from last year.

Margins were a large topic, with several dealers saying they continued to tighten.

 “Margins are getting squeezed, due to customer shopping nationwide to find the best deal,” one dealer wrote in the comment section. Others said hurricanes damaged their profits.

Dealer-manufacturer relationships appeared to be showing some signs of strain after vastly improved relations in the last decade or so. Several dealers worried that manufacturers had an overly optimistic outlook that would lead them to push more inventory on dealers than they could handle.

“Watch inventory closely, many caution flags out there as manufacturers continue to push,” one wrote. “Stock what you can sell.”

“Market is not at all close to what crystal ball that our manufacturers are looking at,” another dealer said.

There is “still concern that some builders will oversupply the pipeline and some dealers will have to dump products in late 2018, causing margin concerns,” another dealer echoed.

Several of the anonymous comments also called out Internet pricing as applying pressure to already tight margins.

 “Manufacturer fixed margin pricing on internet is killing dealers,” one said. “Costs continue to rise and margins continue to drop yet manufacturers want customer experience to remain the same. Not sustainable!”

Others mentioned that credit scores seemed lower than they had been — perhaps a sign that more consumers were using credit for purchases and potentially becoming overleveraged.

Some dealers also said they were having an excellent sales year; others said they’d had a solid first half that was offset when the second half dropped off.

The Pulse Report is designed to provide industry professionals with a regular, timely look into retail trends at the dealership level.

The Marine Retailers Association of the Americas and Baird Research launched the report in December 2013 as a first-of-its-kind tool compiled specifically for marine retailers.

Soundings Trade Only joined the partnership with Baird and the MRAA in February and will continue to participate in the survey’s distribution and results reporting.

“The information contained in each Pulse Report simply can’t be found anywhere else, and we strongly believe our print and online audiences will find them extremely useful,” said Trade Only editor-in-chief Bill Sisson. “Joining MRAA and Baird in gathering data and distributing the Pulse Report results each month was an easy choice for us.”

Retailers who would like to participate in the survey can email Baird senior analyst Craig Kennison at ckennison@rwbaird.com.

This article originally appeared in the January 2018 issue.

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