Dealers’ short-term optimism wanes

Sentiment Index drops in July, but expectations for the next three to five years remain very strong
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Sentiment Index drops in July, but expectations for the next three to five years remain very strong
Pulse Sentiment chart

Marine dealer sentiment declined on a month-to-month basis in July, although the mood based on a three- to five-year outlook brightened.

The MRAA/Baird Marine Retailer Sentiment Index dropped from 77 in June to 69 in July, and was down from a reading of 79 in July of last year. The all-time high is 81 for the monthly index, which began in December of 2013.

Baird said the index’s three- to five-year outlook improved sequentially to 76 in July from 69 in June and was modestly higher than a reading of 75 in July of last year.

Retailers may no longer be optimistic that federal tax cuts and regulatory reforms will happen this year, but they appear to believe action could occur down the road.

Pulse Household Wealth Chart

“Optimism after the election hasn’t turned into a rebound yet,” one retailer noted. “Hopefully, next year will be great.”

“Revenues below our robust 25 percent growth projections (YTD); however, much consumer demand is very strong; inventory is better balanced; very optimistic over the long term,” another dealer said.

Baird said that when it looks at the big picture “we still believe growing wealth among affluent consumers will support growing demand for boats — and the lack of used supply will steer buyers to new boats.”

Fifty-nine retailers participated in the July survey.

New Boat Retail Trends Graph

Baird said the percentage of retailers that reported new-boat retail growth in July (44 percent) declined from June’s pace (59 percent) and was well below last year (76 percent).

 “Net, our checks suggest demand moderated further in July despite an easier [year-over-year] comparison (July 2016 was down 7.0 percent, according to Statistical Surveys retail data),” Baird said. “However, used-boat retail trends in July appear a bit less volatile,” Baird added.

Baird said 51 percent of retailers reported used-boat retail growth in July, compared with 58 percent in June and 64 percent in July last year.

“Seasonally, July is past the peak retail season, but is still an important month, representing about 13 percent of annual sales,” Baird said.

Baird said retailers indicated the economy, new products, access to credit and OEM promotions positively affected demand during July, although none of those factors had as large of an impact as they did last year.

“Business is fairly good for the end of July,” one dealer said. “Historically a slow time of year for our type of business. Leads are up. Activity is good. Sales are up!”

“Pontoons would be hot if I had any left to sell!” another dealer said. “High-end fiberglass sport boats have picked up.”

Triple pontoons in high demand,” a third dealer said. “Very little price negotiation with customers when it comes to triple pontoons.”

However, retailers indicated that weather, trade-in activity and government action or inaction all negatively affected demand during the month.

Used Boat Retail Trend Chart

“Our energy economy is slow to recover after eight years of the Obama administration,” one dealer said.

Retailers reported that new-boat inventory was balanced, although “inventory comfort” declined modestly on a sequential basis.

“The sequential decline is likely a function of slower retail growth that retailers reported in July,” Baird said.

An equal percentage of dealers considered inventory “too high” (38 percent) compared with “too low” (38 percent).

“Still, we believe inventory levels remain within a ‘normal’ range,” Baird said.

Baird said the survey also showed that used-boat inventory remains extremely lean, as inventory levels remained generally consistent with low levels seen during the past few months.

“Illustrating this point, 63 percent of retailers report that used inventory is ‘too low’ versus just 19 percent that report inventory is ‘too high,’ ” Baird said. “We continue to believe one of the key drivers of new-boat demand is the limited supply of used boats.”

The Pulse Reports are designed to provide industry professionals with a regular, timely look into retail trends at the dealership level. They were launched by the Marine Retailers Association of the Americas and Baird Research in December 2013 as the first report of its kind 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 distribution of the survey and the reporting of its results.

“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 September 2017 issue.

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