MarineMax executives were disappointed that they didn’t hit Wall Street’s targets, saying that selling off aging inventory and increasing marketing spending were among the reasons it missed analysts’ second-quarter earnings projections by $1.11 million — although the company still saw year-to-date sales up 34 percent from last year.
“What the industry experienced was a bad decline in inventory turns,” MarineMax CFO Mike McLamb said Thursday during a conference call to discuss fiscal second-quarter results. “Ours need to improve even from where we’re going to conclude this year. So we're improving turns, which will improve profitability. Fresher product yields higher margins. We feel very good about our inventory and our ability to sell and deliver boats in the season.”
“We’re making more and more progress this year to eliminating it all,” MarineMax CEO William “Bill” McGill said. “Will it all happen this quarter? We’re sure pushing to do that, but I kind of doubt it. We’ll have less and less, and margins will improve better and better, because new [product] has substantially higher margins.”
“The thing that gets a little tough to bake into the equation is … it's a three-year complete revamp of our largest supplier [Sea Ray] and we're in the first year right now,” McLamb said.
Inventories were up about 6 percent, to $277 million, McLamb said. “Given that our sales were up 34 percent for the year, our turns are improving and we are comfortable as we enter the busiest part of the year.”
“The signs are all there that it’s very, very positive and some of the … costs that we had, like health insurance and the marketing spend, we believe was the right decision, but getting our inventory right is absolutely the right thing for the long term and really puts us in a position to have an incredible 2015,” McGill said.
Revenue increased from 2014, “so we’re feeling good about that, but as I said, we’re disappointed we weren’t able to hit the Street’s numbers,” McGill added.
Marketing dollars increased in light of all the new models delivered by key supplier Sea Ray, as well as the addition of new lines, such as Scarab, McGill said.
“The March quarter is always the quarter when we spend by far the most in marketing because of all the boat shows we are in,” McLamb said.
“We had new products to show, as well as new brands that we didn’t have last year. So we put on a full-court press and saw a lot of results, a lot of which is getting shoved into this quarter,” McGill said.
“We’re having great success with Scarab, now with four different models, that’s starting to light up across the country,” McGill said. “If you take what’s going on with [Boston] Whaler, Scout, Sailfish, Sea Ray and Azimut, I mean, stars are starting to align here. We didn’t get it all cleared out this quarter, but we sure made a big dent in it.”