This week brought quarterly updates from some big-ticket manufacturers, which provided a look at how consumers are feeling about such purchases. The conclusion as it relates to the first half of 2024 is that things are likely to remain soft, but not worse. Moreover, should interest rates further ease (which we expect), that would set up the second half of 2024 for a stronger result. Consumers are still engaging and interested in power boats and the like. They just feel if they wait that they will get a better deal, both in price and in financing terms and rate. The other takeaway is that the high-end is still spending on big ticket; it’s the aspirational and non-affluent that have grown more cautious about pulling the trigger.
MarineMax--the largest retailer of recreational boats and yachts--reported a +4% comparable sales increase for Q4 2023, with October and November sales below expectations but a strong rebound in December (thus capturing a similar strong finish to 2023 that the rest of retail experienced). The +4% was driven by a slight increase in units but more so by product mix--consumers are migrating into bigger boats and the premium end of the market performed stronger than the entry-level/value segment (similar to other retail categories). For the fiscal period ending September 2024, comparable sales are expected to grow in the mid-single-digits range, in an industry that is expected to be flat-to-up-slightly on a unit basis. MarineMax CFO Mike McLamb noted, “The consumer is making it clear that incentives and urgency help to facilitate retail activity similar to historical years, especially when the industry inventory is elevated for many segments.” MarineMax CEO Bill McGill elaborated, “[W[ith interest rates, really the biggest effect we saw is when rates climbed so quickly. It kind of shocked people, but then once they kind of moderated and people got used to it, that calmed things down...I think people looking out there and saying rates are starting to go down, maybe it gave us a little tailwind [in December and January].” In the Q&A session of company's conference call, McGill observed that consumers were still coming into the top of the sales funnel (boat shows, which typically take place between December-February), they just needed more time and persuasion (incentives) to exit the bottom of the sales funnel (i.e., make a purchase).
Malibu Boats, a supplier to MarineMax and manufacturer of Malibu, Axis, Cobia, Pursuit, and other boats also reported results. CEO Jack Springer is quoted, “While the current macroeconomic outlook creates uncertainty, we are starting to see some positive signs following our Year End Sales event for Malibu, demonstrating the resiliency of our brands. The upcoming boat show season will serve as an additional indicator of retail recovery, as we believe it will reflect the continuing consumer interest for our larger, feature-rich boats.” For reference, the company’s average revenue per “Performance Sports Boat” was $124K. The company's average selling price (ASP) for Q4 2023 was up +5% year-over-year despite a 460 basis point increase in lower prices via discounts. The delta of +960 basis points reflects mix shift into higher-priced brands like Cobalt and Pursuit, and higher-end models.
Polaris reported impressive Q4, with off-road vehicles (ORV) and utility vehicles up +7% year-over-year in units sold. Recreation vehicles were soft (motorcycles decreased -24% and deck boats decreased -42%), except for snowmobiles which were up low-teens (versus easier comparisons in the year-ago period). For 2024, management expects motorcycles to flatten out and marine to moderate to a mid-teens decline, with Q1 still very soft given excess retailer/dealership inventory levels. Similarly to MarineMax’s comments, CEO Mike Speetzen said, “November and December, we increased our promotions for current inventory and response and our strategy seemed to play out well as we saw retail increase meaningfully in both those months.”
