As it was quite predictable, after the post-pandemic boom that the recreational boat industry experienced, mainly driven by people’s desire to spend more time outdoors and enjoy their hobbies, accompanied by a low-interest-rate environment that facilitated financing and purchasing of such products, things took a turn in 2023 when demand began to wane and sales plummeted across the industry – after all, it’s the usual process for any cyclical industry.
However, the situation of different companies in the sector couldn’t be more different (we refer in the article to the following companies)
Manufacturers: Malibu, Bruskwick, Mastercraft, Marine Products
Dealers: OneWater Marine, Marine Max
While during 2021 and part of 2022, dealers were the big beneficiaries of supply chain issues as most delays and cost increases were absorbed by manufacturers and dealers easily met the high demand in the sector, keeping inventory consistently low (at an industry level, no specific player stockouts that could work against the company).
With the normalization of supply chains, manufacturers recovered and saw a significant increase in sales in 2022 and 2023 (fiscal year), while dealers were restocking (and interest rates rising). They could have absorbed this process with fewer inconveniences if it hadn’t been for the numerous acquisitions made in 2022 and part of 2023 (and the overpaying for many of them, as we identified in a previous publication about OneWater Marine and MarineMax with our own calculations based on the companies’ data), which significantly increased their debt (it’s worth noting that the nature of MarineMax and OneWater Marine’s acquisitions was very different).
The challenging part of this process is trying to identify the turning point and how companies will be affected at that point. Because let’s be clear, we’re talking about a cyclical industry with sales declines of 30-50% (depending on the company), arriving in different situations (some thinking about growth and taking advantage of their competitors’ weakness, and others doing calculations for a capital raise).
In fact, last quarter, both ONEW and HZO were already aggressively managing inventories (in addition to having incentive programs enabled by the manufacturers). MarineMax was aggressively cutting personnel (it has the highest SG&A / sales ratio – in fact, executive salaries are staggering and the difficulty of meeting targets is questionable)
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Marine Products Corporation Results $MPX
We will use this section to post our earnings analysis of the rest of US Boats / Dealers companies
