Dealer recovery reports

Dave Briggs, Owner • Wayzata Marine, Inc. • Orono, Minn. • Two locations
Brands: Chaparral, Four Winns, Chris-Craft, Tigé, Yamaha Jet Boats

Market conditions:
I don’t think the marketplace is up. If you look at this market in particular, we’ve lost some major competitors and others have shrunk. I would say the number of locations selling boats is half of what it was two years ago. That business is spread amongst the rest of us. The market is a little better. We’ve bottomed out, but I’m not sure we’re heading up the curve too much.

Sales:
Starting in November, our sales have been up each month. For those six months, we’re up 65 percent over last year. Previously, we were down 75 percent from our high point in sales.

Almost any used boat that is priced correctly is selling very quickly. New boats, especially closeouts and carry-overs that are normal brands – family runabouts, cruisers, deckboats – that stuff is doing very well up to about $100,000. Demand above $100,000 isn’t very great. Not that we haven’t sold any, but there’s not a lot of people walking in. Most of those sales are to people we already know.

Profitability:
We were profitable last year, but our profitability so far this year is about three times what it was a year ago.

We really don’t have the same pressure we had a year ago with price. We’ve been able to raise our margins to almost double what they were a year ago. The shopping back and forth of the customers is happening a lot less. We’re not as anxious to sell a boat just to sell a boat because I have only 20 boats to get as much gross profit from as I can to stay in business. There’s a lot of salesmanship that goes into getting higher margins, a lot of talking about why it’s important to buy locally.

Carlton Phillips, CEO • Prince William Marine Sales, Inc. • Woodbridge, Va. • One location
Brands: Sea Ray

Market conditions:
The phone is ringing hard right now. People are coming into the dealership. We know they’re here for something. I think the people that walk in today have a different attitude than last year. They’re tired of bad news. They want life to go on.

We currently have about 46 percent of the market share locally. But we’ve had three or four dealers close up, representing about 25 percent of my immediate market. I think we picked up some of that.

Sales:
We’ve sold a huge amount of used product in the past year. It has been the best used boat sales period I’ve seen in years. I am putting more value on trade-ins now — 10 to 20 percent more — because I can sell them for more money. I need used boats to sell. I don’t have anything in 2- to 6-year-old boats or 17- to 30-foot models, nothing late model.

The new boat side is OK but not great. We’ve turned three people looking for used into new boat buyers. They take the money they’re planning to use to buy used and put a down payment on a new boat. They’re paying $100 a month and are very, very happy.

We’re definitely up. We’re nine units ahead of last year right now.

Profitability:
We’re not down as far this year as we were at the same time last year. We’ve never had a profitable January, February or March, but we’re doing better than last year at this time. Margins are better this year. Sea Ray had a huge rebate program for the first three months of the year, which helped. Also, when you think you might not have enough products to sell, you think they’re worth a little bit more.

We made money last year, half of what we normally make. I do expect an improvement in profitability from last year. We’ve cut back. There is no more overtime. We’ve increased our detail department. There is no more subletting. We’ve taken all of our services in house. We are increasing our sales staff.

We are increasing our advertising. A lot of people say I’m crazy. But every time someone goes out of business, people looking for a boat have to know where to go.

Alan Bohling, President/CEO • Seattle Boat Co. • Seattle, Wash. • Four locations
Brands: Cobalt

Market conditions:
We are realizing out here in the Northwest that maybe we’re not experiencing the same rebound other parts of the country are seeing yet. Typically, the Northwest follows the East Coast. Once they rebound, we’ll start to see it, though it may be months from now or a season from now. We entered into the recession a little later than others, like New York.

I would guess 75 percent of our local dealer base was lost, but in some cases that business has already been replaced.

I don’t think we’re out of the woods. We’re going to have to manage lean, watch our inventory levels, sell for profitability and rebuild that profitable picture. It’s a two- to three- or four-year process in our minds to get back to what a normal year would have been historically. At that point, maybe the entire marketplace will still report fewer units sold, but because there is less competition, fewer dealers around, I believe our numbers will come back and even exceed our high numbers in three years. But it will be primarily because of a lack of choice in the marketplace.

Sales:
Last year, there was a lot of demand for used boats. New boats were selling only if they were at less than the used boat price. The used boat margin value was crummy for the consumer, but provided a better return for the dealership than the new boats. There was little to no margin on the new side.

New is still slow and soft. Margins are normalized. Sales are just still fewer. And that’s in the narrow pocket where there is still activity. In the Northwest, there has been little to no activity on twin engine models, in the 30-plus foot range, especially in new product. The core for us — the 23- to 26- or 27-foot category — is really the only strength we have in new boats. Overall, we’re at about 45 percent of peak.

When you consider overall dealership sales, we’ve seen a little improvement in March, compared to the same month of last year. January was also improved. February was flat. Overall, we’ve seen almost a 30-percent increase and improved margins on top of that, compared with the same quarter of the year prior. But even if you improve 30 percent, you’re still not bridging the gap. It’s scary how bad it was the last two years. Very few dealers in this marketplace survived it. Are we seeing improvement? Definitely. Are we out of the woods? Not necessarily.

Profitability:
The last two years we’ve experienced extraordinary losses in our sales departments. Never in our history have we sustained such losses in our sales departments. Each will return to profitability this year. We’re narrowing our focus to a fairly narrow bandwidth rather than being a little bit of everything to everyone.

The biggest change we’re seeing is improved margins. I think that’s a factor of inventory. There is less inventory in the field and improved margins.

Everyone has reduced their operating expenses. At the end of 2008, we were shedding expenses going into the winter. In 2009, we ran lean. We continue to run lean today, so as sales and margins improve, we can achieve better profitability.

We’re projecting reasonable profitability this year, but not because of strong sales. Rather, we expect to see continued improvement and strength in service, storage, fuel and marina operations.

Don Galey, President • Galey’s Marine • Bakersfield, Calif. • One location
Brands: Bayliner, Lowe, Sea Ray, Centurion

Market conditions:
From what I understand and I see, of all the states, California seems to be the one that’s in the well really, really deep. I wouldn’t be surprised if the state of California declares bankruptcy. The state can’t pay their bills.
Locally, in Bakersfield, our unemployment is 18.4 percent. That isn’t as bad as it sounds. Our county is one, two or three in agriculture. No one will be in the fields for another six weeks. That’s 6 percent. Another 6 percent never works. But the news media makes it sound as bad as it can. Everyone thinks the sky is falling.

We’re No. 5 in the nation for home foreclosures. We’ve overbuilt so much. It was the heyday until the bell rang. Now, they’re trying to sell them for nothing. People that bought homes are finding they’re worth 50 percent of their value so they walk away from them. No big ticket items are being sold in volume.

We had three local competitors who are all gone. They should have never been in the boat business. They didn’t have service. They were losing money. All that merchandise has to be watered out somewhere, somehow. It’ll take the rest of this year to get it cleaned up. We won’t see it — we’re very seasonal — but the third quarter of the year is going to be better.

Sales:
We had a promotion last weekend at our own facility. We spent a lot on TV and radio. And our floor traffic was certainly down. Our sales were just terrible. We talked to good people who drove to be here, but there is no urgency to buy. They could be out two weeks, two months or a year. Sunday, I got out on the floor myself. I worked with three parties. I thought possibly I could write them at the time. They all fell through. The people in this area think the sky is falling. Some of the dealers I’ve spoken to in California say they’re selling some used boats, but they have to be down in the dirt price-wise to sell.

Profitability:
We lost money last year. We’ve lost money this year. We’re down 25 to 30 percent more this year than last year. I think we have seen the bottom. It can’t get worse.

Financially, I’m very strong, and I can carry the store myself. We’re the oldest boat store in California. I can hang on for another two or three years. We have a good attitude. The people come in laughing and joking. They’re just concerned about the economy.

Debbie Hayes, Co-owner • MasterCraft Boats of Arizona, Inc. • Phoenix, Ariz. • One location
Brands: MasterCraft, Cobalt

Market conditions:
Here in Phoenix, we were probably hit harder than almost anybody else. Phoenix was No. 2 in those regions hardest hit by the downturn. It was California, Phoenix and then Vegas.

What drives our economy is real estate. And we had such a big boom — the higher you go, the quicker you fall. We’ve had such a bad real estate recession here. And it just hasn’t come back yet.

Residential real estate has maybe leveled off a little, but it may not be over yet. They keep talking about a second wave of foreclosures. Commercial real estate hasn’t come close to hitting bottom yet. And our building is not even worth half of what we paid for it just a few years ago. We don’t know when the real estate market will rebound. And I think until that happens, it won’t be a pretty picture.

Almost 50 percent of our local dealers are gone. When it comes back, those of us standing will reap the business, but we’ve got to hang in there. We made it through the winter, but the spring hasn’t been what we’d hoped for.

We always try to be optimistic. When it does turn around, Phoenix usually returns pretty quickly. People want to live here and retire here. You can play golf 365 days a year. And the values around here are very good. But we’ve got to turn that corner, and we haven’t turned that corner yet.

Our weather has been a little funny this year. Sooner or later, it gets damn hot. But it’s been an extremely wet winter for us, which is good because it keeps the lakes full. But it may have delayed things a few weeks. Last week, it was 11 degrees below normal, but it’s coming.

Sales:
We haven’t seen the spring activity that we normally do. March and April are normally super good months for us, but they were not good at all. We have hope that this summer, it will pick up but it better do it damn quick.

The season started a little earlier last year. We’ve got things working, but they haven’t hit the books yet.

Profitability:
We’re about $20,000 worse off than we were last year at this time when it comes to our bottom line.

The buyer’s perception when they come in the doors is if they’re going to buy something, they have to get a deal. They’re not paying retail for anything. We’re having to cut grosses much lower than normal to make a deal. Otherwise, they’ll go online and search across the entire country. So, besides selling fewer boats, we’re making less money on them.

Fred Pace, Managing Director • Legendary Marine • Destin, Fla. • Four locations
Brands: Sea Hunt, Ranger, Four Winns, Hydra-Sports, Everglades

Market conditions:
I think that the manufacturers have taken a different posture toward a lot of the dealerships and realized they have to have a good distribution system going forward. It’s no longer about “How many boats I can sell to this dealer,” it’s “How can I make sure they’re successful and have the proper inventory, not too much, not too little.”

Sales:
We’re very encouraged. We had pretty much embraced the repossessed product last year and were not down a great deal over 2008. We are fortunate to have repossessed product to sell. There’s still a fair amount of that out there. It’s a profit center for the dealership. That needs to go away to return to any sense of new normal.

We were purchasing it because inventories have been short. Like most dealers, we were very apprehensive to place orders in fall and winter because we didn’t know what this season would bring.

Things are significantly better than we had hoped for. We are seeing a return to the market of first-time boat buyers. The 18- to 25-foot boat business is better than the past three or four years. Buyers are discerning, doing more research with the product than in the past, but they’re out there.

Our February and March were way up over last year. The repo business has been steady since November 2008, but the increase has primarily been new boat business in that small boat segment.

Profitability:
2009 was certainly a challenging year. 2010 has already been a better year than 2009. We’re certainly profitable for 2010, and we’re really excited about that. January and February are tough months. We’re 700 miles north of Miami. We have a winter here, and a number of freezing days. There’s not a great deal of activity in those months. Perhaps it was repossessions or a resurgence of new boat buyers, but January and February weren’t as difficult as in the past. March was terrific, and April will be better than that. We are profitable this year, and anticipate that will continue to grow.

Lauren Woodard-Splatt, General Manager • Woodard Marine, Inc. • Hydeville, Vermont • One location
Brands: Sanpan, Sweetwater, Bayliner, Regal, Lund, Hurricane, Moomba, Aqua Patio

Sales:
We’ve had a great boat show season. We came out of the boat show with 10 sales. The types of boats selling right now are pontoon boats and aluminum fishing boats. I sold no fiberglass boats.

Two years ago, the Vermont Boat Show featured 28 dealers. In spring 2009, 14 dealers participated. This year, there were 10 dealers. It was a direct result of those dealers going out of business. I was disappointed in the size of the show, but traffic was up. About 3,000 attendees in two days is normal. This year, the show attracted 5,000 people in two days. It produced more sales because consumers were spending more time in our booth.

Then, there’s our in-house show. In a good year, we would sell about 20 boats in two days. This year, we sold 32. For us, boat sales year-to-date are way up. We are trending back with 2007 numbers, which was before the crash in our boat sales department.

I didn’t take as many trades on new boats last year because I was trying to make as much profit up front and not have to sit on new boats. I came into the year with three used boats, which is not good. We were losing sales because we didn’t have enough pre-owned, so I put a spin on the trade-in coupon in which we offered to buy our customers’ boats outright, which I don’t normally do. As a result, we purchased 10 boats this year, and I’ve already sold all of them.

With used boats and pontoon boats so popular, we sold our rental inventory sooner than usual. Usually, we wait three years. This year, we can get customers through the door with pre-owned. Plus, we make our money back in a year on boats through our rental department, despite only offering 10 weeks per year of boat rental. We budget for that and use it to determine how much we can charge for a rental. Under our three-year plan, we have two years of 100 percent profitability.

Profitability:
I would say we’re the same as last year profitability-wise, which was lower than normal. We went into this year with three noncurrent models, which is very good for us. The marketplace here is not saturated with repos, so everyone had a clean slate, so I raised margins a little bit, though they’re still probably three percent lower than we’d like them to be. We’re hoping to go for more quantity and make up the difference. So far, it’s working.

On pre-owned, we have higher margins than we normally do. That’s just due to buying the boats properly at the right price.

In addition, we used to give away safety packages with all the boats. This year, we have been giving away gift certificates representing half of the value of the safety packages. Our accessories sales are up because they’re spending more than the gift certificate amount buying more expensive stuff. That’s helping the accessories department and the sales department because we’re not giving as much away with the sale. I honestly think that by giving away the free safety package, customers think we’re giving them the cheapest product possible. They didn’t see the value in it.

Jeff Strong, President • Strong’s Marine, LLC • Mattituck, N.Y. • Five locations
Brands: Cobalt, Pursuit

Market conditions:
This is my third major recession I’ve gone through. And it’s not at all uncommon to take two steps forward and one step backward. The reason why our industry may be getting such mixed messages is a result of two broad categories – one is geographic: some regions saw a more dramatic drop-off. The other part is the two steps forward, one step backwards routine, which is not uncommon coming out of the recession we have had.

In our market place, there has been some competition that has gone away, but not much. The vast majority are good quality businesses that have done the same things we have.

Sales:
I would say in our market, on the new boat sales side of things, we were probably hit as hard as Florida and the West Coast when the stock market took a hit. Some areas in Canada and the Midwest didn’t see as much of a decrease. As a result, we’re starting to see a larger percentage increase because it had fallen off so far. Our new boat sales might be up 30 percent relative to last year. But if you put it in the context of ’08, we’re still off 20 percent. Our inventory is in dramatically better shape on the new boat side specifically.

On the used boat sales side of things, we never saw a drop off. If anything, we saw an increase during the recession. We were able to take advantage of some of the repo boats in the marketplace. We could process them and remarket them. Our used boat business was up last year and is up so far this year. There is an appetite for used product – it’s got to be clean and priced relative to what the market thinks is market price, not some blue book. The used product inventory is much lower than we’d like it to be.

Profitability:
While you do still have some bottom feeder activity out there, I would say at least 50 percent of sales have been 2010 product with reasonable margins. While last year, almost all sales were liquidated inventory at losses or very slight margins, this year at least half is current 2010 product at reasonable margins. That’s aiming in the right direction.

Our used margins were fine last year. They were where we wanted them to be. The margins were low on distressed new inventory last year, which was the bulk of the new boats we sold in 2009. We were essentially break-even last year. We expect 5 percent profitability this year.

Karl “Scooter” Rambo, CEO • Rambo Marine • Hazel Green, Ala. • Two locations
Brands: Cobalt, Four Winns, MasterCraft, Crownline

Market conditions:
It seems like customer traffic is not consistent. We’ll have a week of really good traffic and then it will fall off. The weather has turned nice and that has helped. Prior to that, we had to build urgency with customers. You could tell them all day long we were going to be short on models – and we are. We’re already short on some of our most popular models. We were telling the customer that in January and February, but they were very cautious and slow moving. It was hard to get them to pull the trigger and buy at the boat shows or early in the season. They don’t believe there will be a shortage. There already is. But a shortage will be better than the glut of inventory of the past few years.

Sales:
With year-to-date comparisons, we’re up slightly at 10 percent primarily due to new and used boats. I’m very pleased, and I’m also very cautiously optimistic, but I’ve got several concerns. A lot of those sales were non-current boats sold at little or no gross margin, clearing out that product. All of our old product is gone. That’s a good thing. My concern is will the buyers come in and buy current year product at normal margins?

We do have overall pretty good sales in new model stuff too. All of that isn’t carryover, but probably the increase was. I’m cautiously optimistic.

In our MasterCraft and Cobalt lines, the 23- to 26-foot models – those bigger models that we carry – seem to be selling the best so far. Historically, we’ve talked about that in our sales meetings. Our bigger boats sell earlier on. When you get into the boat season, just now starting in our area, the smaller boats take off. The question is whether they will take off like we expect them to, because they haven’t yet. That buyer is more the impulse buyer. That’ll be the real test if that buyer comes out and buys. If he doesn’t, it could be a flat year.

Profitability:
We are in the black, but generally it takes getting through some of the major selling months to really know that for sure. You have a lot of expense in the early months due to promotions and boat shows, and don’t get the sales for those until later in the season. We’ll be profitable – how profitable will be determined by the next couple of months. Quarters tell you a lot more than months do. For the first quarter, I feel good about where we’re at – right in line with budgets. I feel real good about things. We don’t need any big surprises right now. If we don’t have any surprises, it’ll be a very good year.

Mike Hebert, President • Texas Marine • Beaumont, Texas • Three locations
Brands: Ranger, Robalo, Chaparral, Skeeter, G3, Bennington, Yamaha Jet Boats

Market conditions:
It is better than what it was before. The Southeast Texas market and Houston, where we are, we’ve been pretty fortunate. We’re blessed that we had a very good start to the year at our January boat show.

There are now 30 to 35 fewer dealers in my market. We’ve seen some dealers go out of business, but you see the same people coming back with an investor or something.

Sales:
We were able to buy approximately 100 repossessed boats from the bank at a good discount before our boat show this year. The lines were ones that we really wanted, and we’ve added those to our product offerings. We were able to bring them to the show and sold over 150 boats, which is close to an average year for us at the Houston Show.

We actually had budgeted for fewer sales in new boats than last year for this year, but with a larger margin. We’re running a little bit ahead of last year, in the low double digits in new boat sales, and our margin has moved up substantially.

Profitability:
At today’s levels of business, there are still too many manufacturers and dealers for it to be as profitable as it needs to be for the huge investment that it takes to be in business. That’s something our industry is really going to have to work out, and some manufacturers get it and have done a really good job of working with fewer dealers with larger territories, giving them good support and long-term relationships. But they get tempted. They’re just trying to stay afloat themselves.

A lot of dealers and manufacturers are holding on but are weakened substantially. It wouldn’t take much for another wave to knock them out. I don’t think it’s over with. There will still be some shake out on both sides.