Demand for upper end cruisers soft

DENVER – So far this year, consumer demand at the upper end of the cruiser market, which consists of boats priced from $150,000 to $450,000, has been softest of all the boat segments, according to a recent report from A.G. Edwards analyst Tim Conder.

Small boat sales have remained steady after declining to “lower levels” in 2006, he added.

These are some of the many observations that came out of the first in a series of monthly conference calls A.G. Edwards has scheduled with a retail lender to the boating industry, it said.

Conder reported that demand in general so far this calendar year has been weak with poor weather in January and February, during which boat shows suffered from declines in attendance. The good news, however, is that March has shown evidence of a “seasonal pick-up in demand.”

Pacific Northwest strongest boat sales region

He characterized boat sales in the North East are “very quiet so far,” while the Great Lakes is “up a little vs. a weak 2006 related to fallout from upheaval in the automotive industry.” The Midwest is steady year over year, while the south is steady with Florida “tracking expectations despite higher insurance rates for boaters.” California was described as the weakest of the major geographic regions, while the Pacific Northwest was characterized as the strongest year over year, “but generally steady.”

Dealer inventories are slightly heavy – primarily in 2006 models – because dealers have kept their 2007 orders modest, he reported. While dealers are asking boat builders for more promotions and better financing dealers, Conder stated that manufacturers will probably wait to see April and May results before introducing incremental promotions.

On the manufacturing side, “channel inventories remain slightly heavy,” according to Conder, with the big boat builders featuring cleaner pipelines than their smaller competitors due to earlier production cuts.

The analyst reports a “de facto tightening” of consumer credit, with lenders maintaining their standards despite requests from dealers and consumers for better financing terms, such as no down payment.

Overall expectations for 2006 retail dollar sales are that they’ll be flat at best and down 6 to 7 percent at worst, according to Conder.

“While March has improved seasonally, based on the current sales trajectory, 2Q retail dollar sales will be a challenge,” he stated.

The silver lining? Conder said the Grow Boating Initiative should benefit 2007 results and “provide long-term positive inertia as the industry works to attract more first time boaters.” He also noted that about 70 percent of new boater sales are driven by trade-up demand.

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