Analysts unsure about 2008

DENVER and ST. LOUIS – Marine retail sales expectations for the year have once again worsened, following Brunswick’s announcement last week it would be cutting production.

2007 retail dollar sales are now forecasted to be down 12 percent, compared to 2006, while unit sales are expected to decline 15 percent.

Assuming sales are flat for the rest of this year and into early next year, A.G. Edwards & Sons is now forecasting further industry production cuts are ahead if the industry is to bring retail inventories into line. The company is concerned that product greater than 12 months old is at close to 3-year highs, though it is stable and perhaps even improving due to heavy promotions. At this point, there seems no indication that the industry has hit bottom, according to analysts.

Despite this news, analysts and industry insiders remain unsure of what to expect for 2008. In a statement yesterday, RBC Capital Markets reported, “Aside from seeing no visible catalysts to support an improvement in retail sales, assessing boat demand for 2008 is beyond our ability.”

The firm did state, however, that “We are now projecting a flat earnings year in 2008. Analysis of pipeline inventory trends and management commentary on the [Brunswick] call leads up to anticipate further declines in the first have of ’08 followed by a modest recovery in the second half.”

If market conditions remain the same, the company said production should return to modest growth in the 2009 model year, which begins in the third quarter of 2008. Even with a moderate decline in retail activity, RBC suggested boat shipments should return to positive year over year growth in the second half of next year.

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