Inventory progress expected in early 2008

DENVER – Despite what he called “relatively easy comparisons” to last year’s third quarter, RBC Capital Markets analyst Edward Aaron estimated that third quarter boat sales were down somewhere between 12 and 15 percent, the firm reported in a statement today.

Aaron also reported that there continue to be no clear signs that the industry has hit bottom. Housing related weakness continues in Florida and California, regions that “account for a higher percentage of industry sales during off-season months.” Promotional assistance from manufacturers such as Sea Ray and US Marine have come to a close, at least for the rest of the calendar year. And inventory is still “too high relative to demand,” especially in the cruiser segment, according to Aaron.

“Because the seasonally slow period is upon us, we expect minimal inventory progress over the next few months. However, assuming industry growth rates improve somewhat against easier comparisons next year, we would anticipate significant inventory progress in the first half of calendar 2008,” he stated.

With that said, Aaron expects manufacturers – and Brunswick Corp. in particular – to operate at their current low production levels throughout the rest of the model year.

Despite a prediction that Brunswick will probably not cut production further, RBC does anticipate that the company will revise its fourth quarter and 2008 estimates downward.

With the success of MarineMax Inc.’s “World’s Largest Boat Sale” – which Aaron notes was longer and more aggressive this year than last year” – RBC does not expect the boat retailer to revise its fourth quarter or full-year guidance. But fiscal year 2008 is a different story. Aaron believes that industry conditions have likely been worse than the company expected “when they last cut guidance back in April,” he suggested.

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