Survey confirms industry weakness

NEW YORK – RBC Capital Markets Corp. found that demand for boats is poor and many dealers still have high inventory levels, as well as other indicators of the well-documented industry weakness in its “Q2 Boat Dealer Survey,” according to a statement from the company this morning. The survey includes responses from more than 250 boat dealers throughout the United States.

The survey found demand for new boats is extremely poor. Nearly 35 percent of dealers reported that new boat sales are declining by 30 percent or more, supporting RBC’s view that the market was down 25-30 percent in the 2008 second quarter. The used boat market is holding up much better in relative terms. The challenge is that most dealers acquire used inventory through trade-up transactions. As a result, anemic trade-up activity is an impediment to used boat sales. Dealers attribute energy and consumer confidence issues as the primary reasons for the weakness, but also expressed concern over the financing environment.

Inventory is still a problem. Dealers expressed concern with the overall level and, to a greater extent, the aging of their inventory. Nearly half of the dealers surveyed reported meaningful levels of non-current (pre-2008 model year) inventory. Dealers did not indicate a significant amount of promotional assistance from manufacturers, supporting RBC’s view that manufacturers are adjusting primarily through production.

Dealers are planning very conservatively. Most are cautious in the short term and are planning to react by significantly reducing orders, lowering prices and cutting expenses.

Survey respondents are uncertain whether the market will recover next spring. Longer-term sentiment towards the business varied widely. Some dealers believe the current downturn is temporary, whereas others fear that the market could be permanently impaired for structural reasons, most notably the prohibitive cost of owning and operating a boat.

The weakness appears broadly based. Although most dealers surveyed had an opinion about whether the high-end is holding up better than the low-end, feedback on category trends was far from consensus.

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