Dealers operating in war zone, says analyst

NEW YORK – Following a September survey of 500 leisure product dealers, RBC Capital Markets concluded, “It’s a war zone in consumer durables,” with marine and RV dealers being particularly hard hit by tight credit, low consumer confidence and high energy prices and therefore facing excess capacity.

Of the group of boat, RV and powersports dealers surveyed, boat dealers were “most pessimistic about the current business environment and long term outlook,” the firm reported in a statement. And that was in September, before the significant events that have taken place in the financial markets over the past three weeks, the company added.

While RBC said a small majority expect improvement in their markets by next spring, a growing number of dealers, especially those in the boating industry, do not expect a recovery in 2009.

The 250 boat dealers surveyed reported an approximate decline in new fiberglass boat sales of 40 percent and a substantial decline in profitability.

“Inventory remains a problem,” RBC reported. “Dealers are uncomfortable with both the absolute level and (especially) the aging of their inventory.”

The company said dealers expect more moderate declines going forward with an improvement in the rate of retail sales decline over the next 6-12 months. But they don’t plan to fully replenish their inventory. Most dealers plan to cut orders by 20 percent or more over the next 6-12 months, said RBC.

As a result of its survey and the events of the past few weeks, RBC is lowering its forecasts for all leisure companies below consensus and “street-low” in most cases, it said. That includes Brunswick Corp. and MarineMax, both of which face “extreme demand weakness in the U.S. and weakening trends abroad,” according to RBC.

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