MarineMax profit taking a hit

CLEARWATER, Fla. – Boat retail chain MarineMax, Inc. (NYSE: HZO) expects to be significantly less profitable than it originally expected this year, according to a statement it released yesterday. But with unit growth in the double digits, the company believes its strategies are working and it’s gaining market share.

“Based on recent industry reports, challenging marine retail conditions are continuing,” said William H. McGill, Jr., chairman, president and CEO of MarineMax. “Industry data suggests that unit sales in the segments in which we operate have fallen as much as 20 percent. However, our unit growth during the same period has exceeded 20 percent, which is in stark contrast to the industry.

McGill added that while the company is displayed with its earnings and the industry’s weakness, “we are pleased that we have been able to capitalize on our retail strategies, brands and team to considerably outperform our competitors and gain significant market share. Since a large percentage of our revenue is from repeat and referral buyers, these market share gains should yield greater revenue and earnings when the industry recovers.”

RBC Capital Markets analyst Paul Burton suggested that the company has racked up unit sales increases through “aggressive selling of smaller boats (less than 24 feet) at thin margins” and noted that “trade-up demand in the $75K to $500K segment appears very weak.”

The numbers

MarineMax reported that it anticipates its earnings per share for its fiscal year ending September 30 will range from $0.45 to $0.65 on a fully diluted basis, down from previous expectations of $1.40 to $1.50.

The company’s 2007 guidance assumes same-store sales will be flat to low single digit and excludes the impact from any potential material acquisitions that it may complete as well as the unusual item described below, it stated.

The company expects to report second quarter revenue of approximately $326 million, with same-store sales growth of approximately 2 percent and approximately $35 million from stores that were recently opened or acquired that are not eligible for inclusion in the same-store sales base.

Due to increased pricing pressure and increased costs incurred to generate the company’s sales, operating margins were negatively impacted, which is expected to result in second quarter earnings per share ranging from $0.14 to $0.17 per diluted share, the company reported. This range includes approximately $0.06 per diluted share arising from the proceeds of business interruption insurance for claims associated with Hurricane Wilma in 2006, resulting in a range before this unusual item of $0.08 to $0.11 per diluted share.

McGill said that MarineMax is trying to reduce costs and strengthen its balance sheet by cutting its purchases from manufacturers in the June quarter.

“While we are concerned about the near-term retail conditions, we are confident that our strategies and industry-leading position will yield significant long-term revenue and earnings growth for the company,” he concluded.

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