No big surprises in MarineMax report, says analyst

CLEARWATER, Fla. – Boat retail giant MarineMax, Inc. (NYSE: HZO) saw revenues drop and net losses build during its third quarter ended June 30, the company reported in a recent statement.

But that wasn’t a surprise to stock analysts at RBC Capital Markets. Earnings were in line with estimates, and while sales dropped more steeply than anticipated, a gross margin of 22.8 percent was a pleasant surprise, beating forecasts, the company pointed out.

MarineMax management said it has plans to consolidate seven stores, which should drive up revenue at surrounding stores, helping to increase same-store sales comparisons during the 2009 fiscal year, estimated RBC.

While the analysts suggested the 5-percent increase in inventory is a concern, MarineMax’s plan to order about 40 percent less for the 2009 model year should help, they added.

Same-store sales down 27 percent

Revenue was $271.3 million for the quarter ended June 30, compared with $379.8 million for the comparable quarter last year, MarineMax reported. Same-store sales declined approximately 27 percent, compared with a 9-percent decrease in the comparable quarter last year. Revenue from stores recently opened or closed that were not eligible for inclusion in the same-store sales base declined by $10.3 million.

The net loss for the third quarter of fiscal 2008 was $113.3 million. As prescribed by SFAS No. 142, Goodwill and Other Intangible Assets, the company said it concluded its goodwill and indefinite lived intangibles were impaired. Accordingly, the company recognized a non-cash charge of $122.1 million, net of tax, including a valuation allowance related to deferred tax assets, it said. This non-cash charge was a result of the fiscal third quarter decline in the company's market valuation and a continuation of difficult marine industry conditions.

MarineMax also noted that it made changes to its team member benefit plans, which resulted in a $1.5 million reduction to its selling, general and administrative expenses for the quarter.

Revenue declined 23 percent to $719.8 million for the nine-month period ended June 30 from $940.6 million for the comparable period in fiscal 2007, according to the company. Same-store sales declined 23 percent compared with a less than 1-percent decline in the year ago period. Revenue from stores recently opened or closed that were not eligible for inclusion in the same-store sales base decreased $12.1 million.

Net loss for the nine months ended June 30 was $123.2 million, compared with net income of $13.4 million for the comparable period last year, MarineMax stated.

For the three and nine months ended June 30, the company said its same-store sales were adversely affected by the widely reported economic softness. MarineMax’s concentration in Florida and other markets that have been particularly impacted by the weak housing market has further hindered the company's performance, it stated.

"The marine industry, similar to many industries in the United States, is experiencing difficult conditions that continue to dramatically impact business,” said William H. McGill, Jr., chairman, president and CEO. “I am proud of our team's extra efforts during the quarter; however, the soft economic environment led to disappointing results. We are continuing to take steps to further strengthen our balance sheet and reduce our operating costs including store consolidations. Our inventory levels fell seasonally from the end of the March quarter but came in slightly ahead of the third quarter last year due to the greater than expected sales decline. Accordingly, we are further reducing our expected purchases from manufacturers for the 2009 model year."

McGill pointed out that the company has built what he called “a formidable balance sheet” featuring over $257 million in tangible net worth, which will help the company adapt to market conditions and continue its efforts to grow.

“We are confident that our unique customer-focused operating model and current cost-reduction initiatives will enable us to emerge as a leaner organization with even stronger growth prospects when the market turns,” McGill said. “Furthermore, we are experiencing greater customer involvement and participation in our Getaway events validating that our customers are using their boats as much as ever as they enjoy the lifestyle of boating. Our business is cyclical but our customer's passion for boating is not."

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