Earnings up, sales down for Coast Distribution System

MORGAN HILL, Calif. – The Coast Distribution System, Inc. (Amex: CRV), a supplier of aftermarket replacement parts, accessories and supplies, saw an increase in earnings despite a decrease in sales during the second quarter ended June 30, it reported in a recent statement.

Coast, which serves the recreational vehicle (RV), marine and outdoor recreation industries, reported net earnings of $1.6 million on net sales of $41.2 million for the second quarter of 2008. For the same period of 2007, Coast reported net earnings of $1.5 million on net sales of $50.8 million.

The company reported gross margin of 21.4 percent for the 2008 second quarter, an 11.5 percent year-over-year improvement over gross margin of 19.2 percent in the corresponding quarter of 2007. Coast attributed the increase in gross margin to the strengthened Canadian dollar, improved pricing and increased sourcing of products from Asia. It noted the 2008 second quarter also marked the fourth consecutive quarter of gross margin improvement.

Coast attributed the 18.9 percent year-over-year decline in sales during the quarter to decreased demand in the RV industry coupled with decreased demand in the boating industry. The Recreational Vehicle Industry Association (RVIA) recently reported a 14 percent year-over-year decline in RV shipments for the five months ended May 2008, the latest data available, the company noted. Several pleasure boat retailers have also reported similar declines in the second quarter.

“Given the extremely difficult market conditions, we are pleased with our ability to increase margins and maintain our profitability,” said Coast Chief Executive Officer Jim Musbach. “With economic uncertainties and higher fuel prices, it appears many would-be purchasers of RVs and boats are currently deferring big-ticket purchases. However, the RVIA has indicated that it expects RV sales to stabilize by early 2009. The RVIA also expects RV rentals to increase 18 percent this year, while RV campground attendance has increased year-over-year. Though sales of new RVs are sluggish, we believe consumers are using their RVs and enjoying the RV lifestyle more than ever, and will continue to need our aftermarket products.

“Based on economic conditions in the RV and marine markets, we anticipate that the second half of 2008 will be a difficult period. Our focus remains on areas management can directly control, such as increasing the number of exclusive products we sell, and controlling costs to keep them in line with sales. We believe that the strategic steps we have taken in the last several years – the improved efficiency of our operations, our improved product development capabilities and our expanded market share of Coast developed products – continues to place us in a good position for the future.”

Coast reported net earnings of $711,000 on net sales of $80.7 million for the first six months of 2008, compared with net earnings of $873,000 on net sales of $94.5 million in the same period of 2007.

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