USA demand for cruising boats 'disappointing'

Disappointing year for yacht dealers
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A wide-ranging survey of 288 dealers in the USA confirms that 2011 has been a disappointing year for yacht and boat dealers. According to a report from Royal Bank of Canada (RBC) Capital Markets, '2011 is not the transition year that many hoped for going into the selling season.'

'Dealers expressed disappointment with what appears to be a flat to slightly down year for new boat sales. However, RBC's guidance and investor sentiment reflect a flattish year, so we view these results as roughly neutral, versus expectations,' analyst Edward Aaron wrote in his report. The survey was done in conjunction with Boating Industry magazine.

Bright spots in the survey include:

• Small-boat categories continue to show gradual recovery and dealers are reporting robust used boat sales and service business.

• There are pockets of geographic strength, including evidence of a recovery in Southern markets.

• Inventories remain healthy.

Still, Aaron wrote, 'Dealers have grown more cautious in recent months, reflecting disappointing sales performance and negative macro headlines. The biggest fundamental problem, by far, is that ‘trade-up’ segments, cruisers in particular, are still very weak despite absorption of late model year used inventory.'

Aaron noted that the survey results are consistent with expectations for a 'flattish' year for the industry.

'Our best guess is that [second-quarter] retail sales were down slightly following the 1 percent decline reported in [the first quarter],' he added. 'We expect data to show single-digit growth in aluminum … flat growth in outboard … and an approximately 20 percent decline in sterndrive/inboard.

'While dealers are broadly disappointed with [second-quarter] business performance, investor expectations have come down since last quarter and no longer reflect expectations for positive industry growth in 2011,' Aaron wrote.

About half of the dealers said that the key second-quarter selling season was below expectations, though 20 per cent said it was above their forecasts. About 40 per cent reported positive new-boat sales through the second quarter, with 24 per cent seeing a decline. Though pessimistic about macro-economic conditions, a majority of dealers said that financing was better than they had experienced in the first quarter of 2011.

But only 29 per cent of the dealers maintain an optimistic outlook, compared to the previous survey in the winter, when 60 per cent said reported optimism