Feb. 11, 2008 – Dealership survey: Sled sales up compared to previous year

By Neil Pascale
Editor
A decade-long trend of declining new snowmobile sales in the United States appears poised to come to an end.
A national survey conducted for Powersports Business shows U.S. retail sled sales are up compared to a year ago for approximately half the dealers surveyed. Those dealers report a significant increase: on average, their sales have risen by 41 percent compared to the previous selling season.
“Assuming we got snow, it had nowhere to go but up,” Kurt Thomas, president of Bangor Motor Sports, Bangor, Maine, said of the retail snowmobile market.
The national dealership survey conclusions follows what Ed Klim, the president of the International Snowmobile Manufacturers Association, has seen from sales data taken from warranty registration cards.
That data, which was through December, shows the United States up slightly more than 8 percent and Canada up approximately 18 percent over a year ago.
“I’m confident that if keeps snowing a little bit and it stays cold we’re going to have a good January and a good February and we may see some substantive increases here,” Klim said.
The Powersports Business survey of 151 dealers from 23 states, taken in mid-January, also found:
•Dealer inventories are in much better shape this year, with the number of noncurrent vehicles down dramatically compared to a year ago;
•Parts and accessories sales have risen compared to a year ago, as well as apparel sales, although not as often as P&A;
•Although the total number of sled sales have increased, there appears to be little difference in the amount of profit dealers are making from those sales.
Still, the extra business was an especially significant boon to dealerships in the upper Midwest that have seen sled sales decline in recent years and then suffered through a poor fall in terms of new ATV sales. Mike Catlin, general manager of Appleton Powersports, was one of those. The Appleton, Wis., dealership had actually begun cutting employee hours down before snow in November turned things around.
“This winter there was a lot of guys in here buying that I have not seen in the store for a few years,” Catlin said of his consumer base.
The Wisconsin dealership, which has seen sled sales jump 20 percent over last year, actually called an OEM seeking more sleds. That increase in sales wasn’t uncommon elsewhere, the national survey found.
Approximately 12.5 percent of the dealers said they could have sold more sleds this year if their OEMs would not have cutback production.
Early season snow obviously has been the difference-maker.
Seventy percent of dealers surveyed this year said their area has had good snow cover. Thomas was one of those, with Bangor, Maine, seeing snow since the first weekend of December.
In contrast, Bangor did not receive any significant snowfall last year until February. As a result of this year’s early snowfall, Bangor’s sales in December alone amounted to more than the entire previous season’s total.
“On the flip side, even though we sold a lot of machines, we didn’t make any money from them,” Thomas said. “Everybody is in ‘giveaway, dump’ mode. There was no money to be made, and I still believe that there is a decent number of noncurrent sleds out there.”
Dealer inventories, however, look much improved over numbers a year ago. On average, dealers have 26 new snowmobiles in their inventory, which is a reduction of more than 36 percent from a year ago.
Noncurrent inventory also is in better shape, most dealers reported. Nearly 60 percent of dealers said their noncurrent inventory is “substantially lower” or “somewhat lower” when compared to numbers from a year ago.
Gross program margin on the new sleds, however, has not increased dramatically, the survey found. Dealers report on average receiving 8.6 percent gross margin.
However, 37 percent of dealers reported getting 3 percent or less on gross profit margin for new sleds, a sign that many are discounting their noncurrent inventory to make it more attractive to the consumer.
“There is still heavy, heavy discounting going on,” Thomas said. “Guys are selling for invoice minus whatever the factory is giving back for kickbacks.”
He said with the amount of noncurrent inventory still around that trend could continue into next year.
“If we have a similar winter in terms of snowfall next year, it’s possible that the following year business could be back to normal,” Thomas said.
Dealers are doing much better on PG&A sales, however. The survey found that nearly 70 percent of dealers said their parts and accessories sales were “substantially higher” or “somewhat higher” than the year before.
Apparel and riding gear isn’t quite so high, as only 51 percent of the dealers surveyed said their garment sales were “substantially higher” or “somewhat higher” than the year before. Close to 30 percent of the dealers said their garment sales have been similar to last year.