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Dealer: Public ‘snapped wallets shut’

4 in 10 dealers said their dealership’s performance was below plan

The second quarter of 2016 saw many dealers below plan, according to the recent Powersports Business/BMO Capital Markets Q2 dealer survey. Of the 127 dealers from 40 U.S. states and eight Canadian provinces who were surveyed, 41 percent noted business was below plan in Q2.

While the majority of dealers reported they were below plan, 22 percent said they were above plan and 37 percent were on plan. Overall business conditions were positive, with 67 percent of dealers answering that they were average, somewhat or very strong.

Thirty-five percent of dealers saw somewhat or very strong new unit sales, and 52 percent experienced somewhat or very strong service department business in Q2. The majority of dealers said used unit sales, P&A sales and F&I business were average.

Source: Powersports Business/BMO Capital Markets Q2 2016 dealer survey

Source: Powersports Business/BMO Capital Markets Q2 2016 dealer survey

Customer traffic was down in Q2, as 38 percent of dealers marked it was somewhat or significantly worse than in Q2 2015.

“Many dealers commented that foot traffic and consumer buying interest were weaker in the quarter,” said BMO Capital Markets analyst Gerrick Johnson.

Even though dealership traffic and buying interest has led to a flat quarter, 29 percent of dealers surveyed said that their business outlook was somewhat or significantly better than the previous six months. Of those who answered, 38 percent said their business outlook had not changed despite a slow start.

External factors such as the U.S. political environment and international economic issues saw the largest change in concern from dealers.

“Somewhat surprising, but definitely not shocking, is that the biggest macro concern is not employment, gas prices, the housing market or financing, but the U.S. political environment,” said Johnson.

In fact, 72 percent of dealers responded have grown more concerned with the current U.S. political environment, and 63 percent are more concerned with economic and political issues outside of the U.S. than before.

While absolute performance may have been only slightly negative in the quarter, the performance against dealers’ plans was more disappointing, Johnson reported. Side-by-sides (43 percent below plan, 21 percent above plan) and ATVs (42 percent below plan, 21 percent above plan) seemed the most disappointing relative to plan, despite decent sales in the quarter.

Source: Powersports Business/BMO Capital Markets Q2 2016 dealer survey

Source: Powersports Business/BMO Capital Markets Q2 2016 dealer survey

PWC showed the best strength relative to plan, but even this performance was somewhat disappointing, Johnson added. About 47 percent of dealers said their PWC business was on plan, but 33 percent said it was below and only 20 percent said it was better than plan.

Over the next 12 months, 57 percent of dealers expect to see an increase in side-by-side sales, and 44 percent predict ATV sales to decline.

“Despite a weak-ish quarter, with sales disappointing relative to plan, dealers are still slightly more optimistic about sales over the next 12 months,” said Johnson.

Overall, business outlook remains optimistic, with 38 percent of dealers foreseeing sales growth, compared to 24 percent who believe sales will decline.

The following are a selection of anonymous comments left by dealers about their quarterly performance:

• “Our local economy is down due to the price of natural gas.”

• “I see a brighter future ahead, as the economy continues to grow.”

• “Biggest problem in our area is loss of good paying jobs. Energy — coal and natural gas — has decreased employment levels by over 60 percent.”

Source: Powersports Business/BMO Capital Markets Q2 2016 dealer survey

Source: Powersports Business/BMO Capital Markets Q2 2016 dealer survey

• “Lower-priced vehicles seem to be the way to go.”

• “Our business has dropped considerably compared to Q2 last year. Cool weather and local economic uncertainty coupled with election year uncertainty seems to have snapped wallets shut.”

• “Floor traffic has been like a rollercoaster ride.”

• “I feel the market has become somewhat saturated, as well as stagnant. Advertising is at such a high cost, and the competiveness of activities makes for such a broad spectrum and is difficult to focus on.”

• “Overall business is not bad, just need some adjustments from OEMs to the market.”

Click here to purchase the full Q2 dealer survey.

 

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