Dealer margins showed improvement in the second quarter compared to the year-ago quarter, according to a Powersports Business dealer survey done in partnership with RBC Capital Markets. More than 40 percent of respondents reported "somewhat better" or "significantly better" margins in Q2 2012 compared to Q2 2011. The survey, the only quarterly gauge of its kind in the industry, included responses from 214 dealers from 47 states and Canada.
"Feedback on dealer margins was incrementally more positive than last quarter, which we think reflects the benefit of strong early-season sales and generally lean channel inventory levels," RBC Capital Markets analyst Ed Aaron reports. "Looking at performance by department, dealers continue to be encouraged by used sales, the service business and (to a lesser extent) parts & accessories. Feedback on new unit demand was marginally negative overall but positive for Polaris dealers."
Survey results also show that Polaris continues to gain market share, potentially at an accelerated rate, leading RBC Capital Markets to estimate that "Polaris will report North American retail growth in the 20 percent range for both ORV sales and total North America sales. ... We expect that Polaris will unveil an above-average year of new product innovation at is dealer meeting in late July. While competition will intensify over the next couple of years, we do not see meaningful change to the competitive landscape in the 2013 model year."
Recent conversations with Polaris dealers by RBC Capital Markets found that at the dealer meeting later this month, "Polaris will also formally announce the rollout of its MVP inventory management system to motorcycles. Our understanding is that the motorcycle MVP model will work similar to ORV, but will also include customization (i.e. build-to-order) capabilities," Aaron writes.
Here are selected other RBC Capital Markets takeaways from the Q2 Dealer Survey:
* Side-by-sides: For the industry as a whole, 60 percent of all dealers reported positive sales growth in Q2 vs. 20 percent of dealers reporting declines. For Polaris products, 81 percent of dealers reported positive growth vs. 9 percent reporting declines. Notably, 59 percent of Polaris dealers reported double-digit growth for Polaris side-by-side products vs. 46 percent reporting double-digit growth for the broader industry.
* ATVs: ATV category sales grew single digits in Q2, marking the second consecutive quarter of positive growth following six years of continuous decline.
* Heavyweight motorcycles: With 45 percent of dealers reporting positive growth vs. 31 percent reporting declines, feedback on heavyweight motorcycles reflects mixed trends. Notably, Victory sales appeared very strong in Q2, as nearly half of Victory dealers surveyed reported double-digit growth.
* Dealer inventories, with the notable exception of snowmobiles, appear to be in great shape for both the industry and for Polaris.
* While dealers expressed some caution about the macro environment, most appear to be projecting decent sales growth for the year ahead, especially in side-by-side, where over half of all dealers surveyed project double-digit sales growth.
Read more about the survey results and dealer feedback in the Aug. 6 edition of Powersports Business. Share your initial thoughts about the survey results by commenting below. Purchase a PDF of the January-March Q1 2012 Powersports Business Dealer Survey here.