FOCUS – New Snowmobile Sales Drop Again

It's a recurring theme in the snowmobile business: As the snow goes, so go sled sales. North America suffered through yet another sub-par winter in 2004-05, marking the eighth consecutive year that vast stretches of the continent have received less than average snowfall. And not surprisingly, new snowmobile unit sales were down from the previous season. Again.
According to statistics provided by the International Snowmobile Manufacturers Association (ISMA), an estimated 240,000 units were retailed in North America in 1997. In 2005, the number of new snowmobiles sold was about 147,203. Compared to 2004, '05 sled sales in North America were down some 6%, and the 100,899 machines moved in the United States was the lowest total since 1993.
SNOW - A FOUR LETTER WORD
Although 2004-05 wasn't the worst year in the past 10 for accumulation, it wasn't good for much of the Snowbelt. “Snow was pretty spotty,” says John Tranby, Arctic Cat marketing and communications manager . “And the problem is that it came so late.” True - even areas that received above-average white stuff had to wait in many instances.
“We didn't get real snow until mid-January,” says Pete Gassert of Duluth Lawn & Sport, a Polaris and Ski-Doo dealership. Though it came late to Gassert's region, it did come. Northeastern Minnesota had its best winter conditions in years, with snowmobilers notching miles and hotel visits in large numbers until near the end of March.
The solid riding in February and March helped Gassert on two fronts. “Because the late season snow was really good, we were able to clean out almost all of our inventory,” he explains. “I'm sitting really pretty. Between the good snow and getting rid of carryover, our spring sales were substantially better than the year before.”
But where the snow wasn't as heavy, the news wasn't as good. In the Northeast United States, for example, conditions were largely terrible. “Our snow was so slow to come last year,” says Twin Mountain, New Hampshire's Wayne Garneau at Garneau's Garage. “Our first big snow was Feb. 12, and that's way too late. You lose all of that pent-up enthusiasm.”
“Timing is everything in this business, and we need to move the calendar back about a month,” says Rick Hacker, owner of Hacker's Yamaha. Hacker's is located in Houghton Lake, Michigan, which had excellent snow later in the season but little early.
“What I see in Michigan is that people are geared up for sledding through February,” Hacker adds. “But even come Valentine's Day, it seems like 80 percent of the people around here start thinking spring.”
FACTORY FEELINGS VARY
Despite Hacker's hopes for earlier snow, he's hardly complaining. As a Yamaha dealer, he's in solid shape. “We've got good new models, and Power Surge was better than it's been the past two years,” he says. “And we carried over less than 10 from last year, which is nothing. That's pretty typical.”
Typical for a Yamaha dealer, at least. “We have no ending inventory problem,” says Adam Sylvester, Yamaha's snowmobile product manager. “Our goal is to have a high sell-through percentage and no inventory, and we're at our lowest carry-over level in years.”
For Yamaha, the news gets even better, because the factory is coming off an excellent spring. “Our spring was awesome,” says Yamaha Snowmobile Product Manager Adam Sylvester. “We were up considerably over the previous year. We hit our targets and it was the best Power Surge we've had in three years.”
Sylvester notes that the increase in sales is being driven by models like the Apex, Attak and Nytro, part of Yamaha's stable of four-stroke high-performance sleds. “Our engineers worked hard to meet the core needs of riders - handling, ride comfort and performance - and the response at consumer shows was incredible,” he says, adding that attendance at shows was up. “The best way to convince consumers that four-strokes are competitive is to get them on one.”
Yamaha wasn't the only brand doling out test rides; Polaris crossed the continent with demo machines. “We've always been about the ride, and we had gotten away from that a little,” explains Eric Lindquist, Polaris' general manager for snowmobilers. “So to give consumers a chance to ride the new equipment was exciting.”
Apparently, the opportunity to ride sleds like the 600HO and new FST four-stroke line was exciting for consumers, also. “Response was very, very favorable,” Lindquist says. “We gave a little more than 6,000 test rides, and we would've had more but we just ran out of snow. We were the only factory to really take it to the rider, and reaction was neat.”
Unfortunately, the successful demo tour didn't translate to a big spring season. “We were pretty flat, and because of our product line that was disappointing; we expected more” Lindquist says of sales. Inventory is also an issue for the factory, with Lindquist saying, “We were actually flat year-on-year, but we did have more carryover than we expected, so we had to do what's right and take the ('06) build down a little. It's unfortunate, because with 15 new models and five new engines we had such good product news.”
Extra inventory was also true for Arctic Cat and Ski-Doo, with Cat joining Polaris in lowering their '06 build to help account for the carryover. “Sales were down in '05,” begins Cat's Tranby, “and we've got more inventory than we'd like, so we adjusted (the build) down.”
According to Ski-Doo Marketing Director for Snowmobiles Francois Tremblay, inventory increased a small amount for the snowmobile industry's sales leader while the '06 build remained about the same.
“We need to satisfy demand, but we don't want to push too hard because we want our dealers to be healthy,” Tremblay says. “We know our marketshare is going up while overall industry sales go down, but our focus is on lowering inventory. Our build is up a little, but we're staying pretty stable.”
The exception to modest build numbers is at Yamaha. Though the smallest manufacturer in terms of total sled sales, Yamaha had - by far - the greatest percent increase to their '06 build. “Dealer demand was up and we're expecting a big increase in sales, so we changed our build accordingly,” says Sylvester.
REGISTRATIONS STILL RISING
While new sled sales struggle, other industry indicators continue to improve. According to ISMA, snowmobile registrations are now up to an all-time high of 1.77 million, resort nights and trailer sales are strong, PG&A sales are up and clubs are growing. “The infrastructure of the sport is really healthy,” says Lindquist.
Indeed. According to the ISMA Web site, snowmobilers in North America now spend more than 20 billion annually on the sport. “In New York, the economic impact of snowmobiles has risen 86 percent in just the last five years,” says ISMA President Ed Klim. “People are definitely using their sleds.”
While new units sold were down, sales in terms of dollars were actually up substantially. It was the first time in four years that dollars grew over the previous year, and the $825,725,000 2005 models generated was an increase of $114 million over '04.
Obviously, then, consumers are buying more expensive sleds. And with factories meeting new EPA guidelines for 2006, price tags are going to continue to rise. “There's going to be sticker shock in the fall when consumers have to pay retail,” warns one dealer. “People have been buying so cheap because of all the carryover and some dealers were just dumping them. But the '06s will be high because dealers have been losing their ass and they're tired of it; they want to keep to the margins.”
Other dealers certainly hope that's the case. “Basically, we're selling more but making less,” says another well-established dealer. “There are too many dealers, they have to sell to cash-flow themselves and they're killing the margins. What we need is good early season snow so we can make some money, because when the snow's late guys get nervous and start dumping product.”
Snow. In the sledding industry, it always comes back to that.

- Vince Castellanos

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