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Powersports 2019 retail growth estimated by analyst

Wells Fargo Securities analyst Tim Conder has provided Powersports Business readers with a monthly update based on Wells Fargo Securites’ market observations and conversations with Wells Fargo Commercial Distribution Finance (CDF) colleagues who oversee wholesale (floorplan) lending in the core Powersports, Marine and RV sectors.

Following is a recap:

The 2019 U.S. core powersports unit retail “likely saw low-single-digit (LSD) percentage growth with ongoing positive momentum in Q419,” according to a research note by Wells Fargo Securities analyst Tim Conder that was provided to Powersports Business.

“Core Powersports Update – Solid retail momentum exiting 2019 with best five-year channel position, positions the industry well for 2020. We remain selective on Powersports equities favoring Overweight PII (tariff resolution optionality) and DOO.CN (market share growth opportunity). We remain cautious on Equal Weight HOG given structural industry headwinds.

“We believe collective 2019 U.S. core powersports unit retail likely ended +LSD% with ongoing positive momentum in Q419. We do not have a good read on early-Jan. retail or recent Canada trends. Collective channel inventories remain very healthy with aging down 200bps yr/yr to <10% and turns marginally better ~3.0x. Credit quality remains stable. Overall wholesale/retail volumes remain very balanced at both the national and state level. The only areas of noted relative retail weakness are the Northeast and Northern Rockies/NV. We believe promotions remain seasonally normal with channel inventories healthy. As with Marine and RV, we will continue to monitor the potential for “political pause” around the uncertain 2020 presidential election, but believe the risk/exposure is more limited in the core powersports space. We note economic indicators more highly correlated to collective Powersports are slightly positive.

“2019 Retail: Motorcycles: Units flat (-LSD% adjusted for Ryker intro) vs. -1% comp.

“On-Highway likely ended –LSD% vs. -4% comp with traditional Heavyweight lagging –HSD%.

“Off-Road Dirt outperformed +LDD%, while other Off-Road also positive.

“ATV: Units +LSD% vs. -2.9% comp. This is the first year of ATV market growth since 2014, which is encouraging given the ongoing growth/shift to SxS. Chinese OEMs (excluded) are having success.

“SxS: Units likely +MSD% with positive momentum from OEM innovation (Polaris/Can-Am) and new Sport entrants (Honda/Kawasaki).

“Snowmobiles: Units +LSD%-MSD% season-to-date, but Dec. down. Strong early season snow benefited retail. Inventories at historically clean levels.”

Check Thurday’s Powersports Business Enewsletter for Conder’s 2020 Outlook.

“2020 Outlook: We are cautiously optimistic for continued powersports market growth in 2020 (subject to weather) given recent retail momentum, clean channel positioning, and constructive consumer fundamentals.

“Motorcycles: We expect units –LSD% against difficult Ryker and Off-Road comps. Heavyweight declines will likely be less bad (more in line with the market), but we do not see any catalysts that could reverse the segment’s structural headwinds.

“ATV: We expect units flattish vs. 2019 +LSD% comp.

“Side-by-Sides: We expect units +LSD% with Polaris holding share at the top with Can-Am (innovation/whitespace) and Honda (Talon) gaining additional share.”

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