June retail performance projected: analyst

Coming off some record-setting months at many dealerships throughout the U.S., Wells Fargo Securities analyst Tim Conder has provided a prospectus for June powersports retail performance in a research note provided to Powersports Business.

Conder reports that “admittedly, the robust retail Powersports resurgence from the H2 Mar/H1 Apr COVID-19 trough has surprised everyone (OEMs, dealers, floorplan/retail lenders, and investors) as consumers appear to be disproportionately looking to the space for affordable/family friendly outdoor social distancing options. Strength has been broad based led by ORVs/off-road motorcycles followed by marine and RVs. Since Mar 15th/Apr 1st, our Powersports Composite is +78%/+118% vs. SPX +15%/+20%, MID +20%/+28% and RUT +20%/+26%.”

Conder adds that “May retail strength has been most evident in the U.S. followed by Canada with Europe lagging due to more restrictive COVID-19 lockdowns and lower governmental stimulus (to date). We believe robust U.S. demand across ORV, motorcycles, boats and RV is due to (1) pent up demand, (2) normal seasonal demand, (3) significant influx of first time buyers (depending on the sector, May +50-200% vs. historical norms). June will also likely see strong retail performance across all Powersports sectors restrained only by product availability. We note that early June used product auctions are seeing somewhat of a ‘feeding frenzy’ as dealers and secondary distribution outlets scramble for used inventory awaiting new supply from OEMs who are re-ramping production and starting to simultaneously change over to MY21 products. In our view, May/Jun will ultimately be seen as outlier demand spikes (creating a very difficult comp) with demand beginning to normalize in July as increased OEM supply and seasonal slowing begin to enter the equation. Additionally, we feel these same factors will result in used product pricing beginning to normalize.”

“Beyond this, the primary determinant of the ‘new normal’ will be first time buyers. Similar to the 1970s/1980s when Baby Boomers drove entry level boat demand, we feel COVID-19 has been the extra upside ‘step function’ catalyst to pre-existing building Millennial/Gen X new entrant secular demand. The current pace of new entrants is clearly unsustainable, in our view. However, we strongly feel a higher step function of demand is materializing in most sectors (on-road motorcycling could be the exception) as ongoing participation among new entrants should more than offset Baby Boomers who age out of participation.”

— Dave McMahon, editor, dmcmahon at powersportsbusiness.com

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