It’s always good to be smart about adjacent markets, so it’s with that reasoning we provide you with another research note from BMO Capital Markets analyst Gerrick Johnson. Johnson offers the following after having attended the Miami International Boat Show.
“We attended the Miami International Boat Show last week, where dealers commented on continued strong demand, particularly at the high-end and for boats that are heavily ‘optioned up’. Buying activity almost took on a panicked and frenzied feel as consumers searched aggressively for available inventory rather than deals. We found that most models were sold out through MY2022 with some even sold out through MY2023. Most dealers continue to comment that price increases and surcharges are not impacting demand, though we suspect some boaters are trying to procure product ahead of price increases and the possibility of rising interest rates.
“Retail demand was strong, particularly on day one, a trend we've observed at most early season shows. Traffic seemed a little lighter than usual, though. One New York dealer commented that many of his clients did not make the trip, fearing Florida's lax COVID-19 protocols. Those buyers who were there were well researched, and more purposeful, with fewer ‘tire kickers’. We think consumers are ready to buy as they know shows are one of the few places where they'll be able to find available inventory.
“On a product basis, BRP's (DOO-TSX; $94.07, OP) Switch Pontoon was generating very strong consumer interest and buzz, particularly among first-time boaters. We also saw strong interest in recently introduced new products such as the Sea Ray 370 Sundancer Outboard and the Boston Whaler 360 Outrage, both from Brunswick (BC-NYSE; $95.32, Mkt), and the Cobalt R33 from Malibu Boats (MBUU-NSDQ; $67.65, OP).
“We heard several times that buyers are shopping for inventory ahead of brands. As one dealer mentioned, ‘I've sold nine boats and lost three,’ commenting that customers returned later in the day to retrieve their refundable $1,000 deposit after finding a different boat from a different dealer that was in stock or would arrive sooner. One growing concern we have is that consumers are placing multiple deposits on multiple boats (especially if they are refundable), hedging their bets and resulting in an artificially high perceived backlog.
“While a few dealers called out customer sticker shock at the low end, most indicated that surcharges and prices increases have not impacted demand. Most sales continue to take place at MSRP, with very few discounts. Pricing was often hard to find or not presented at all. Furthermore, we saw many signs indicating that prices were subject to change. Since the vast majority of MY2022 production slots are sold out, dealers are selling MY2023 and MY2024 slots and forecasting what the yet-to-be determined prices will be. MBUU's brands were the most commonly cited as being price protected for the consumer willing to place a deposit.
“In our outboard engine survey, we found that 58% of boat brands were outfitted with BC's Mercury outboards, 49% with Yamaha, and 12% with Suzuki. In 2020, 60% of boat brands were fitted with Mercury outboards, 40% had Yamaha, 16% displayed Suzuki, and another 4% had DOO's Evinrude, which has since ceased production (percents >100% owing to some brands displaying multiple outboards). We believe Mercury's share dropped owing to significantly fewer overall boat brands on display this year, with those not showing tending to favor Mercury. The ratio for Mercury also declined at the New York show for similar reasons.”