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Recreational Boat Sales Rise Despite Higher Fuel Prices

But analysts predict that within the next year or so manufacturers could see demand soften.

June 28, 2004|From Reuters

Sales of recreational boats are sailing in smooth waters this summer, but analysts say a combination of high fuel costs and rising interest rates could stir up headwinds in the future.

Boat makers in recent months have seen robust sales and higher stock prices. Both Brunswick Corp., the largest U.S. boat manufacturer, and MarineMax Inc., the largest U.S. recreational boat retailer, reported net sales increases of 28% for the quarter ended March 31.

Brunswick stock has risen about 26% since the beginning of the year. MarineMax stock has risen about 50%. This compares with a rise in the Standard & Poor's 500 index of 2.75%.

But analysts predict that within the next year or so boat makers could see sales soften, particularly sales of smaller models typically purchased by middle-income consumers who are financing the purchase.

"Historically, a cyclical decline in industry boat sales is preceded by a period of increases in gas prices and/or increased interest rates by about one to two years," said Bryan Knoepp, an FTN Midwest Research analyst.

More people are asking dealers questions about high fuel prices, said Steve Croft, spokesman for the Boat Owners Assn. of the United States.

"I don't think buyers are walking out on the dealer when people say, 'Gas may be $2.60 or $2.70 a gallon.' I don't think it's a deal breaker, not yet," he said.

Recreational boat fuel tanks range in size from 30 to 400 gallons, which can be a considerable cost to fill for the average owner.

For wealthier owners -- of boats averaging $85,000 a sale -- the price of fuel is less important when considering the total cost of boating, said Mike Loughran, an analyst for the Robins Group. Consumer confidence and a stable job market are influences on this group's purchasing decisions, he said.

"Marine industry leaders are somewhat less optimistic about the environment for boat sales during the next 12 months," Jim Petru, market statistics director for the National Marine Manufacturers Assn., said in a statement. "But most believe the industry will continue its economic recovery in spite of higher gasoline prices and the fluctuating stock market."

There are few reports of product shortages as consumer demand rises, but dealers are keeping inventories lean, a sign they could be preparing for slowing sales.

Big-ticket leisure product sales are on the rise as families vacation close to home. Winnebago Industries Inc. and other motor home makers also have seen a quarter of high sales and a rise in stock prices. But comparatively, boats are leading the recreational category.

"I don't think you're going to hear many companies that are engaged in a boating-related industry talking about the pending decline in demand, because you're still looking at a year or two of good results," Knoepp said.

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