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California

Retailers Hope Summer Floats Boat Sales More

The pleasure craft industry is enjoying better numbers but needs hot weather for a breakout season.

March 29, 2004|From Reuters

SAN FRANCISCO — Salesman Jason Lewis sits in a showroom filled with sleek new powerboats and wonders if this will be the summer that steers a once-booming business back on course.

A skittish economy has made his job difficult for the last few years, but Lewis sees consumers growing more confident about jobs, their stock portfolios and, he hopes, their desire to own one of the dozens of his beautiful boats, many of which cost tens of thousands of dollars.

"I talk to quite a few people who say they feel the economy is coming back," said Lewis, who works at PowerBoats of Fairfield, Calif., about 40 miles northeast of San Francisco and on the way to a popular recreational lake. "People are willing to spend money."

Boat shows across America over the last several months, which produced strong sales and encouraging attendance numbers, also have boat makers and retailers such as Brunswick Corp., MarineMax Inc. and West Marine Inc. banking on a successful summer to power the industry.

Michael McLamb, MarineMax chief financial officer, said better news coming out of recent boat shows has contributed to a more optimistic outlook after some tough years following the Sept. 11 attacks.

Better sales figures have buoyed hopes as well. McLamb noted that the nation's largest recreational boat retailer saw same-store sales increase 56% for the first quarter ended Dec. 31, compared with an 18% drop a year earlier.

"The tone has been more positive in the past six months," McLamb said. "This year is better than last year and most dealers we are talking to are starting to feel better."

Brunswick, the world's largest maker of pleasure boats, also sees the sector rebounding, but warns that manufacturing will remain below peak levels of 2000 until the economic recovery is on solid ground.

The company's Chairman and Chief Executive George Buckley said at a recent investor conference that consumers at last month's Miami International Boat Show -- the industry's biggest -- seem to have a renewed interest in shelling out bigger bucks for high-end boats.

At Brunswick, prices range from $9,995 for a 17 1/2 foot Bayliner with trailer to $8 million for a top-of-the-line Hatteras yacht.

"People were out there with money to buy the higher-priced, higher-margin products," he said. "People were much more optimistic than in times gone by."

Analysts say that low interest rates and a desire for Americans to spend leisure time closer to home bodes well for companies such as Brunswick, West Marine and MarineMax, whose shares have outperformed the broader stock market in the last year.

Since last March 24, investors have pushed up the shares of Brunswick and West Marine about 100% to $38.70 and $29.95, respectively. MarineMax stock has shot up 186% to $25.90 over the same period.

Yet Timothy Conder, an analyst at A.G. Edwards & Sons, said dealers, who have boosted inventories by about 5% to 7% this year, may even be too cautious as they place their orders ahead of the crucial summer season because demand is rising at an even faster clip.

"Should these trends hold, there could be shortages," Conder said.

The salesmen at Fairfield's PowerBoat agree, and they are optimistic because more people have come in this spring who are interested in buying.

Yet even with an improving economy and sleeker, sexier boats, they also warn that the weather is the wild card they need for a breakout season.

"When the weather is hot, people want to be on the water," Lewis said. "I'm just hoping."

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