Boat Business Braces For Even Stormier Seas

Think the housing market is taking a pounding? Try selling a boat these days. A new report from the National Marine Manufacturers Association (NMMA) says that traditional powerboat wholesale shipments sank 13% in 2007 in volume.

And while it's hopeful that sales-typically closely tied to consumer confidence and the housing market, both currently in sorry shape-will bottom out in 2008, a spokesperson says, "it will likely be 2009 before we see strong growth again."

A big part of the problem is that most people finance boats, and the typical price for a new boat/trailer package is about $26,000, she says. And while credit is tightening all over the country, it doesn't help that Florida and California, two of the biggest boating states in terms of sales, are also leading the list of national foreclosures.

And with rising fuel costs siphoning off the discretionary income of the middle class, the boating industry is especially vulnerable. Boating is a $39.5 billion market, and of the nearly18 million boats bobbing around out there, 75% belong to households with less than $100,000 per year. And 90% are trailerable, says the NMMA-the kind of boat more likely to be parked in your neighbor's driveway than down at the local yacht club.



In 2006, the group says, dollar sales for new boats gained 3% to $11.9 billion for new boats; used boats accounted for $11.5 billion.

Consumer confidence, which earlier this week hit a 35-year low, according to the Conference Board, has been trending down for two years, and typically plays a big role in boat sales, the NMMA says.

Interestingly, though, the trade group says that while rising fuel prices may cut into the discretionary funds families might use to buy a boat, they have little impact on boater behavior. "A typical boat might use 20 gallons of fuel over a weekend," she says, "and our studies have shown that even if gas prices go up $1 per gallon, that only adds another $20 to the cost of boating, and it doesn't deter them. Boaters will be boaters, no matter what."

Meanwhile, West Marine, a leading retailer for enthusiasts, reported a $50.2 million loss Wednesday, compared to a loss of $7.7 million last year. (Losses in both years are linked to store closures, and in 2007, goodwill write-offs, severance charges for its former CEO, and legal fees stemming from a Securities & Exchange Commission investigation.)

Sales for the year declined to $679.5 million, compared to $716.6 million in the prior year. And while much of that decline can be linked to fewer stores, comparable store sales 1.9% compared to the same period a year ago.

In a conference call for investors, CEO Geoff Eisenberg said the company continues to expect an "extremely challenging" environment in 2008, with comparable-store sales declining between 3% and 5%. And while it plans to open between 5 and 10 new stores, it will also shutter between 10 and 15.

West's marketing strategy, he says, will shift. The company is preparing to open a new prototype store in Jacksonville, Fla., which it hopes will become its new format. At 30,000 square feet, larger than its superstores, the new store will provide more room to convey information about it products, and the company is also revamping its associate sales training program.

"We sell relatively complicated products, "he says, "and being able to provide information is critical." Its latest catalog, for example, is 1,300 pages, "and our best effort yet. We will closely monitor its results." And while he says its web site is much improved, "we still have a very long way to go."

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