Sales of recreational boats are sailing in smooth waters this summer but analysts caution that a combination of high fuel costs and rising interest rates could stir up headwinds in the future.
In recent months boat makers have seen robust sales and higher stock prices, with boat sales performing well along with other big-ticket leisure products.
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 percent for the quarter ended March 31.
Brunswick stock has risen about 26 percent since the beginning of the year. MarineMax stock has risen about 50 percent. This compares to a rise in the Standard and Poor’s 500 index of 2.75 percent for the year.
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 (gasoline) prices and/or increased interest rates by about one to two years,” said Bryan Knoepp, a FTN Midwest Research analyst.
More people are asking questions of dealers about high fuel prices, said Steve Croft, spokesman for the Boat Owners Association of the United States.
“I don’t think buyers are walking out on the dealer when people say, ’(Gasoline) may be $2.60 or $2.70 a gallon,’ I don’t think its a deal breaker, not yet,” he said.
Recreational boat fuel tanks range in size from 30 gallons up to 400, which can be a considerable cost to fill for the average owner.
For wealthier owners -- boats averaging $85,000 a sale --the price of fuel is less important when considering the total cost of the 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, National Marine Manufacturers Association Market Statistics director 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,”
As consumer demand rises, there are few reports of product shortages, but dealers are keeping inventories lean, a sign they could be preparing for slowing sales.
Big-ticket leisure products sales are on the rise as families vacation close to home.
Winnebago Industries Inc. and other motor home makers have also experienced 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.