MarineMax, Inc. (HZO)

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MarineMax Inc (HZO)

F1Q2011 Earnings Call Transcript

February 3, 2011 10:00 am ET


Kate Messmer – ICR

Michael McLamb – CFO

Bill McGill – President and CEO


James Hardiman – Longbow Research

Gregory Mckinley – Dougherty & Company

Tim Conder – Wells Fargo

Brandon Taylor – Raymond James



Good day everyone and welcome to the MarineMax Incorporated first quarter 2011 earnings conference call. Today’s call is being recorded.

At this time for opening remarks and introductions, I would like to turn the call over to Ms Kate Messmer from ICR, please go ahead ma’am.

Kate Messmer

Thank you, Operator. Good morning everyone and thank you for joining this discussion of MarineMax's 2011 fiscal first quarter results. I'm sure that you've all received a copy of the press release that went out this morning, but if you have not, please call Linda Cameron at 727-531-1700 and she will fax or e-mail one to you.

I would now like to introduce the management team of MarineMax, Bill McGill, Chairman, President and CEO and Mike McLamb, CFO of the company. Management will make some comments and then will be available for your questions. Mike?

Michael McLamb

Thank you, Kate. Good morning everyone and thank you for joining this call. Before I turn the call over to Bill, I would like to tell you that certain of our comments are forward-looking statements as defined in the Private Securities Litigation Reform Act.

These statements involve risks and uncertainties that may cause actual results to differ materially from expectations. These risks include but are not limited to the impact of seasonality and weather, general economic conditions and the level of consumer spending, the company's ability to capitalize on opportunities or grow its market share, and numerous other factors identified in our Form 10-K and other filings with the Securities and Exchange Commission.

With that in mind, I turn the call over to Bill.

Bill McGill

Thank you Mike and good morning everyone. We are very encouraged by a few areas of progress in the quarter even with the challenges that our industry continues to face. Mainly we were able to achieve a significant year-over-year increased in new boat sales and product margins increased incrementally as the ageing of our inventory improved. The industry challenges persisted in the December quarter with reports showing that the segments in which we operate, new boat – new unit sales were down approximately 30% and historically low consumer confidence levels continued.

Given this backdrop, the fact that our new boat sales for the first quarter were up in units about 25% overall, lead by an even stronger Sea Ray as well as some of the other key brands offerings is a real positive. The growth we experienced in new boat sales contradicts the latest industry data for the December quarter which we viewed as an evidence of our continued progress in gaining market share and we believe that validates our retailing strategies as well as strengthen the brands we represent. As I mentioned earlier, we were also able to generate this increase in new boat sales while increasing margins.

The strength in new boat were masked in our overall results due to a decline we experienced in used boat sales versus last December quarter. Over the past few years, there is been a shift in our industry towards the sale of used boats due to the influx of inexpensive but relatively good quality used boat inventory due to repossessions in other market dynamics.

Historically the industry sales mix has been made up of approximately 70% used boats and 30% new boats in terms of units. In recent years, due to the increased availability of attractively priced and in an abundance of used boat inventory this shifted to about 85% of used and only 15% new. Now the industry is in a situation where availability of late model used boat inventory at attractive prices has diminished greatly.

As a result our inventories of used boats and that of the industry has become leaner than in the past few years and this in turn has impacted our used boat sales. We also believe that this in turn has and will continue to benefit new boat sales as the pricing of used inventory is stabilized and increase, consumers will focus more attention on new boats when making their purchase decisions and be more willing to trade their boats with improved trade values. We believe that eventually the historic levels of used versus new will likely return as new boat sales pick up.

Moving on to inventory well our inventory levels generally rise seasonally from September to the December quarter, we were able to keep our inventories approximately flat on a sequential basis. As of December 31, our inventory stood at $189 million. Importantly, the ageing of our inventory continues to improve. Inventory levels across the industry also appeared to be much better aligned with demand and also continue to show improved ageing.

Our gross margin of 25.6% for the quarter was up compared to September of last year. We continue to make modest improvements in our higher margin businesses such as service, parts and accessories brokerage and finance insurance. These improvements should continue to benefit gross margins. While there are always mix shift that impacts our gross margins from quarter to quarter, we believe that we can maintain margins in the mid 20% range on an annual basis of course subject to further declines in the economy or deterioration of the inventory ageing conditions. Dealer failures are ongoing, however the pace is certainly at levels far less than in the past few years.

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