MarineMax, Inc. (HZO)

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MarineMax, Inc. (HZO)

F3Q11 (Qtr End 06/30/11) Earnings Call

July 28, 2011 10:00 am ET


Brad Cohen - ICR

Bill McGill - Chairman, President and CEO

Mike McLamb - CFO


James Hardiman - Longbow Research

Greg Mckinley - Dougherty



Good day everyone and welcome to the MarineMax Incorporated third quarter 2011 earnings conference call. (Operator Instructions) At this time for opening remarks and introductions, I'd like to turn the call over to Mr. Brad Cohen of ICR.

Brad Cohen

Thank you, Operator. Good morning everyone and thank you for joining this discussion of MarineMax's 2011 fiscal third 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 email one to you.

I would now like to introduce the management team of MarineMax, Mr. Bill McGill, Chairman, President and Chief Executive Officer and Mike McLamb, Chief Financial Officer of the company. Managements will make some comments and then be available for your questions.

And with that, let me turn the call over to Mike.

Mike McLamb

Thank you, Brad. 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’d like to turn the call over to Bill.

Bill McGill

Thank you Mike and good morning everyone. As seeing today's results, we have reported strong new boast sales for the third consecutive quarter. We are encouraged by the fact that our sales growth exceed today that is generally being reported by our industry. Despite industry challenges with a drop an already low consumer confidence, not to mention generally rising fuel prices for most of the June quarter. We continue to drive positive traffic and were able to achieve same-store sales growth of 33%.

We'll increase new unit sales for the past three quarters. We replenished our availability of use boats as customer striated in their boats for new ones. For the first time this year, because of these straightens, we had a slight increase in used boat sales over the prior year. From a pricing perspective used boats continue to incrementally increase in value is the availability, generally has tightened in the industry.

With increases in used boat pricings, consumers are rethinking their consideration on new boats, when making their purchases, and are more willing to trade in their boats, when they can realize higher trade and values. And the industry continues to improve, we are starting to gain confidence that this positive momentum is a new sales were build and proved to be sustainable as we move through the next few years.

However, given the seasonality of the business and the unstable microeconomic factors, there is most likely to be continued quarterly volatility. Nearly 33% same-store sales growth in the quarter is significant and clearly shows that our industry is alive and also shows the passion and desire that our customers have to be out on the water with their family and friends.

At this point, it's worth mentioning that during the depths for the recession until today, we made strategic decisions to not reduce in anyway the things that we do for customer. For example, we are doing more Grady-White trips with our customers. Our mobile service efforts have increased. Our training classes for customers or team members for that matter have not been cut. We also launched more ways for us to stay in touch with our customers. We created a call center. We launched a rewards program for our customers. We enhanced the ability of our customers to reach us through the web offerings. We offered MarineMax care, which provides two annual services for new boat sales and so forth and so on.

We believe that these efforts are the main drivers for a strong double-digit unit growth as compared to the unit growth the industry generally is reporting, because these efforts kept our customers boating, it kept them happy, and as Cap MarineMax involved with them as being part of our family. Of course, these efforts have a cost. But we determined it was and still is the right long-term investment to drive share growth. We also believe that our one-price pricing strategy in the brands we carry, provide our strong team with added advantages over the competition and further enhanced our unit growth.

On previous calls, we commented that as our new boat business returns and drives boat sales to be a larger percentage of our overall revenues. Our consolidation margins will be impacted. With very strong boat sales driven growth that we experienced this quarter and higher margin businesses strength as a percentage of the whole. This drive down margin percentages as compared to the relatively low boat sale quarter last year that we have, when our higher margin businesses were larger percentage.

Additionally, we incrementally sold more larger product this year versus last year. We typically carry lower gross margin percentages. There is good news in the fact that our product margins are still 300 basis points to 400 basis points for all historical level. And therefore, as we move forward in the recovery, the opportunity increased profitability remains compelling. As stated earlier, our results for the June quarter in the segments in which we focused and are in contract to the industry reports. However, there are increasing reports that the industry has bottom and unit growth is beginning to return. Most recent reports indicate flat to single-digit unit growth in the June growth.

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