Leisure vehicle makers feel the heat this summer as big-ticket spending cools
2024.08.01 12:50
By Savyata Mishra
(Reuters) – Makers of ATVs, boats and other recreational vehicles are staring at a bleak summer as caution around big-ticket purchases amid high interest rates has dashed hopes of a demand recovery for big manufacturers of leisure products.
In the wake of the coronavirus pandemic, consumers with money to spend took advantage of low rates to buy goods many refer to as “adult toys” – motorcycles, boats, RVs and other vehicles that cost a lot and are often financed through loans.
The shine came off some of the companies when people returned to international travel, but now with consumer spending slipping, makers of the discretionary items are feeling the pain.
Retail sales in the recreational vehicle industry for June and July were slightly worse than what dealers experienced in May, D.A. Davidson analyst Brandon Rolle said.
Late last month, shares of motorboats maker Brunswick (NYSE:) and snowmobiles manufacturer Polaris (NYSE:) slumped after they slashed annual forecasts after reporting a drop in second-quarter sales and profit.
“Consumers are either maxed out or banks are hesitant to lend at these elevated levels. All these factors have negatively impacted the industry retail environment and resulted in a need to lower inventory of dealerships,” Polaris CEO Mike Speetzen said on a post-earnings call.
Brunswick expects U.S. powerboat sales to a decline of around 10% after posting a 15% drop in sales during the second quarter, normally its peak selling season.
Several brokerages have lowered their price targets on Brunswick and Polaris after their results. Thor Industries (NYSE:) also trimmed its full-year forecast and said it expects weakness to continue into 2025 as dealers are wary of excess inventory.
The Canadian powersports firm BRP (NASDAQ:), which reported results in May, also pruned its annual outlook, despite its first-quarter profit beating estimates.
“With no signs of a seasonal uptick in demand so far, 2024 will almost certainly be a lost year and prospects for 2025 are now coming into question,” Roth MKM analyst Scott Stember said about Brunswick.
Most companies took steps to reduce inventory. Harley-Davidson (NYSE:) cut dealer inventories by 30% and said it hopes retail and wholesale inventory will be balanced by the end of the year.
“It’s not just about the fact that financing the purchase is more expensive overall, that budget suppression …and interest rates on other finance purchases, not to mention the fact that there’s a confidence issue there,” Brunswick CEO David Foulkes said.
So far this year, Polaris, Brunswick and Thor stocks have lost between 12% and 16% of their value. Harley-Davidson was up 2% and BRP 4%.
