Weather Was Most Often Cited As The Reason
[dropcap]O[/dropcap]ur latest survey of powersports dealers indicates the building retail sales momentum that powersports dealer have seen since late January came to an end in April. While unit sales slowed in April, the news was not all bad. Specifically, the most commonly cited reason for the softer sales was the weather, which should normalize. Additionally, dealers were able to improve their inventory position relative to how they see demand trending and still experienced growth in the all-important UTV category. Further, many noted that relative performance of the Rec segment improved (we view as a positive due to the more discretionary nature of the product). Despite all the positives, we would be remiss not to point out that the overall volatility of the market and intensely promotional environment continued to be major topics of conversation. There is no doubt that reducing dealer inventory will result in a healthier channel – especially when consumer demand hits the next speed bump. That said, we are concerned that all of the promotional activity across the industry is becoming a crutch to move units that will ultimately just train the consumer to wait for promotions.
Motorcycle dealers saw improved consumer spending as the first quarter progressed. Specifically, many dealers saw improving trends in February, only to be followed by even stronger demand in March. All in, the market appears to have grown modestly – especially in the all-important 601+ cc on-road market. From a brand perspective, the stories of the quarter were the progress Harley-Davidson has made (albeit still short of posting growth), the continued robust growth from Polaris’ Indian brand, as well as a share shift from Yamaha to Honda among the Japanese OEMs. Looking ahead, the question will be: how much of the sharp sales acceleration dealers saw in March was a weather-related pull-forward of demand vs. slowing consumer spending? While it is still early too early to say, we believe that sales momentum has picked up steam since the middle of May when the weather started to break in many parts of the country.
Seth Woolf, a research analyst with Northcoast Research Partners, covers the powersports sector within his consumer sector coverage list. Northcoast Research Partners is an institutional equity research firm located in Cleveland, Ohio.
