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CYCLE – Dealers Stock More PG&A Items, Margins Continue to Increase

During January, Power Products Marketing conducted a telephone survey on behalf of Powersports Business among 100 authorized motorcycle dealers across the U.S. These dealers collectively reported 2004 motorcycles sales of over 71,000 units, about 7% of the actual market. The following is an analysis of the feedback we received pertaining to the parts, garments and accessory (PG&A) lines and new and used motorcycle sales and inventories, which we update at this time each year.

We asked 100 motorcycle dealers we surveyed to what extent the number of motorcycle apparel and accessory items they are carrying in inventory had changed during 2004. It should be emphasized that this is not actual “inventory” but the numbers of different items and brands dealers choose to carry in apparel and accessories.
Based upon the responses, the number of items dealers stock increased on average only 8% last year.

Change In Number of Items Stocked
2004 7.9%
2003 17.9
2002 8.8
2001 16.4
2000/1999 25.0
1998 20.0
There were 10 dealers (7-2003) that reported a decrease in their apparel and accessory offering during 2004 and 35 dealers (33-2003) reported no change while 55 dealers (60-2003), reported an increase of varying amounts.
The significant drop this last year is a combination of the average increase declining sharply, by a third, and the average decrease jumping by 75% among those dealers when compared to 2003.

CHANGE IN APPAREL AND ACCESSORY FLOOR SPACE
According to the 100 dealers we surveyed, the amount of floor space in motorcycle dealerships devoted to apparel and accessory items increased between 6 and 7% during 2003.

Change In Floor Space
2004 6.6%
2003 12.9
2002 9.3
2001 9.7
1999-2000 19.0
1998 16.0
Only 3 dealers (3-2003) reported an actual decrease in floor space during 2004 while 59 dealers (54-2003) reported no change. There were 38 dealers (43-2003) that reported increasing the amount of apparel and accessory floor space during 2004. The 2004 rate of increase declined by nearly half due to a decline in the average increase per dealer and a slight shift in the number of dealers that reported no increase.

PG&A PROFIT MARGINS
Profit margins on motorcycle parts, garments and accessories continue to face pressure from competition despite the improving economy. We asked the 100 dealers we polled to indicate how much their motorcycle PG&A profit margins had increased, decreased or stayed the same over the last year and by what percents.
According to the responses, the overall average amounted to an increase of 1% during 2004.

Change In PG&A Profit Margins
2004 1.0%
2003 0.6
2002 1.1
2001 2.4
2000/1999 3.0
1998 3.0
There were 14 dealers (16-2003) that reported a decrease in their PG&A profit margins during 2003 while 58 dealers (64-2003) reported essentially no change. Just 28 of the 100 dealers we surveyed (20-2003) reported an increase but this was up from the prior year.

CHRISTMAS HOLIDAY PG&A SALES
Based upon our dealer survey, motorcycle PG&A sales over the 2004 Christmas holiday were on average only 2% better compared to 2003, the lowest rate of increase since we’ve been tracking this activity:

Change In Holiday PG&A Sales
2004 2.0%
2003 8.8
2002 3.9
2001 8.9
1999-2000 19.0
1998 9.0
Of the 100 dealers who responded in our telephone survey, 15 indicated their motorcycle PG&A sales during the 2003 Christmas holiday had decreased (20-2003), 44 dealers (25-2003) reported no change or flat sales compared to the previous year and 40 dealers (55-2003) reported increases of varying amounts.
The average increase for those reporting dealers was over 40% below the 2003 average, which contributed to this decline as well as 15 dealers that shifted from reporting increases in 2003 to flat sales in 2004.

USED MOTORCYCLE SALES
We asked 100 dealers to report their new and used motorcycle sales for 2003. As indicated earlier, there were over 71,000 new motorcycles collectively sold by our sample of dealers during 2004. These dealers also reported over 15,300 used cycles sold. This computes to a 21.6% used/new ratio on average, or about 1 used bike for every 5 new sold.
This is nearly identical with the 21.5% ratio we compiled from our survey from a year ago for the year 2003, 21.5% for 2002 and a 22% ratio from 2001. This indicates that motorcycle dealers have sold used bikes over the last four years at virtually the same rate as new.

NEW MOTORCYCLE INVENTORY
We next asked the 100 dealers we surveyed to identify how many new and used cycles they currently had in inventory at December month-end. Based upon their responses, there were over 20,800 new motorcycles in dealer inventories, which computed to just over 29% of their 2004 annual sales they reported, or about 3.5 months of product on-hand. The chart below compares prior year surveys.

# Mos. New Inventory On-Hand (Dec.)
2004 3.5
2003 3.2
2002 4.3
2001 3.8
2000 4.4
Although up slightly from 2003, the figure generated from our ’04 dealer survey is still below historical levels.

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USED MOTORCYCLE INVENTORY
Used motorcycle inventory reported by our 100-dealer sample totaled nearly 2,300 units. This computed to about 15% of used cycle sales or 1.8 months of used motorcycle inventory on hand. The chart below compares previous averages from prior years.

# Mos. Used Inventory On-Hand (Dec.)
2004 1.8
2003 1.9
2002 2.5
2001 2.6
2000 2.7
Over the last two years, with used bikes selling at the same pace as new ones, dealers have been able to hold used bike inventories to below 2 months on-hand.

Dave Crocker is senior partner for Power Products Marketing, a market research firm based in Minneapolis, Minn. PPM (Web site: www.powerprods.com) specializes in the power products and components, powersports and marine industries. Crocker may be reached at 952/886-7333 or at dcrocker@powerprods.com.

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