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Aug. 10, 2009 – Has the industry bottomed out yet?

August 14, 2009
Filed under Features

Two statistical benchmarks that chart the health of the industry’s retail sales are showing different possible conclusions.
The Motorcycle Industry Council’s (MIC) recent first-half retail sales report showed an industry sliding into territory it hasn’t frequented for decades. On-road motorcycle sales, which were healthy for most of last year, suddenly slid, falling more than 45 percent compared to the year-ago period. Scooter sales, last year’s surprising retail category, were down even worse than on-road motorcycles.
Another industry report, however, shows retail sales may not still be on a straight downward spiral.
A same store dealership sales report, which ADP Lightspeed compiles for Powersports
Business, shows sales down significantly in June, but the decline is no longer on a percentage basis getting worse than the prior month. That wasn’t the case for the past several months, according to the report that tracks more than 250 metric and V-twin dealerships across the United States.
So have the industry’s retail sales bottomed out and started to, even at a gradual pace, work themselves back to 2008 or even 2007 levels?
Industry executives see a pretty murky picture as they consider the immediate future.
“It’s pretty hard to say,” said Ray Blank, senior vice president of American Honda Corp.’s Motorcycle Division. “In the utility products, we’re seeing some bottoming.
“On the recreational side, it may take some time to sort out. People are going to have other priorities with their money before they return in the same numbers to the purchase of toys. We’re cautiously optimistic with some of the turns of events of the last quarter, but at the same time we don’t want to fool ourselves. We think the bottom is in sight. We may not have actually seen it yet.”
Steve Johnson, president of national distributor Tucker Rocky, notes his background isn’t in economics but the different signs he sees — more saving and less spending by consumers and less overall customer confidence — point to a challenging retail environment.
“I think we have a ways to go before we
bottom out,” Johnson said. “I actually believe
it’s going to be a slow recovery rather than a quick recovery.”
Johnson echoed Blank’s thoughts, noting some key aspects of consumers’ lives, employment being one, have to return to more normal levels before sales really start to pick up.
“Those priorities will come before spending in some parts of our industry,” he said. “The good news is it will come back.”
For now, OEMs mostly are banking on continued slow sales. Arctic Cat CEO Chris Twomey in his company’s recent earnings conference call noted the company took certain assumptions about the economy as it made its business plan for its current fiscal year. Those assumptions include:
The U.S. recession will end within the next six months, but overall sales growth will remain very sluggish;
The worldwide recession will lag at least a quarter, if not two, behind the U.S. recession;
Consumer spending will remain “anemic” throughout this year and 2010, with spending on recreational products trailing spending in general;
U.S. unemployment levels will remain above 9 percent.
“Nothing we have seen so far this year would lead us to change any of these assumptions,” Twomey said.

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