MarineMax, Inc. (HZO)

Troubled waters ahead.

MarineMax, Inc. operates as a recreational boat dealer with 88 stores in United States. It sells new and used recreational boats, including pleasure boats (such as sport boats, sport cruisers, sport yachts, and yachts), and fishing boats, with a focus on premium brands in each segment. It also sells a line of boating accessories, including life jackets, inflatables, and water sports equipment and other marine related products.

The past performance of the company has been good with decent level of revenue growth. However, the company is not likely to sustain the same level of growth in fiscal 2007 since the future outlook is negative. Since the company offers luxury goods, its business is severely affected by the economic environment. Housing slump in US is discouraging the customers to make big-ticket purchases like boats. MarineMax has already started getting a sinking feeling by incurring a loss in December quarter. Events like boat shows are the major revenue drivers for the industry. However, this year these actions are likely to slow down due to the economic slowdown. Management expects decline in operating margin due to higher marketing spends owing to softness in the industry.

As per the recent industry data, the segments in which the company operates have dropped in revenue terms and the slide is expected to continue. Further about 59% of company’s revenues come from sales of new boats manufactured by Brunswick. As the demand is expected to fall in future, Brunswick is on the threshold of downsizing its staff. Discouraging trends have provoked the management to lower its earnings outlook, which indicates a sharp fall of 27% in the full year earnings of fiscal 2007. Thus, diving is tough and the sea is gazing wildly at MarineMax.