Negative Industry Trends are Bound to Change for the Better

Don Brown numbers financial outlook

HOPE SPRINGS ETERNAL, which is a good thing for those who believe in it, as I do. There is no place in this business for those who don't use such ammunition against all sorts of unexpected, unwanted measures that seek to close the doors of their businesses before their time. (Click on charts for larger view.)

While I would like to be able to talk about how the economy is improving, there isn't much out there to whistle about. There are four or five indices that I tend to lean on when it comes to keeping an eye on how the banks are getting through the government's "stress tests." I haven't figured out yet whether it's the banks that fail their tests that get another billion dollars or so of our money, or whether it's the other way around. Will it matter?

What's this got to do with the powersports industry? Plenty! When the economy starts to improve again, guess what's bound to accompany that otherwise welcome trend? Higher interest rates! As I have said before, I am not in the game of preaching my view of what's happening with the economy, but it's at least a good idea to know what to expect. Those who remember the Reagan years will know what it means to operate a business when interest rates are running as high as 22 percent.

Fortunately, that period didn't last too long, but it sure hurt both sides of the selling-and-buying equation of motorcycles, ATVs, scooters, personal watercraft and — well, you get the idea. Why the high interest rates? Inflation! Nothing is feared more by the government, by consumer-based companies or by Wall Street companies (depending on which side of the equation they are playing).

So much for the sense of dollars. The sale of products in the powersports industry hasn't been especially encouraging, even though it has been only a while since double-digit sales increases were still encouraging buyers and sellers alike. We still have double-digits, but now they're colored red, and they aren't just for the cash-strapped manufacturers — it's across the board in too many categories for us to be comfortable.

The charts on these pages tell the story. So far I can find very little that points toward the sky and too much that has a minus sign in front of it. But hang on — these negative trends are bound to change for the better. The obvious question is when? Right now I would be guessing, but remember a few columns ago when I wrote about one "magic answer?"

The answer was used motorcycles. I have talked to several dealers who have been on both sides of that answer. For a few, merchandising used bikes is a great idea. But there were others who asked me if I were crazy! It isn't just used bikes that's helping to make the register sound off; it's the combination of used bikes and accessories that the used bikes need that's keeping the doors open. As long as I have been in this business — don't answer that — it's always been the combination of bikes and accessories that has made the difference. I'll say it again: When the economy sinks as it has recently, it's the used bikes and accessories that can help make the difference at your bank! — DJB

Editor's note: Economic conditions are affecting the powersports industry, as they are affecting many other industries. Some of the significant declines in our sales forecast could be the result of a very slow start in the first three months of 2009. This slow start could be the result of manufacturers depleting stock at the end of 2008, then not being able to have the right models for early sales. In the end, we won't know enough about what this year may do for another two or three months. Our forecasts are made with the best of efforts and techniques, but given these economic pressures, we must advise the greatest care in evaluating these forecasts. Stay tuned! — DJB

COMPOSITE INDEX: 2008: 42.98 2009: 37.06*