Q2 Dealer Sentiment Index: Foul weather, high inventory levels dampen the mood

Publish Date: 
Jul 10, 2013

FOUL WEATHER, HIGH INVENTORY and product innovation remain key themes for the powersports industry, according to the results of the Baird/Dealernews Q2 Powersports Dealer Survey.

“Similar to last quarter, dealers broadly reported that retail sales were hampered by weather issues,” said Craig Kennison, senior research analyst with Baird. “Not surprisingly, dealer inventory grew as a result of the delayed demand.

"While challenges abound for many dealers, those with fresh and innovative products were largely able to overcome the difficult start — and overall, dealer sentiment improved sequentially, indicating that many are looking past the near-term difficulties and are encouraged by future opportunities,” he said.

It’s still about weather. Dealers reported slow traffic and soft demand, with most blaming the weather which has washed out the early part of the riding season in many areas of the country. Whether it was cold temperatures, warm temperatures, ice storms or excessive rain, unfavorable weather continued to keep the customers out of the showrooms and disappointed dealers who had hoped the weather impact would abate after a difficult first quarter.

The impact was most severe on PWC and motorcycles. Parts and services trends remained challenging (in tandem with the weather) but improved sequentially.

Some brands weather the weather. While the weather proved to be a challenge for every brand, new products from some OEMs helped dealers to better overcome the tough conditions.

In particular, dealers noted the positive impact of new and differentiated products from Polaris, BRP, Honda and Harley. Many dealers carrying other brands were disappointed by the lack of innovation currently available for their showrooms.

Inventory story is mixed. Across the industry, dealer inventory is up versus last year as weather drove softer retail trends after eager OEMs pressured dealers to stock more. The dynamic had many dealers (especially those with sleepy product lines) concerned about competitive pricing actions at other dealerships.

The negative sequential change in trend was most pronounced in PWC and scooters; notably, dealers felt better about SxS inventory levels than they did three months ago. In a few instances, dealers complained of supply constraints for hot products.

Sentiment is improving. The Baird/Dealernews Powersports Dealer Sentiment Index rose slightly, indicating a mixed but improving outlook. While the weather disappointed, new products from some OEMs are encouraging some dealers. (Click on the charts throughout this article to view enlargements.)

LONGER TERM VIEW.
Overall, dealers reported they were more satisfied with current conditions than in April, and the three- to five-year outlook reached its highest level of the past year.

“Many factors impact this metric as it encompasses dealers carrying different products and different brands,” Kennison explained. “Given the frequent commentary on weather, it’s not surprising that dealers across all categories and brands are broadly ‘neutral’ about current conditions. Naturally, dealers were more encouraged by those brands with fresh products.” (Continued.)