OneWater Marine’s CEO on 2024’s Q3 results, exiting brands, dealers exiting and June softness
OneWater Marine has announced its results for its fiscal third quarter ended June 30, 2024.
“In the third quarter, our strategic inventory management and operational execution drove outperformance against the industry. However, our performance for the quarter was below our expectations due to a progressively weaker market environment and a negative impact from weather in Texas,” says Austin Singleton, CEO at OneWater (pictured above). “As we look to the balance of the fiscal year, we remain cautiously optimistic. We are focused on proactively managing inventory and expenses, which should provide some tailwinds as we navigate into fiscal 2025.”
Revenue for fiscal third quarter 2024 was $542.4 million, a decrease of 8.7 per cent compared to $594.3 million in fiscal third quarter 2023. Same-store sales decreased 8 per cent. New boat revenue decreased 10.4 per cent and pre-owned boat revenue decreased 4.1 per cent, driven by a decrease in units sold and average price per new unit.
Texas’ adverse weather had a meaningful impact, explains Singleton. “We’ve got two of our biggest stores in Houston and Dallas. And when you went through that, if you look at Houston, it’s already had the total amount of rainfall for the entire year through May. And so what we had in Texas was we had a lot of our lakes that our customers boat on that were actually closed and you weren’t allowed to boat on them.
“So, that doesn’t breed really well into people getting excited about going out and buying a boat, even on a sunny day. If they go buy a boat and they can’t put it on their lake and use it, they’re like, okay, why are we buying a boat?”
Exploring OneWater’s Q3 2024 results
Excluding OneWater’s Texas locations, same-store unit sales were down 1.9 per cent for the fiscal third quarter. Finance & insurance income increased slightly as a percentage of total boat sales. Service, parts & other sales were down 8.4 per cent compared to the prior year quarter. Excluding the impact from the dispositions that occurred in the fourth quarter of 2023, dealership segment service, parts and other sales were positive. Distribution segment service, parts, and other sales were lower due to reduced production by boat manufacturers.
Gross profit totalled $132.6 million for fiscal third quarter 2024, down $26.8 million from $159.4 million for fiscal third quarter 2023. Gross profit margin of 24.4 per cent decreased 240 basis points compared to the prior year period, driven by the normalisation of new and pre-owned boat pricing and lower revenue from higher margin businesses. Sequentially, gross profit margin decreased 20 basis points as the industry continues to stabilise.
Fiscal third quarter 2024 selling, general and administrative expenses totalled $87.1 million, or 16.0 per cent of revenue, compared to $92.8 million, or 15.6 per cent of revenue, in fiscal third quarter 2023. The increase in selling, general and administrative expenses as a percentage of revenue was driven by lower revenues. On a dollar basis, selling, general and administrative expenses declined 6.2 per cent due to previous cost reduction actions, ongoing expense management, and lower personnel costs.
Net income for fiscal third quarter 2024 totalled $16.7 million, compared to net income of $33.3 million in fiscal third quarter 2023.
OneWater Marine is one of the largest and fastest-growing premium marine retailers in the United States with a total of 98 retail locations, ten distribution centres / warehouses and multiple online marketplaces in 18 different states. It offers a broad range of products and services and has diversified revenue streams, which include the sale of new and pre-owned boats, finance and insurance products, parts and accessories, maintenance, repair and other services
“On the fundamentals of the industry, I am pleased to report that we have been very encouraged by the turnaround that we’ve seen in July. However, given the industry-wide decline that we saw this quarter and the weather-related impact in Texas, we are lowering our full year outlook,” says Singleton.
June 2024’s soft marine market in USA
Singleton admits that industry softness in June “kind of blindsided us.”
July has improved significantly compared to June from an industry standpoint. “But I don’t know what happened in June. It just — I can’t really put my finger on it.”
He posits that ‘hook and rolls’ went soft for OneWater in June. These are the people who come in and research one week, set up a demo the following week, and then take delivery of of product for the next weekend. “That’s the majority of the stuff, the hook and rolls, the stuff that people kind of made a decision on in a week’s time or ten days is what really went soft on us in June. But I can’t tell you what led to that,” he says.
Now focus remains on factors within his control, including ongoing strategic inventory management, cost-cutting measures, and the green shoots seen in the distribution business. He believes these have positioned OneWater very well to turn the page into fiscal year 2025.
Exiting marine brands to free-up floor space
“To make way for the next model year, we are selling through current inventory and we are making good progress while ensuring we have appropriate levels to meet demand. Utilising our industry-leading inventory management tools, we are evaluating every make and model by location. For some locations, we have elected to exit certain brands and optimise the model mix for others,” says Anthony Aisquith, president and COO.
“What we did is a deep dive with our inventory tool,” explains Singleton.
“Some brands have had higher price increases than other brands. Some brands have not brought the innovation that the other brands had. But when you look at covid, we made a decision as a company to take on some of these other brands because we needed inventory. We were selling everything we could touch.”
Along with the OneWater Q3 results in 2024, the company has analysed everything from location to model to options.
“Some of the one-off brands that we got . . . [we] can’t move to five other locations or [they] . . . maybe didn’t have the innovation that [we] needed and kind of rode the covid wave up, and nothing’s really changed,” says Singleton. “Those are the things that we looked at and said, okay, we’re not going to tie up floor plan dollars with these brands when we can buy more from the premium guys.
“There were certain models that we were sold out for two years. That’s not happening anymore. Now it’s back to the normal cadence of, depending on the complexity of the boat, 14 to 30 weeks . . . we’re only going to get seven of these next year.
“We would rather spend more money with – like a Pursuit – so that we have 20 locations instead of four that we can move the inventory around as we go through a season and make quicker adjustments.”
Marine boat dealer exit strategies
Singleton also references covid when it comes to dealers, and exit strategies.
“What we saw at the very beginning of covid was you had a lot of mature dealers out there that were like, ‘oh boy, what is this leading to?’ I’m not going to go through another 2008, 2009, something like that.
“What’s the exit strategy for the premier dealers in the country that are… 60 years old to 64 years old?
“What I think we’ll end up seeing [now], and we saw a couple of these already this year, is you’re going to have some more mature dealers that, from maybe an age perspective, they are going to be like, all right, ‘I’m just not going to fight through this again’.”
Singleton posits that some dealers will take their ‘chips off the table’. “It’s not health as much as just tightness and having to really work through and survive a winter – versus the last three years have been pretty simple.”
Health of marine industry USA
That said, he’s not really worried about the health of the industry as a whole or as a majority, because, he’s comfortable with where inventory is, the trend, where inventory is heading. “I think we’re all in really good shape to set up for 2025, and I think that’s what’s kind of a little bit of excitement for us is that, this quarter wasn’t good . . . but it’s not going to be a game buster. And probably the Q1, going in through the winter is a tougher quarter for us now that it’s gone back to more seasonality. But by the time we roll into boat show season next year, inventory will be in the right spot.
“So we expect to see some sort of margin uptick on new boats and then there’s a bunch of other green shoots . . . It kind of has us really looking forward and thinking 2025 is going to be a little bit of a rebound year.”
The post OneWater Marine’s CEO on 2024’s Q3 results, exiting brands, dealers exiting and June softness appeared first on Marine Industry News.
