After extensive interviews with over 100 dealers, Baird told clients the powersports market is still impacted by persistent supply chain problems.
A team of the firm’s analysts led by Craig Kennison the dealers reported slowing sales across makes including Honda (NYSE:HMC), Yamaha (OTCPK:YAMHY), BRP (DOOO), Harley-Davidson (HOG), Polaris (PII), and RumbleOn (RMBL). Yet, the sales slowdown was not a product of supply chain issues more so than a pullback in consumer spending.
“Dealers continued to report soft sales stemming from lack of inventory, as consumer demand reportedly remained solid despite overarching macro concerns,” Kennison wrote on Wednesday. “Multiples have compressed and we see economic risk tied to the war, interest rate policy, oil prices, and inflation — but according to dealers, inventory availability remains the key issue in powersports today.”
In particular, 87% of Yamaha and 85% of Honda dealers responding to the survey indicated inventory remained too low. As such, many customers have begun to transfer off of wait lists for Honda and Yamaha products for other products that are immediately available. As availability of even alternative brands begins to diminish, many dealers reported turning customers away.
However, the lack of supply has also proven positive for select powersports stocks.
“Supply in powersports remains exceedingly tight — supporting strong dealer margins (a positive for RumbleOn),” Kennison concluded. “But investors should brace for worsening economic conditions, in our view.”
Overall, BRP (DOOO) was cited as the firm’s “favorite in watersports”, while Polaris (PII), Harley Davidson (HOG), and RumbleOn (RMBL) were each assigned “Buy” equivalent ratings as well, despite remaining supply chain overhangs.
Read more on powerboat sales trends.