Retailing Questions Continue for Powersports


Wells Fargo Consumer Conference

There wasn’t much to excite investors at the recent two-day consumer conference held by Wells Fargo Securities, according to a report issued by the company last week. The conference was held Sept. 29-30 in New York, but there were not many powersports companies among the 64 firm that gave presentations to the analysts. Perhaps the best known powersports participants were Arctic Cat and Brunswick. Other related companies included International Speedway Corp., Penske Automotive, Tractor Supply, Marine Products, and U.S. Auto Parts Network.

Several trends ran through the presentations, according to reports compiled by attending analysts. These include: A continuing major shift to online marketing in a number of forms; personalized marketing is growing, using the Internet and social media to drive sales at online and bricks and mortar sites; increased sourcing costs which could put pressure on margins even though many companies are operating in a more efficient manner, and holiday inventories seem to be in good shape.

“Powersports retail sales visibility likely will be clouded until the beginning of seasonal sales in March,”  Senior analyst Tim Conder wrote in his conference summary report. Near-term price movements of powersports stocks most likely will be tied to general economic activities, he wrote. In his conclusion about the leisure segment, Conder says he likes certain toy companies, followed by cruise lines and powersports companies. Not a real strong recommendation.

Writing about the broad leisure segment, Conder said that company and channel inventories  are in “good/very good condition” relative to last year and historic and seasonal cycles. This segment includes toys and boats as well as powerports products.

There’s a spread on retail sales performance within this segment in 3Q, Conder says. Toy sales seem to be above expectations, while higher priced items, such as boats, are “slightly below expectations.”

Conder also is concerned about costs, although he says these increases are balanced, to a large extent, by increased efficiencies in manufacturing and operations, new products, and selected price increases, although these are mostly on lower price-point products. You can expect to see these negative factors carry through 2011, he says.

Here are selected notes on other consumer segments from a variety of Wells Fargo analysts:

  • Retail. Consumers are spending money, notes another Wells Fargo analyst, but “they have become a lot more discretionary and cost-conscious in their purchases.” Retailers are working harder to get customers into the stores. That means more money spent on advertising and promotions. The shift from print to online advertising continues. Apparel companies have seen a pickup in sales and seem optimistic about sales for Spring 2011.
  • Retail and Consumer Products. There were positive comments from a number of retailers, a surprise, said another analyst. Interestingly, wrote Grant Jordan, “Several management teams mentioned a shift from defense to offense. Based upon these comments, we believe retail sales in September could surprise to the upside.” He expects online marketing to be a major area for marketing by retailers over the next several years, based upon management comments.
  • Retail Hardlines. Private label products are increasing and consumers seem willing and able to buy if retailers have innovative products that are distinct from the competition, and if they can successfully communicate their value propositions to consumers. In the auto sector, used vehicles continue strong and presenters said that parts and service should continue strong in coming quarters.  JD

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