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Boat sellers pitch smooth sailing to rally sales

A potential boat buyer looks over the console during a recent show. AP

ORLANDO, Fla. — Harry St. John had his eye on a sleek
18-foot fishing boat as he browsed for bargains at a recent boat
show. But his mind was on Wall Street.

``It does worry you when you see what the stock market did last
week,'' the 65-year-old Hernando Beach retiree said of the recent
dip in the bull market. ``Gas is getting high again. That's all
going to be taken in to play. I'm not buying unless the price is
right.''

With consumer confidence wavering, shoppers like St. John are
balancing the desire to get out on the water with the $25,000
average price of a new boat. Boat sales are down and the projection
for 2007 is flat or down slightly from 2006, said Thom Dammrich,
president of the National Marine Manufacturers Association.

``Nobody needs a boat,'' he said. ``It's a discretionary
purchase. It depends on people feeling good.''

The slump has also hit the boat retail industry's only giant —
Clearwater, Fla.-based MarineMax — but the company seems to be
shaking off the worst of it. The $1.2 billion corporation has more
than 2,200 employees at 88 retail locations selling everything from
$20,000 starter boats to multimillion dollar yachts.

``They are dramatically outperforming the industry,'' said Brian
Rayle, an analyst with KeyBanc Capital Markets. ``Even though the
market was down 15 percent, their same store sales were up 7
percent. They are continuing to take market share even in the
trough.''

The company has Wall Street's attention. Shares of marine
manufacturing giant Brunswick Corp. slumped in January when
MarineMax, the only publicly traded boat retailer, lowered its 2007
profit expectations.

For the quarter that ended Dec. 31, MarineMax
posted a loss of $3.8 million, or 21 cents per share, compared with
earnings of $664,000, or 4 cents per share, during the year-ago
period. Sales climbed 30 percent to $234.7 million from $181.2
million.

The company said employee and product incentives and increased
spending on marketing hurt its operating margins. MarineMax
chairman, president and CEO Bill McGill also said a slump in the
housing market has hurt the worst.

``Store traffic is usually down when there is bad news out
there,'' McGill said.

McGill started his professional life as an aerospace engineer.
He even hoped to be an astronaut. But when the Apollo-era ended and
aerospace cratered, McGill, an avid water-skier, decided to do
something he loved. He got into the boat business.

He recognized right off that customers wanted to spend time on
the water, not changing their engine oil or stressing about running
aground in unfamiliar waters.

MarineMax rose to dominate the industry on that simple idea:
Customers will pay premium prices for more fun and less hassle.
McGill's stores offer services ranging from a fleet of mobile
mechanics to certified captains to take rookie boaters on their
maiden voyage.

``It has got to be hassle-free as much as we can make it
hassle-free,'' McGill said. ``People are more sophisticated
consumers. It's do-it-for-me instead of do-it-yourself.''

That includes showing a family how to tie knots or how to take
their boats on two-week excursions to the Florida Keys and the
Bahamas. MarineMax found overnight group trips were a sure way to
persuade wealthy clients to upgrade to bigger boats.

The hands-on approach was a new thing when McGill got into the
business 34 years ago.

``The traditional boat dealer was 'Here are your keys, come back
in five years when you want to buy a new one,''' Rayle said. ``It
was a very hands-off retail industry, which given the price point
of what they are selling was not a great business model.''

MarineMax's success forced change among boat sellers, Dammrich
said.

``They really have set the bar for the industry in terms of
delivering a quality customer experience,'' Dammrich said. ``The
most successful dealers are those who are selling the lifestyle and
not just the product.''

Dammrich said the boat retailers weathered past rough patches,
including a recession, with the knowledge that peaks and valleys
are common in the industry and the desire to get out on the water
will always lure customers back to showrooms.

``There's really kind of a five-year cycle — two years down, two
years up,'' Dammrich said. ``Even if sales are down, we still sold
300,000 boats last year. We're not seeing a lot of boat dealers
going bankrupt or anything like that.''

MarineMax concentrates on the high-end of the boating market
with an average unit cost of $110,000 — more than four times the
industry average, McGill said. The dealerships carry brands such as
Boston Whaler and Sea Ray, the BMW and Mercedes equivalents of the
boating world.

Dealers who cater to blue-collar boaters, including bass boats
and some of the smaller lake and ocean boats, aren't on MarineMax's
radar. The tussle is in the upscale market where independent
dealers stake local roots against MarineMax's corporate muscle.

``We're stomping all over them,'' said Wayne Sorensen, owner of
Utah Watersports in South Jordan, Utah, a suburb south of Salt Lake
City. ``I guess in some cases the big conglomerate has done well,
but here we're outselling them two to one.''

Still, the bigger MarineMax gets, the less there is for everyone
else.

``They're taking market share,'' Rayle said. ``That's obviously
coming from those other guys.''

St. John was impressed with the MarineMax sales pitch at the
Orlando boat show.

``I think they're offering more than they did 10 years ago • of
course the prices have gone up, too,'' said St. John, who has owned
a boat for most of his life.

But it was the most basic touch, missing at several surrounding
displays, that persuaded St. John to stop at MarineMax's booth: a
price tag.

``I want to see it in writing before I start talking,'' St. John
said.