MarineMax (NYSE: HZO) is building steam while West Marine (NASDAQ: WMAR) is stuck at anchor. To learn more about Forward View equity research, visit http://www.sportinggoodsmonitor.com/

1. A Tale of Two
(Marine) Retailers
www.sportinggoodsmonitor.com

2. MarineMax (NYSE: HZO) is building steam while West Marine
(NASDAQ: WMAR) is stuck at anchor. To learn more about Forward
View equity research, visit http://www.sportinggoodsmonitor.com/
One-Year Stock Price Chart
A Tale of Two
(Marine) RetailersSeptember 18, 2016
Nathan Yates, M.S.F.
Director of Research
nathan@forwardviewconsulting.com
Michael Williams
Research Analyst
michael@forwardviewconsulting.com

3. 2
The News
On September 8th
, West Marine reduced full-year revenue and profit
guidance. The company now expects revenue to be flat or down slightly y/y with
same-store sales seen as flat or up just 1%. Previous guidance called for revenue
to climb 1–4% with comparable same-store sales up 1–3%. Pre-tax profits are
now forecast to range between $9–$11M vs. earlier guidance for $11M of pre-tax
earnings. West Marine blamed the cut in guidance on softer-than-predicted
revenue from professional customers (think marinas and boat dealerships or repair
shops). CEO Matt Hyde hinted that efforts to boost profits have dented demand
from this niche market, likely indicating that higher prices have hurt sales. It’s a
price elasticity issue.
Forward View was already forecasting essentially flat sales for West
Marine and pre-tax profit of around $10.1M. Thus, we weren’t anticipating that
the firm’s previous guidance would be achieved. Still, our 3Q and 4Q revenue
estimates have been lowered by 0.3% and 1.5%, respectively. We now forecast
$9.7M of pre-tax profit and full-year diluted EPS of $0.22, down a penny from
our last estimate. We’ll stay on the low end of the new guidance.
The Tour
Forward View research analyst Michael Williams toured the MarineMax
dealership in Orlando on September 14. We thank the company for the
opportunity to have a visit. As our regular readers know, Forward View believes
that field research is essential to our expertise.
Michael’s Notes
MarineMax operates as a corporation with a community-banking
mentality. Each standalone dealership operates by the rules and regulations of the
corporation, but the teams at each location have their own personal touch in terms
of management.
New boat models at the Orlando location were from Sea Ray and Boston
Whaler, both owned by Brunswick (NYSE: BC), with Sea Ray being the biggest
seller and the key to brand loyalty. Sea Ray is the core brand for the Orlando
location, largely due to the dealership being established in 1987 by Parker Boats.
The top model that I saw with my eyes was Sea Ray’s SLX. This boat, with its
dual engines, has a joystick that controls the boat. (Children could actually captain
the boat but that is obviously illegal.) Another top seller in the Orlando market
would be the Harris Pontoon Solstice 250. Customers have the option of adding
an additional motor for the boat to give it that extra bit of power.
While I was hoping to see yachts, the Orlando location doesn’t sell yachts,
but they do service them. MarineMax as a whole does carry yachts, and we would
• Forward View
research analyst
Michael
Williams
recently toured
a MarineMax
dealership in
Florida.
• He found
evidence to
affirm our Buy
rating on the
stock.
• Meanwhile,
West Marine
recently cut
revenue and
profit guidance.
• MarineMax and
West Marine
are sailing in
opposite
directions.

4. have to visit the other locations near the coast in St. Petersburg or Pompano to look at the yacht
selection. (Azimut brand yachts would be available there.)
MarineMax hurricane prep is based on the location and where the storefronts are situated. Dealerships
are given a checklist and have hurricane planning meetings. The inventory they have takes top priority, while
customers are given waivers and must be insured. The Orlando location doesn’t have shutters, but their
locations on the coastlines do and they run through their checklists in weekly increments based on the storms.
The Orlando facility has good storage space in terms of parts and accessories. Yeti cups are the big hit in
their service store, while the lead time for service varies per season. From now until February, 2–3 days is
typical, but during boating season, 3 weeks or longer may be necessary for customers and a little bit more time
when they are not previous MarineMax customers.
The biggest key for MarineMax and their strategy for growth is a time-tested marketing plan. Word of
mouth, due to the customer experience and getaways, are how the company keeps and brings in a lot of its
business. They teach their customers how to use a new boat and work to ensure that the boating lifestyle
becomes a lifelong passion. MarineMax’s “Women on the Water” classes are another way that the company
gains and keeps its clients. Additional revenue streams are derived from their brokerage and insurance
offerings. MarineMax is thus a high-end and full-service boat dealership company.
The Forward View
While MarineMax has enjoyed a great year thus far, West Marine keeps struggling. The casual analyst
would assume that strong sales of high-end boats, as we’ve seen in 2016, would lead to increased demand for
the high-end boat accessories, watersports equipment and fishing gear carried by West Marine. (Demand for
boat parts, the core strength of West Marine’s legacy business, lag sales of new boats just as sales of
ammunition lag demand for firearms.) Unfortunately for West Marine, retail stores haven’t enjoyed an increase
in traffic commensurate with the spike in boat demand. We believe there are two explanations for this situation:
1. West Marine isn’t #1 in any of the product lines seeing overall growth. The company’s identity
hasn’t become synonymous with anything except for boat parts. West Marine’s fishing gear
selection isn’t as strong as Bass Pro Shops or Cabela’s (NYSE: CAB), their watersports product
lineup faces competition from numerous big-box/online retailers and the company’s clothing
offerings fall into the sub-niche of expensive boating apparel. That’s not a recipe for success.
2. Sales of fishing and marine products are shifting online, and West Marine doesn’t have a leading
e-commerce and digital marketing platform. Social media data gathered by our friends at
Thinknum shows that West Marine doesn’t generate much buzz online. The number of Facebook
users checking in at West Marine stores remains underwhelming, too. See Chart 1 below to
understand the erratic pattern of visitors to West Marine’s website.

5. 4
Chart 1: West Marine Monthly Unique Website Visitors (courtesy of Thinknum)
Due to the weakness in West Marine’s retail operations and still-developing e-commerce business, we
have slightly reduced our earnings and revenue estimates for the company. Our Hold rating and $9 target price
are reiterated, though. West Marine’s stock price took a hit following the guidance cut, and we don’t anticipate
any positive catalysts in the near-future. If the stock rises at all, it’s because investors have become so wildly
bullish that they’ll purchase anything and everything. A market focused on fundamentals won’t be pushing
West Marine shares higher. Still, it’s also unlikely the stock will fall much farther due to the overall trend in the
market. Our financial model indicates a fair value per share of between $8–$9.
Our MarineMax price target of $25 and Buy rating are reiterated. We see this company as an appealing
niche investment. It’s a reasonably-priced and high-growth opportunity that isn’t connected to traditional retail
trends. Affluent Americans are doing well in the current economic environment, and they’re the target market
for MarineMax. Boat-buying is also rather immune to a shift toward e-commerce, thus giving MarineMax a rare
retail moat. Even drones can’t deliver boats! MarineMax deserves a place in any growth-oriented portfolio. We
close this report with a graph of key MarineMax and West Marine financial metrics (Chart 2) followed by our
estimates and valuations for each corporation.
Chart 2: Key MarineMax and West Marine Financial Metrics

6. 5
MarineMax Estimates & Valuation

7. 6
West Marine Estimates & Valuation

8. 7
Disclaimers & Disclosures
Analyst Certification: I, Nathan Yates, certify that the views expressed in this publication accurately reflect my personal views about
the subject companies and their securities. I also certify that I have not, am not, and will not be compensated directly or indirectly in
exchange for expressing any specific recommendation in this report.
Required Disclosures: Nathan Yates may or may not own long or short positions in securities mentioned in this report. As a matter of
principal and ethics, he will not trade for three days in any security to be mentioned in any report. Occasionally, the time gap between
a personal trade and an unanticipated event may be less. There is no known affiliate ownership in subject companies of this report.
The firm does seek to sell research descriptions to publication corporations. No other known conflicts exist.
Important Disclosures: Forward View Consulting employs various equity valuation methodologies to develop investment ratings,
target prices and conclusions. Certain risks to our ratings, target prices and ultimate investment conclusions exist which include,
without limitation, a company’s failure to achieve financial results, product risk, regulatory risk, general market conditions and
volatility, interest rates, political factors, acts of God, terrorist activities and changing economic conditions. Forward View Consulting
is not a registered investment advisor and is not acting as a broker-dealer under any federal or state securities laws. Notable
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Disclaimer: Material provided in this publication is for educational purposes only, and was prepared from sources and data believed
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Recommendation Expected Return
Buy Shares are expected to deliver alpha
Hold Shares are expected to match the market's risk-adjusted return
Sell Shares are expected to underperform the market