Malibu Earnings: Patient Consumers Delay Purchases, Leaving Dealer Inventory Higher Than Optimal

Echoing similar sentiment to the other discretionary manufacturers on our coverage list, narrow-moat Malibu continues to see a hesitant consumer purchase boats cautiously, held back by higher loan expense and worry around economic malaise. In turn, this has hindered dealer ability to absorb more units from manufacturers, adding to caution around higher floorplan financing costs. As a result of this throughput chokehold, Malibu delivered third-quarter sales that contracted 46%, with volumes lower by 52% and average selling prices up 13% (helped by mix). Although adjusted EBITDA margin of 12% was better than our 10% estimate, it was still more than 900 basis points lower than last year, as cost absorption was nonexistent—gross margin declined by 645 basis points (19.8%) and operating expense margin rose by 565 basis points (13.2%). Weak performance is industrywide, rather than idiosyncratic, and we think most manufacturers are prudently ratcheting back shipments to ensure the dealer base isn’t inundated with stale inventory as they move into the next model year.