Manufacturers of ATVs, boats and other recreational vehicles are facing a bleak summer as reluctance to make major purchases amid high interest rates has dashed hopes of a recovery in demand among major recreational product manufacturers.
In the wake of the coronavirus pandemic, consumers with money to spend took advantage of low interest rates to purchase what many refer to as “adult toys” – motorcycles, boats, RVs and other vehicles that cost a lot and are often financed with loans.
As people returned to international travel, some of the companies lost their luster, but now that consumer spending is declining, the makers of these discretionary items are feeling the pain.
According to Da Davidson analyst Brandon Rolle, retail sales in the recreational vehicle industry were slightly worse in June and July than dealers reported in May.
At the end of last month, shares of motorboat manufacturer Brunswick collapsed BC and the snowmobile manufacturer Polaris 
PII after lowering its annual forecasts after reporting a decline in second-quarter revenue and profit.
“Consumers are either at their limit or banks are hesitant to lend at these high levels. All of these factors have negatively impacted the industry’s retail environment and led to dealers having to reduce inventories,” Polaris CEO Mike Speetzen said in a conference call after the financial results.
Brunswick expects U.S. powerboat sales to decline about 10 percent after the company reported a 15 percent drop in sales in the second quarter, which is typically the peak selling season.
Several brokerages have lowered their price targets for Brunswick and Polaris following the results. Thor Industries 
THO also reduced its full-year forecast, saying it expects weakness to continue into 2025 as traders wary of excess inventory.
The Canadian powersports company BRP 
DOO, which reported its results in May, also reduced its annual forecast, although its first-quarter profit beat estimates.
“With no signs of a seasonal increase in demand so far, 2024 will almost certainly be a lost year, and the outlook for 2025 is now in question,” Roth MKM analyst Scott Stember said of Brunswick.
Most companies have taken steps to reduce inventory. Harley-Davidson 
HOG reduced inventory levels at retailers by 30 percent and hopes to balance retail and wholesale inventories by the end of the year.
“It’s not just the fact that financing the purchase is more expensive overall, but also the budget suspension… and the interest rates on other financial purchases, not to mention the fact that there’s a confidence issue,” said Brunswick CEO David Foulkes.
So far this year, shares of Polaris, Brunswick and Thor have lost between 12 percent and 16 percent of their value. Harley-Davidson rose 2% and BRP rose 4%.
