Too late to ride the MarineMax wave?
The Clearwater, Fla.-based boat retailer has seen its stock price rise 330% in the past five years. But we think there's room for more gains.
Corey Hajim, FORTUNE reporter

Lately, boat retailer MarineMax has left the competition (not to mention the rest of the market) drowning in its wake. Over the past five years, its stock price has risen 330%, vs. the S&P small-cap index which returned 99%. But should investors try to get in now, or will they have already missed the boat?

In a business dominated by mom and pop shops, Clearwater, Fla.-based MarineMax (Research) has been gobbling up competitors -- growing from a consortium of six dealers at its IPO in 1998 to becoming the leading player with 77 locations and revenues of $947 million in 2005.

A Sundancer for sale through MarineMax
A Sundancer for sale through MarineMax

MarineMax added to its flotilla on April 3 when it acquired Surfside - 3 Marina, a boat dealer with eight locations in Connecticut, Maryland, Rhode Island and New York. RBC Capital analyst Ed Aaron calls it "a transformative deal" that will keep the stock on its run.

Acquisitions are one source of expansion, but MarineMax has also grown organically. "Since its IPO, the company has averaged same-store sales growth of close to 10%," says Aaron. "For any retail business that is a big number."

A full 90% of revenues come from new and used boat sales. MarineMax sells in the premium market with an average unit price of $110,000, which is about three times the industry average.

But CEO Bill McGill says that the secret to MarineMax's success is from "selling the pleasures of the boating lifestyle."

"People don't need a boat," he explains. "It is an emotional, right side of the brain purchase."

So MarineMax sells more than just a boat. It is also in the business of financing, insurance, maintenance, boat accessories, slip management, seminars, and trip planning. MarineMax creates a community around boating that enables them to attract and retain customers over time. They host classes like Women on Water and plan trips for boaters to destinations like the Bahamas where 150 boats recently headed, en masse.

McGill, who grew up in the boat business and was described by one board member as a "feisty fellow and a clear thinker," emphasizes getting the right people in the right position to sell successfully.

Potential employees are interviewed by eight to ten team members before they are hired. Once on staff, they attend MarineMax University, completing up to 15 hours of coursework online.

MarineMax also spends a good deal of time on getting recently acquired dealers up to speed. A centralized computer system is used to track and share inventory data across stores. P&Ls at managers' fingertips not only show how a dealer or region is doing, but also how well he or she may be compensated as a result. Such systems build discipline and efficiency in an otherwise low-tech market.

"The entire supply chain in the boating industry is somewhat antiquated," says Aaron. "[MarineMax's] selling practices are just superior."

Still, the industry outlook seems promising, with boat-show attendance up 8 percent to 9 percent this year over last, according to the National Marine Manufacturers Association, which launched a $15 million marketing campaign called "Grow Boating" in March.

The business is bolstered by aging baby boomers with ample bank accounts and recreation time, as well as the strength of the economy. Even if a downturn should dampen sales, MarineMax would probably be able to take advantage of attractive acquisition opportunities in that environment.

"If you look back historically," says Aaron, "you'd be challenged to find a single period of time when MarineMax didn't gain market share."

While the stock has already had a good run, Aaron believes there is room for margin growth. Trading at nearly 17 times 2006 earnings guidance, MarineMax isn't cheap, but with a strong management team, an abundance of acquisition opportunities, and sophisticated operational systems, we think MarineMax is set to sail, as well as weather storms.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.