Boat and marine products retailer OneWater Marine (NASDAQ:ONEW) announced better-than-expected results in Q4 FY2023, with revenue up 13.4% year on year to $451 million. Turning to EPS, OneWater made a GAAP loss of $6.89 per share, down from its profit of $1.28 per share in the same quarter last year.
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OneWater (ONEW) Q4 FY2023 Highlights:
- Revenue: $451 million vs analyst estimates of $422.2 million (6.8% beat)
- EPS: -$6.89 vs analyst estimates of $0.45 (-$7.34 miss)
- Full year EPS guidance below expectations
- Gross Margin (GAAP): 26.4%, down from 31.7% in the same quarter last year (miss vs. expectations of 27.0%)
- Same-Store Sales were up 14.6% year on year (big beat vs. expectations of up 0.6% year on year)
“Our team delivered record revenue, solid gross margins and strong cash generation in fiscal 2023, despite a dynamic operating environment. Healthy demand and effective execution drove a double-digit revenue increase and a 3.0% increase in same-store sales for the year. Our gross profit margin continues to stabilize, bolstered by a 26% increase in our higher-margin service, parts and other sales which helped offset the expected decline in product margins as the industry returns to historical seasonality and more normalized pricing,” commented Austin Singleton, Chief Executive Officer at OneWater.
A public company since early 2020, OneWater Marine (NASDAQ:ONEW) sells boats, yachts, and other marine products.
Boat & Marine Retailer
Retailers that sell boats and marine products sell products, sure, but they also sell an image and lifestyle to an often wealthier customer. Unlike a car–which many use daily to get to/from work and to run personal and family errands–a boat or yacht is certainly a discretionary, luxury, nice-to-have purchase. While there is online competition, especially for research and discovery, the boat and yacht market is still very brick-and-mortar based given the magnitude of the purchase and the logistical costs associated with moving these products over long distances.
Sales Growth
OneWater is a small retailer, which sometimes brings disadvantages compared to larger competitors that benefit from economies of scale. On the other hand, one advantage is that its growth rates can be higher because it's growing off a small base.
As you can see below, the company's annualized revenue growth rate of 26% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was exceptional as it added more brick-and-mortar locations and increased sales at existing, established stores.
This quarter, OneWater reported robust year-on-year revenue growth of 13.4%, and its $451 million in revenue exceeded Wall Street's estimates by 6.8%. Looking ahead, analysts expect revenue to decline 1.8% over the next 12 months.
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Number of Stores
When a retailer like OneWater is opening new stores, it usually means it's investing for growth because demand is greater than supply. As of the most recently reported quarter, OneWater operated 98 total retail locations, in line with its store count a year ago.
Over the last two years, the company has rapidly opened new stores, averaging 20.8% annual growth in its physical footprint. This store growth is among the fastest in the consumer retail sector and gives OneWater a chance to scale towards a mid-sized company over time. With an expanding store base and demand, revenue growth can come from multiple vectors: sales from new stores, sales from e-commerce, or increased foot traffic and higher sales per customer at existing stores.
Same-Store Sales
A company's same-store sales growth shows the year-on-year change in sales for its brick-and-mortar stores that have been open for at least a year, give or take, and e-commerce platform. This is a key performance indicator for retailers because it measures organic growth and demand.
OneWater's demand within its existing stores has generally risen over the last two years but lagged behind the broader consumer retail sector. On average, the company's same-store sales have grown by 9% year on year. With positive same-store sales growth amid an increasing physical footprint of stores, OneWater is reaching more customers and growing sales.
In the latest quarter, OneWater's same-store sales rose 14.6% year on year. This growth was an acceleration from the 12% year-on-year increase it posted 12 months ago, which is always an encouraging sign.
Key Takeaways from OneWater's Q4 Results
With a market capitalization of $381.6 million and more than $93.31 million in cash on hand, OneWater can continue prioritizing growth.
We were impressed by how significantly OneWater blew past analysts' revenue expectations this quarter, driven by much better-than-expected same-store sales. That stood out as a positive in these results. On the other hand, its full-year earnings forecast underwhelmed and its EPS missed Wall Street's estimates. Overall, this was a mixed quarter for OneWater. The stock is flat after reporting and currently trades at $26.58 per share.
OneWater may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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The author has no position in any of the stocks mentioned in this report.