MarineMax (HZO)

Boat and marine products retailer MarineMax (NYSE:HZO) reported Q1 CY2025 results exceeding the market’s revenue expectations, with sales up 8.3% year on year to $631.5 million. Its non-GAAP profit of $0.23 per share was 19.3% above analysts’ consensus estimates.

Company Overview

Appropriately headquartered in Clearwater, Florida, MarineMax (NYSE:HZO) sells boats, yachts, and other marine products.

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.

Competitors offering recreational marine products include OneWater Marine (NASDAQ:ONEW), Yamaha Motor Co. (TSE:7272), and Brunswick Corp (NYSE:BC).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $2.42 billion in revenue over the past 12 months, MarineMax is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers. On the bright side, it can grow faster because it has more white space to build new stores.

As you can see below, MarineMax grew its sales at a decent 12.2% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts) despite closing stores, implying that growth was driven by higher sales at existing, established locations.

This quarter, MarineMax reported year-on-year revenue growth of 8.3%, and its $631.5 million of revenue exceeded Wall Street’s estimates by 8.8%.

Looking ahead, sell-side analysts expect revenue to grow 2.6% over the next 12 months, a deceleration versus the last six years. This projection doesn't excite us and suggests its products will face some demand challenges.

Number of Stores

A retailer’s store count influences how much it can sell and how quickly revenue can grow.

MarineMax listed 70 locations in the latest quarter and has generally closed its stores over the last two years, averaging 3.1% annual declines.

When a retailer shutters stores, it usually means that brick-and-mortar demand is less than supply, and it is responding by closing underperforming locations to improve profitability.

Same-Store Sales

The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales provides a deeper understanding of this issue because it measures organic growth at brick-and-mortar shops for at least a year.

MarineMax’s demand within its existing locations has been relatively stable over the last two years but was below most retailers. On average, the company’s same-store sales have grown by 1.9% per year. Given its declining store base over the same period, this performance stems from a mixture of higher e-commerce sales and increased foot traffic at existing locations (closing stores can sometimes boost same-store sales).

In the latest quarter, MarineMax’s same-store sales rose 11% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.

MarineMax’s gross margin is slightly below the average retailer, giving it less room to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged a 33.2% gross margin over the last two years. Said differently, MarineMax had to pay a chunky $66.83 to its suppliers for every $100 in revenue.

In Q1, MarineMax produced a 30% gross profit margin, down 2.7 percentage points year on year and missing analysts’ estimates by 7.9%. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting it strives to keep prices low for customers and has stable input costs (such as labor and freight expenses to transport goods).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

MarineMax was profitable over the last two years but held back by its large cost base. Its average operating margin of 6.2% was weak for a consumer retail business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, MarineMax’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q1, MarineMax generated an operating profit margin of 3.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

MarineMax’s full-year EPS grew at an unimpressive 2.9% compounded annual growth rate over the last five years, worse than the broader consumer retail sector.

In Q1, MarineMax reported EPS at $0.23, up from $0.18 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects MarineMax’s full-year EPS of $2.15 to grow 21.8%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

MarineMax’s demanding reinvestments have consumed many resources over the last two years, contributing to an average free cash flow margin of negative 6.2%. This means it lit $6.21 of cash on fire for every $100 in revenue.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

MarineMax’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 16%, slightly better than typical consumer retail business.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

MarineMax’s $1.33 billion of debt exceeds the $203.5 million of cash on its balance sheet. Furthermore, its 7× net-debt-to-EBITDA ratio (based on its EBITDA of $160.9 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. MarineMax could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope MarineMax can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

We were impressed by how significantly MarineMax blew past analysts’ revenue, EPS, and EBITDA expectations this quarter. On the other hand, it lowered its full-year EPS guidance. Still, we think this was a decent quarter with some key areas of upside. The stock traded up 7.7% to $20.72 immediately following the results.

Updated: July 10, 2025 at 10:39 PM EDT

Are you wondering whether to buy MarineMax or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

MarineMax isn’t a terrible business, but it doesn’t pass our quality test. Although its revenue growth was solid over the last six years, it’s expected to deteriorate over the next 12 months and its declining physical locations suggests its demand is falling. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its brand caters to a niche market.

MarineMax’s P/E ratio based on the next 12 months is 10.6x. At this valuation, there’s a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $32.33 on the company (compared to the current share price of $27.86).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.