Specialist
Former executive at West Marine Inc
Agenda
- Trends and developments in the marine aftermarket industry, focusing on West Marine
- Demand trends and competitive positioning across product portfolio
- Profitability profile – OPEX, inflation and supply chain
- Medium-to-long-term outlook
Questions
1.
Could you share your up-to-date perspective on the marine aftermarket industry, pulling out 2-3 key trends or developments that you’ve been following?
2.
What percentage of the industry today do you believe is sold online vs in-store?
3.
West Marine seems pretty nascent in its e-commerce strategy right now, but is the company in the 25% that is sold online or is it on the lower end? Do you have any kind of anecdotal evidence on where the company stands there?
4.
You shared a characteristic of the core customer profile, being that they make over USD 100,000 per year. How would West Marine profile its core customer base, and could you share any other characteristics?
5.
We have a USD 7bn market size and you broke out some product or business lines. What percentage of market share does West Marine actually own in that space?
6.
Is West Marine gaining or losing market share? Do you have an outlook for where that market share might sit? Do you expect it to stay in the same place?
7.
What drove West Marine’s bump in market share and why has the company not been able to hold onto it? You highlighted execution.
8.
Is the rest of the industry also being hindered by supply chain issues?
9.
With some of the colour you’ve shared with us, it sounds as though the long-term more sustainable growth rate is around 4%. Do you expect West Marine to be in line, above or below that over the longer term?
10.
Could you outline the competitive landscape? How is each player positioned and what is West Marine’s edge? How replicable is it, and do you have any further comments on market share? You’ve highlighted some competitors, such as Amazon, the mom-and-pop operators and Defender, which excelled in D2C.
11.
Do you have a rough estimate of the size of the whole mom-and-pop segment? How much share do they have of the USD 7bn wider market?
12.
Could you discuss West Marine’s main product or business lines and your outlook for each segment’s performance?
13.
You talk about a potential weakness of West Marine’s electronics business, being that it’s all mostly branded products – you highlighted Garmin and Navico, which was acquired by Brunswick in October 2021. How does the company think about private label? Is that a big pillar or strategic point for it? Is it a factor at all?
14.
In terms of West Marine’s segments that you’ve highlighted, are any of them less susceptible to the inflationary environment we’re in or in a potential recessionary environment just looking forwards? Are any more resistant to it? Which would probably be impacted more?
15.
Why does Home Depot have a bigger buying base?
16.
You said West Marine is much higher-priced in this segment, with some products being USD 20-30 higher than on Amazon. Would you say that West Marine has significant pricing power? How did the company think about its pricing and increasing pricing, especially in an inflationary environment? Does it have that pricing power with its customers to continue to pass on pricing?
17.
Where are the material challenges for West Marine’s supply chain? Where is the company struggling the most and what bottlenecks need to be relieved so that it can press on and focus on execution again?
18.
What drives West Marine’s relationships with its vendors? How did those negotiations look in recent months or in these past few years, given pricing being passed on and inventory issues and shortages? What do those conversations look like today?
19.
How much runway does West Marine have in terms of managing OPEX? What kind of low-hanging fruit or levers are at the company’s disposal to continue to take cost out of the business?
20.
How should we think about West Marine’s potential growth and profitability profile over the next few years?
21.
We talked about maybe 60% of the industry still being mom-and-pop. Do you expect to see any industry consolidation going forwards?
22.
Are there any viable, attractive and obvious targets that make sense for West Marine specifically?
23.
What are your views on West Marine’s management? How would you characterise its ability to execute? Are there any moves you would question?
24.
What might be the best- and worst-case scenarios for West Marine over the next 12-18 months?
