OneWater (ONEW) Q1 2026: Pre-Owned Sales Jump 24% as Margin Expansion Outpaces Flat Demand
Margin expansion and a 24% surge in pre-owned sales defined OneWater’s first quarter, as disciplined inventory management and brand rationalization offset the drag from soft new boat demand. Portfolio streamlining and an impending distribution asset sale signal a sharper capital allocation focus, positioning the company for improved leverage and profitability if industry volumes rebound. Management’s tone remains cautious but confident, underscoring a strategy built on margin resilience and operational agility rather than chasing top-line growth in a flat marine market.
Summary
- Margin Resilience Emerges: Gross margin expansion outpaced volume softness, aided by brand rationalization and favorable model mix.
- Pre-Owned Momentum Accelerates: Strong trade-in flow and improved inventory fueled double-digit pre-owned sales growth.
- Strategic Refocus in Motion: Distribution asset sale and leverage reduction anchor a more focused, flexible balance sheet.
Performance Analysis
OneWater’s Q1 results highlight a business shifting from volume-driven growth to margin-centric execution. Total revenue edged up 1% year over year, with a pronounced divergence across segments: new boat sales declined 6%, while pre-owned sales soared 24%, reflecting improved trade-in availability and a normalization of post-pandemic inventory flows. Service, parts, and other revenues grew 10%, demonstrating the underlying strength of the company’s distribution and customer loyalty even as new unit demand softened.
Gross margin expanded by 110 basis points to 23.5%, a direct result of brand rationalization and a healthier inventory mix. The company’s disciplined approach to inventory optimization and cost control was further reflected in a lower net loss and a sharp improvement in adjusted EBITDA. Selling, general, and administrative expenses rose modestly due to higher commissions linked to stronger margins, not bloated overhead. Inventory levels fell 6% year-over-year, driven by both asset reclassification and tighter management, while net leverage remains elevated but is set to decline through asset sales and retained earnings.
- Pre-Owned Outperformance: 24% growth in pre-owned sales, fueled by increased trade-ins and faster inventory turnover, offsetting new boat softness.
- Margin Expansion: 110 basis point gross margin gain, driven by discontinued brands and improved mix, signals structural profitability upside.
- Inventory Discipline: Inventory down to $602 million, reflecting both held-for-sale assets and active optimization, with aged product at its healthiest in years.
OneWater’s bottom line improvement—despite flat top-line growth—underscores an operational pivot toward profitability and capital discipline. The company’s ability to expand margins while maintaining liquidity and reducing inventory bloat positions it well for an eventual industry rebound.
Executive Commentary
"Importantly, we are pleased with our inventory levels, and despite a highly competitive environment, we believe we are operating from a position of strength. Our inventory mix and age profile are healthy, and our OEM partners continue to be supportive while maintaining disciplined production schedules. This has allowed us to sharpen our focus on disciplined execution as we navigate the current environment and position the business to benefit as industry conditions improve."
Austin [LastName], Chief Executive Officer
"Reducing leverage remains our top capital allocation priority in the year, and we are confident in our path forward. Based on our solid first quarter performance and current market visibility, we are maintaining our fiscal year 2026 guidance ranges and remain cautiously optimistic. Our outlook is anchored in our expectation that the industry will be flat to down low single digits year over year. While we anticipate outperforming the industry, we expect same-store sales to be impacted by brand rationalization headwinds, resulting in flat same-store sales overall."
Jack [LastName], Chief Financial Officer
Strategic Positioning
1. Portfolio Rationalization and Brand Focus
OneWater completed a major brand rationalization initiative, discontinuing non-core brands to sharpen its premium offering and improve gross margins. Management expects the positive impact of these discontinued brands to flow through at varying levels throughout the year, with an anticipated 100 basis point improvement in new boat margins for the full year. This move reflects a clear prioritization of quality over quantity, aligning the business with higher-margin, faster-turning inventory and simplifying operations.
2. Distribution Asset Sale and Capital Allocation
The decision to divest certain distribution segment assets marks a pivotal shift in capital allocation, with proceeds earmarked for debt reduction and enhanced financial flexibility. This is not a reaction to operational underperformance, but an opportunistic step to streamline the business and reinforce a focus on core competencies. The transaction is expected to close before the end of March, and management projects leverage to drop below four times adjusted EBITDA by year-end, a material improvement.
3. Margin-Driven Execution and Inventory Optimization
Margin expansion is now the central strategic lever, with disciplined inventory management and model mix optimization supporting profitability even as volumes remain subdued. The company’s inventory age profile is at its healthiest in recent memory, and management is intent on maintaining this discipline, resisting the temptation to chase volume at the expense of margin integrity. The focus on CRM, advanced inventory tools, and network scale reinforces OneWater’s ability to deliver for customers while protecting profitability.
4. Pre-Owned Market Opportunity
Trade-in availability and improved pre-owned inventory flow have unlocked a key growth vector, with management highlighting that pre-owned sales now represent a significant runway for future expansion. The company remains a small fraction of the total pre-owned market, suggesting ample room for share gains as sourcing and customer demand stabilize post-pandemic.
Key Considerations
This quarter demonstrates a decisive pivot toward operational discipline and capital stewardship, with management prioritizing margin, leverage reduction, and strategic focus over top-line growth. Investors should weigh these developments against a flat industry backdrop and ongoing macro uncertainty.
Key Considerations:
- Brand Rationalization Impact: Margin gains from discontinued brands are expected to persist, but may fluctuate quarter to quarter as promotional support wanes.
- Distribution Asset Sale: The divestiture is set to materially reduce leverage and improve balance sheet flexibility, but execution risk remains until the transaction closes.
- Volume Mix Shift: Pre-owned strength is offsetting new unit softness, but long-term volume recovery is needed for sustained growth beyond margin gains.
- Inventory Health: Inventory is at its healthiest in years, reducing aged product risk and supporting pricing discipline across the premium portfolio.
- Macro Sensitivity: Flat industry volumes and potential promotional pullbacks from OEMs could create choppiness in margin cadence as the year progresses.
Risks
OneWater’s margin-led strategy is vulnerable to macro swings, including further softness in new boat demand, unpredictable OEM promotional activity, and potential delays in closing the distribution asset sale. Elevated leverage, while improving, still constrains flexibility if industry recovery is delayed or if asset sales are challenged. Flat to declining industry volumes and possible shifts in consumer sentiment remain key watchpoints.
Forward Outlook
For Q2 2026, OneWater guided to:
- Flat to down low single-digit industry volumes, with the company aiming to outperform the sector.
- Continued gross margin improvement, particularly in new boats, though with potential quarter-to-quarter variability.
For full-year 2026, management maintained guidance:
- Total sales of $1.83 billion to $1.93 billion
- Adjusted EBITDA of $65 million to $85 million
- Adjusted earnings per diluted share of $0.25 to $0.75
Management’s outlook is anchored by:
- A focus on profitability and leverage reduction over aggressive volume growth.
- Expectations for margin gains from brand rationalization and inventory optimization, balanced by cautious macro assumptions.
Takeaways
OneWater’s Q1 2026 marks a strategic inflection, with margin expansion and capital discipline taking precedence over volume chasing. The company’s operational pivot is evident in both its P&L and its approach to portfolio management.
- Margin Over Volume: Structural margin improvement is now the core driver, with brand focus and inventory discipline delivering tangible results.
- Balance Sheet Reset: Asset sales and leverage reduction underscore a strategic commitment to financial flexibility and risk management.
- Pre-Owned Opportunity: The pre-owned segment’s growth highlights a durable new lever for share gains and resilience, but long-term growth still hinges on an eventual rebound in new unit volumes.
Conclusion
OneWater is executing a deliberate shift toward margin resilience, capital discipline, and strategic focus, positioning itself to outperform in a flat marine market and to capitalize on upside when industry volumes recover. Investors should monitor the cadence of margin gains, the pace of leverage reduction, and the durability of pre-owned momentum as key signals for future quarters.
Industry Read-Through
OneWater’s results and commentary reinforce several broader marine industry trends: margin discipline is replacing volume chasing as the primary lever for profitability, and inventory normalization is enabling more rational pricing across the sector. Pre-owned market dynamics are emerging as a critical growth vector, with improved trade-in flows and dealer inventory health supporting both stability and share gains. The shift toward capital allocation discipline and asset-light strategies could become more prevalent across the industry as participants seek resilience in a low-growth environment. Investors in adjacent recreational and specialty retail sectors should watch for similar pivots toward margin-centric execution and portfolio streamlining as macro uncertainty persists.