Baird Survey: Dealers OK with Lean Inventory

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July 15, 2011 by   Comments Off on Baird Survey: Dealers OK with Lean Inventory

Editor’s Note: Robert W. Baird & Co. issued a client newsletter offering an overview of a dealer survey designed to get a pulse on the  retail environment during the second quarter. Excerpts from the Baird newsletter follow.

Retail up despite traffic headwinds. We contacted 95 RV dealers to assess recent retail trends. Traffic deteriorated throughout the quarter, as elevated gas prices and unfavorable weather weighed on consumer confidence. Despite weaker traffic, retail improved in both motorhomes (+4-6%) and towables (+12-15%), but the recovery has been slower than expected. Inventory remains lean, but dealers plan to stock conservatively heading into winter.

• Strong conversion rates support retail demand. Traffic fell throughout Q2, but retail sales held up better as dealers cited better close rates. Demand improved in both motorhomes (+4-6%) and towables (+12-15%), with particular strength in lower ASP “stick-and-tin” models. Gas prices and weather continue to pressure results at retail, but many dealers indicated improved trends in recent weeks. Although our survey does not overlap perfectly with the quarter-end for Winnebago or Thor, these trends are better than what we assume in our models.

• Inventory in good shape. Dealers are comfortable with current inventory levels, and expect to enter the off-season with lower-than-usual inventory as demand moderates and accelerated curtailments incentivize faster turns. Just 25% of dealers consider inventory “too high,” a healthy sign. Inventory turns have increased slightly into mid-summer, but remain solid for both motorhomes (125 days) and towables (112 days).

• Sentiment down on weaker consumer. Dealer sentiment fell again in Q2, on higher gas prices, lower consumer confidence, and bad weather during the prime selling season.

• Increased competition benefiting credit environment. Finance availability and terms are improving, according to dealers. The aggressive entrance of Ally Bank into the space seems to be having an impact on rates and creating some credit availability for FICO scores under 700. However, curtailments still kick-in at the 6-month mark, causing many dealers to hold very low inventory levels through winter.

• Recent retail data. Statistical Surveys Inc. recently released May motorhome retail data. Motorhome sales fell 3% in the month. Our positive retail checks (through June) imply demand improved a little recently, possibly due to better weather and lower gas prices.

• Outlook. Demand growth has moderated in the upper-single to low-double-digit range, and inventories remain lean. Dealers seem reluctant to accumulate inventory, but we do not expect another destocking cycle. While the retail recovery has not been as strong as expected through the first half of the year, we see good value in Winnebago and Thor at depressed levels.

This summary of a Baird survey is not intended as investment advice. To participate in Baird surveys and receive research reports, contact Craig R. Kennison, CFA, at


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