Editor’s Note: Robert W. Baird & Co. conducted a quarterly survey of 122 RV dealers to assess recent trends. The following offers a summary of the results.
Retail improves as confidence rebounds. Retail improved during the seasonally weak quarter as consumer confidence rebounds. Inventory is healthy, but dealers may defer orders after taking advantage of incentives at the fall Elkhart show. We see value for patient investors and note a recent lift in investor sentiment after an awful year.
• Decent off-season retail: Traffic was mixed, but dealers reported growth in motorhomes (+5-7%) and towables (+7-9%) during the seasonally weak December quarter. Better consumer confidence and favorable weather appeared to help. Separately, Statistical Surveys Inc. reported that U.S. motorhome retail improved 2% in November, corroborating our observations.
• Inventory levels hold steady: Dealers report 117 days of towable inventory (down from 119 days last year) and 127 days of motorhome inventory (down from 133). However, some dealers are still taking delivery on orders placed at the fall Elkhart show, which offered heavy incentives on towables. Thirty five percent of towable dealers consider inventory “too high” versus just 15% of motorhome dealers.
• Dealer sentiment rises above key threshold: Dealer sentiment rose above 50 for the first time since October 2007, hitting 55 in our most recent survey of current conditions (50 is neutral). The move coincides with a recovery in consumer confidence we consider essential to a broader recovery in the RV sector.
• Credit trends remain favorable, but unchanged: Access to both wholesale and retail credit remains healthy, but largely unchanged. Dealers liked the GE Capital promotion, which covered floorplan interest costs through the winter on product from Thor and Forest River.
• Outlook: After an awful year for RV stocks, investor sentiment is beginning to recover as consumers and dealers grow more optimistic. We see value for patient investors, noting that inventory is healthy and expectations for 2012 retail seem reasonable (Thor retail up 3%, Winnebago up 1%), setting the stage for better shipments if the economy recovers. Thor has $3.77/share in cash and no debt, with a chance to earn over $3/share in a recovery scenario. Meanwhile, Winnebago has $2.45/share in cash and no debt, with the potential to earn over $1/share in a recovery scenario.
Note: Contact your Baird representative for a complete copy of our 39-page dealer survey.