Baird Dealer Survey: 2Q Demand Was ‘Robust’

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July 15, 2013 by   Comments Off on Baird Dealer Survey: 2Q Demand Was ‘Robust’

Editor’s Note: Robert W. Baird & Co. recently partnered with the Recreation Vehicle Dealers Association (RVDA) to contact 146 RV dealers regarding demand during the second quarter. The following is a summary of the results.

Solid industry trends continue. Dealers indicated that peak-season trends are very strong – particularly in motorhomes. Retail demand was robust – new motorhome demand jumped 28% while new towable demand improved 11%. Meanwhile, inventory is lean-to-balanced and dealer sentiment remains high, leaving manufacturers well-positioned as the evaporation of negative equity spurs new retail demand. We remain bullish on fundamentals and would look to add on weakness.

Peak-season strength. Dealers reported robust growth in motorhomes (+27-29%) and solid demand for towables (+10-12%) in April-June. Dealers also noted strong demand for used RVs (particularly motorhomes), driving used values higher according to dealers. We believe better used RV values (combined with a better housing market and higher stock prices) have helped reduce the negative equity that had prevented consumers from purchasing new RVs.

Dealers short on motorhomes. Dealer inventory appears lean in motorhomes and balanced in towables. On a days inventory basis, motorhome inventory appears flat relative to last year (99 days vs. 101 days), but by a 9:1 ratio dealers indicated that inventory was “too low” versus “too high.” The desire for inventory is also evident in the strong motorhome backlogs Winnebago (+130%) and Thor (+105%) recently reported. A limited supply of Class A chassis has exacerbated the inventory shortage. The number of days of towable inventory also appears flat, but slightly more dealers consider inventory “too low” than “too high” – a sequential improvement. Recall that dealers stocked up ahead of the retail season – a bet that paid off.

Dealer sentiment high. Dealer sentiment remains near record levels, based on our proprietary index, but fell slightly versus April. Some dealers pointed to Internet competition and supply shortages as sources of frustration, but strong retail trends and favorable credit conditions keep confidence high. We note that credit has been a tailwind in recent years but could face a challenge as interest rates rise – a trend to watch.

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