Editor’s Note: The following is an investment analysis on the RV industry by The Motley Fool.
As many baby boomers contemplate retirement, quite a few are opting out of an overseas excursion and buying a recreational vehicle instead. With pent-up demand for replacement campers, as well as a flood of new buyers entering the market, sales of motor homes have jumped 30% from the previous year, making 2013 a year of record RV ownership.
More and more families are purchasing RVs for a variety of reasons. Travel trailers save an average of 23% to 59% on typical vacation expenses, and young buyers are discovering the convenience of owning a vacation home on wheels. Overseas travel has become expensive as rising fuel costs have led to airfare hikes, and rising political tension abroad has scared some travelers away from vacationing abroad as well.
Although many people still prefer the common camping experience — mosquitoes, mud, and meals cooked over a fire — camping in luxury with a TV, air conditioning, and most importantly a bed is turning the traditional camping excursion into a luxury experience.
Backlog and inventory
Thor Industries Inc. is the market leader in RV sales and distribution, with 31% of market share. Thor produces and distributes RVs, towable RVs, and fifth-wheel trailers. Revenue increased 35% from 40.9 million in the prior-year fourth quarter due to increased demand in all segments. RV retailers are seeing high demand from young families who are buying recreational vehicles for leisure and a fast, easy way to travel for a getaway weekend.
Inventory management is the key to Thor’s success. Like any motor vehicle dealership, inventory of recreational vehicles cannot build up or the excess will be sold at a discount on the showroom floor. Such sales hurt revenues and reduce profit margins. Thor’s sales growth proportionally matches that of its inventory increase, insuring that there is no excess buildup.
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