Editor’s Note: Robert W. Baird & Co. conducted a survey of over 100 RV dealers to assess recent trends during the second quarter. The following offers a summary of the results.
Solid results – but cautious commentary. Dealers reports on traffic, retail, inventory, credit, and sentiment look good – but cautious dealer comments temper our enthusiasm. We see value for patient investors – but until economic fundamentals regain better traction, some investors may trim into strength, limiting rallies.
• Traffic up, but deteriorated in June. Traffic improved versus last year, but deteriorated as the quarter unfolded. Recall that traffic surged in spring following a mild winter, potentially pulling forward some demand. Despite mixed traffic, dealers reported surprisingly strong retail trends, including 5-10% motorhome growth and 15-20% towable growth. A harder look at the motorhome data indicates broadly muted growth with pockets of robust demand.
• Inventory appears lean – but dealers want deals. More dealers report that inventory is “too low” than “too high,” a good indication that inventory is lean. Dealers report 103 days of towable inventory (down from 113 days last year) and 90 days of motorhome inventory (down from 113 last year). Order stats are strong, but some dealers lack an appetite to restock ahead of the open house season this fall in anticipation of better deals. As economic trends deteriorate – the urgency to restock just isn’t there.
• Dealer sentiment getting better. Sentiment among dealers improved again, hitting the highest level since 2008. The improved attitude is surprising given recent the mixed tone of results.
• Financing stable. Credit availability remains good. Customers with good credit scores don’t have trouble obtaining financing, but buyers may be more reluctant to tap credit lines today.
• Outlook. The survey results are unusually difficult to interpret this quarter. Retail growth and other metrics point to a surge in demand – but dealer comments simply don’t back it up. We see value for patient investors and remain comfortable with our estimates, but would not over-react to the robust retail metrics.
Please contact your Baird representative for a complete copy of the 36-page dealer survey.
Editor’s Note: Robert W. Baird & Associates issued a client newsletter following last week’s release of the October wholesale shipment figures by the Recreation Vehicle Industry Association (RVIA). Excerpts of the Baird newsletter follow.
October shipments flat. Motorhome shipments increased 29%, while towable shipments fell 3%. Shipments have slowed recently, but it is the off-season and dealers are closely watching inventory levels heading into the winter. We expect weaker wholesale results through winter due to tough comps and prudent inventory management. The most recent RVIA forecast calls for RV wholesale growth of 43% in 2010 (vs. +53% YTD) and +4% in 2011.
Total RV wholesale shipments flat. Overall shipments were flat in October (+56% YTD) as growth in motorhomes was offset by declines in towables. Shipment growth decelerated through late summer and into fall as retail slowed and dealers manage inventory levels ahead of the slower winter season.
Motorhome shipments increased 29% (+116% YTD). Class A shipments increased 38% while Class C shipments increased 17%. We expect motorhome shipment growth to slow heading into winter on more difficult comps and a lower replenishment rate.
Towable shipments fell 3% (+51% YTD). Travel trailer shipments dropped 2% and fifth-wheel shipments decreased 5%. Towable shipments declined for the second consecutive month, but 2010 shipment levels remain significantly above 2009. Towable shipments moderated throughout the summer as dealers reduced inventory. Based on the most recent data, we estimate dealers reduced inventory by over 7K units (July-September).
SAAR. We calculate a seasonally adjusted annual rate of shipments. The SAAR of motorhome shipments dropped to 22.3K units in October, from 22.7K units in September. The SAAR of towable shipments fell to 166.4K units in October, from 170.6K units in September.
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