Rising oil prices and higher interest rates during the first half of 2005 put a dent in consumer confidence which was felt acutely in the recreational vehicle business, according to an Associated Press report.
RV manufacturers, which posted record sales of $14 billion las How To Get Your Ex Boyfriend Back t year, had been riding high on the demographics of an aging and affluent Baby Boom generation, a post-9/11 preference for driving vacations over air travel, and easy consumer borrowing.
But results for the second quarter, traditionally the busiest season for RV sales, were disappointing.
“Many of you have told us you expected the quarter to be ugly, and it was,” Elden Smith, president and chief executive of Fleetwood Enterprises Inc., said at the opening of the company’s conference call with investors to discuss the quarter.
The problems at Fleetwood were seen across much of the industry – weak demand and inefficient operations as manufacturers scaled back production.
Fleetwood’s RV sales were off 21% at $381 million for the quarter, compared with a year ago. At Winnebago Industries Inc., Forest City, Iowa, revenue fell 18% to $255 million, and Coburg, Ore.-based Monaco Coach Corp.’s sales dropped 14% to $306 million.
While the Recreation Vehicle Industry Association (RVIA), Reston, Va., expects uncertainty surrounding oil prices and the economy generally to weigh on sales this year, they see a short-lived effect.
“We’ve turned a corner in terms of attracting a whole new generation,” said Mac Bryan, vice president of administration for RVIA, referring to the 26 years that have lapsed between the industry’s peak year for unit sales in 1978 and the near record hit in 2004, when nearly 370,000 units were shipped.
But still it’s hard to shake fears that rising oil prices will prove to be a long-term drag on consumer confidence and in turn on the RV business.
“While we can all do the math and recognize that a $0.50 increase in fuel price does not necessarily significantly increase the overall cost of an RV trip, every dealer we spoke with brought up higher fuel prices on an unprompted basis when we asked what is holding the buyer back,” BB&T Capital Markets analyst John Diffendal wrote in a recent research report.
Winnebago’s stock is something of a proxy for consumer confidence, according to Edward Aaron, an analyst with RBC Capital Markets. It’s used as “a way to place bets (on) the sustainability of the consumer spending cycle,” Aaron said.
Of course, the stock also can get a lift when general consumer sentiment turns and consumer confidence surveys have indicated a recovery in the last few months.
And that helps explain why RV shares have clawed back much of their losses despite the sharp sales declines this spring.
Winnebago shares are up 40% since the end of April; Fleetwood shares have risen more than 50% over that same period; and Monaco Coach’s shares also have gained nearly 40%.
The planned purchase of Forest River Inc. by Warren Buffet’s Berkshire Hathaway Inc., announced in July, has supported the view that there’s value in the industry and likely consolidation ahead. And at least one major player, Thor Industries Inc., which is buying up competitors, posted strong results in the most recent quarter.
While investors fret over the possibility that the Big Three U.S.-based automobile manufacturers, battered by overseas competition and high labor costs, may shrink to just two, the RV industry supports an astounding 141 domestic manufacturers.
“This is very much a U.S. product,” said Bryan.

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