Editor’s Note: Robert W. Baird & Co. recently partnered with the Recreation Vehicle Dealers Association (RVDA) to contact 112 RV dealers regarding demand and sentiment during the fourth quarter. The following is a summary of the results.
RV momentum slows. Baird contacted 112 RV dealers in partnership with RVDA to assess recent trends. It’s the off-season, but demand slowed and inventory expanded – slowing some of the momentum that had been building. Dealers cited several factors, including unfavorable weather and national politics (shutdown, ObamaCare). Big picture, Baird believes the wealth effect for affluent consumers is releasing pent-up demand for RVs, supporting Baird’s favorable fundamental outlook. But with momentum slowing, Baird believe investors can afford to be patient.
Retail momentum slows. Dealers reported growth in motorhomes (+4-6%) and towables (+6-8%) in the October-December period. But traffic appeared to slow in November and December, with unfavorable weather and national politics playing a role during the seasonally weak period. Big picture, Baird continues to believe an emerging wealth effect is releasing pent-up demand. Towable retail has reached 90% of prior peak volume, while motorhome retail has recovered to just under 50% of prior peak.
Inventory is balanced, but more elevated. Dealer inventory appears balanced in motorhomes and towables, but appears higher than at this time last year. Based on anecdotal commentary, dealers appear comfortable with inventory levels, but may limit orders until demand accelerates. It is the off-season, so dealers have time to sort out their needs.
Sentiment still high, but weakened in Q4. The Baird/RVDA dealer sentiment index remains elevated, but weakened during the quarter. The 3-5 year outlook remained above 70 for the sixth consecutive quarter (71), but the measure of current conditions dropped from 68 to 57. Frustrated dealers blamed national politics, ObamaCare, and competition from multi-location and internet competitors. Net, dealers are optimistic – but some renewed doubt has surfaced.
Outlook. Although we are bullish on RV fundamentals, trends deteriorated in Q4. Big picture, Baird believes rising home values and a better stock market are creating more discretionary wealth for affluent consumers. Baird expects this wealth effect to release pent-up demand, especially where the recovery has yet to unfold – a trend that favors motorhomes over towables.
Contact your Baird representative for a complete copy of the dealer survey.