Editor’s Note: Robert W. Baird & Co. recently partnered with the Recreation Vehicle Dealers Association (RVDA) to contact 116 RV dealers to assess trends during the first quarter. The following is a summary of the results.
RV momentum improves sequentially: Weather hampered retail traffic and demand early in the quarter, though dealers noted sequential improvements. Inventory remains balanced in motorhomes and towables, supporting parity between retail and wholesale going forward. Big picture, we believe the wealth effect is releasing pent-up demand for RVs, supporting our favorable fundamental outlook – though we are biased toward later-cycle exposure (motorhomes).
Retail improves sequentially: Dealers reported growth in motorhomes (+14-16%) and towables (+4-6%) in the January-March period. While traffic trends were abysmal in January and February – during the height of the Polar Vortex – traffic improved materially in March. Although the results are not a surprise, given the overlap with already-reported results from Winnebago and Thor, the sequential improvement is encouraging – especially given recent weather and reports from other discretionary categories (boats).
Inventory is balanced: Dealer inventory appears balanced in motorhomes and towables, as inventory levels appear essentially in line with levels last year. Based on anecdotal commentary, dealers still appear willing to stock incremental units – as many dealers believe that weather created significant pent-up demand – and are concerned that long lead times will result in insufficient inventory to satisfy an inflection in retail demand.
Sentiment improves sequentially: The Baird/RVDA dealer sentiment index improved from seasonal lows, as dealers become increasingly optimistic about the spring selling season. The 3-5 year outlook remained above 70 for the eighth consecutive quarter (73), and the measure of current conditions improved dramatically as well (from 57 to 64). Net, dealers remain optimistic at this point in the cycle and see a pathway to a strong retail season as weather improves.
Credit: Credit trends remain favorable, in aggregate, though conditions decelerated from our prior survey. While we think credit still provides a tailwind at this point in the cycle, we believe it is a trend worth watching, particularly as dealer commentary on credit conditions becomes incrementally negative.
Outlook: Big picture, we continue 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 – a trend that favors motorhomes over towables.