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Robert W. Baird & Co. Inc., a Milwaukee-based investment firm that regularly tracks the recreational vehicle industry, recently released its April RV Dealer Survey.
The results, culled from 91 dealers nationwide, offer a snapshot of the retail environment during the critical spring selling season.
Highlights from the Baird survey include:
Trends: To capture incremental changes to dealer sentiment, we track key trends relative to our January survey. In this context, the sales environment – though weak – has improved modestly, but inventory levels and the consensus 2006 outlook has deteriorated. Promotional levels are unchanged. Dealers report continued declines in motorhome sales through February; however, sales trends improved modestly in March. Towable sales remain relatively strong and have improved since our January survey.
Retail: Relative strength in towables has offset soft demand for motorhomes, consistent with recent patterns. Demand picked up in March. Used RVs are selling well. Local market phenomena, such as weakness in areas that depend on the automotive industry, are also a factor.
Outlook: Dealers have tempered their outlook for 2006. Collectively, dealers expect towables to remain strong, but now forecast a decline in motorhomes. For perspective, our estimates for Winnebago Industries Inc. anticipate roughly a 7% decline in retail volume, among other considerations.
Inventory: Dealer inventory levels are up as early-season sales generally failed to meet expectations. Meanwhile, the cost to finance inventory also is rising, squeezing dealer profits. Based on these conditions, dealers plan to deplete inventory, which could force manufacturers to cut production if retail demand remains soft. For now, most dealers are “comfortable” with inventory levels with the prime retail selling season still on the horizon.
Promotional Activity: Promotional activity is unchanged, according to dealers. Monaco Coach Corp. and Fleetwood Industries Inc. continue to reduce incentives, consistent with publicly stated goals. Thor remains the least aggressive discounter.
Focus Question: We asked dealers, “What is behind Thor’s success?” Many dealers attribute Thor’s success to price/value, with innovative designs (floorplans), inventory turns, profitability, brand independence, service, and management also receiving favorable recognition. A few dealers complain that product quality and service were sub-standard.
Estimates: Generally, we believe estimates for manufacturers with exposure to motorhomes are at risk, if they have not already been cut.