Investment firm Robert W. Baird & Co. believes RV retail registrations will increase by 6% this year even though the Milwaukee-based firm does not argue with the Recreation Vehicle Industry Association’s (RVIA) estimate of only 2% wholesale shipments growth for 2003.
The Baird firm believes RV retail sales will outpace factory-to-dealer shipments because dealer inventories expanded during the past year.
“After a strong 2002, dealers continued to build inventory hoping that low interest rates and favorable demographics would sustain demand trends,” wrote Craig Kennison, Baird’s senior analyst.
However, the prospect of war in Iraq created a “soft pocket” in retail demand, which gave most RV manufacturers little choice but to lower their output earlier this year, Kennison continued.
He added, however, “Early indications suggest that consumer confidence has improved since the fall of Baghdad and retail has begun to follow suit. We view this scenario as bullish for the RV industry, which needs a healthy retail environment to keep inventory turning on dealer lots.
“Ideal conditions include strong retail demand and depleted inventories, which describes conditions soon after 9/11. In 2002, manufacturers shipped 21% more RVs than in 2001, more than twice the pace of retail growth. We refer to this pattern as an inventory replenishment cycle, and in our view, it has run its course.
“Dealers now have adequate inventory to satisfy robust demand, meaning wholesale growth should grow at a pace at or below retail growth. Since wholesale shipments outpaced retail sales for much of the past year, we believe that a reversal is in order. Over the long run, wholesale shipments should trend closer to retail sales, closing the wholesale-versus-retail gap.”
In a forecast for the RVIA, Richard Curtin of the University of Michigan projects that shipments of all types of RVs will increase 2% this year to around 316,900 units, compared with 311,000 units delivered to dealers in 2002.
Meanwhile, Kennison is forecasting retail sales will increase 6% this year to around 283,300 units, versus 267,000 last year.
Baird has included three RV manufacturers, Monaco Coach Corp., Thor Industries Inc. and Winnebago Industries Inc., in its 2003 Growth Stock Conference, which begins Tuesday (May 13) at the Four Seasons Hotel in Chicago. Executives from Monaco, Thor and Winnebago will give presentations on Thursday (May 15).