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Impacted by retail market pressures stemming from excess inventory and soft demand, Monaco Coach Corp. reported a nearly 17% slide in revenues and an almost 94% earnings decline for the company’s second quarter.
Corroborating estimates issued in a preliminary report July 11, the Coburg, Ore.-based builder also reported second quarter earnings of 3 cents per share, falling well below analyst’s expectations and down from 40 cents per share last year. Monaco noted the quarter included a one-time charge of $2.35 million for the relocation of the company’s Beaver motorhome manufacturing facility from Bend, Ore., to Coburg.
“As we stated last week, the market conditions throughout the RV segment were very challenging in the second quarter,” said Kay Toolson, chairman and CEO. “Wholesale ordering was down due to the slower retail sales environment and the model-year changeover.”
Revenues for the three-month period, ended July 2, were $306.2 million compared to $357.8 million in the year prior while net income was $755,000 versus $11.9 million.
For the six months, revenues were $637.7 million compared to $712.8 million last year and net income fell to $6.1 million from $23.9 million.
Monaco said second quarter motorhome shipments declined 24% to 1,606 units, reflecting the soft market and dealers’ high inventory levels. The imbalance also resulted in heavy discounting, which cut into profits.
“The decline in margin was the result of greater discounts and lower absorption of costs as we managed our production run rates to remain below our level of retail sales,” said Toolson. “We have faced these challenges head-on and we believe our dealer motorhome inventories, which have been reduced by over 500 units since the beginning of the year, are in very good shape. The company will continue to produce at levels that are equal to or less than retail demand.”
Towable shipments, however, were down just 1.4% to 1,205 units for the quarter.
“Over the past few quarters, we have placed an emphasis on increasing sales of our towable products, and we are pleased that our six month wholesale towable units sold were up almost 10% and through May our share of the fifth-wheel and travel trailer retail market is up 33.8%,” said Toolson.
Looking ahead, Monaco reported strong dealer response to the rollout of its 2006 product line along with the “Franchise for the Future” program during the company’s Dealer Congress.
“We wrote over 2,700 orders at our June Dealer Congress,” said Mike Snell, vice president of sales and marketing. “Our ‘Franchise for the Future’ program has been a tremendous success. Over 75% of the units we are selling today fall under the new franchise program.
“This is significant because the 2006 model Monaco, Holiday Rambler, Beaver and Safari motorhomes will be highlighted in distinctive areas at the majority of dealer lots by name, logo and key benefits, differentiating the value of Monaco’s products from the vast majority of units parked on the lot.”