Thor Industries Inc. by and large, exceeded expectations in yesterday’s (June 8) 3Q financial report by turning a profit and otherwise generating positive net cash from operations during a stanza (ended April 30) that President and CEO Bob Martin described as “one of the most unusual quarters I have ever experienced.”
Speaking on the headwinds his company faced in coping with a global pandemic of epic proportion, Martin said Monday that Thor was weathering the storm and that its “financial position has remained strong as a result of numerous management-led actions that were executed quickly in conjunction with our temporary plant shutdowns in mid-March. Our results are the product of both the highly variable cost structure we have created and our ability to quickly align our production and cost structure to meet fast-changing market conditions.”
Wall Street seemed to approve as Thor’s stock, joined by other publicly traded companies in the industry, was again hovering Tuesday near 52-week highs, despite the fact that Thor reported revenue declines of nearly 39% domestically and nearly 20% in European operations due to the ongoing impact of the Coronavirus on sales and operations. Order backlog levels are reported as generally even with past periods.
Martin took a bit of time out of his busy day Monday to answer a few questions for RVBUSINESS.com.
RVB: Considering all of the moving parts in the U.S. economy right now amid this extraordinary pandemic era, Bob, what’s your general assessment of the whole situation from your seat at the helm of Thor Industries Inc.?
Martin: This has definitely been a roller coaster for us the last few months. When it first broke out and the states shut down, no one really knew what to expect. There was a lot of fear. People didn’t know what was going to happen, and so we really went into a mode as a company where we pulled everything back very quickly.
We unfortunately had to furlough a lot of people. But as we got into this and a month went past – and then over the last four weeks after we brought production back – the retail environment around the country became less of a lockdown. People could go out and they could actually shop. They started coming out more and more every week.
And as I’ve talked to dealers, it’s gotten better and better to the point that many dealers are already ahead of last year’s sales, even with being shut down some four to six weeks. So, it’s not something that really anybody could have predicted, but it was definitely just a very quick setback on the retail end.
So, one of our top priorities right now is making sure we’re getting dealers the product they need.
RVB: That’s an amazing statement, only weeks after a one-in-a-lifetime, national-scale industrial shutdown, that one of your top jobs is trying to make sure dealer inventories are in line.
Martin: Yes, our managers have been getting a lot of calls from dealers whose inventories are getting low as they go into the season because retail picked up so quickly in May. So, we’re bringing the factories back up to a level that we can build product with quality and be safe with COVID.
There’s definitely a balance that we have to strike right now and we’re trying to do both. But we know that dealers need inventory, so we’re trying to do the best that we can to increase rates in a new work environment, which is challenging. But we think that we can definitely help that situation as the next few weeks and months go on as we learn to function in what is kind of the new normal.
RVB: So, based on all that as well as the recent uptick in stock prices and other factors, what’s your take on the industry’s overall recovery?
Martin: Even while people were shut in, we could tell by the website activity that they were shopping. And, really, people still want to travel this coming summer and fall and their options are limited.
An RV to many is looking to be one of the safest options for both short and long trips and traveling with your own restroom, your own shower and bed with your own linens. You can take the whole family and the family pets. So, as we look through the summer, we see a lot of people really that maybe have never looked at the industry before or thought about it, but finally pulled the trigger. They’re visiting our dealers’ locations and they’re buying RVs so that they can actually travel and get out of the house and do it safely.
So, right now, we’re reacting to the market as it is here this spring, and it’s very good. We’re trying to build the orders from our dealers who are pleasantly surprised to see this recovery come back so quickly while keeping an eye on the COVID situation, which is something, of course, that people don’t understand.
RVB: So, what percent of Thor’s overall operations are back up and running?
Martin: It’s nearly 100%. It’s not everyone. There are still some (Thor units) that haven’t brought everyone back and some that are trying to hire new people in cases where people may have taken different jobs.
As for the nature of the market, though, I can tell you that our dealer partners are seeing very few trade-ins. A lot of people are coming in and buying a new unit with no trade. This is good news for the long-term outlook of the industry as we’ve really tried to reach a younger, more diverse demographic. And right now, that appears to be working in our favor.
At the same time, shows are probably one of the big unknowns right now. We’re kind of waiting to see as well. But our company in Europe has decided not to take part in shows just because we don’t know how many people will be allowed to go. So we’ve been really focused on pushing all customers to our dealers’ locations where they can control things in a smaller environment and have a great experience while socially distancing. I think our dealers have adapted well to all this.
RVB: On the topic of shows, Bob, the whole world’s wondering about the prospects for this year’s Elkhart RV Open House. Realizing that September’s a ways off, what can you tell us about plans for that national dealer show.
Martin: Just for us, we’re still planning on having the Open House. Obviously, we’re waiting until new state guidelines come out on numbers allowed in gatherings, but we’re hoping that things work out to the industry’s advantage. Speaking for Thor, we have a very large open space. It’s not like a dealer’s retail show like the Tampa Show, which draws in 70,000 consumers. We have a few thousand dealers and we can spread them out quite well.
And it may mean, where last year we had 500 units, maybe we bring 400 and the aisles are larger. We still don’t know what it means for food service, things like that. We’re working through some of those issues and talking to a lot of dealers. A lot of them still, quite frankly, want to have the Open House. They like the venue and the chance to come see the product for next year. On the other hand, I’ve talked to some on the West Coast who may not come in because they don’t want to fly out.
RVB: So, like so many other things these days, a lot of it’s up in the air, isn’t it?
Martin: Yes, there may be more virtual things that happen. But I think right now our plan is to continue on, and I think we could manage it in a way that’s very safe and keep the distance. It’s a long way away right now. The last two months have felt like a year, and we don’t know what we don’t know going through the summer. We’re hoping everything gets better, but you don’t know. We’re moving forward similar to most years, but looking at what changes we need to make and also being conscious of state and CDC guidelines.
RVB: So, can we assume that major Open Houser social events with high profile entertainment like we’ve seen in the past are off the table, at least in Thor’s case?
Martin: Yes. I could say things may change. We had a great event with a concert last year with Keith Urban. It was received very well, We had over 5,000 people. But as we all know, most concerts around the country for this year are canceled.
Many artists have canceled tours for the entire year going into next year. So, for us, this year’s Open House is probably not going to be an environment where you have a concert with a lot of people banded together. But you never know. If something were to totally change going into the fall and everything was better, you can always pull off things quickly. But, right now, that’s probably not something that’s in the cards.
RVB: Finally, we hear about a spike in coronavirus cases around the RV-building center of Elkhart. Realizing that it’s a sensitive topic that has drawn plenty of attention behind the scenes, what can you tell us about that?
Martin: As we talk to the community health officials, we do know that the next few weeks are critical. So, for us, we brought manufacturing back. We did it in a very safe manner that involved a lot of communication with our employees as we work to navigate this new normal. And all we can tell you at this point is that as employment has come back everything has been done safely and with social distancing.
We developed a return-to-work playbook and it’s nearly 30 pages. It’s very detailed and addresses the processes outlined to keep us safe. We’re always looking at the things that we have to do and we update it every week, just new things pop up. We do regular health screenings and disinfect all of our plants on a regular basis.
RVB: So, Thor, in a nutshell, is doing everything it can in your view to protect its workforce?
Martin: Yes, we hand out personal protection. Equipment masks or face shields are required in all of our plants. We’ve provided our team members with hand sanitizer and have sanitizing stations throughout the plants. We have signage everywhere when you walk into a plant.
We also do health screenings, so we do a temperature check when everybody walks in, including offices and so forth. And we regularly listen to multiple sources including the CDC and the governor’s office, but then also working really closely with Beacon Health locally, getting their information, their thoughts, their guidance. And that’s been very helpful.
