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In a conference call with analysts on Thursday (Nov. 2), the management of Monaco Coach Corp. offered a mostly flat outlook for business in its fiscal fourth quarter and hedged on its expectations for 2007, pending the outcome of the National RV Show in Louisville, Ky., at the end of this month.
The Coburg, Ore.-based company projects a loss of between 7 and 13 cents per share for the final quarter on sales of $300 million, based on a $10 million increase in motorized sales to $230 million and a $13 million decline in towable sales. This projection mirrors what the company perceives to be a pickup in sales of motorized units at both the wholesale and retail levels in October, as well as a mixed consumer response at the recent retail show in Pomona, Calif.
John Nepute, Monaco president, said the company’s internal numbers showed Class A retail registrations increased by 11% year-over-year in October, due in part to a decision to convert two of its high-end gas models into lower-priced diesel products. These brands, the Vacationer by Holiday Rambler and La Palma by Monaco, have helped Monaco hold onto its industry-leading share of the diesel market, now at 23%, he noted.
October represents the first year-over-year increase in Class A’s for Monaco since August 2005. Nepute noted that diesel units account for 93% of Monaco’s gross revenues on the motorized side.
On the gas side, the company sees consumers moving toward lower-priced Class A motorhomes but not to Monaco products. To counteract this shift, “We are introducing some less expensive models at Louisville that we think better address that price point. We hope to improve our wholesale and retail gas motorhome business going forward,” Nepute said.
He also noted that fourth-quarter comparisons will imply improving conditions because the fourth quarter of 2005 was “pretty weak.” Industrywide, demand for motorhomes has declined year-over-year for 18 consecutive months through August, according to Grand Rapids, Mich., marketing firm Statistical Surveys Inc.
“It doesn’t signal the industry is back but it suggests better times lie ahead in 2007,” Nepute said. “I would hope the entire market is heading up and we’re part of it.”
Monaco has increased the run-rate at one of its plants in Wakarusa, Ind., to reflect the motorized pickup, he said. Overall, utilization of Monaco’s motorized plants is running at about 50%, he estimated. Save for one carryover program, the company is not offering any dealer incentives to move its 2006 Class A product, Nepute said.
On the towable side, Monaco is running its plants at 30% utilization, reflecting low demand.
Nepute characterized the mood of the dealers as wanting to “shed inventory” and not restock until after the Louisville show. “Dealers expected a certain level of retail activity and didn’t get it so they are consolidating on their lots,” he said.