As is often the case, initial sales reports from the Recreation Vehicle Industry Association’s (RVIA) 42nd Annual National RV Trade Show, Nov. 30-Dec. 2 at the Kentucky Fair & Exposition Center in Louisville, Ky., ran the gamut.
In talking with manufacturers both on and off the record, most were pleased with their sales experience at the national show. Others were ecstatic, while some of the 98 exhibiting RV builders, quite frankly, returned home looking for more.
That variance seems to mirror the underlying pulse of the industry right now, a mood that was set to some extent earlier in the fall by RVIA consultant Richard Curtin, of the University of Michigan’s Consumer Survey Research Center, whose quarterly forecast called for a 5.9% decline in conventional towable shipments and a 10.5% retreat in motorized wholesale activity.
Indeed, among many attendees interviewed by RVB staff at the nation’s largest RV trade event, there seemed to be a shared measure of caution despite generally strong sales numbers that seem to indicate a strong finish for 2004 and the makings for yet another banner year in 2005.
Also fueling a sense of wariness are ongoing concerns regarding the general drift of interest rates and, of course, the documented evidence of a slowdown during the latter months of the year.
According to Statistical Surveys Inc., a repository for retail registrations based in Grand Rapids, Mich., combined towable retail sales were down 1.6% in September – primarily because of a 27.3% decline in folding campers – but were up 5.7% for the third quarter. Motorized sales were off less than 1% for September and decreased 3% in the third quarter.
“It appears the Class A line was hit hardest in the third quarter,” noted Tom Walworth, president of Statistical Surveys. Retail sales of gas-powered Class A units were down 6.4% for the three-month period.
Whatever’s afoot in the marketplace right now, vigilance is a familiar theme among both manufacturers and suppliers in this traditionally cyclical industry.
“We’re keeping a close eye on the market,” said Chris Braun, executive vice president of Fleetwood Enterprises Inc.’s RV Group based in Riverside, Calif. “We especially watch the entry-level towable market. That’s a good barometer for the industry. If there’s an increase or decrease in the marketplace, it will surface in that sector.”
He added, “If need be, we will take reductions in production, but at this point I don’t see us having to do that.”
Taking a similarly guarded, but upbeat stance on the floor of the show was Dometic Corp. Vice President of Marketing Brad Sargent.
“Our sales are fairly close to what we saw a year ago,” said Sargent, whose Elkhart-based company purveys awnings, air conditioners and toilets among other products in the RV sector. “We have seen a slight softening in motorized, while the towable side seems to be sustaining itself. We look very closely at the flush of product through the distribution channel and that seems to be pretty good. But if sales do go down we are positioned to make an adjustment.”
“Appropriately paranoid” is how Workhorse Custom Chassis President David Olsen described his Union City, Ind., firm’s approach to the current marketplace. “Our take of the market is that as business took off this year dealers have invested in new product and in new locations,” he said. “And maybe our industry has encouraged that line of thinking – stock to the roof and run to capacity. I think part of what we’ve been seeing lately is that a lot of people are catching their breath and waiting to see what’s around the next corner.”
Russ West, vice president, OEM unit for supplier Carefree of Colorado, Broomfield, Colo., offered this: “There does appear to be a softening in the industry. Our best (manufacturing) customers are down to four days a week. But the thing is, we never saw it. November was our best ever and December is looking like a record. But we’re aware of a slowdown and we will continue to closely monitor the pipeline.”
Bruce Hertzke, president and CEO of Winnebago Industries Inc., Forest City, Iowa, and chairman of RVIA, contends the industry’s general direction right now is simply part of a normal cycle. “The industry is experiencing a typical year with a slowdown in Thanksgiving and on through Christmas,” he said. “Last year, we had an unusually strong fall and winter because of the Iraq War. There was pent-up demand. We were pleased with the market in the (calendar year) third quarter and, although we did see a slowdown in the fourth quarter, we’re looking for a strong 2005.”
Speaking for his Nappanee, Ind., firm, Gulf Stream Coach Inc. Motorized Division President Brian Shea concurred with Hertzke. “Overall, other than the seasonal slowdown and the shift from northern to southern markets,” he said, “business has been steady.”
In turn, no one can accurately determine just how much recent extraneous events, including the spate of Florida hurricanes, November’s presidential elections and a significant spike in gas prices, may have magnified the industry’s normal braking tendencies during the late fall and early winter.
“There’s no doubt that the uncertainty of the election and four hurricanes in six weeks affected the market,” said Gary Poole, RV product manager for Freightliner Custom Chassis, Gaffney, S.C. “We have seen OEM orders moved out farther and some adjustments in inventory levels. We are prepared for an adjustment on our end. We’re just not sure how sharp of a spike it will, but there is the possibility the correction could be of some magnitude.”
Although the industry has maintained that the effects of higher gas prices went virtually unnoticed, some insiders insist otherwise, saying there was a perceptible change in the market when pump prices hit their peak.
Tim Tiffin, general manager of Tiffin Motorhomes, Red Bay, Ala., noted, “We did see a shift in the market from gasoline to diesel this fall. I’m not sure what the reason was, but we started doing around 60% diesel. All in all, our sales remained steady. We were able to stay at the same production levels.”
“I do think gas prices had a bearing on the market,” added Dick Aker, president of Hart RV Supercenter, a FreedomRoads dealership in Elkhart, Ind. “We saw a slowing in gas Class A’s and high-end fifth-wheels.”
Regarding the election, Walworth said, “We saw a similar pattern in 2000 and 1996 where retail numbers declined right before the presidential election. I think it’s just the uncertainty among consumers, especially in a tight election.”
Overall, there was a prevailing positive outlook in Louisville, particularly among the dealer body. Even if a slowdown carries into early 2005, most anticipate a strong spring selling season, allowing retailers to remain comfortable with slightly larger than normal inventory levels.
“Dealer inventory has been accumulating,” said Craig Kennison, analyst for Milwaukee, Wisc.-based investment firm Robert W. Baird. “We watch wholesale shipments to retail sales, which gives us one measure of how inventory stands. Right now it appears to be 5% to 6% higher than last year.
“But we were very pleased by how positive and enthusiastic the dealer body was at the Louisville show. We feel they will clear out existing inventory and create an environment for growth in 2005. A growing industry can afford to have inventory build.”
“We positioned ourselves to acquire product in the fall and then acquire new product for early spring,” noted REDEX Dealer Michael Paey, owner of Holiday World of Houston, Katy, Texas. “I do believe the first quarter will be relatively flat, or there could possibly be some contraction. Our strategy for 2005 is to hold steady with last year while gaining market share.”
For his part, outspoken West Coast retailer Dave Altman, owner of Altman’s Winnebago, Baldwin Park, Calif., said his company was poised for growth in 2005, including a major expansion project. “We had a gangbuster beginning of the year,” he said. “It was like a freight train, and for the first six months we were buying like there was no tomorrow. We were down slightly in August and September, but in October we were way up. There may be some bumps and grinds coming up, but I’m anticipating a strong year – and I’m never that optimistic.”
Similarly upbeat at Louisville was Sid Johnson, director of marketing for Jayco Inc., Middlebury, Ind. “We’ve been talking to dealers and they’re telling us 2005 will be more of the same (meaning positive sales trends),” said Sid Johnson. “Even if the retail market hiccups in the beginning of the year, I think it will be brief and won’t signal an interruption in growth for the balance of the year.”
Wade Thompson, chairman of Jackson Center, Ohio-based Thor Industries Inc., also is looking for good things in the year ahead. “We were slightly down for a couple of months, but are up significantly in November,” said Thompson, noting that his publicly held company’s recent sales and earnings report showed record performance for the first quarter in fiscal 2005. “We are looking for continued growth in 2005.”
Adds Walworth: “Short term, you may see a bit of a roller coaster in 2005, but nothing dramatic – maybe up or down a few points. But long term, the industry is fine. The three-legged stool that supports the industry – low unemployment, interest rates and income – are all favorable. And the market has definitely seen a shift to a younger buyer. The biggest demographic sector is now the 45- to 60-year-old buyer.”