New inventory levels for all dealer sectors remained significantly higher than last year during the first three months of 2005, according to consulting firm Spader Business Management.
“Higher inventories started surfacing last fall, so it’s something we’ve been watching closely,” said Noel Lais, vice president of operations for Spader. “I think it may be compounded this year because of slower retail sales in January and February, particularly in motorhomes.”
Lais noted, however, that the “seasonality” of the industry traditionally produces strong retail showings in April, May and June, which could help clear out excess inventory.
Inventory levels for all three dealer categories ranged from 16% to 20% higher, including:
* Larger dealers, defined as those with annual income over $10 million, showed a 20% increase in new inventory through March, rising from an average of $4.1 million in 2004 to nearly $5 million.
* Midsize dealers with annual income between $5 million and $10 million had a 16% rise in new inventory for the first three months, increasing to an average of $2.1 million versus $1.8 million last year.
* Smaller dealers, those with less than $5 million in annual earnings, showed a 16% increase in new inventory levels, rising to $1.16 million compared with $1 million in 2004.
High inventory levels generally impact gross profit margins as manufacturers implement discounting to move product through the pipeline.
Large dealers were the only group yielding a profit for the first quarter, posting an average net income of $121,958. Midsize dealers had an average net loss of $3,422 for the three months while smaller dealers showed an average net loss of $25,392.
Other highlights include:
* New RV sales for smaller dealers were about 5% higher than the first three months last year with an average of $454,758 while total dealership sales increased 7% to an average of $709,607.
* New unit sales for midsize dealers in the quarter were just over 2% ahead of last year to an average of $983,236 while total sales rose 6% to an average of $1.5 million.
*Larger dealers had an 8% increase through March in new RV sales to an average of $2.9 million while total dealership sales also gained 8% to an average of nearly $4.5 million.