Why RV Sales Are Growing

Curious thing this media coverage on RV sales. CNBC pushed out this article and this video describing the reason for the boom in RV sales.

CNBC make claims that I see getting repeated widely on social and mainstream media: dealers have experienced record sales, demand is high, and campsites are full.

The coronavirus pandemic appears to be sparking another boom in the industry as travelers concerned about the risks of flying are packing their families into RVs and seeking out campgrounds around the country.

Dealers and RV manufacturers, such as Thor Industries, Winnebago and Forest River, have reported spikes in demand during the spring and summer of 2020, and industry analysts say several good months could be ahead.

Let’s stop here for a moment. All three manufacturers cited in the article are publicly traded. Let’s see what a couple of them are telling their investors about sales.

Thor’s investor update — released in June of 2020 — includes industry statistics for towables and motorized RV sales.

Net sales for the industry paint a somewhat different picture: down 37.5 percent for towables and 42.5 percent for motorized. Yikes.

Third quarter FY for Thor is end of May. And it is quite possible that there might be a surge in production since their last report. I have yet to see the June numbers from the RVIA — they are late reporting industry shipment numbers — and that might show a dramatic increase which would lend some credibility to the media coverage.

Here is what Thor told their investors last month:

COVID-19 and the related governmental mandates implemented to slow its spread in North America and Europe had a significant negative impact on the Company’s results of operations for the third quarter of fiscal 2020. Consolidated net sales, gross profit, North American and European wholesale shipments and retail sales were all negatively affected during the quarter.

What did Winnebago tell their investors last month?

Revenues for the Fiscal 2020 third quarter ended May 30, 2020, were $402.5 million, a decrease of 23.9% compared to $528.9 million for the Fiscal 2019 period. Revenues for Newmar, which was acquired in the first quarter of Fiscal 2020, were $88.0 million.  Revenues excluding Newmar were $314.5 million, a decrease of 40.5%.  Gross profit was $32.0 million compared to $86.6 million for the Fiscal 2019 period.  Gross profit margin decreased 840 basis points in the quarter, primarily driven by deleverage due to the significant revenue decline and an unfavorable mix as Towable’s revenue, as a percent of total revenue, was lower compared to the same period a year ago.  Operating income was an $8.2 million loss for the quarter, compared to operating income of $49.0 million in the third quarter of last year.  Fiscal 2020 third quarter net income was a loss of $12.4 million, compared to net income of $36.2 million in the same period last year.  Net loss per diluted share was $(0.37), compared to earnings per diluted share of $1.14 in the same period last year. Consolidated adjusted net loss per diluted share was $(0.26) for the third quarter, excluding costs totaling $3.5 million, or $0.11 per diluted share, after tax, driven by the non-cash portion of interest expense and restructuring charges.  Consolidated Adjusted EBITDA was $4.1 million for the quarter, compared to $55.9 million last year, a decrease of 92.7%.

Winnebago’s revenue excluding Newmar decreased 40.5 percent. Thank heavens they bought Newmar. That softened the overall revenue hit to a decrease of 23.9 percent. Big hit to gross profit though. And EBITDA down by 92.7 percent.

Tough times for the RV industry this past quarter.

What else did CNBC have to say about the surge?

A lot of these buyers are first-timers and many are purchasing lower-cost units, which are often favored by younger consumers.

“All dealers are reporting a high mix of first-time buyers as evident by lack of trade-in units,” said Wells Fargo analyst Tim Conder in a July 15 note. “Dealers are saying as high as 80% of customers are first-time buyers … vs. the typical 25% mix. The pandemic is driving the purchase decision for new-entrants.”

The Heintzes are among the countless RV buyers who have found the road comes with unexpected challenges.

First, finding the unit they wanted was tough — they had to seek out several dealerships, and inventory seemed to be disappearing quickly.

Then, they found that as RVs have become more popular, finding a spot at a campground can be tricky.

And finally, there were some early problems with the vehicle itself.

There are unexpected challenges on the road. Some of these first-time buyers are in for a bit of a surprise I suspect.