It's a great time to be in the recreational vehicle industry. Sales are on pace to soar in 2021 as consumers, flush with cash, look for ways to vacation closer to home while spending time outdoors.
Thor Industries (THOR), a major global player, just announced earnings results that paint a brighter picture for the market than most investors had expected. That's good news for its business, but it also suggests a potential blockbuster report on the way for rival Winnebago (WGO -0.70%) in just a few weeks.
Demand is epic
There wasn't a hint of a growth slowdown in Thor's recent update. Sales for the period that ended in late July were up 54% and included soaring sales of motor homes and towable products both in the U.S. and in Europe. Part of that spike came from an unusually weak year-ago period that included production shutdowns due to the pandemic. But Thor said customer enthusiasm was still at record levels. "Demand for our RV products remains very robust," CEO Bob Martin said in a press release, "continuing to exceed [maximum] production output ."
Winnebago announces its results around Oct. 21, and it has recently been trouncing Thor in the growth department. That gap is partly thanks to its wider RV portfolio and more targeted focus on the North American market. Most investors who follow the stock are currently looking for Winnebago's sales to rise about 28% to $943 million following last year's 39% spike.
Beating back the supply challenges
Thor did a better job this quarter managing the business through major supply chain bottlenecks and labor shortages. That success showed up in its faster sales growth and in rising profit margins. Gross profit for the full year rose by nearly 2 percentage points to reach 17% of sales.
Winnebago has a bigger range of premium products across the motor home, boating, and towable RV lines. That might set up an even bigger earnings jump when the RV giant reports its next earnings update. Three months ago, gross profit margin jumped 10 percentage points to 18% of sales. Management suggested more gains ahead thanks to historically low promotion levels at dealerships.
The bright outlook
Thor is sitting on a record backlog of $16 billion that, assuming no big economic slump, should keep it operating near capacity through all of 2022. Dealerships are currently holding 44% lower inventory than the more normal operating environment of two years ago, the company estimates.
Thor is expecting further industry growth in 2022 on top of this past year's surge, and that's despite continued supply chain and production pressures. "Our positive outlook for the RV industry and Thor Industries remains unchanged," Martin said.
I'd expect Winnebago to echo those bullish comments in its upcoming earnings report. The company might have an even brighter outlook, too, as it builds on its market share. That core metric rose 0.4 percentage points last quarter and is heading toward 13% of the U.S. industry.
Given its dominant position in attractive niches like premium towables and boating, Winnebago should issue a positive outlook for fiscal 2022 -- if it managed through the recent supply chain challenges at least as well as Thor did through late July.