Thor Industries (THO 0.54%) is setting the types of records that investors love to see. Not only did the RV giant reveal strong sales gains through late January, but its profit margins jumped thanks to rising prices and improved manufacturing efficiency.
Thor is optimistic about the coming year even though supply chain challenges are impacting its European segment. The company might even steal more market share from big rivals like Winnebago.
Let's take a closer look.
Thor's quarter was sparkling on the growth front. Sales rose 42% overall, to $3.9 billion. The company noted strong demand for its towable and motorized RVs, which it was able to meet despite supply chain challenges. That success allowed earnings to roughly double to $4.79 per share compared to late 2020.
It gets better. Thor estimates that its market share for motorized RVs jumped to 48% of the U.S. market in 2021 from 39% a year ago. The company mostly stole share from smaller brands, but it also chipped away at Winnebago's second-place position. "Our results show the strong appeal of our products," CEO Bob Martin said in a press release, "[and] the continued strong demand in our industry."
Inventory and pricing
Selling prices continued rising as dealerships enjoyed strong enough demand that they could pull back on their promotions. Thor also raised its own prices to reflect inflation on many of its key inputs.
Gross profit margin hit a record 17.4% of sales thanks to those wins, plus Thor's improving manufacturing efficiencies. Pre-tax income landed at $660 million, or 8.4% of sales, over the past six months compared to $310 million, or 5.9% of sales, a year earlier.
Thor's backlog fell compared to the previous quarter, which normally would be a warning sign about slower sales gains ahead. These aren't normal times, though, since dealerships have been struggling to get enough inventory to satisfy demand. Thor succeeded in shrinking that inventory gap, putting it in a great position to keep sales growing through 2022. "We are working hard to deliver enough units," Martin said.
Looking to 2022
Management was cautious to note that there are many risks to the 2022 outlook that currently calls for just a modest slowdown compared to last year's booming RV demand. Geopolitical strife in Europe and soaring gas prices are just two of the many challenges that could pressure this niche, which is highly sensitive to changes in consumer discretionary spending patterns.
Thor says it learned hard lessons from the last time the industry hit a surprise downturn in 2018, though, and so it is being careful today to make sure its production levels aren't outpacing actual demand at dealerships.
That cautious approach helped it achieve impressive sales gains this past quarter even as it helped lift dealership inventories. Thor might be sacrificing a bit of revenue growth in early 2022 thanks to this strategy. But it's a sensible way to target market share gains without overstretching the business.