Thor Industries (THO -0.16%) is sounding the alarm on recreational vehicle (RV) demand, and investors are taking the message to heart. Shares of Thor were down 13% as of 2 p.m. ET Wednesday after the manufacturer missed expectations and lowered full-year guidance.
Higher rates lead to inventory cuts
Thor is the world's largest RV manufacturer, owner of brands including Airstream, Dutchmen, and Thor Motor Coach. The company earned $0.13 per share in its fiscal second quarter ending Jan. 31 on revenue of $2.21 billion, falling short of Wall Street's consensus forecast for $0.67 per share in earnings on $2.27 billion in sales.
Net income was $7.2 million, down from $27.1 million a year ago. But that figure includes a $14.7 million charge related to the company's debt refinancing efforts that does not appear to have been factored into the per-share estimates. Even without the charge, net income was down year over year and revenue fell 6% from the same three months of fiscal 2023.
CEO Bob Martin in a statement said the quarter "presented a challenging operating environment as seasonally lower retail demand and cautious dealer sentiment impacted our results." Dealers are feeling the pinch of higher interest rates, which mean elevated floor plan financing costs, and are limiting inventory to help manage expenses.
Thor remains cautious heading into the spring selling season. The company cut its full-year fiscal 2024 earnings view to $5 to $5.50 per share, down from $6.25 to $7.25 per share, with Martin saying he expects dealers "will maintain tight control over inventory levels until retail demand firms."
Is Thor stock a buy after its disappointing earnings result?
Thor came into earnings season on a roll, up more than 50% from its April 2023 lows. The bull case from here is an unexpectedly strong RV retail buying season forces dealers to restock inventories more rapidly than they anticipated, allowing Thor to easily exceed those revised estimates.
That scenario is not completely out of the question. The consumer, though pressured by higher rates, has remained resilient. Travel data suggests that consumers are still spending on experiences, and RVs can be a cost-effective way to get out and travel should budgets get pinched.
But it is also possible that all these economic pressures will finally take their toll, and the dealer prudence will be justified.
Thor is a strong operator and should be a long-term winner, but the near term is currently very much in doubt. Investors tempted to buy in today need to aware patience could be required in 2024.
