Thor Industries (NYSE: THO), a maker of recreational vehicles and small buses, came out with lower first-quarter profits as sales could not keep up with higher costs, although revenues were pretty much in line with estimates. Let's take a closer, Foolish look at what Thor's been up to.  

Not revving up
The company saw sales rise 11% from the previous year's quarter, to $673 million, though net income ended 6% lower, at $22.4 million. Peer Drew Industries (NYSE: DW) saw net sales rise by 14%, to $136 million, in its last quarter, but the company's profits declined by 30%.

Segment-wise, Thor's towable RV business sales were up 18% to almost $500 million. Motorized RV sales, on the other hand, were down 26% to $65.5 million, while bus sales were up by 11% to $111 million.

CEO Peter Orthwein said Thor could expect more sales opportunities in the bus division as private and public transit agencies gradually begin to replace their buses.

The company's gross margins fell 150 basis points, to 11.1%, mainly due to higher product discounts along with incentives for the RV dealers themselves. Competition called for elevated discounts and incentives to improve sales. Thor's selling general and administrative margins declined by 140 basis points, to 5.7%.

More pain to follow
The RV industry seems to be going through pretty rough times. Though there has been a slight improvement from last year's performance, the RV industry still has a lot of ground to cover before it reaches prerecession levels.

Unfortunately, things may get worse before they can get any better.

Before the financial meltdown, total shipments of RVs in 2007 had reached 353,400 units. By 2009, this figure had plummeted to just 165,700. Some analysts expect 2012 shipments to decline as well, although moderately.

The Foolish bottom line
Even though Thor's fiscal-first-quarter sales were OK, the company did not see any appreciation in its earnings over last year's levels. However, it could benefit from its diversified operations, as bus sales might just climb further if the public transportation market improves next year. Other than that, given the dull economic outlook and the prediction that sales might take a dip, I would prefer to stay away from the RV industry for now.

What do you think about Thor and the RV industry? Leave your comments in the box below. Also, don't forget to add Thor to your very own watchlist. It's free and helps you stay up to speed with the latest news and analysis for your favorite companies.

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