THOR Industries has announced results for the first quarter of fiscal 2020, ended Oct. 31, showing net sales were $2.16 billion, an increase of $402.8 million, or 22.9 percent, from the first quarter of fiscal 2019.
The addition of $493 million in net sales from the European RV segment was partially offset by net sales decreases of 6.1 percent and 3.6 percent in the North American towable RV and the North American motorized RV segments, respectively.
Consolidated gross profit margin was 14.3 percent for the quarter, compared to 11.8 percent in the prior-year period, primarily reflecting favorable overall product mix and reductions in material, labor and warranty cost percentages in the North American RV segment, tempered by the gross profit margin from the European RV segment, which was lower than the overall North American gross margin for the current quarter.
“In our fiscal first quarter, we achieved a pronounced improvement in our operating results, reflecting the benefits of the flexible and highly variable cost model we have developed, as we increased gross profit margins in our North American RV segments despite modest decreases in net sales,” said Bob Martin, president and CEO. “EHG’s results for the quarter were generally in line with expectations as EHG has historically generated flat-to-negative first quarter results due to the European holiday shutdowns that occur in August, and due to the higher concentration of marketing and advertising expenses in the fiscal first quarter to support the annual RV shows in Europe. Industry conditions in North America continued to improve as the independent dealer inventory rationalization that has affected our results over the past year nears its end. Dealer optimism is strong in both the North American and European markets with excellent feedback from our September Open House in Elkhart, Indiana, and positive performance at industry wholesale and retail shows in Germany and across the U.S. We look forward to continuing that momentum as the spring RV show season starts in North America in January and the European selling season begins.”
North American independent dealer inventory rationalization continued during the fiscal first quarter, as North American industry wholesale shipments once again declined at a faster rate than retail registrations.
As a result, independent dealer inventory levels of THOR products in North America decreased by 22.8 percent to about 101,500 units as of Oct. 31, compared to approximately 131,500 units as of Oct. 31, 2018. Independent dealer inventory of THOR products in North America, following the first quarter of fiscal 2020, was at its lowest point since the first quarter of fiscal 2017. Management believes independent dealer orders will generally be commensurate with consumer demand during calendar 2020.
European dealer inventory is also going through a modest rationalization, though inventory levels were not as high as in North America on a relative basis. Management believes that independent dealer inventory levels of EHG products in Europe, while somewhat elevated in certain locations, remain generally appropriate for seasonal consumer demand in Europe moving into calendar 2020.
North American towable RV sales were $1.2 billion for the first quarter of fiscal 2020, compared to first-quarter sales of $1.28 billion in the prior-year period. This decrease was primarily driven by lower unit shipment volume compared with the first quarter of fiscal 2019, as independent dealers continued to reduce their inventory levels, but was partially offset by a shift in product mix toward higher-priced units.
North American towable RV backlog increased $48.6 million to $1.07 billion at the end of the first quarter of fiscal 2020, compared to $1.02 billion at the end of the first quarter of fiscal 2019. The company believes the current towable RV backlog is returning to a more normalized level and is reflective of dealer trends toward smaller, more frequent, order patterns.
North American motorized RV sales were $415.9 million for the first quarter compared to $431.2 million in the prior-year period. The decrease in motorized sales was primarily driven by a shift in product mix towards lower-priced products.
North American motorized RV backlog decreased about $70.3 million to $670 million from $740.2 million a year earlier. The company believes the current motorized RV backlog is reflective of the shift in dealer order patterns to smaller and more frequent orders.
European RV sales were $493 million for the first quarter. Historically, for EHG, the first quarter represents the slowest quarter due to the annual European holiday shutdown period in the month of August, as well as the consumer trend of purchasing units earlier in the calendar year for use during the summer months. Historically, EHG’s quarterly net sales tend to improve sequentially from the first to the second quarter, and even more so into the third quarter, according to the company.
European RV gross profit was $64.6 million, or 13.1 percent of net sales, in the fiscal first quarter. Gross profit margin is historically impacted in the fiscal first quarter by reduced fixed cost absorption from seasonally lower first quarter sales levels.
“We are optimistic about our prospects for improved results in fiscal 2020, particularly following such a solid start to the fiscal year,” said Martin. “Attendance and feedback from recent shows in Düsseldorf, Germany; Hershey, Pa.; Fontana, Calif.; and our Open House in Elkhart, Ind., have been very positive. … Consistent with our comments from last quarter, our outlook for North American markets is to remain relatively flat, or decline modestly, in fiscal 2020, barring a significant macroeconomic change, with the potential for better results should retail demand strengthen. For the European retail market, we expect to see modest growth similar to fiscal 2019.”
