REV Group has reported its third quarter results, showing consolidated net sales were $617 million, an increase of 3.2 percent compared to $597 million for the same period last year. Sales growth in fire and emergency and commercial was partially offset by lower net sales in the recreation segment.
The company’s third quarter 2019 net income was $5.6 million compared to net income of $18.3 million in the third quarter 2018.
“We believe the fundamentals that drive our business remain strong with the exception of softness in the RV market,” said Tim Sullivan, CEO of REV Group. “The recreation segment was negatively impacted primarily by a larger than expected decline in wholesale deliveries of our Class A motorhomes as dealers have been reducing their inventory levels in excess of the actual decline in retail demand. We believe the current dealer inventory levels are close to being in balance and importantly we have revamped this business’s product portfolio which we expect will drive incremental demand going forward.”
Recreation segment net sales were $166 million for the third quarter, a decrease of 15.5 percent, from $197 million, for the third quarter 2018. The decrease in net sales compared to the previous year period was primarily due to decreases in sales of Class A motorhomes as well as truck campers, partially offset by the benefit of delivering on existing backlogs in other RV categories.
Recreation segment backlog at the end of the third quarter 2019 was $129 million, which was down 55.4 percent from $290 million at the end of fiscal 2018 and down 23.3 percent sequentially compared to the second quarter 2019.
The decrease in Recreation backlog is reflective primarily of the softer Class A RV and camper markets plus the overall slowdown of wholesale shipments in the broader RV market during the quarter.
“The third quarter Class A wholesale market slowdown was greater than anticipated as dealer orders have been slower than retail sales during the quarter, impacting the segment’s top and bottom lines,” said Sullivan. “As a result, we identified and implemented cost reduction opportunities within the segment by shutting production down an extra week during the July 4th holiday and further consolidating Class A production facilities from two locations to one at our Decatur, Ind., location.
“In addition, we reduced production line rates and adjusted the mix of coaches produced at our remaining Decatur facility during the quarter. While retail demand for our products was reasonable compared to the overall industry during the quarter, wholesale demand was soft and is likely to remain so until at least the September Open House dealer event where we will showcase our new 2020 models.”