Thor/Winnebago: the wheels come off RV sales

Sales of the humble caravan — or recreational vehicle — surged during the pandemic. Americans looking to satisfy their pent-up wanderlust while social distancing emptied dealership lots. Low fuel prices were another incentive. Nearly 1.1mn units were sold between the start of 2021 and the end of 2022. That was the best two-year stretch of sales on record.

Shares in Thor Industries, the US company behind Airstream trailers, quadrupled between March 2020 and early 2021, when they reached a new high. Smaller rival Winnebago and RV retailer Camping World Holdings made similarly outsized gains during the period. The stocks have since come off their peaks, although they remain up between 20 and 40 per cent over the past 12 months. The good times cannot last, however.

High inflation, tighter lending conditions and fears the US economy could slip into a recession have prompted many Americans to hold back on big-ticket items this year. Higher interest rates have driven up financing costs. Overall, fewer than 300,000 RVs sales are expected this year. That is less than half the level in 2021 and about 40 per cent lower than last year’s sales.

Results from Winnebago reflect the waning demand. Revenue for the three months to end of May fell 38 per cent to $901mn. Net income was 44 per cent lower compared to the year ago period. Its order backlog shrank sharply. Thor released similarly downbeat results earlier this month.

That said, the long-term trends remain favourable for the RV industry. As more ageing baby boomers retire, they will boost their leisure spending. At the same time, some millennials are switching to the van life to dodge high housing costs.

That may explain why shares in Thor and Winnebago are not yet bargains. They trade on 13 and 8 times forward earnings respectively even though sales and profits, having peaked in 2022, are not expected to recover until 2026. Would-be adventurers should wait and see if the RV industry can shed its cyclical nature before climbing on board.