Offering consumers an expanded model lineup enhanced by a host of set-apart luxury features, Heartland Recreational Vehicles LLC’s full-profile Bighorn fifth-wheel line is enjoying strong sales and incremental market share gains coming out of the early show season.
According to Grand Rapids, Mich.-based Statistical Surveys Inc., Bighorn market share was up 9.9% in the first month of 2016.
“Bighorn sales performed extremely well in 2015 and the tempo has really picked up after a strong retail show season this year,” said Chris Hermon, president of the Elkhart, Ind.-based Thor Industries Inc. subsidiary, in a press release. “Bighorn is arguably one of the most recognized names with retail customers and dealers. We’re proud of what was accomplished at last September’s Open House and we’re seeing the results with very strong retails in the first quarter of 2016.”
Tom Montague, general manager for Bighorn, added, “We are particularly pleased with our new model momentum. We are tuned in to the high-end demographic and are producing product that uniquely meets their needs.”
New floorplans include the triple-slide 3575EL and 3760EL boasting a popular rear living room layout and a front bedroom with a king-size walk-around bed. The newest addition to the lineup, the 3970RD, is a five-slideout unit, including two opposing sofa slides in the rear living/entertainment area.
Montague noted that all Bighorn models are equipped with a lengthy list of standards that target the discerning tastes of today’s luxury fifth-wheel buyer.
“Standard features retail customers want and use on a daily basis have contributed to our fast start in 2016,” he said. “Retail customers are more educated than ever before and are demanding standard features that make RVing more enjoyable. Add a full-time warranty for overall piece of mind and you have a recipe for success.”
While Heartland focuses on progressive product development, the company has also taken aggressive steps on the service side, offering support to dealers and end users on every product and brand that the company offers.
“In addition to great product, Heartland continues to make significant investments in our customers’ overall ownership experience,” Hermon noted. “The state-of-the-art service center located in Elkhart provides campsites, a customer lounge and a dog park with 24-hour access with prior reservations. It’s not just about a particular brand anymore. The manufacturer and the dealership play an important role in overall customer satisfaction and right now Heartland RV is leading the way.”
On the heels of an impressive second-quarter financial report, referred to by Thor Industries Inc. Chairman Peter B. Orthwein as the “strongest first half of any fiscal year in the history of our company,” the publicly held Elkhart, Ind.-based firm’s senior management has addressed a series of questions as part of an “Investor Q&A” accessible on the company’s website. Those questions not only deal with the intricacies of Thor’s own balance sheets, but with a few general industry topics that RVBUSINESS.com is highlighting here:
Q: What is the current state of the Canadian RV market? What do you anticipate the market will be like for the remainder of calendar 2016?
The Canadian market is still challenging as we see continued volatility in the value of the Canadian dollar relative to the U.S. dollar. Since we sell our products to Canadian dealers priced in U.S. dollars, this creates an upward pressure on prices in local currency which has an adverse impact on demand. As a result, total Canadian retail registrations as reported by Statistical Surveys Inc., fell 12.9% for the full calendar year 2015, with towables decreasing 12.0% and motorized decreasing 26.7%. Other factors impacting the Canadian market include increased job losses, an economic recession and tighter lending practices. However, even with these negative headwinds, we are seeing some areas of improvement in certain geographies and lean, healthy dealer inventory levels in the channel.
Q: Have you seen any signs of a slowdown in demand for RVs?
At this point, we have not seen any indications of a slowdown in demand at the dealer or retail level in the U.S. Despite the recent volatility in the stock market, consumers remain positive, as the impact of lower fuel prices, increasing job creation and lower unemployment have helped consumer confidence to remain strong. This positive consumer confidence is met with improved product offerings in our industry and, combined, these factors have driven continued growth surpassing the growth rate of the broader economy.
Q: Describe the current competitive environment; is there much discounting going on?
The RV industry is always competitive, but in the past year or two, we have seen less of the more extreme discounting than we have seen in prior years, with pockets of more aggressive discounting on certain high-end products.
Q: Have you seen any softness in markets that have been heavily impacted by the oil industry?
The largest state with exposure to the oil industry is Texas, which, based on retail registration data from Statistical Surveys, accounted for 31,656 units in 2015, which was up 8.5% for the year. At this point, we have not seen signs of reduced demand in the large metro regions of Texas, though we continue to monitor the situation closely.
Q: What is the current state of dealer sentiment and dealer inventory levels?
Dealers in general remain optimistic regarding calendar 2016. Early season shows on average have been well attended with very solid sales volume. Dealer orders are generally expected to reflect a 1-for-1 replacement as units are sold at retail. Dealer inventory remains appropriate for current conditions in both towables and motorized.
Q: Do we anticipate further RV industry consolidation?
Although a significant amount of consolidation has already happened within the industry since the last recession, we do believe that opportunities remain for additional consolidation within the industry. Consolidation in our industry does not threaten the competitive environment as years of consolidation have evidenced. So, even with more consolidation, we are confident that the competitive environment that drives innovation and improved product offerings throughout our industry will continue. In addition, we have seen a number of new or returning entrants to the RV manufacturer base since the recession as well. As these new entrants grow, there may be additional consolidation.
Q: Are we at the peak for shipments?
We do not believe we are at the peak for shipments. As an industry, we are impacted by many macro-economic factors such as consumer confidence, interest rates and credit availability, employment levels, inflation rate, and a number of other factors. Currently, many of these macro-economic factors remain favorable. In addition, a positive future outlook for the RV segment is supported by favorable demographics – both as more people reach the age brackets that historically have accounted for the bulk of the retail RV sales as well as an influx of younger consumers that are attracted to the RV lifestyle. These younger consumers in particular are generally attracted to lower and moderately priced entry-level products and are, in part, fueling additional growth in the industry beyond historical levels. In addition, RVIA recently updated their forecast for calendar 2016 and are now projecting 2% growth, to 381,800 units.
Q: What is the status of the new Heartland plant in Idaho?
The Heartland facility in Idaho is progressing according to our original timeline. We are ramping up production at the new western facility that is on track to begin producing and shipping units by the end of the fiscal third quarter. The Nampa facility will produce travel trailers to meet the strong demands of the West Coast dealers of our Heartland subsidiary.
Q: Thor has lost market share in calendar 2015. Why have you lost market share and what does the company plan on doing to address or reverse the losses?
From a share perspective, we have gained significant market share in motorized, which has been partially offset by some decreases in towable share, most notably in high-end fifth wheels and some travel trailers. Market share is certainly a key metric that we monitor for all our product categories – however, it is not the only metric. Overall, we generally try to take a balanced approach to growing or maintaining market share and growing or maintaining gross margin. The RV industry is extremely competitive and pricing discipline can come at the expense of market share for all participants, including the largest. We have developed a variety of new products that we believe address the largest and fastest growing segments of the market, which should help to improve share as they penetrate the broader market.
Q: What is your outlook for the rest of the year?
Continued strength in the RV market and a healthy dealer channel should result in continued, but more modest RV revenue growth in the second half of the fiscal year. Growth in gross profit margins will become more challenging as improvements in material costs and warranty expenses that were realized in the second half of fiscal 2015 will create difficult comparisons for the second half of 2016. In addition, certain benefits to gross margins, specifically the impact of the retroactive reinstatement of tariff rebates on certain imported raw material, which had a significant positive impact on gross margins in the fourth quarter of fiscal 2015, will not repeat in the fourth quarter of fiscal 2016. Finally, the effective income tax rate will likely remain higher on a year-over-year basis, compared with the relatively low rate in the second half of fiscal 2015
Q: What is your strategic plan for future acquisitions?
We have established a very disciplined approach to acquisitions to ensure we remain focused on the factors that provide the greatest likelihood to a successful acquisition and that will provide long-term value to our shareholders. We are opportunistic in our approach and seek willing sellers at a reasonable sales price. We also seek companies with strong management teams. We remain focused on acquisition opportunities within or adjacent to the RV industry.
The LaGrange County Economic Development Corp. (EDC) announced the sale of 64.4 acres in Howe, Ind., to Heartland Recreational Vehicles, a subsidiary of Thor Industries Inc.
According to a press release, Heartland RV broke ground Jan. 1 on a 52,200-square-foot state-of-the-art facility that will house a service center, warehouse and executive office for its Cruiser RV and DRV Luxury Suites subsidiaries. The project will create at least 15 new jobs.
Heartland acquired the sister companies in early January, 2015, to build its presence in the lightweight trailer and high-end fifth-wheel markets. Construction is expected to be completed in late spring and the new facility will be fully-staffed and operational by June 1.
Larry Miller, president of the LaGrange County Board of Commissioners and a member of the LaGrange County EDC Board, noted, “It’s impossible to deny the economic development momentum building in LaGrange County, and this project is a strong indication of that. Heartland RV’s purchase of the remaining land at Fawn River Crossing Industrial Park is particularly meaningful as it took many years of planning, land preparation, marketing and significant public investment to make it possible.”
“The commitment by Heartland RV and Thor Industries to the LaGrange County community demonstrates tremendous progress. The new jobs and capital investment are alone a reason to celebrate,” added Ryne Krock, president and CEO of the LaGrange County EDC. “We are encouraged by this project and potentially additional development by Heartland RV in LaGrange County in the future.”
Heartland RV’s plans received approval from the LaGrange County Plan Commission at a special meeting held on Dec. 18, 2015.
Thor Industries Inc. subsidiary Heartland Recreational Vehicles LLC announced it has integrated operations for specialty trailer manufacturer Bison Coach into its growing portfolio, effective Feb. 8.
Thor, through a wholly-owned subsidiary, acquired the net assets of Bison Coach in October of 2013 from an operating unit of Navistar Inc. Bison Coach, originally founded in 1984, is known for its rugged, high-quality and affordable specialty trailers, including a full lineup of equine trailers equipped with living quarters.
“We’re excited to team up with one of the most successful companies in the horse trailer business and bring Bison Coach into our family of companies,” said Heartland President Chris Hermon in a press release. “With Heartland’s knowledge and support system, we are eager to take this company and help it increase sales and better strengthen the service side of the business with its dealer body.”
Thor, through a subsidiary, expanded Bison Coach’s footprint in June of 2014 by acquiring a 55,000-square-foot facility in close proximity to the Bison Coach campus in Milford, Ind., along with purchasing 20 acres of land for future growth. Hermon noted, “Thor made a significant investment in Bison Coach. Our mission is to help push Bison Coach to that next level and cement its standing as the market share leader.”
The move represents the latest in a series of expansions by Elkhart, Ind.-based Heartland. In July of 2013, the company announced the acquisition of the assets of park model builder Breckenridge followed by the acquisition of Cruiser RV LLC and DRV LLC in early January 0f 2015. In addition, Heartland will be ramping up operations at a new facility in Nampa, Idaho, in the next 45 days.
“This is an exciting time for Heartland,” Hermon stated. “We are experiencing tremendous growth on the RV side and continue to be at the forefront of innovation and product design. Bison Coach offers a similar profile in the specialty trailer market and we see this as a strong, productive alliance moving forward.”
On the heels of an impressive second-quarter financial report, referred to by Thor Industries Inc. Chairman Peter B. Orthwein as the “strongest first half of any fiscal year in the history of our company,” the publicly held Elkhart, Ind.-based firm’s senior management has addressed a series of questions as part of an “Investor Q&A” accessible on the company’s website. Those questions not only deal with the intricacies of Thor’s own balance sheets, but with a few general industry topics that RVBUSINESS.com is highlighting here: