Thor Industries, Inc. reported consolidated net sales of $2.21 billion in the second quarter of fiscal 2024 ended January 31, 2024, compared to net sales of $2.35 billion for the second quarter of fiscal 2023.

THO shares were down in the mid-teens in pre-market trading on March 6, 2024.

“Our fiscal second quarter, similar to the prior-year period, presented a challenging operating environment as seasonally lower retail demand and cautious dealer sentiment impacted our results,” said Bob Martin, president and CEO of Thor Industries. “As macro conditions continue to pressure the top line, our teams proactively navigated through the retail offseason to improve the competitive positioning of our operating companies and independent dealer partners. Notably, we continued to work with our North American independent dealer partners to closely match wholesale production with the pace of retail sales and we enacted promotional programs to assist independent dealers in moving prior-model-year units and stimulate retail demand. With the rapid increase in interest rates over the past year, dealers face elevated floorplan financing costs that have put substantial pressure on their operations. As a result, we currently believe that even though the levels and mix of channel inventory are well-positioned ahead of the retail selling season, dealers will remain focused on limiting inventory levels as they manage interest expense.”

North American Towable RV

  • Net sales were down 11.9 percent for the second quarter of fiscal 2024 compared to the prior-year period, driven by a 10.2 percent increase in unit shipments offset by a 22.1 percent decrease in the overall net price per unit. The decrease in the overall net price per unit was primarily due to the combined impact of a shift in product mix toward travel trailers and more moderately-priced units along with price compared to the prior year period.
  • Gross profit margin was 7.4 percent for the second quarter of fiscal 2024, compared to 6.4 percent in the prior year period. The increase in gross profit margin was primarily driven by a decrease in the material cost percentage, due to the combined favorable impacts of product mix changes and cost-savings initiatives, partially offset by higher labor and manufacturing overhead percentages.
  • Income before income taxes for the second quarter of fiscal 2024 was $0.7 million, compared to a loss before income taxes of $7.1 million in the second quarter of fiscal 2023. This improvement was driven primarily by lower amortization costs and larger gains on the sales of fixed assets in the current year period.
  • At quarter-end, North American Towables Backlog was down 27.5 percent year-over-year.

North American Motorized RV

  • Net sales decreased 22.8 percent for the second quarter of fiscal 2024 compared to the prior year period. The decrease was primarily due to an 18.4 percent reduction in unit shipments, partly due to independent dealer restocking in the prior-year period, as well as a 4.4 percent decrease resulting from changes in product mix and net price per unit as current-year shipments trended toward more moderately-priced units and included elevated sales discounts compared to the prior-year period.
  • Gross profit margin was 10.6 percent for the second quarter of fiscal 2024, compared to 14.5 percent in the prior-year period. The decrease in the gross profit margin for the second quarter of fiscal 2024 was primarily driven by an increase in sales discounts and chassis costs as well as an increase in manufacturing overhead cost as a percentage of net sales due to the reduction in net sales.
  • Income before income taxes for the second quarter of fiscal 2024 decreased to $26.5 million compared to $61.5 million in the prior-year period, driven by the decrease in net sales and the decline in the gross margin percentage.
  • At quarter-end, North American Motorized RV Backlog was down 42.0 percent year-over-year.

“In North America, we took deliberate actions of maintaining production discipline balanced with increased dealer assistance to help address the current macro environment. During the fiscal second quarter, we continued to sustain production levels that mirror the pace of retail sales, resulting in modest restocking of approximately 4,000 units, far below historical restocking levels for our fiscal second quarter. Our teams provided increased incentive support to our independent dealers aimed at helping pull prior-model-year product through and to assist dealers facing cash flow constraints. Additionally, throughout the quarter, we continued to leverage our variable cost model as we achieved greater footprint consolidation and operational efficiencies. As a result of these actions, we are well positioned to work with our independent dealers to endure current market conditions and emerge in a stronger position with the resumption of long-term market growth trends,” said Todd Woelfer, SVP/COO at Thor Industries.

European RV

  • Net sales increased 20.9 percent for the second quarter of fiscal 2024 compared to the prior-year period, driven by a 3.9 percent increase in unit shipments and a 17.0 percent increase in the overall net price per unit due to the total combined impact of changes in foreign currency, product mix and price. The overall net price per unit increase of 17.0 percent includes a 4.1 percent increase due to the impact of foreign currency exchange rate changes.
  • Gross profit margin was 15.3 percent of net sales for the second quarter of fiscal 2024 compared to 14.1 percent in the prior year period. This improvement in the gross profit margin for the quarter was primarily driven by net selling price increases, product mix changes and a reduction in labor costs as a percentage of net sales.
  • Income before income taxes for the second quarter of fiscal 2024 was $38.1 million compared to income before income taxes of $12.0 million during the second quarter of fiscal 2023. The improvement was primarily driven by the increase in net sales.
  • At quarter-end European RV Backlog was down 10.1 percent year-over-year.

“In Europe, fiscal second-quarter net sales increased 20.9 percent while income before income taxes increased by more than 200 percent compared to the prior-year period. While we consider independent dealer inventories of European products to be restocked to appropriate levels exiting the second quarter of fiscal 2024, we are extremely pleased with the continued efforts of our European teams to drive continued operational efficiencies to sustain a strong profitability profile and work towards recapturing market share of motorized product as a result of improved chassis availability. This positioned our European companies to provide acceptable levels of inventories to our European dealers,” said Woelfer.

Consolidated gross profit margin for the second quarter of fiscal 2024 was 12.3 percent, an increase of 20 basis points when compared to the second quarter of fiscal 2023.

Net income attributable to Thor Industries, Inc. for the second quarter of fiscal 2024 was $7.2 million, or 13 cents per diluted share, compared to $27.1 million, or 50 cents per diluted share, for the second quarter of fiscal 2023.

“Similar to last year, our fiscal second quarter financial results were impacted by cautious wholesale ordering patterns by our North American independent dealers in response to challenging seasonal market conditions and the elevated interest rate environment,” added Todd Woelfer. “Against this backdrop, our operating teams maintained a prudent focus on operational execution that prioritizes through-cycle profitability while also actively assisting independent dealers in managing their respective inventory positions. We have implemented a disciplined operating approach in a softer demand environment that involves producing the right mix of products at price points that resonate with today’s more budget-conscious consumer. In addition, we are working with our supplier partners to identify opportunities to reduce costs where possible.”

In the second quarter of fiscal 2024, as a result of the amendments and associated maturity date extensions and interest rate margin reductions related to the November 15, 2023 refinancing of the company’s debt facilities, the company recognized total expense of $14.7 million. Approximately $7.5 million of this expense is classified as interest expense in the company’s Condensed Consolidated Statements of Income and Comprehensive Income and primarily represents extinguishment charges, and the remaining $7.2 million of this expense is classified as administrative expense and primarily represents third-party costs attributed to the modified debt facilities.

Outlook
The company’s fiscal 2024 guidance has been revised to reflect challenging market conditions expected to persist into the second half of fiscal 2024. Based on current North American order intake levels through the end of February, the company is lowering its consolidated net sales and diluted earnings per share guidance ranges to reflect a lowered fiscal year 2024 North American industry wholesale shipment range of between 330,000 and 340,000 units, which is more conservative than our previous shipment range of between 350,000 and 365,000 units.

For fiscal 2024, the company’s updated full-year guidance now includes:

  • Consolidated net sales in the range of $10.0 billion to $10.5 billion (previously $10.5 billion to $11.0 billion);
  • Consolidated gross profit margin in the range of 14.0 percent to 14.5 percent (previously 14.5 percent to 15.0 percent); and
  • Diluted earnings per share in the range of $5.00 to $5.50 (previously $6.25 to $7.25)

“The combination of the delay in interest rate relief and softer return of the retail market as the macroeconomic challenges persist has delayed the return of stronger top and bottom lines from our expectations at the beginning of our fiscal year. Because we have not assumed any material relief from these macroeconomic challenges through the balance of fiscal 2024, we have revised our guidance to match our current outlook and will continue to manage the business in line with this more cautious view. While this delay will impact our earnings results in fiscal 2024, we have strong confidence in our ability to deliver on our revised fiscal 2024 outlook,” concluded Martin.