Thor Industries reported net sales for the third quarter were $4.66 billion, an increase of 34.6 percent as compared to the third quarter of fiscal 2021 due to continued strong RV demand.
Consolidated gross profit margin for the third quarter ended April 30 was 17.3 percent, a 270 basis point improvement over the comparable prior-year period. Earnings per share for the third quarter were $6.32 per diluted share, an increase of 92.1 percent as compared to $3.29 per diluted share in the same period of the prior fiscal year.
Consolidated RV backlog as of April 30, 2022 was $13.88 billion.
“I am pleased to report this quarter that Thor once again managed through an uncertain business environment to achieve record net sales and profitability across many of our brands. Our teams have done an exceptional job navigating continued supply chain and labor constraints while still fulfilling ongoing dealer and consumer demand for our products. Net sales for our fiscal third quarter increased 34.6 percent, net income attributable to Thor grew 89.9 percent and our gross margin improved by 270 basis points compared to the fiscal third quarter of 2021. Our growth and profitability is a result of our ongoing commitment to prudent operational and financial management,” said Bob Martin, president and CEO, Thor Industries.
“At the end of our fiscal third quarter, due to the outstanding production efforts of our team members, our independent dealer inventories of towable RV products were at more historically normal levels. Due to continued high demand for our motorized RVs and persistent global chassis supply constraints, our independent dealer inventories of motorized products were still below optimal levels. We do not expect motorized RV inventory levels to return to more historically normal levels until early in calendar 2023.
“We continue to make progress in managing and fulfilling our order backlog. In the third quarter, we decreased our backlog by more than 3 percent to $13.88 billion compared to the third fiscal quarter of 2021. This calendar year, we have reduced the backlog, which was $17.73 billion as of January 31, 2022, by 21.7 percent at the end of our third fiscal quarter on April 30, 2022. We are very pleased with our progress, and we believe that the current backlog, while still elevated, is indicative of healthy long-term demand for our RV products. As we have reported, we actively verify the backlog on an ongoing basis and will continue to do so to make sure that it is aligned with both our dealers’ inventory needs and retail demand. To be clear, the current level of our backlog remains elevated, and we continue to be focused on opportunities to lower it to more traditional levels.
“We remain disciplined in aligning production to meet current demand without overproducing and overloading our independent dealer channel. In order to align production with retail demand, we pulled back on towable production in the latter half of our fiscal third quarter. On a historical basis, we have prudently and proactively managed our production rates category-by-category based on market conditions, and we are doing so again today,” said Martin.
Third-Quarter Financial Results
Consolidated net sales were $4.66 billion in the third quarter of fiscal 2022, compared to $3.46 billion in the third quarter of fiscal 2021. The increase in consolidated net sales was largely impacted by the increase in the average sales price of our units in addition to the increase in units sold. The addition of Airxcel, acquired in September 2021, accounted for $154.0 million of the increase in net sales for the third quarter of fiscal 2022, net of intercompany sales.
Consolidated gross profit margin increased 270 basis points to 17.3 percent for the third quarter of fiscal 2022, from 14.6 percent in the corresponding period a year ago driven by margin-focused operational improvements and the low discount environment.
Net income attributable to Thor Industries and diluted earnings per share for the third quarter of fiscal 2022 were $348.1 million and $6.32, respectively, compared to $183.3 million and $3.29, respectively, for the prior-year period.
Management Commentary
“We achieved yet another quarter of record net sales and earnings despite ongoing chassis supply constraints which limited our production volumes and prevented us from meeting the market demand for motorized products in both North America and Europe which prevented us from posting an even stronger quarter. Our focus on long-term margin improvement along with lower discounts resulted in our outstanding consolidated gross profit margin of 17.3 percent for the fiscal third quarter, and we are confident that our core margin improvement strategies will sustainably improve our margin profile for the long run. While margin levels have been positively impacted by a low discount environment in the last couple of quarters, as the industry returns to a more normalized discounting environment, our 2025 goal of 16 percent consolidated gross margin is still attainable,” said Colleen Zuhl, senior vice president and chief financial officer.
“Our record fiscal 2022 third-quarter operating results helped generate strong net cash from operations. Net cash provided by operating activities for the nine months ended April 30, 2022 was $637.5 million as compared to net cash used in operating activities of $175.1 million for the nine months ended April 30, 2021. We remain committed to a balanced approach to capital deployment as we leverage our strong cash flow to enhance the long-term value of our company. During the third quarter of fiscal 2022, in addition to organic reinvestment into our operations, we continued to reduce our overall debt with principal payments of $124.6 million on our Term Loan. Subsequent to the end of the third fiscal quarter, we made additional principal payments of $140.5 million on our Term Loan, and our remaining principal balance on the Term Loan as of June 3, 2022 is approximately $1.22 billion.
During the three months ended April 30, 2022, we also repurchased 499,106 shares of our common stock at a weighted-average price of $80.12 for an aggregate purchase price of approximately $40.0 million. Since announcing our $250.0 million share buyback auThorization in December 2021, we have now repurchased nearly 1.1 million shares of our common stock at a weighted-average price of $90.20 for a total aggregate purchase price of $98.3 million. As of April 30, 2022, the remaining amount of the Company’s common stock that may be repurchased under this buyback auThorization is $151.7 million,” added Zuhl.
“In balance with margin improvement, we are focused on stabilizing and growing market share. As an example, we have aggressively developed and introduced a comprehensive line of Class B motorhomes across our brands for delivery to our independent dealer network. We did not have any meaningful share in this segment when we started a few years ago, but according to first-quarter data for calendar 2022 from Statistical Surveys, Inc., we have taken significant market share and are now the #1 RV manufacturer within the North American Class B motorhome category. When combined with our European sales of campervans, which are European Class B equivalents, we are also the global leader in this segment – the hottest segment currently within the RV industry. It is a testament to our ability to use our scale and innovation to quickly grow in a new market segment. In addition, with this exciting news, as of the end of the quarter, we are now the market share leader in every North American RV product category in which we compete,” added Todd Woelfer, senior vice president and chief operating officer.
Outlook
“The RV industry’s calendar 2022 retail selling season has been impacted by the current macroeconomic conditions faced by consumers, and while North American industry retail towable demand is anticipated to be lower than the historically high levels of recent quarters, it remains robust as enthusiasm for the RV lifestyle continues to grow. Motorized industry retail demand continues to outpace the industry’s ability to produce given the limitations on chassis supply. Industry retail registrations in the first calendar quarter of 2022, while below the record levels of 2021, exceeded both 2020 and 2019 registrations in both North America and Germany. We believe retail demand for the remainder of our Fiscal Year 2022 and the beginning of Fiscal 2023 will be strong, barring additional macroeconomic impacts, and we expect calendar year 2022 North American RV industry retail sales of between 460,000 and 480,000 units, which would represent one of the best years of North American RV retail sales on record,” continued Woelfer.
“Based on the recent moderation of North American retail demand, the RV Industry Association (RVIA) recently reduced its North American wholesale forecast for calendar year 2022 shipments to be between 537,800 and 561,900 units with a most likely total of 549,900 units. We agree with the revised lower end of the wholesale RVIA’s forecast, and we believe it is in alignment with our forecasted RV industry retail sales as a number of the wholesale units shipped so far this year were used to restock dealer towable inventories to more normalized levels. Looking ahead to the second half of the calendar year, we expect RV Industry wholesale shipments and retail RV sales to be closer to one-to-one parity, as we work to manage wholesale production to align with retail demand.
“As the world’s leading RV manufacturer, we recognize the importance of maintaining production discipline as we strive to fulfill dealer orders that are in balance with retail sales forecasts. Our production discipline is greatly valued among our dealer partners as we work to protect the long-term interests of our customers and the industry,” concluded Woelfer.
“As always, we remain focused on driving growth, profitability and long-term value for all of our stakeholders. We are currently implementing many strategic and innovative initiatives to expand our industry leadership position in fiscal year 2023 and beyond. We look forward to sharing our long-term vision, priorities and financial targets with you at our Investor Day in late June,” added Martin.
Photo courtesy Thor Industries/Heartland RV
