As RV manufacturers discuss the state of their dealer inventory in public filings, Rev Group executives told analysts they continue to work on towable and motorized fills.
Chief Financial Officer Mark Skonieczny said on a call with analysts inventories remain down 60% to 70% across all brands from two years ago.
“While some have noted increased stocking of towable units,” he said, “our Lance travel trailer inventory is down 15% versus January of last year.”
To bring inventory back to pre-2020 levels requires 1,500 more RVs, Skonieczny said. The number equals six months’ additional manufacturing at current run rates.
The CFO highlighted brands’ growth success in 2021. Midwest Automotive Designs’ Type B motorhomes outgrew the market the past year, he said, and grew year-over-year each quarter since Rev Group bought the manufacturer in 2017.
Another acquisition, Renegade RV, was signaled out. Rev Group bought the company in December 2016 and Skonieczny said it “significantly” outperformed the market in 2021. He said Renegade inventories declined 59%.
Company CEO Rod Rushing highlighted two challenging areas in manufacturing.
The first is motorhome chassis availability. He said inventory improved sequentially but remained down from the previous year.
However, a bigger concern for Rev Group is when the chassis are delivered, he said.
“The challenge we are having, from a production execution standpoint, is the lead time we are getting on delivery against those allocations,” he said.
Rev Group typically gets longer lead times on deliveries, helping managers plan materials around delivery. Today, changes in delivery can continue until three weeks before the manufacturer gets the chassis, affecting Rev Group’s fill rates, Rushing said.
“It is creating inconsistencies in our planning process because of the nature of the receipt of these chassis that we continue to manage,” he said. “I think we are all over it to optimize the best we can. I know what they are dealing with, but it just makes it more difficult for us to get visibility on a longer cycle on what is going to happen because everything starts with the chassis.”
The other primary challenge Rushing cited is inflation. As the manufacturer’s backlog continued to grow, he said the purchasing department focused on expanding Rev Group’s supply base. He anticipates inflationary pressures continuing for the next 18 months.
“Within the quarter, we experienced a greater number of inbound price increase requests,” Rushing said. “The team has worked diligently to limit these impacts through dual sourcing, leveraging offshore resources, and increasing the number of e-auctions. We have implemented additional forward-pricing actions to offset the forward inflation of raw materials, components, labor and transportation. In addition to that, we have worked with our channel partners to re-price portions of our backlog.”
Finally, Rushing described the challenges Rev Group faced in manufacturing during the past three months because of Covid. Although the company recorded only 12 new cases in October, the positive case total rose to 158 in December and 615 in January.
Rushing said Rev Group estimated it lost 45,000 labor hours in the quarter to Covid-related absenteeism.
