Patrick Industries has its sights locked onto industry relief as the supplier anticipates inventory restocking in future quarters.
The company noted various achievements and fiscal increases during its third-quarter earnings call.
After a year of industry declines, Patrick CEO Andy Nemeth said, “We do feel pretty confident that a restock will be needed.”
Nemeth said dealers are focused on maintaining low inventories. Throughout the year, he said the company noted incremental upticks in dealer demand from manufacturers.
Nemeth also said future interest rate reductions could influence consumer behavior.
“I am not saying we are banking on significant rate reductions, but I do believe that consumer confidence will improve,” Nemeth said, “and we do feel like there is another one or two rate reductions coming, built into our assumptions at this point.”
Patrick RV President Jeff Rodino estimated destocking around 19,800 RVs in the third quarter, resulting in dealers having 16-18 weeks of inventory on hand compared with the historical average of 26-30 weeks.
Patrick anticipates recent travel trailer purchase trends soon will morph into consumer demand. Rodino said about 5% of the overall RV market has shifted into travel trailers since the beginning of the year. Nemeth said he anticipated returning travel trailer consumers will soon upgrade.
“We expect to see these small units for a short period of time until such point when that consumer confidence inflexes,” Nemeth said, “and then at that point in time, we would expect to see a mix shift back towards the larger units.”
Nemeth said Patrick is aligned with the current run rate but prepared to scale up when the industry is ready.
To assist its customer base, the company acquired Icon Direct, operating as RecPro, to boost Patrick’s aftermarket offerings. Rodino said the acquisition has three objectives. RecPro will continue growing its consumer-focused brand and portfolio of private-label and independently branded direct-to-consumer products. Secondly, Patrick will introduce the RecPro brand name and products to its OEM customers as an alternative to current products in the market.
“Finally, we have the opportunity to sell our legacy portfolio of manufactured and aftermarket products across end markets through a more effective, well-known and efficient distribution platform,” Rodino said. “Together, in collaboration with RecPro’s incredible team, we plan to expand and enhance the accessibility of aftermarket components at Patrick and see significant runway and continued growth potential to this channel as a result.”
According to Rodino, the Patrick and RecPro teams have adapted to RecPro’s model and are furthering the supplier’s aftermarket presence.
Andrew Roeder, executive vice president of finance, chief finance officer and treasurer, said, “We are optimistic that an inflection will come in 2025 and believe consumer confidence will improve following the election given still low unemployment, solid economic growth and a more favorable interest rate outlook with lower inflation.”
Based on these expectations, Roeder forecasts RV retail to be flat next year, which will drive wholesale shipments’ improvement as dealers maintain weeks on hand.
