Patrick Industries Says RV OEMs Scaling Back Appropriately

A picture of the Patrick Industries logo atop a brick building.

At the company’s June quarterly earnings presentation, Patrick Industries said the company sees healthy inventory levels at dealer lots as the summer selling season progresses. Dealer traffic is stabilizing and still above pre-pandemic levels, executives said, but inflationary pressures are emerging.

Lifestyle changes of families looking to experience campgrounds and boating activities with friends and family continues to support demand, Patrick Industries said.

Patrick Industries President Jeff Rodino said OEMs are reacting accordingly to consumer demand and scaling back production by taking out days of the week as well as taking off occasional weeks.

“They are keeping a good eye on it and backing off production levels. Giving us some foresight on what those are going to be so that we can act accordingly also,” Rodino said “There is definitely a tone out there that they understand what is going on. They are very conscious of what is happening, and they are pushing back their production levels to react to that.”

Still, CEO Andy Nemeth said dealer lot traffic remains strong.

“Customers are coming prepared to buy,” he said. “Traffic is down a little bit, but the resilience of the customer that is ready to buy at that point in time, that point of purchase sale is still resilient. So, we are pretty optimistic.”

On the manufacturing said, the company is currently seeing the pace of production run rates decline 35% to 45% compared with last year, Nemeth said. The current production rate should keep levels normalized, he said.

“Anecdotally, if you think about the last time the RV industry recalibrated in 2018/2019 prior to the pandemic, inventory levels are today from our estimates right at that place where the inventories had recalibrated to an optimal level,” Nemeth said. “So, we feel like it is in balance. We feel like the manufacturers are doing the right things. They are aggressively adjusting their production run rates to align with retail, and so all this matches very well. We do think it will be a softer back half, but we do think those inventories are calibrated.”

Nemeth said he thinks retail will be down double digits for the year to the 440,000-460,000 range.

“I think we are seeing the wholesale calibration to that number,” Nemeth said.

Chief Financial Officer Jake Petkovich said Patrick has 30 to 45 days’ worth of inventory, with sales volume up and pricing higher. He said about 20% of inventory increases are related to pricing activity.

“Without question, from a standard cost perspective, the price of aluminum, the price of resin, the price of fiberglass and so on and so forth have helped that number swell some,” he said.

Patrick Industries’ second-quarter RV business, represented 57% of the company’s revenue. The RV segment totaled revenue of $837 million in the quarter, up 41% from the second quarter of 2021, as wholesale RV industry unit shipments remained relatively flat. Content per wholesale RV unit (on a trailing 12-month basis) increased 34% from the second quarter of 2021 to $4,754. Rodino said the per-vehicle gains were driven by market share gains, acquisition and investment in automation initiatives the past 24 months.

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