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Fleetwood Enterprises, Inc.: High gas Prices Mean Slow RV Sales
On May 4, 2006, I blogged that "The Road Trip was Over" for Thor Industries, Inc. (NYSE: THO), an RV manufacturer. I got many adamant responses telling me that I had it all wrong. Many of you said that nothing would tear you from your RV travel, so I started thinking maybe these Boomers were more dedicated to their RVs than I thought, and willing to pay for them, no matter the price. But gas prices continue to go up without any sign of improvement, and sales performance of RV makers continue to fall. Even the Boomers with expendable income are finding it just doesn't pay to travel with a vehicle that typically only gets between 7 and 12 miles-per-gallon. With gas prices solidly in the $3-plus a gallon price range, we're looking at one expensive cross-country road trip! You might as well fly.
Which is why I'm bearish on Fleetwood Enterprises, Inc. (NYSE:FLE), a leading producer of recreational vehicles and manufactured homes. FLE recently reported a fourth quarter sales decrease of 16% over last year, and within that, the RV group took a particular hit, declining by 12% for the quarter. Inventories seem to be piling up, as they didn't anticipate sales falling so much. I simply don't see how this can turn around any time soon.
Type of stock: A leading producer of mobile homes and RVs that has been hit by high gas prices.
Price Target: At its current price of $8.86, I don't think this is a smart buy. We're going to see Fleetwood sink more as gas prices rise. Ultimately, there could be consolidation which could provide a lift to the price, but it isn't worthwhile to chase the stock today in anticipation of an event whichmay be a few months or years off.
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6/12/07 2:31 PM
RV owners "might as well fly?" Why? There's a lot to the RV experience that you don't seem to understand. There's a freedom of the open road and a itinerary that is penciled, not inked, in; there's an atmosphere at the parks and campgrounds where people meet their neighbors and chat; you can bring a lot more of home with you in an RV, including toys like ATVs or motorcycles, and you get to cook your own food. One gas bill, multiple plane tickets. RV park fees are cheaper than hotel bills. Gas would have to be pretty expensive to outweigh the increased costs of parking your personal vehicle at the departure airport, renting another vehicle at the other airport, eating out, and increased lodging costs.
You have a glaring error in your writeup: It seems to me that if the average decrease was 16% and the RV group took 12%, that SOME OTHER GROUP besides RVs is the culprit. Like the Housing group which got cut in half! Let's not forget that RV's, especially towables, have some really mean post-Katrina comps to meet. Not to worry, though, FEMA is hiding all of those trailers in Nebraska rather than releasing them on the open market, so there won't be a flood of used ones anytime soon.
I can understand why you want to sensationalize the gas price issue, it's sexy and current, and would be attractive to the mindset of the typical AOLer (disclosure, I'm on AOL, but apparently not typical). Where one would expect gasoline prices to show up the most is the Class A and Class C sales, the Motor Home group, because these are the vehicles that consume their own gas. Fascinatingly, this group was +26% in sales, quarter to quarter. So much for gas prices. Year over year, this group was only –6% in sales, compared to the Towa