Thor Industries - RV Monopoly At The Right Price
Thor Industries - RV Monopoly At The Right Price
Resilient business with 40%+ market share and integrating vertically
Hi SWI,
I am working on my next deep dive, a dominant player with a 70%+ market share in the medical industry with no worthy rivals, which should be released in a few weeks. However, in the interim, I want to bring your attention to Thor Industries, a company that also fits the Sleep Well Investments mold. I have not pulled the trigger but could do in the coming months. I’ll keep you posted.
For now, you can be assured that Thor scores well in my Sleep Well Investments checklist (12/20 points). It is worth keeping an eye on; if not deserves a small allocation. It has many qualities that I look for
+A dominant market position with defensible moats
+Incentivized management with a strong track record of capital allocation
+Survived past recessions and industry turbulences
+Ample opportunity to reinvest at high ROIC
+Trading below fair value (a bonus)
THOR Industries
THOR (NYSE:THO) was founded in 1980 and is the world's largest manufacturer of recreational vehicles (“RVs”), with a steady 40%+ market share in North America and 20% in Europe.
The Company manufactures a wide variety of RVs. It sells those vehicles and related parts and accessories primarily to 3500+ independent, non-franchise dealers throughout North America (2400 dealerships) and Europe (1100 dealerships, only two are company-owned, 45% sell EHG brands exclusively).
They produce RVs by assembling key components like chassis, windows, and frames from a limited number of suppliers and thousands of other parts from numerous suppliers. They have 400+ facilities and 32,000 employees worldwide.
THOR has three segments, NA Towables, NA Motorized, and European.
Recent financials - Q3’23
THOR’s recent Q3’23 results show a continued challenging period for the leisure industry.
Revenue was $2.93 billion, a decrease of 37.1% YoY and 15.3% over the same quarter of the fiscal year 2021. The revenue decline continues from Q2’23 and Q1’23 declines of 39% and 22%, respectively, but is slowing down slightly.
The decline is mirrored by the steep fall of 55% in backlog orders in the largest segment, NA Towables, representing over 50% of the business.
However, positives are seen in the newly acquired segment - European, where sales increased by 20% and gross margin was 17.5%, higher than the 14% compared to the same quarter in fiscal 2022.
Overall, management sees a challenging FY2023. Hence they have lowered the sales guidance for the year to $10.75B at the midpoint (previously $11B). But they see a slight improvement in the gross profit margin range of 13.8% to 14.2% (previously 13.4% to 14.2%) as they continue to stick with the price hikes. Finally, earnings per share will be in the range of $5.80 to $6.50 (previously $5.50 to $6.50), representing a slight improvement.
I am more interested in looking at the business with a long-term view, and I believe THOR has many positives despite a challenging year.