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Thor Industries is on the right road
The maker of a wide variety of recreational vehicle brands including Airstream, Four Winds, and Jayco pleased investors Monday evening with an earnings report that left analysts expectations in the dust and caused the stock to soar 10.1% today. Revenue for the third quarter was $2.02 billion, up 57%, and earnings per share came in at $2.11, up 42%. Analysts were expecting earnings of $1.89 per share on sales of $1.96 billion.
Thor completed a purchase of privately held Jayco last year, and the acquired business added $516.5 million to the top line in the quarter. But even without the Jayco contribution, the company grew sales by nearly 17% year over year. Sales backlog more than doubled since Q3 of last year, indicating that demand remains strong for the company’s vehicles and boding well for upcoming quarters. The company expects double-digit growth in both revenue and earnings in Q4, despite lapping the Jayco acquisition during the quarter.
CEO Bob Martin was upbeat on the future, saying:
With the surging popularity of our RVs, and the RV lifestyle in general, we have seen a significant increase in demand for our products, particularly our wide array of affordable travel trailers and motorhomes. As a result of this significant increase in demand, we continue to expand capacity in a prudent, measured approach that will allow us to be nimble and flexible as market conditions and product demand change. Currently, we have new plants or expansion projects underway at nearly every Thor subsidiary, which will begin contributing to our overall production capacity in the fourth quarter of fiscal 2017 and early fiscal 2018.
Thor is riding some major tailwinds, including the increased leisure time of retiring baby boomers. But perhaps still unappreciated by the market is the extent to which the products are attracting younger customers, too. According to the company, Gen Xers and millennials made up 72% of campers in 2016, and 8 out of 10 first-time buyers of RVs were under the age of 65. Thor Industries appears to be executing well in a market that is growing 10% annually.
Macy’s causes more retail worry
Woes continued for shareholders of Macy’s as the stock retreated 8.2% following downbeat comments at the company’s annual investor meeting. Chief Financial Officer Karen Houget warned that gross margin will be lower for the year than had been anticipated when guidance was given in February.
“We are confident that there will be significant reductions happening relative to what we were guiding earlier in the year,” said Houget, referring to gross margins. She said that gross margin in the second fiscal quarter, ending in July, will be 1 percentage point below that of Q2 the previous year, and that gross margin for the full year will come out 0.6 to 0.8 percentage points below that reported for 2016.
Apparently ignored by the market were further comments that Macy’s expects to cut expenses in the second half in order to compensate for pricing pressures, allowing management to reaffirm earnings guidance for the year of $3.37 to $3.62 per share, unchanged from what the company has been saying since February.
But it’s not surprising that any negative words from the company elicit a market reaction at this point. Against a backdrop of distressing news from mall retailers, Macy’s sales declines have continued since 2015, including a drop in comparable-store sales of 5.2% in the most recent quarter. With the stock hitting new 52-week lows, investors with eyes on the near term seem inclined to ignore the steps the company is taking to get the business on track until they start seeing some positive results.