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Polaris, Thor Industries boost RV production as ‘unprecedented demand’ weighs on inventories

Scott Wine, CEO, Polaris Industries

Scott Mlyn | CNBC

With more Americans spending time in the great outdoors amid the coronavirus pandemic, the trend has lead to a glut in inventory at recreational vehicle dealerships.

Polaris and Thor Industries, two recreational vehicle manufacturers with more than $5 billion in value on the stock market, are both bolstering their operations to respond to unprecedented consumer demand in the industry.

Both companies are reporting having the lowest number of rec vehicles, like boats, motorhomes and four-wheelers, on hand in decades as new consumers seeking new ways to spend the time with restrictions on gathering and other activities in place across the country.

“Historically, we’ve never seen the inventory this low,” Bob Martin, chief executive of Thor Industries, told CNBC’s Jim Cramer Tuesday. He said he would have to go back 15 years, when Thor’s production rate was much lower, to see inventory at current levels.

“We’re really ramping up production as safely as we can and our backlog has grown and it continues to grow,” he said.

In a separate interview that aired on “Mad Money” that same day, Scott Wine, head of Polaris Inc., said his company is also seeing “unprecedented demand,” which is being driven by new customers, particularly millennials, coming into the powersports market. The newfound interest has brought Polaris’ inventory down to a “multi-decade low,” he added.

“We just do not have enough dealer inventory and … we’re really working to optimize our supply chain,” he said. “We’re giving them enough to keep going, but, ultimately, it’s at a multi-decade low right now … it’s going to be a few more quarters before we get there.”

As the warmer months get behind us and the winter months approaching, Polaris is reporting early signs of strong snowmobile sales.

Polaris is also seeing more women buying its products, and the spike in new customers — in addition to the low supply in motor vehicles — warranted the company to cut back on its marketing spending. That has allowed the company to utilize better pricing power and improve its margins, Wine said.

“Once we bring them in, they’re more likely to bring their friends in and keep this going for us,” he said. “We do not plan to get to those higher-level promotions. We believe that we’ve got the right products, we’ve got the right marketing campaigns and we’re really confident in our ability to deliver both the third quarter and the rest of the year strong for shareholders.”

As for Thor’s Martin, he sees the rise in demand for its motorhomes being a long-term trend, aided by the remote work and remote learning lifestyle that can be carried out while on a road trip. The company has record backlog and expects the trends to stick around for longer than just the near term.

“We see this as a very long-term issue that we’re facing but it’s an opportunity,” he said. “For us, we see a lot of people coming in that are new to the industry that have really latched on to this lifestyle, and we see this being as something that grows for many, many years to come.”

While both companies have enjoyed outsized demand for their products, only one stock has proved to be a winner on the market this year.

Shares of Polaris dipped 0.84% in Tuesday’s session to $91.31, down more than 10% on the year.

Thor Industries on the other hand is up almost 27% year to date. The stock also dipped 0.41% in Tuesday’s market, closing at $94.26.

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