Lazydays’ Jeff North to Analysts: ‘We’re Getting Through It’

John North

Fresh off a year in which the company reported a record $1.3 billion in revenue, CEO John North – whose been on the job since September 2022 – said Lazydays’ performance essentially mirrored that of the rest of the RV industry.

Speaking to investment analysts following Lazydays Q4/2022 financial report issued Thursday (Feb. 23), North said the first six months of last year were marked by a “pandemic-fueled continuation of outsized deliveries” while there was a “sequential softening in sales volume” in the latter half.

“Industry-wide, the normalization of demand, coupled with record RV production for the year has resulted in elevated inventory levels, lower gross margin on new units and increased carrying costs through both higher days supply and higher interest rates on floor plan facilities,” North said in his prepared remarks.

“The cyclicality of our business and the commensurate levers to pull, however, are neither new nor novel,” he added.

North noted that the company – which has 1,400 employees working at 18 locations in 11 states – is taking appropriate measures to reduce costs, but added Lazydays has “prioritized improving the health of our organization for growth.”

“The key areas of focus are: one, owning and controlling our real estate; two, ensuring sufficient capital for growth and; three, preparing our support infrastructure to leverage economies of scale across many locations,” he explained.

He cited as examples the real estate purchase of the company’s stores in Elkhart, Ind., and Nashville, which brings the percentage of company-owned locations to 39%.

“We see further opportunities to acquire more of our real estate through existing purchase options or relocating to new facilities in the future,” North said, noting that Lazydays remains on track to open four new greenfield locations later this year beginning in the spring in Council Bluffs, Iowa, just outside of Omaha.

What follows is an edited account of the Q&A portion of the conference call with investment analysts.

On the current inventory management environment:

North: As I mentioned in November when we spoke last, this – getting our inventory healthy – was already a top-of-mind topic for us.

Our inventory levels on an absolute basis were flat from the end of January to where we sit today in February. So, we really haven’t added or shrunk our inventory levels at all, and I feel pretty good about where they are – call it plus or minus 3,700 units. What we have seen is a sequential improvement each and every month in terms of prior model or, to your point, as of yesterday, about 72% of our inventory was current model year.

So, we were still getting 2022 inventory even into September and October in some cases. We’ve been ahead of this curve since really the late summer, but we’ve been continuing to have that. And then we had a number of inventory units that we couldn’t sell because they were under a recall. There’s been plenty of conversation about that as it pertains to the spend recall.

So, we’re working through all of that. We’ve still seen a profitable front end, as we would call it, in terms of that sales, although it’s shrinking, right? We’re discounting more aggressively to get through it.

What we’re seeing on our current model inventory is that grosses are really hanging on pretty much unchanged. So, I think it’s just that each store having to try to find the right customers. And we’ll stretch and get aggressive in terms of pricing to move through that stuff.

For the current model year inventory, there’s still pretty good healthy gross profit to be had there. So, it’s a balance of both, and it’s going to take us another few months to work through it. But I’m really pleased with where we are relative to being ahead of this and really having a good strategic plan and it’s something that we’ve been working on for months.

On Lazydays’ growth strategy in terms of greenfields vs. acquisition:

North: Our preference is 100% (acquisitions). Greenfields come with their own set of complexities, the two biggest ones in my mind are, let’s call it an 18-plus month construction lead time, where you’re sinking capital in the ground, so to speak, and waiting many, many, many months for a return. And, while you’re avoiding goodwill, the second component of a greenfield is in the start-up cost and having to start from scratch with an entirely new staff of sales and service personnel versus if you’re buying an existing location where you have an installed customer base, you have employees that know the drill, and you have brands that exist in the market.

So, I think we definitely are focus more on looking for acquisition opportunities.

We won’t do a Greenfield. I’m sure that there will be circumstances and situations where that makes a ton of sense. We’re excited about the ones that we have in flight. But, in general, you’re going to see us do more acquisitions as opposed to building new stores. I think that allows us to grow faster.

Source: https://rvbusiness.com/lazydays-jeff-north-to-analysts-were-getting-through-it/