Lippert: Diversification Helping LCI Weather Soft Market

Jason Lippert

The diversification strategy implemented after the 2008-009 recession helped LCI Industries (Lippert) navigate the headwinds of the RV industry’s current soft market, company officials said Tuesday (Nov. 1).

Following the company’s third quarter 2022 performance results, President & CEO Jason Lippert told investment analysts that the softened market demand was due to “overbuilding of inventory and continued macroeconomic challenges,” resulting in a nearly 40% drop in North American RV OEM production in the third quarter.

Despite this, he pointed out, the company delivered revenues of $1.1 billion in the third quarter, down 3% year-over-year against record 2021 results.

“Our performance this quarter remains far above pre-pandemic years, further illustrating the impact that the outdoor lifestyle trend and our focus on diversification has had on our business,” Lippert said, noting that the recent acquisitions including Furrion, Girard, Trazcor and others added approximately $39 million in net sales for the quarter.

He emphasized the company continues to have a very positive outlook on the RV industry.

“Over the past two years, RV demand exploded as consumers flooded into this space looking for safe and affordable alternatives, and traditional vacations in the wake of the pandemic. As expected, demand has come down from those record-setting levels. That said, we remain confident that the underlying demand driver – the desire to be outdoors – isn’t changing, and people across the globe continue to recognize and take advantage of the adventure that camping, boating and RVing offer over airline travel and hotel lodging,” Lippert said.

Also supporting this outlook, he added, is the fact that from now till the end of 2030, the U.S. will see 10,000 Baby Boomers reach retirement age every day.

“That is an astonishing number of people in one of our core demographics at our prime to take vacations or generally spend more time outdoors in retirement,” he said. “On the other hand, younger groups like Millennials and Gen Zers continue to stream into the space at record levels. One of our panelists from outdoor travel marketplace Outdoorsy reported that 70% of all rental bookings fall within these younger generational groups. These younger demographics consistently seek out both in RVs with more smart technology, which is exactly what LCI is positioned to provide through our strategic focus on driving innovation throughout our portfolio.”

Lippert also highlighted the company’s content per RV growth in the quarter, which increased 54% to a record $5,824, as well as the nearly 50 new products the company launched into the RV aftermarket this year.

“We are focused on continuing to grow our RV aftermarket business by meeting demand from hundreds of thousands of RVs entering the repair, replacement, and upgrade cycle each year, as well as by supporting consumers throughout the customer experience department,” he said.

“A key piece of our innovative strength is not recreating the wheel; a large part of our growth comes from taking existing products and building a next-generation version with improved features,” Lippert continued. “Products like ABS have existed in cars for decades, and thanks to our deep R&D talent, we were the first to bring this feature to RVs in a meaningful and cost effective way. We anticipate that in the next five years, most RVs will have ABS brakes, resulting in one of the most transformative products we’ve launched in years. Products and improvements like these can translate to hundreds and dollars of content per vehicle.”

What follows is an edited account of the conference call with investment analysts:

On OEM production levels, especially with the holiday season approaching:

Lippert: We don’t have complete visibility in December yet, but when businesses is really, really good, there’s usually a week – maybe a little bit more than a week – shutdown in December. And when business is less than great, it’s usually a two- to three-week shutdown in December. So, we don’t anticipate anything more than normal.

On Brian Hall’s announcement that he would be stepping down as CFO no later than June 2023:

Lippert: I can’t possibly close without thanking my good friend and partner in the business, Brian Hall for nearly 10 years of service with this great organization. He’s been integral in helping us grow an annual revenue from $1 billion to $5 billion. Brian has not only been a great leader in the business, but he’s also completely transformed our accounting and finance team, placing many great people here to run this function very successfully. Going past his work contributions here at LCI, he’s also been a standout leader with respect to our community impact initiatives. Brian has serving many charitable boards, helping to lead local charities and help spearhead fundraising for general and large capital projects at these organizations. As many of you know, Lippert has a community impact focus, and Brian has been a true leader showing those around him how important is to lead in the community just as strongly as one is expected to lead here at Lippert.

Brian, we thank you for all that you’ve helped create, and you’ll always be part of Lippert family. As you saw this morning, the Board has initiated a search for Brian successor and we appreciate his support to ensure we have a smooth transition. That being said, we are going to savor the last six or so months you’ll have with us and are excited as you enter the next chapter in your life.

Source: https://rvbusiness.com/lippert-diversification-helping-lci-weather-soft-market/