Profit margins....

[cdlaine]

Seems many conversations on these forums relate to
cost cutting corners taken by RV manufacturers'...
undersized tires / wheels / axles , electric vs.
disc brakes , insulation materials, frame types...etc. .

Just wonder what most would think the typical 5ver/TT
corporate "profit" margin is ??? I would expect ranges
vary ..less on the low end (volume sales) , more on the
high end (larger buy-in) , but I have no idea what per cent
range we would be talking about .. 5%, 10 %, 20 %, 30%, ?

Any here with business acumen that may know what the
acceptable per unit profit margin must be to stay in
business ? And, how does the "dealer" margin figure in ?

Thanks,

Charles

[westernrvparkow]

cdlaine wrote:
That's OK...

Thor’s stock is currently trading at a P/E multiple of 15.82 against the industry average multiple of 4.76 says StockCall. Other financials are also healthy indicators of the company’s growth potential including a gross profit margin of 12.58 and net profit margin of 4.20 percent against the industry average of 26.82 percent and 41.69 percent respectively whilst Thor’s Return on equity of 15.32 percent surpassed the industry average return of 2.19 percent.

Thank you ....guess it was answerable.... I have a brother
with an MBA from Stanford... they really do talk like the
blurb quoted. And he does it with twinkle in his eye !
Good stuff , thanks again. Appears a few players in the
marketplace must be doing much better then the industry
average. Hopefully, a good sign.

BTW... I don't even have a clue what "Googled the Q" entails. Ha !

Charles

Even with those figures, you really can't tell how well the company is performing. Are they spending enough on research and development to continue into the next decade? If not, they are overstating their earnings. Do they have interest rate exposure (i.e loans the come due that currently have a below market interest rate) so that when the loans renew, interest expense will escalate. Is maintance of buildings and equipment current or are there deferred expenses coming? Are they facing potential labor cost increases? Are pensions adequately funded? Do they have the ability to raise prices should cost of materials rise or will that squeeze margins? Profit statements are but a snapshot, and like photos, can be manipulated to show things differently than they really are.

[cdlaine]

That's OK...

Thor’s stock is currently trading at a P/E multiple of 15.82 against the industry average multiple of 4.76 says StockCall. Other financials are also healthy indicators of the company’s growth potential including a gross profit margin of 12.58 and net profit margin of 4.20 percent against the industry average of 26.82 percent and 41.69 percent respectively whilst Thor’s Return on equity of 15.32 percent surpassed the industry average return of 2.19 percent.

Thank you ....guess it was answerable.... I have a brother
with an MBA from Stanford... they really do talk like the
blurb quoted. And he does it with twinkle in his eye !
Good stuff , thanks again. Appears a few players in the
marketplace must be doing much better then the industry
average. Hopefully, a good sign.

BTW... I don't even have a clue what "Googled the Q" entails. Ha !

Charles

[JALLEN4]

Francesca Knowles wrote:

JALLEN4 wrote:
You would first need to define profit...gross or net.

The word "profit" only has one meaning: the net left after all expenses are met.

That said:
The question asked in the opening post strikes me as unanswerable.

In a world populated by "Lemonade Stands" you are absolutely correct. In the real world of manufacturing and product retailing you could not be further from the truth!

[deleted-2]

Well I googled the the Q and snipped this from an article dated 6/25/2011

Thor’s stock is currently trading at a P/E multiple of 15.82 against the industry average multiple of 4.76 says StockCall. Other financials are also healthy indicators of the company’s growth potential including a gross profit margin of 12.58 and net profit margin of 4.20 percent against the industry average of 26.82 percent and 41.69 percent respectively whilst Thor’s Return on equity of 15.32 percent surpassed the industry average return of 2.19 percent.

[cdlaine]

Mr. Bombero,

It strikes me as.....so what?

What does it matter?

Why ask?

Post originator here... just wanted to increase my knowledge base...
nothing sinister...have learned much from the responses to this post...
thought that was the purpose of this forum. Thank you for your insights.

Charles

[Gjac]

The Mfg per unit cost is based on how many units that they make. I would guess that RV mfg is on a 85% learning curve. In simple terms every time the number of units doubles it takes 15% fewer hrs to mfg the unit. If it takes 1000 hrs to make the first unit the second would be 850 hrs, the 4th would be 722 hrs and so on. The Mfg that builds and sells the most units that are the same would be able to sell the units cheaper and make the most profit. If they plan on building 1000 of the same units the 1000th unit would take about 440 mhrs to build, they would price the RV according.

[ol_Bombero-JC]

Francesca Knowles wrote:

JALLEN4 wrote:
You would first need to define profit...gross or net.

The word "profit" only has one meaning: the net left after all expenses are met.

That said:
The question asked in the opening post strikes me as unanswerable.

Very well said, FK.

It strikes me as.....so what?

What does it matter?

Why ask?

BTW - anyone can come WAY way closer to knowing real *DEALER* COST of
cars and trucks than RVs.

Even then - the only benefit is ordering a vehicle at less than
DEALER INVOICE. No way to know the mfgr's "per unit" cost.

BTW - watch for a poster with the ID of "Beancounter"..:W

~

[Water-Bug]

It all depends on the company business goal. Is it growth, return on investment (shareholder dividends)? I've worked for tech companies that have sold more stock than product.

[tatest]

cdlaine wrote:
Thanks Tom...good stuff. Not being in "business" do not
know the correct vernacular. As indicated, a very complex
situation.

As such, are our grousing about undersized axles,
ST tires, lack of disk brakes, 1 year warranties,
etc.... indicative of lack of understanding of how
the business model works or just human nature ? I
myself am worse then most... have often repeated
the aforementioned complaints , but really lack
understanding of all the variables that go in to
the decision making process by the RV industry.

SAD , sorry , poor writing skills , the original
post was meant to focus on the manufacturer and
(subset) dealer.

Charles

The main factor that goes into determing what a manufacturer is willing to put into a RV (which is just part of the cost) is the price customers are willing to pay. We get cheaply made RVs because when we make buying decisions too many of us go for the lowest price, with now understanding of quality or content. Manufacturers are not going to sell at a loss to make a sale. Those that do, don't do it for very long.

There are a few manufacturers who target customers willing to pay more. Some work on image, some add glittz, some put the money into quality. But the number of customers willing to pay moe is small.

[Oaklevel]

True no cut & dry answer........... From the dealers stand point most get a discount the more trailers / RVs they buy..... but then comes overhead ......how many employees, cost of taxes, their building, electricity, advertising, etc. etc. etc......

Our little dealer has 3 employees, is in an very old car dealership, & in an area with a low tax rate.(They see a lot of campers) or Take a Camping would with a several million dollar building, many employees probably at least 30, do a lot of advertising, sit on high dollar property, & are usually in a bigger city with higher tax rates & etc............

As far as the manufacturer........ the unit they are building makes a difference is it popular or unknown....... Why is a 36- 40 Toyhauler (Different make similar features) Run MSRP from 35-125K ?????????? Again labour rates of the area, taxes, materials all come into play.........

[Francesca_Knowl]

JALLEN4 wrote:
You would first need to define profit...gross or net.

The word "profit" only has one meaning: the net left after all expenses are met.

That said:
The question asked in the opening post strikes me as unanswerable.

[JALLEN4]

You would first need to define profit...gross or net. Simply subtracting the cost of labor and materials invested to build an RV from the price it was sold to the dealer for would give you one profit number. That would not account for a myriad of other expenses involved including but not limited to occupancy, warranty, advertising, engineering, depreciation, health care, distribution, etc.

[cdlaine]

Thanks Tom...good stuff. Not being in "business" do not
know the correct vernacular. As indicated, a very complex
situation.

As such, are our grousing about undersized axles,
ST tires, lack of disk brakes, 1 year warranties,
etc.... indicative of lack of understanding of how
the business model works or just human nature ? I
myself am worse then most... have often repeated
the aforementioned complaints , but really lack
understanding of all the variables that go in to
the decision making process by the RV industry.

SAD , sorry , poor writing skills , the original
post was meant to focus on the manufacturer and
(subset) dealer.

Charles

[SolidAxleDurang]

Profit margin of whom?

The local dealer?
The big box retailer/dealer like Camping World?
The manufacturer (like Thor or Forest River)?

[tatest]

Margins on sale of product or service, and return on investmet are two different things, different accounting rules. It might take a 30% to 60% margin on the product to produce a 1-2% return on investmest, for a company burdened by debt service, taxes, inflation, pensions, etc.

As an investor, I'm looking for 3 to 8 percent above inflation rate, but the way the money supply is being managed today I have to be satisfied with any positive return.

For the RV industry today, it is hard to say how they are doing because most of the smaller businesses are privately held, and some of the biggest players are wholly owned by holding companies that do not have to report financials for subsidiaries.

The dealer per unit margin is the difference between what the dealer pays the manufacturer and the selling price. Not all of that is profit, because dealers have the same additional costs as any other retail business: payroll, benefits, taxes, rent, debt service, etc. Calling the 30-50% gap between invoice and MSRP a "profit" is unrealistic, and even calling it a margin is bogus, because the MSRP is bogus. Both the dealerand manufacturer know the dealer is not going to be able to sell at that price.