Scott Stember: Mike, you were talking about one of the bigger headwinds is deal or inventories for towables and the whole right-sizing process. Could you maybe expand on that a little bit as far as 2022 models that are in the field, and if you guys are feeling any need to have to discount more than normal notably on Grand Design?
Michael Happe: Yes. Scott, thank you for your question. I’ll break my answer down into two parts. First, retail; and then second, wholesale, and I’ll start with the latter wholesale. Our two businesses, Grand Design RV and the Winnebago branded Towables in this segment have not provided what I would consider to be abnormally steep discounts to our dealers from a historical perspective to move product at this time. We came to the open house in the September/October timeframe with fall programs that we stated at the time we’re similar to our pre-pandemic fall programs in terms of benefits to the dealers. And we generally used the structure of the fall programs on both of those businesses throughout the rest of Q1 through November to ship product to the market.
From a retail standpoint, we are certainly watching retail inventory carefully. The good news is, is that the market was pretty healthy in 2021. And the first probably 1/3 to 40% of 2022 and so subsequently, you did not have significant piles of excess or old inventory that were stuck at retail when the market started to slow down. But as inventories, as we’ve admitted in the Towables segment are our healthy and ample, we do watch the aging inventory on our products. We have the ability through reporting here to look at inventory in different age brackets in the field. And each of our businesses then determines whether they work with the dealers when aging inventory is excessive. I would not say that at this particular time, the aging inventory in our Towable segment is a major problem.
It could certainly turn into that over the course of 2023 if retail conditions are not as we imagined, and we would then have to deal with it at this time. But from a historical standpoint, as we sit here today, we do not have overly excessive aging inventory on towables in the field. But I can tell you that dealers and OEMs certainly have a sense of anxiety with the uncertain economic conditions, and we’ll be monitoring that carefully. But Q1 did not include any significant retail support programs for aging inventory from our Towables businesses.
Scott Stember: Got it. And regarding 2023 orders, we know coming out of Open House that there really wasn’t a lot that took place, but dealers are going to have to have some 2023 product on their lots. Can you just talk about whether the order activity has picked up and also in Q2, sequentially, what are we looking like, particularly on towables from a production standpoint?
Michael Happe: So order activity, like a number of other questions, varies by category. Order activity in the Marine and the Motorhome space has remained reasonable. And what I mean by that is, as dealers are adjusting to the retail conditions in the Motorhome RV and the Marine markets, they are ordering in what we would call a rational reasonable level. And on those two businesses, you still see a healthy backlog as projected by our dealers, which again, we attempt to cleanse as regularly as we can to make sure it has integrity for our production planning purposes. From a Towables RV standpoint, Scott, we have not seen a meaningful difference in probably order taking here in the last 60 days. It remains lower than certainly the last couple of years at this time, which would be expected.
And dealers are very cognizant of the inventory they’re sitting on. The economic conditions around them with inflation, general inflation and rising interest rates, and they continue to be conservative with their Towable RV ordering pattern. So we really don’t share specific information on production planning for current or future quarters that we’re in. I can just tell you that daily, if not almost hourly, we continue to discuss with all of our businesses and brands, the rightsizing of our production schedules to the market conditions and the wholesale appetite that our channel partners have. So we are acting accordingly in all of our businesses. Certainly, some more aggressively than others, Towable RV at the top of that list to make sure that we do not overproduce in the future.
Scott Stember: Got it. If I could just slip one last one in. Looking at the total backlog, it looks like units in absolute value are down about the same amount. So is it fair to assume that on what is being ordered that the pricing is reflecting the realities of what’s going on in the market right now?
Michael Happe: Yes. I would tell you that €“ and this is a good opportunity, Scott, to talk about inflation that we’re seeing or not seen and how it relates to our pricing. Certainly, historically, we adjusted pricing preferably one time a year at the model year change. And then as we got into conditions in 2021 and 2022 with unexpected and rapid inflation. As all of you know, we were forced to take multiple price increases during a model year in order to try to keep up. And as Bryan Hughes has explained many times, there’s been a sort of a timing element to that as to whether you’re ahead of or behind the inflation that you’re facing. We are seeing generally very moderate inflation in our business today with the exception of motorized chassis, which is where we’re seeing our most significant inflation still sequentially and overall, in most of our other categories, our inflation is pretty moderate right now.
I would not call it deflationary, but it has moderated to a meaningful degree. Subsequently, our pricing actions outside of the model year changes from 2022 to 2023. Our businesses, generally across the board have not felt the need to have to take price increases here recently above and beyond what they’ve priced at the model year change. We don’t share a ton of information for competitive reasons on this call about our pricing behaviors. And so I won’t comment on anything we have planned. But I would tell you the wholesale programs, particularly around Towable RVs continue to be sort of framed in the fall program context that our businesses took to Open House.
