Michael Happe: Yeah. Good morning, James. This is Mike. Well, let’s start with RV specifically. At the end of February, I would say our model year ’24 inventory, especially for our two largest RV businesses from a unit standpoint, Winnebago and Grand Design were approaching the 75% range at the end of February, which meant for those two brands the model year ’23 inventory was probably in that 23% to 24% range in the model year. We may have had 1% at the end of February of model year ’22 in the field. The numbers on Newmar are a little higher, just based on the type of category that Class A is. But overall, it’s probably in that 70% to 75% range on model year ’24 and almost 25% range on model year ’23, which I think is very similar to what one of our largest competitors recently reported.
Now, you actually compare that to a year ago at this time, and those numbers are a little lighter for our Winnebago brand. We’re a little bit more aged on the Winnebago brand, but actually on the Grand Design brand, which is our biggest RV business, that mix is actually healthier this year than it was a year ago. If you compare the numbers I just stated on RVs to the pre-COVID periods, both us as an OEM, but probably the industry as a whole is sitting with more aged inventory here in 2024 than we had in, let’s say, 2018 or 2019. I anticipate that we’ll continue as an industry to work through this cycle. And as we see the overall RV cycle start to pick up and retail begin to regain some momentum, I anticipate over the next three or so years, we’ll head back to some of those numbers that we saw pre-COVID in terms of aging mix.
So we feel comfortable, James, bottom line on the RV side as to where we’re at. We’re very focused on it. I would imagine three weeks into March. I don’t have the numbers in front of me, but we’re probably obviously in better situation today than we were three weeks ago. On the pontoon side, as Bryan commented about quarter three, as we look forward, we have more aged inventory today than certainly I think the dealers and ourselves would like. But we also have great retail momentum on Barletta as well, and we anticipate continuing to move through that very quickly. So at the end of February there we were probably closer to 65% model ’24, let’s say 35% model ’23 in the Barletta business. And we believe that’ll work its way down nicely here over, especially the spring and summer retail months.
Again, those are a little higher than we’ve seen, but Barletta continues to be a great story. And dealers, if they’re going to put inventory in any pontoon brand right now, they are choosing Barletta, and they’re still being cautious with their overall pontoon inventory, but they continue to shift shipment share and retail share to that brand.
Bryan Hughes: One other thing I’ll add to that, James, is our process related to managing the aging of inventory, which is just to take a very detailed and targeted approach. So if we have incentives that we are introducing, it is targeted at those retail units that we feel we want to help the dealers in partnership with them move off their lot. So we take a unit by unit approach to that. We’re tracking every unit, and our incentives are certainly targeted at moving anything that is aging. So I wanted you to be aware of that process as well.
James Hardiman: Got it. That’s great color, and it sort of dovetails into my next question, right? As you’re trying to move those model year ’23 units, I’m assuming that that’s at least part of what’s weighing on the Q3e margin outlook that you gave. And so I guess my question is, you talked about margins being, I guess, somewhat better sequentially, but down year-over-year in Q3, maybe it’s too early to make a call on Q4. But is there a chance? How should we think about Q4 margins? Is there a chance that those could grow year-over-year? I’m guessing that it has a lot to do with the effectiveness of clearing out those model year ’23s in the meantime.
Bryan Hughes: Yeah, it does. And then certainly, we’re citing leverage and deleverage as a biggest driver as we go through the cycle here of year-over-year margin performance. That will continue to be the case going forward, of course. But then to your point, the allowances, the discounts, as we right size our inventory, as we deal with the aged inventory that Mike was just referring to, those allowances and discounts and retail spiffs will start to wane as well. So that should help as we go through the coming quarters.
James Hardiman: Do you think it’s plausible that margins could grow year-over-year in Q4, or way too early itself?
Bryan Hughes: Yeah, we’re going to refrain from commenting on that at this stage.
James Hardiman: Fair enough given everything that’s going on. I get it. Appreciate the color, guys.
Bryan Hughes: Thanks, James.
Operator: Thank you. One moment for our next question. And our next question comes from Bret Jordan of Jefferies.
Bret Jordan: Hey, good morning, guys.
Michael Happe: Good morning, Bret.
Bret Jordan: Little follow up, I guess on the last question, really around the Marine dealer environment. Should we expect sort of the support — the promotional support cadence to pick up here into the spring? I guess we’re technically two days into spring. Are we going to try to hit summer with clean inventory? Or was what we’re seeing sort of consistent with what we’re going to see going forward, is there’s not going to be a surge in promotion?
