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Thor’s Marketing Claims Under Investigation in Germany

Recreational vehicle manufacturer sets aside millions of dollars to settle accusations.

March 9, 2022

Shares of recreational vehicle (RV) manufacturer Thor (THO) jumped 6% in early trading following an earnings report that beat expectations. The company also reduced its estimate of the cost of a recent recall, citing more vendor reimbursements than originally expected. Lumped in with the recall update— and the related reserve— is a disclosure regarding an investigation in Germany.

The investigation centers on the accuracy of Thor’s marketing in the country. In a filing for the quarter ending January 31, 2022, Thor seemed to signal the investigation had both progressed and potentially worsened in terms of a potential financial penalty:

“... we accrued additional expense during the second quarter of fiscal 2022 based on developments related to an ongoing investigation by certain German-based authorities regarding the adequacy of historical disclosures of vehicle weight in advertisements and other Company-provided literature in Germany.”

Thor isn’t quantifying the reserve related to the German issue. Nor did it quantify the reduction in recall expense. However, in the prior quarter Thor set aside $22 million in recall expense. In the latest quarter, Thor lumped together the recall and German matter, setting aside $13 million in the latest quarter and $35 million in the last six months.

The German matter will cost Thor many millions of dollars; immaterial compared with the company’s nearly $300 million in operating cash flow in the latest quarter. Investors will be watching to see if the scrutiny hops the ocean and gets the attention of U.S. authorities. If so, expect Thor’s selling, general, and administrative (SG&A) costs to increase further.

It’s not likely a concern to investors though. While dealer inventory has increased, Thor estimates it’s still below historical average. The company’s backlog grew 79.6% to $14.6 billion.


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