Skyline Champion Corp (NYSE:SKY) Q4 2019 Earnings Conference Call Transcript
May 22, 2019 • 08:30 am ET
Thank you. (Operator Instructions) Our first question is from Daniel Moore with CJS Securities. Please proceed.
Good morning, Keith, Mark, Laurie.
Good morning, Dan.
Keith, thank you. Just briefly and best of luck to you, and Mark, obviously, welcome and look forward to working with you a little bit more closely as we go forward. In terms of just -- first, in terms of weather, maybe talk about some of the regions that were most impacted in the March quarter, conditions in those regions in terms of ability to ship and place homes and how shipments are tracking there?
Sure, Dan. I think the primary areas affected by the weather are kind of the region in the country between, let's say Texas and North Carolina. Rainfall and wet weather conditions have delayed sets. So, we've seen a build-up of retailer inventories over the past several months and those inventories have now come down through the March period. And we expect that inventory destocking to continue primarily in the Texas to Tennessee region over the next few months and be completed by the end of the first quarter.
And, obviously, given that the inventory is expected to destock, are you now sort of back to normal in those areas as far as the ability to ship?
It's still delaying shipments slightly. It's starting to pick up activity in those regions, but I expect that those delays to continue slightly through the first quarter.
Helpful. And in terms of order rates, Keith mentioned in the US, impacted sort of double-digit order rates in April. Texas, Florida, South Central, you called out as soft in the March quarter. Are those areas coming back as well and where are you seeing pockets of strength?
Yeah. I think it's -- we're seeing strength in customer demand across the country. I think it's important, Dan, to separate out HUD industry shipments from overall customer demand. Placements across the country from our retail channel and our community channels have been strong the entire time. Actually, if you look at statistical surveys and other market indices, they actually show retail activities very strong, even though our shipments from wholesale have been soft. So, end consumer demand is on track and very good. We just need to get through the destocking in winter period across those softer regions.
Helpful, Mark. And then in terms of Fannie and Freddie's programs, sounds like some signs of momentum building. Are you seeing those programs attract more lenders back to the MH space? Any comments on kind of the latest spreads between MH and traditional site-built mortgages? And then, I think Keith mentioned H2, we might start to see some impact. Is there any way to -- I know it's difficult, but any way to quantify that?
Yeah. I think in the latter half of the year, we will see traction from the Fannie and Freddie programs. We've seen good traction from the MH Advantage and MH Choice programs that they've rolled