Leading RV maker Winnebago reported worse than expected top line third quarter (May) earnings on Wednesday before the bell. However, $WGO earnings estimates reflected better-than-expected profitability within its Towable RV and Marine businesses and beating earnings estimates by a wide margin. The soft sales figures underscored persistent weakness within the RV industry with unfavorable rising interest rates raising the cost to finance an expensive RV purchase and high gas prices increasing the cost to operate an RV. With that, earlier in the month Thor Industries, $WGO’s top competitor reported solid earnings and revenue in its report. While $THO provided formal guidance Winnebago did not.
Supply chain shortages hampered production and delivery. However there does appear to be a new generation of consumers enjoying the easing of travel restrictions & lockdown inspired off-the-grid living.
Winnebago Industries Inc NYSE: WGO: Reported Earnings Before Open Wednesday
Winnebago Q3 (May) 2023 Earnings
- Adjusted EPS contracted 48.4% yr/yr to $2.13
- Revenue $900.8 mln fell 38.2% yr/yr
- Significant declines in Towable RV and Motorhome RV, which tumbled 52.3% and 27.5% yr/yr, respectively.
- Declines largely from Winnebago implementing higher discounts and allowances compared to the prior year to help move units.
- Winnebago’s Marine line, particularly the Barletta brand delivered solid market share gains in the aluminum pontoon category. At only 14% of total revs, the Marine segment was not meaningful enough to offset the RV industry’s softness.
- Winnebago continues to buy back its shares, repurchasing $20 mln during MayQ.
- Retained its dividend yield of 1.7%, 50% above the previous year’s dividend.
WGO Stock Market Reaction
- $63.43 ▼ -0.75 (-1.17%) Lunch today
- $63.43 ▲ +17.72 (+38.72%) past year
- $63.43 ▲ +22.88 (+56.35%) past 5 years
- 52wk High $70.53
- 52wk Low $45.50
- Management reiterated its plans to actively manage production levels to align with dealer demand, seasonal retail conditions, and the company’s broader market share aspirations.
- Sales miss was not that bad against Thor’s 37.1% sales decline yr/yr in AprQ.
- With revenues starting to bounce back sequentially and long-term dynamics remaining intact, Winnebago may be amid a long-awaited turnaround, similar to Thor the desk is leaning towards. Interest rates will play a big factor in that.
- WGO remain bullish on long-term RV trends, commenting that the increasing interest in the outdoors by a growing range of consumers should last over the long haul.
Bottom line, although WGO and the RV industry are not looking to repeat past mistakes, such as overproducing during a lackluster 2018, the near term is not looking overly favorable given the headwinds. Keep an eye on backlogs as a possible sign of dealers adjusting to what they predict in terms of future retail demand. One of the largest RV dealerships, Camping World Holdings (CWH) is one to watch for inventory levels in Q1.
RVs are highly discretionary purchases, and consumers will put them off if monthly payments are too high. The demand for RVs continued its momentum by safe travel enthusiasts and millennials’ zeal for off-the-grid living.
Another headwind is supply constraints and the shortage of various RV components in Europe and North America. A tight labor market, and high commodity and SG&A costs are also likely to hurt. Higher interest rates, higher gasoline and diesel prices as well increasing the costs of RVs are all headwinds.
The pandemic paved the way for more remote work.
Rv’s provide access to freedom, thousands of wineries, farms, breweries, etc. for self-contained RV’ers, found in its survey of 10,000 campers that 23% of them worked remotely in their RV in 2021. Remote work is here to stay even if COVID-19 goes away.
On the plus side remote work is seeing more individuals purchase RVs and work remotely as they travel the country. Living off the grid has become very popular after the pandemic forced many to find alternative ways of using vacation and leisure time. Looking at both THO and WGO they both had strong quarters despite constrained global supply chains showing RV demand remains robust in the new world order.
The pandemic ignited a desire to get off the grid which bodes well for the RV industry even after normalcy resumed. As people begin to camp in their RVs for the first time, many may embrace the lifestyle. This creates a larger pool of RV owners who could eventually become seekers of upgrades, helping to bolster the used RV market.
Winnebago Industries, Inc. is a leading North American manufacturer of outdoor lifestyle products under the Winnebago, Grand Design, Chris-Craft, Newmar and Barletta brands, which are used primarily in leisure travel and outdoor recreation activities. The Company builds quality motorhomes, travel trailers, fifth-wheel products, pontoons, inboard/outboard and sterndrive powerboats and commercial community outreach vehicles. Winnebago Industries has multiple facilities in Iowa, Indiana, Minnesota and Florida. The Company’s common stock is listed on the New York Stock Exchange and traded under the symbol WGO.
From The TradersCommunity Research Desk