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Winnebago Industries Inc. endured a challenging third fiscal quarter but Chairman, President and CEO Bruce Hertzke sees improving market conditions now that the company is building and distributing 2004 model-year units.
Hertzke, during a conference call with investment analysts Friday (June 13), said Winnebago had sold all but “a handful” of its 2003 model-year motorhomes to its dealers.
The Iowa company began building 2004s in May and Hertzke said its new model-year Class A and Class C motorhomes “seem to be accepted real well” by the dealer body.
On Friday, Winnebago, a New York Stock Exchange-listed company, reported that its earnings for the March-through-May period declined 48% to $9.3 million and its sales revenue declined 19% to $200.2 million.
Sales and profits declined mainly because Winnebago lowered its production volume as dealers became hesitant about ordering prior to the war in Iraq, said Ed Barker, CFO.
Winnebago operated on four-day work weeks during a six-week period that began on March 2, but it has been operating on 40-hour work weeks since then, Hertzke said.
In contrast, Winnebago employees worked 45- and 50-hour work weeks during the entire March-through-May period of 2002, as the company scrambled to catch up with the sudden surge in dealer demand that occurred last year, he said.
Although Winnebago operated at about 105% capacity a year ago, it operated at 75% to 80% of capacity during the three months ended May 31, in part because of the opening of its new Class C assembly plant in Charles City, Iowa, in March, Barker noted.
Additionally, Winnebago was forced by competitive pressures to lower the price of its 2003 models more than it would have liked, Hertzke said. Winnebago did not cut prices as aggressively as some of its competitors, which might explain its slipping two percentage points lower in retail market share, he added.
However, Hertzke said, “While we certainly enjoy being the top-selling motorhome manufacturer, our priority is to remain the RV industry leader in profitability for our shareholders.”
Winnebago does not have any discounts on its 2004s, only on the remaining 2003s, Hertzke said. Dealers had “pretty well ramped up for the spring market” by the end of February, so, in addition to the war, low consumer confidence and high fuel prices, they were reluctant to order more units from the manufacturers, particularly because they knew the new model year would begin soon anyway, he ‘said.
“I really believe they (dealers) are in a pretty good position to get set up for 2004 now,” Hertzke continued. “We feel we’re in a good position. Business remains very strong.”