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The investment community reacted quickly today (March 16) to lower than expected earnings from Winnebago Industries Inc., as the Forest City, Iowa-based firm’s stock dropped.
Winnebago’s shares closed trading at $28.97, down $3.04, or 9.4%, following the company’s financial report that showed a 38.7% decline in net income for its fiscal second quarter and a 30.7% drop in earnings for the six weeks.
The Associated Press reported that in a conference call this morning, the company said higher gas prices and rising interest rates had deflated consumer confidence and continued to slow recreational vehicle sales, particular higher-cost motorhomes.
“We saw consumer confidence coming up in November and December and we thought in the spring it would go back and take off and be more of a typical year,” said Chairman and CEO Bruce Hertzke. “It’s starting up really slow. I wish I could tell you why it’s starting up slower than I thought it would and I think 90% of the industry anticipated.”
Hertke even hinted that adding towables to the longtime motorhome builder’s lineup was not out of the question, although profitability was a concern.
“It would be pretty easy for us to get into the trailer industry,” he said. “I’m not sure we could hold the margins we do in the motorized industry and that’s a concern.”
The company said overall average selling price for motorhomes fell from $89,693 in 2005 to $85,344 so far this fiscal year. The largest drop was in the highest profit diesel-powered class A motorhomes, which sold for an average of $156,098 last year and were going for $145,864 this year.
Hertzke said the company’s strategy is to continue to work to develop its diesel market, where profit margins are highest.
Although profits have fallen, Hertzke said cash flow remains strong and the company is in a position to look for acquisitions if some competitors get into financial trouble in the difficult market.
“This is a time we could look at some of the other companies,” he said. “We’ll have to see where it goes.”