The start of the spring selling season is a risky time for a recreational vehicle manufacturer like Winnebago Industries Inc., as its new lineup of products meets its first big test with consumers. On top of that challenge, the RV giant had to deal with spiking raw material costs that threatened to hurt profitability.
The Motley Fool reported that Winnebago overcame those issues to post healthy growth in sales and profits in its most recent quarterly report. Following the announcement, CEO Michael Happe and his executive team held a conference call with Wall Street analysts to put the results in perspective and detail their latest thinking on the fiscal year trends. Here are a few highlights from that presentation.
The towable RV segment powered Winnebago’s market-thumping growth this quarter, with deliveries up 31% to 2.3 million. The demand was broad-based, management said, and lifted both the Winnebago brand and the recently acquired Grand Design RV portfolio. These products generate far higher profit margins, too, which helps explain why gross profit is up to 14.6% of sales over the last nine months, from 13.6% in the prior-year period.
Executives said they see no impending slowdown and in fact noted that challenges are on the supply side of the equation right now. That’s why the company is aggressively expanding capacity, including by launching expansion projects in both the Winnebago and Grand Design production lines this quarter.
The motorized segment wasn’t as robust, with sales rising just 3.1% as adjusted profitability sank to 3.7% of sales in the third quarter, compared to 6% a year earlier. Management pointed out that growth trends edged up slightly when compared to the prior quarter, but repeated its claim that the recovery will take time. Winnebago is tinkering with its motorized RV portfolio by obsoleting brands that aren’t fitting the growth strategy. While warning that these won’t be “overnight fixes,” executives explained that the end product should be a leaner, higher-volume portfolio.
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