Behind continued strong performance in its motorhome segment coupled with improvements on the towable side, Winnebago Industries Inc. capped off its 2014 fiscal year with a solid fourth quarter that positions the company for more growth moving forward.
“It was definitely a great finish to the year,” Chairman, President and CEO Randy Potts told RVBUSINESS.com. “As we said coming out of the recession, we’re doing more with less. Like everybody, we had to change our business model to a certain extent. I think our fourth quarter shows that we are making the right decisions.”
He added, “An indication that we are on the right track was the reissuance of our quarterly cash dividend. We wouldn’t have done that if we didn’t think the company was healthy and in good shape for the future.”
The Forest City, Iowa-based builder reported Thursday (Oct. 16) that revenue for the fiscal 2014 fourth quarter increased 14.8% to $245.9 million while net income grew 21.8% to $12.9 million. For the full year, sales rose 17.7% to $945.2 million and net income grew 41% to $45.1 million. In the quarter, Winnebago noted motorhome revenue grew 15% driven by unit growth of 25.1%
While overall numbers suggest an expanding motorhome market, Winnebago did incur a dropoff in margins during the fourth quarter as consumers seem to be trending toward lower-cost, entry-level models. Winnebago reported that its average selling price fell 8.4% during the period while backlogs for its most expensive motorhomes declined from a year ago.
“After the recession, there was a movement in all segments, towable and motorhome, where people were trending toward smaller, more value-priced units,” Potts said. “This was especially true for motorhomes, and the trend has been hanging on longer than in other markets. We cover a full range of motorhome products, so if the lower-priced units are what people are buying, that’s where we will make hay. Basically, we’re going to fish all the fishing holes out there, making sure our products are capitalizing on what’s trending in the market.”
Potts suggested that another component behind consumer downsizing may be a shortage of used units on dealer lots. “In a normal market, when a customer was looking for a lower priced motorhome, dealers would steer them toward a used product,” he said. “Well, people are holding onto their coaches longer, so quality used units have been hard to come by, and our dealers are asking for less expensive models. I think that situation will change as the used market grows.”
Potts stressed that “there will always be a high-end market,” as evidenced by the company’s performance in the Grand Tour and Ellipse Utra diesel pushers as well as the gas-powered Adventurer and Sun Cruiser lines. In the Class A segment, Winnebago also rolled out the Brave and Tribute, offering a “retro” look with the iconic Winnebago “brow” that had successful debuts. “The Brave and Tribute are just cool,” Potts said. “Even if people aren’t interested in owning one, they always smile when they see the coach.”
In line with the trend toward smaller coaches, the company has also maintained a strong commitment to its Class C offerings, highlighted by its View and Navion built on Mercedes-Benz Sprinter chassis, and the Travato Class B line.
Potts said that while staying in step with demand was important, innovative design and quality still stood as the company’s benchmarks.
“Winnebago has typically never been the least expensive,” Potts said. “Our products are usually an upsell, and that’s true, to some extent, in every category. People recognize Winnebago as a leader in service and overall quality, and that brand recognition allows us to win out over price.”
Potts said that Winnebago is applying that same strategy on the towable side. But he acknowledged that the division had gone through some growing pains since Winnebago acquired longtime towable builder SunnyBrook Manufacturing Inc. around four years ago.
“We sure didn’t want it to take this long to figure it out, but it did,” he said. “I’m the first to admit that it’s been a journey to get that operation on track. And the problems were on multiple fronts, both operational and in product design. But with the team we have in place, led by Johnny Hernandez, we are seeing continued improvement.
“We have showed a profit for the last three quarters in our towable segment and were profitable for the year,” Potts added. “I think we’re hitting on all cylinders.”