Winnebago Industries Inc. Thursday (Oct. 13) reported a sharp decline in quarterly profit as high fuel prices and low consumer confidence hurt sales, but the results beat Wall Street forecasts and pushed shares up 3%.
According to Reuter’s, while the Forest City, Iowa-based builder said it relied less on customer incentives, it reported sharp sales drops across its line of motorhomes, especially Class A vehicles.
“Motorhomes are a luxury item and we expect to see continued cyclical swings in demand,” Chairman and CEO Bruce Hertzke said on a conference call with analysts.
“Everybody in the industry is waiting for consumer confidence to improve and the market to take off again,” he added. “When it turns, we’ll have a good opportunity to resume growth.”
Net income fell to $15.4 million, or 46 cents per share, in the fiscal fourth quarter ended Aug. 27, from $19 million, or 55 cents a share, a year earlier.
Analysts on average had expected 42 cents per share, according to Reuters Estimates.
Revenue fell 18% to $231.5 million, below analysts’ average forecast of $236 million.
“We’ve been seeing weakness in the RV market for the better part of this year, so we’re not surprised to see a down earnings quarter,” said analyst Edward Aaron of RBC Capital Markets. “What we tend to see in the RV market during periods of weakness is relative strength at the value end of the market.”
Aaron has a “sector perform” rating on Winnebago shares and a $36 price target.
Winnebago delivered 2,551 vehicles during the quarter, a 17% drop. Deliveries of Class A gas-powered vehicles fell 20%, while Class A diesel vehicle deliveries fell 36%.
By contrast, deliveries of Class C vehicles – smaller, lower-margin motorhomes – were down just 2.5%.
The company said it expected the shift in its product mix, and the trend toward weaker consumer confidence, to continue into 2006. The company has cut production to better reflect demand, Hertzke said, including the layoff of about 170 workers.
Winnebago’s report came a day after rival Thor Industries Inc. reported higher quarterly profits and sales despite a soft recreational vehicle market. Unlike Thor, Winnebago did not benefit from orders for temporary housing from the Federal Emergency Management Agency (FEMA) in the wake of hurricanes Katrina and Rita.
“We don’t have any big numbers to report because of FEMA,” Hertzke said. Separately, Winnebago did not rule out using more price discounts to drive sales, but executives said they prefer to focus on maintaining profit margins.