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Management of Winnebago Industries Inc. does not see the Class A motorhome market returning to more traditional levels in the next six months.
Winnebago’s flat forecast for the motorhome business, coupled with disappointing fourth quarter results, sent the company’s stock downward just over 4% in mid-day trading on Wall Street Thursday (Oct. 12).
For the quarter ending Aug. 26, the company earned 30 cents per share, which was below analysts’ estimates, on sales of $205.4 million, an 11.3% decrease from a year ago. For the year, Winnebago earned $44.7 million, or $1.37 per share, on sales of $864.4 million, a decrease of 12.9% from last year.
The company reported that Class C shipments for the year totaled 5,388 units, or 54.7% of its total motorhome deliveries. This was the first time in the last 10 years that C shipments exceeded Class A’s, Bruce Hertzke, chairman and CEO, told analysts in a subsequent conference call. This was a significant shift from fiscal 2005 when Class A deliveries represented 63% of all motorhome deliveries.
Hertzke said the shift in product mix was even more dramatic in the fourth quarter when Class C’s represented 65% of all shipments, adding that the trend will likely continue for the near future.
Hertzke noted the swing occurred in part because of consumer acceptance of Winnebago’s new, fuel-efficient Class C View and Navion, which he called “a homerun” in 2006.”
“After a year on the market, they continue to sell well,” he said.
Citing the August figures from Statistical Surveys Inc., Winnebago’s share of the Class C market has risen from 19.3% a year ago to 25.1%, he said. In combined Class A and Class C sales, Winnebago continues to lead the industry with an 18.9% market share, compared with 17.3% a year ago.
Hertzke sees the Class A market returning and eventually outperforming the Class C sector, but could not say when that will occur. Some competitors have had some success in lower, entry-level Class A gas motorhomes, he said, and Winnebago is looking at that target market.
As for the diesel Class A business, “even though diesels are down, Winnebago is doing better in whatever market there is.”
Looking to 2007, Hertzke said Winnebago got good response to its new value-priced Winnebago Access and Itasca Impulse Class C’s at the company’s Dealer Days event in June. Orders for these new units are reflected in the company’s backlog, which stood at 896 Class C’s on Aug. 26, compared with 800 Class A’s. These figures are down from 973 and 1,086, respectively, from a year ago.
The backlog declines reflect dealers’ delay in restocking their inventories as quickly as they did last year, Hertzke said.
“Our industry now is just waiting to see a turn and for retail to pick up,” he said.
Ed Barker, president, said the company will be closely watching the Pomona Show which opens Friday in California. “It will give an indication whether consumers are reacting to lower energy prices,” he said.
In the last 40 days, Winnebago has become more promotional to help its dealers move out their ’06 product and make way for the ‘07s, Barker said.
Barker identified manufacturing utilization at between 61% and 63% of capacity in the fourth quarter, not unlike a year ago. “The volume last year was similar but the mix was different,” he said.
Hertzke said Winnebago has enjoyed an edge over the competition in the Class C market because of its exclusive agreement with Daimler-Chrysler for its diesel chassis. He is unaware of any other manufacturer that also has been certified, but he said that could change in 2007.
In request for an update on Winnebago’s thoughts about getting into the towable market, Hertzke said Winnebago has talked with some other companies but added, “I’m not sure how many good, viable (towable) companies are out there…If we get into it, we want to be a player and not have just half of 1% of the market.”