Winnebago Profit Slumps Amid High Fuel Prices
DES MOINES, Iowa – Winnebago Industries Inc. (WGO), one of the nation's largest motor-home makers, on Wednesday reported its fiscal first-quarter profit fell almost 26 percent amid higher interest rates and fuel prices.
Net income was $14.6 million, or 44 cents per share, in the quarter ended Nov. 26, down from $19.5 million, or 57 cents per share, a year earlier. The company said the latest quarter included $1.5 million, or 5 cents per share, from stock option expenses. Revenue fell 13 percent to $232.3 million.
Analysts surveyed by Thomson Financial expected earnings of 42 cents per share on $238.4 million in revenue.
Winnebago shares surged 7.5 percent higher, or $2.52, to close at $35.81 on the New York Stock Exchange.
It was the fourth consecutive quarter that the company reported declining profits.
Winnebago was riding a wave of record profits in recent years as baby boomers with cash and the desire to travel fueled a strong recreational vehicle market. As recently as last December, the company reported record earnings, but the tide turned early this year, when Winnebago reported in March its first quarterly decline in its second quarter.
That has been followed by two more quarters of profit declines attributed to lower consumer confidence as a result of higher fuel prices and rising interest rates.
"Revenues and net income for the quarter were negatively impacted primarily by lower motor home deliveries as a result of lower consumer confidence, which in our opinion is due mainly to the increase in fuel prices," said Chairman and Chief Executive Bruce Hertzke in a statement. "We also experienced a shift in product mix weighted more heavily toward lower priced products in the first quarter."
Fuel prices seem to have had the greatest immediate impact, but there were positive signs as gas prices dropped.
"One of the things we saw in September and October was that consumer confidence was as low as it's been all year long," said Ed Barker, the company's president. But that began to change in November when RV dealers reported a spike in customer interest.
"As gas prices approached $2, some dealers reported they had seen better traffic than they've seen previously," he said. "We're optimistic come spring, if we get consumer confidence at reasonable levels and reasonable fuel prices, we'll see a growth in the market."
Increasing interest rates will continue to be a drag on sales, but are likely to be less of a factor than fuel prices since about one-third of RV customers pay with cash.
"We're not hearing a lot of pushback from dealers that interest rates are a big issue, but there's no question that the RV buyer's dollar doesn't go as far as it did before," he said.
The average selling prices for RVs range from $156,857 for the top-of-the-line diesel powered units to around $59,042 for lower cost gas-powered units.
Customer interest shown at recent RV shows indicates sales may pick up in the spring, Hertzke said. Customers that do buy may be more cost conscious and more interested in buying lower cost RVs or to look for special deals, factors that could push profitability for RV manufacturers lower, Hertzke said.
"We definitely have to adjust to the marketplace," he said.
Dell Sanders, chairman of the Recreation Vehicle Dealers Association, and a Florida RV dealer, said sales seem to have softened but he's not concerned.
"Shipments are down a little bit, but it's nothing to me to get concerned about at this point in time," he said. "These are slight upticks and downticks, that's all it is."