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Winnebago: RV Industry Near Bottom of Cycle

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June 18, 2009 by   Leave a Comment

Winnebago Industries Inc. CEO Bob Olson was generally upbeat during a third-quarter investors’ conference call today (June 18).

Despite a major thunderstorm that struck Forest City, Iowa, during the call and the specter of the just-completed third quarter, in which the company experienced a net loss of $8.6 million on a 63% reduction of sales, Olson contended that the RV industry has brighter days at hand.

For many months now, Winnebago dealers have not been matching sold units at the retail level with wholesale purchases on a one-to-one basis, depleting their dealer lot inventories to record-lows, Olson said.

At the end of May, dealer inventories totaled 2,324 units, compared with 4,341 units a year ago. Olson said he thought the replenishment would kick in when inventories fell below 3,500 units.

But he thinks a change is imminent.

“My gut tells me we’re an eyelash away from this replenishment cycle starting,” he said.

Dealer inventories were down 47% in April from a year ago and are near the lowest in Winnebago history, Olson said. “There is a point where this is not sustainable, where replenishment must begin again,” he said.

”That would make a huge difference if we could just equal where retail is right now,” he said. The lull in orders has sent Winnebago factories down to just a 18% utilization rate at the end of the quarter.

While retail and wholesale credit remains tight, Olson cited several factors to support his optimistic outlook.

Winnebago scrapped its traditional new product introduction in Las Vegas and instead introduced its 2010 lineup via a DVD sent to all 243 dealers. The DVD is being followed up with personal visits to all the dealerships this month.

“This was quite a deviation from what we have done in the past,” said Olson, who sat in on several of the presentations. “The first thing said after it was over was the dealers were impressed how Winnebago is innovative in a depressed year. They didn’t expect new product but just a facelift.”

The Via, the industry’s first Class A motorhome produced on an importered Mercedes-Benz Sprinter chassis, has been well-received, Olson said, though the company is just beginning production. The Via on the 11,030-pound GVWR Sprinter chassis equipped with a 6-cylinder 154-hp turbocharged front diesel engine averages 14-15 mpg, Olson said.

The company also “stepped up a notch on its other diesel motorhomes with new interiors and exteriors based in part on feedback from its dealers,” he added. Winnebago also is offering a new “bath-and-a-half” on some floorplans, as well as some with tag axles. He said he also heard a good response from dealers about its revamped Sunstar Class C motorhome, which sports a new front end and more amenities.

“We’ve invested a lot in our 2010 product,” he concluded. “I was impressed they noticed the fact that innovation at Winnebago is alive and well.”

In the present environment, Winnebago has been able to increase its market share in both Class A and Class C motorhomes, he noted. The company had an 18.4% market share in both classes through April, up from 17.3% a year, he added.

Olson acknowledged that he once feared now defunct or bankrupt manufacturers would flood the market with “huge, huge, huge discounting” of new units, but that has not come to pass. ”There is still have a very large discounting environment out there,” he said. ”For the retail customer it’s a great time to buy an RV. Really, when you look at what it could have been, it didn’t end up as being as bad, so far.”

Olson also maintained that the large pent up demand for RVs should begin to show up at dealer lots as interest rates loosen and consumer confidence rises. The industry enjoyed a record year in 2004, he said, and with RV owners typically holding onto their units for four to six years, RVers are ready to trade up.

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