Reuters: Volatility Dampens Winnebago Sales
Winnebago Industries Inc.’s profit topped Wall Street estimates, but hopes of a nascent recovery in the recreational vehicle industry earlier this year skidded as the largest U.S. motorhome maker warned of ebbing consumer confidence.
Reuters reported that shares of the company, known for its large, luxurious motorhomes that provide home-like comfort on the road, rose as much as 11% to $8.50 in early trading Thursday (Oct. 13) following the company’s financial report, but pared most of those gains to trade up 1%.
“While we experienced improved market conditions in the first half of fiscal 2011, we were disappointed to see the negative effects caused by falling consumer confidence throughout the remainder of the year,” CEO and President Randy Potts said in a statement.
Sales of Winnebago’s motorhomes, which can sell for as much as $300,000, are heavily dependent on discretionary spending by consumers. A fragile economy and slow jobs growth have dampened consumer confidence in recent months.
In September, U.S. consumer confidence dropped to near 2 1/2-year lows, pointing to weak spending in the months ahead.
Speaking to Reuters, Potts said the industry had a sense of optimism in the most recent spring.
“Things were starting to look better. Everybody in the RV industry, all the way down to the dealer level, was hoping this was going to be beginning of a bigger change, and it just didn’t develop,” Potts said. “Now it’s time to get through the fall season, which is always a tougher time of year from a wholesale perspective.”
Forest City, Iowa-based Winnebago, which sells its motorhomes under the Winnebago, Itasca and ERA brands, said motorhome deliveries during the quarter fell 6.5% to 1,088 units. Dealer inventory slipped 4.2%. Backlog at quarter-end fell 10% to $74.7 million, suggesting demand was weak for the company’s motorhomes, some of which include beds, kitchens, toilets and showers.
The company is expecting to see growth in its Winnebago Towables Division, formed when the company acquired SunnyBrook RV Inc. in December of 2010.
“Fiscal 2011 was a year of investment in the towables subsidiary,” said Potts in a statement. “As anticipated, we incurred operational losses in towables during the year in part related to the integration of systems, expansion of the distribution network, the updating of existing SunnyBrook product and the development of a new Winnebago branded towable product line. We are very excited about the future growth potential this new market holds for us.”