Winnebago 2Q Reflects Seniors are Confident
Winnebago Industries Inc. reported surprisingly strong profit on Thursday (March 28), suggesting the growing confidence among U.S. consumers is shared by the 50 and older crowd, the prime demographic for the No. 1 U.S. maker of motorhomes.
Reuters reported that the company said renewed momentum in the broader economy – from surging stock prices to signs of recovery in the housing market – helped push its order backlog to pre-recession levels and its profit past market expectations for the third quarter in a row.
The company’s top executive said demand is still below the levels seen before the housing bubble burst – a collapse that sent recreational vehicle demand plummeting and half dozen of Winnebago’s rivals, including Fleetwood Enterprises and Monaco Coach, into bankruptcy.
Winnebago, known for its large touring vehicles that provide home-like comfort on the road, said its order backlog had nearly tripled from a year earlier to 2,752 units as of March 2, the fifth quarterly rise in a row.
The Forest City, Iowa-based company’s order backlog for motor homes is now at its highest level since the fourth quarter of 2004, said Kathryn Thompson, chief executive of equity research firm Thompson Research Group.
Winnebago said the buyers returning to RV showrooms are showing an appetite for products across its line, which range in price from about from $65,000 to more than $300,000. Most of Winnebago’s customers are either retired or semi-retired, the company said.
According to Reuters, the apparent rebound in the U.S. housing market may be the most important factor of all. Motorhome sales are sensitive to a lot of factors, but tend to be most strongly influenced by the housing market and energy prices.
Winnebago says its sales closely track the ups and downs of the market for new homes. Earlier this month, the Commerce Department reported that permits for future construction jumped 4.6% in February, the fastest pace since June 2008.
Randy Potts, the company’s chairman, president and CEO, cautioned that while retail trends are positive, consumer demand is still “not even close” to where it has been historically – before industry sales peaked in 2004 and began their long slide in 2005.
“What we’ve gone through in recent years wasn’t a cycle, it was a catastrophe,” Potts said in an interview with Reuters.
But pent-up demand from consumers who postponed purchases waiting for the economy to recover may change that.
Potts said that in the 25 years before 2004 and 2005, the RV industry would ship an average of 60,000 motorhomes annually. In 2013, even with the current rebound in demand, the industry expects to ship about 32,000 units.
“That’s still just 50 percent of what we want to say is a normal market,” Potts said.
“So if you believe that the RV lifestyle is alive and well and that normal hasn’t changed … there should be a real pent-up demand out there.”
Winnebago’s stock, which has risen about 30% since the start of the year, closed down 5.6% at $20.64 on the New York Stock Exchange on Thursday. The stock hit a five-year high of $22.34 on March 14.
There has been some concern that the RV market might be hurt by cuts in federal spending as well as rising fuel prices.
But data released late last month showed that consumer confidence is rebounding.
Winnebago reported a profit of $6.3 million, or 22 cents per share, in the quarter ended March 2, compared with a loss of $9.1 million, or 3 cents per share, a year earlier. Revenue rose 35% to $177.2 million.