The strength and profitability of Winnebago’s motorhome business during its fiscal second quarter – punctuated by a backlog that nearly tripled from a year ago – outweighed “sustained underperformance” in the company’s still evolving towable division.
In a conference call today (March 28) delivered in the wake of a report that showed a 34.6% sales increase and a swing to a $6.3 million profit, the Forest City, Iowa-based firm touted the results from its motorhome operations that yielded a “positive comparison in nearly every aspect of the business,” according to Chairman, CEO and President Randy Potts.
“Our motorhome products are in high demand and continue to outpace the industry, which has resulted in an increase in motorhome backlog over the last five quarters,” Potts said, noting that the year-to-date backlog stood at 2,752 units.
Accordingly, production lines “are completely filled and running,” reported Vice President and CFO Sarah Nielsen, a situation that has also spurred a spike in hiring. “With the pace that we’re running, we are behind where we want to be on head count,” she said, “but we are still looking to expand our run rates and work force.”
Nielsen also pointed to higher gross margins during the quarter compared to a year ago, primarily achieved through a reduction in discounting of product.
Potts stressed, however, that the lack of Class A gas chassis from Ford Motor Co., the industry’s key supplier, continued to pose a challenge. “It represents a constraint on the entire industry, and it appears to be a constraint for the foreseeable future based on demand and what Ford says it can supply,” he said.
Looking forward, Potts offered a progressive outlook for motorhome demand, stating, “We believe the motorized RV market will continue to grow toward pre-recession levels. Improved economic indicators such as rising housing starts, lower unemployment and attractive interest rates should create a positive environment going forward.”
On the towable side, Winnebago continues to operate in the red, incurring an operating loss of $850,000 in the second quarter, according to Nielsen. Winnebago launched its towable group with the acquisition of Middlebury, Ind.-based SunnyBrook Manufacturing Inc. in December of 2010.
“This is not acceptable,” Nielsen said, pointing to the adverse effects of increased warranty expense coupled with one-time employee separations. “We are addressing these issues, including several management changes and the closing of one of two assembly plants. We have also centralized warranty and service operations to Iowa.”
Demonstrating the gap in divisions, motorhome deliveries for the quarter rose 42% to 1,419 units while towables edged up just 2.5% to 548 units.
The most high-profile personnel change was the recent promotion of industry veteran Johnny Hernandez as president of Winnebago Towables, replacing Elvie Frey, former president of SunnyBrook. “With these improvements, our goal is to achieve break-even results in the fiscal fourth quarter,” Nielsen said.
Potts added that the towable market still represents a “tremendous opportunity” for Winnebago. “Many parts of our strategy have worked well, but there are parts that didn’t work out,” he said. “We have a number of details that need to be shored up.”