Hit the Road

If you're thinking about hitting the road in your customized Winnebago, you're not alone. Last year was the biggest year for RV sales in 25 years. In part one of our two-part series, David Gardner talks to Winnebago (NYSE: WGO  ) CEO Bruce Hertzke about Winnebago sales, Nascar, and the profile of the average Winnebago customer.

David Gardner: Bruce, in percentage terms, looking back over the last five years, are RV sales up? Are they down? Are they flat?

Bruce Hertzke: Oh, RV sales are definitely way up. In 2004, our industry -- not just Winnebago Industries, but the recreational vehicle industry -- actually sold more product than in (any year in) the last 25 years. So that was our largest year in excess of 25 years. We actually grew 32% in revenue and 42% in earnings last year.

DG: Gas prices are on a lot of people's minds these days. They've climbed to well over $2 a gallon in many parts of the country, close to $3 a gallon in some places. How have higher gas prices, Bruce, affected Winnebago's business?

BH: Well, gas prices last spring really took the big spike. I can tell you that it was still our industry's largest year. Gas prices, I think, have some effect on consumer confidence, and they definitely attract a lot of attention as far as at the pumps, but the bottom line is you are not going to get the American people to stay home. They are going to go out and travel. They are going to enjoy their vacations. Whether it is $20 extra in a tank of gas or whether it is $50 extra for an airline ticket, or however they decide to enjoy their vacationing, they are not going to stay home. So I think it is just a matter of getting used to it, and people are still going to figure out how to enjoy their lifestyle.

DG: What type of mileage am I getting in my Winnebago?

BH: Well, it depends. Some of the smaller motor homes (from) Winnebago have what we call a fuel-efficient front-wheel-drive motor home, called a Rialta, that can get anywhere from 14-16 miles per gallon. Then we have a new diesel class C body that can get as high as 16-19 miles per gallon. But the average Winnebago RV, with the gas chassis, will probably get anywhere from 8-10 miles per gallon, and the diesel motor homes will get anywhere from probably 9-13 miles per gallon.

DG: Looking now over your product line, Bruce Hertzke, how much am I paying for your top-of-the-line Winnebago these days and what am I getting?

BH: Well the top-of-the-line Winnebago will run up around $250,000. If you get all the options, it can run a little bit more, but you are going to get a product with ceramic tile, Corian countertops, dishwasher, washer and dryer, Sony Surround Sound system, satellite TV, and satellite radio for going down the road -- you can even pick up satellite TV. DVD players, global positioning systems, full-body paint....

DG: And what type of Winnebago are you driving? I am assuming you are driving a Winnebago, aren't you Bruce?

BH: Yes, I am. I have a 39-foot Journey diesel motor home that I am driving. It just so happens that the Journey was the very best-selling diesel motor home in 2004, and I am driving one of those and utilizing that at different times throughout the year, and I can tell you I very much enjoy the use of that because it is a very fine coach.

DG: And Bruce, do I get any tax breaks for my Winnebago?

BH: Yes, you do. One of the things that the Recreational Vehicle Industry Association is very pleased to have is that a recreational vehicle qualifies as a second home, so if you buy that, it is just like if you bought a second home, and your interest is tax-deductible for that purchase.

DG: Bruce, what is the profile of the typical Winnebago customer?

BH: Well, a typical Winnebago customer, is first of all, over the age of 50. The Baby Boomers are very important to us because every month there are 350,000 people who are turning age 50. That is over four million new customers per year. That is a long-term trend for the Baby Boomers. Most of them are married. Most of them are pretty well-established in life. They are looking for what to do with their second half of life, as far as enjoying hobbies or traveling, and they are looking for different ways that they can go out and explore the world.

DG: And what is bigger for your business, NASCAR or college football, if you had to get rid of one of those?

BH: NASCAR or college football? Well first of all, I don't want to get rid of either one of them, but if I had to get rid of one, I would think I would definitely have to say NASCAR is still bigger than college football, although we continue to see more and more vehicles that are actually designed especially for tailgating. We just had one of our big diesel motor homes that was painted bright orange for the Clemson Tigers, and we got that completely rigged up for tailgating (especially) for a customer, so we are seeing more and more of that, but I would have to say that NASCAR is still probably larger than tailgating events.

Don't miss part two of David's interview with Winnebago CEO Bruce Hertzke tomorrow!

Fool co-founder David Gardner heads-up theMotley Fool Rule Breakersnewsletter service. The Motley Fool is investors writing for investors.


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