Winnebago (WGO 2.04%) just closed out a wild fiscal year in strong fashion. The recreational vehicle giant on Wednesday announced fourth-quarter results that showed a sharp demand rebound as compared to the prior quarter. The spike helped it reach flat organic sales for fiscal 2020 despite several weeks of COVID-19 production and dealership shutdowns.
CEO Michael Happe and his team are sounding an optimistic tone about the new year ahead, too, thanks to a record level of order backlog for boats as well as towable and motorized RVs. Let's take a closer look.
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Surging demand
Executives three months ago predicted a strong growth rebound ahead despite the fiscal third-quarter's 41% sales slump. That boost clearly showed up in this week's report as revenue jumped 39%. Excluding the new business brought on the by recent Newmar acquisition, organic sales rose 15% to put Winnebago at a flat result by that measure for the full 2020 year.
"In the face of unprecedented impacts of the COVID-19 pandemic," Happe said in a press release, "our strong fourth quarter finish to the year was a testament to...the strength of our portfolio of leading outdoor lifestyle brands."
The company saw higher demand across its growing portfolio. Towable RV products grew 34% and motor homes were up 50%, although that latter figure was mainly driven by the Newmar acquisition. Executives said the company continued to win market share overall, suggesting additions to its roughly 12% grip on the industry.
Costs and profits
Winnebago's net income landed at $42 million, or about the same 6% of sales that the company managed a year earlier. However, there were some significant swings in the metrics that factor into that bottom-line result.
Gross profit margin improved by almost a full percentage point, which helped operating income rise to 9.3% of sales from 8.4%. But Winnebago paid out more interest expenses due to its higher debt burden. That pressure offset the other efficiency gains to keep net income margin steady overall.
Bigger backlog
Some of the best news for investors came from Winnebago's bright outlook for the new fiscal year. While risks remain in the consumer discretionary space, including a prolonged recession and stubbornly high unemployment, management is seeing sustained demand for its RV products as people look for outdoor entertainment options that are close to home.
Winnebago's backlog jumped to a record $1.85 billion, in fact, with towable backlog jumping 200% to $750 million as motorhome orders soared over 500% to $1.1 billion. Management credited "extremely high levels of consumer demand" in the most recent quarter for helping convince dealers to make aggressive ordering plans for the next months.
It's not clear whether that RV boom will hold through most of fiscal 2021. Higher debt levels should continue pressuring earnings over the short term, too.
But Winnebago is entering the period with major advantages, including a strong market-share position and a diverse collection of brands that now includes Newmar, Grand Designs, and Chris-Craft franchises. Those assets should support robust investor returns over the long term, even if operating results stay volatile over the next year or so.
