Winnebago (NYSE:WGO) shareholders had good reasons to look forward to the company's fiscal 2021 first-quarter results in late December. The RV giant raced back to sales growth in the prior period as dealerships restocked following COVID-19-related shutdowns. Heavy traffic at these locations convinced dealers to ramp up their ordering, too, as consumers redirected cash toward RVs while airplane travel demand was depressed.

Winnebago's Q1 report this week confirmed that positive narrative by revealing surging sales volumes in the towable and motorhome divisions. Record backlog suggests even faster growth ahead for the RV market share leader.

Let's take a closer look.

An RV is parked near a lake.

Image source: Getty Images.

Sales sped up

Winnebago executives said in October that demand appeared to be rising as consumers turned to the RV niche to provide outdoor recreation activities closer to home. That boost shined through in this week's report as sales jumped 35%. Excluding the recently acquired Newmar brand, Winnebago's revenue rose 22%, marking an acceleration over the 15% increase last quarter.

The automaker saw strength across its portfolio, with towable vehicle sales rising 33% year over year and motorhome revenue growing 7%. That motorhome segment's growth landed at 43% after accounting for the Newmar brand.

Executives said the metrics, and Winnebago's rising market share, illustrate the advantages built into the business. "[The] results underscore the strength of our unmatched portfolio of leading brands," CEO Michael Happe said in a press release, "and continued demand from the end consumer."

Pricing and costs

Winnebago was also able to convert a larger share of those sales into profits. Gross margin jumped higher by four percentage points to 17.3% of sales. That success was powered by several positive trends, including cost cuts. But the biggest factor was steady pricing. "The momentum we are seeing ... allowed us to capture the full value of our products in the marketplace," Happe said.

The combination of rising gross margin and falling operating expenses supercharged earnings growth, with pre-tax income landing at $75 million, or 9.5% of sales, compared to $18 million, or 3.1% of sales last year. Earnings per share jumped to $1.70 from $0.44.

Metric Change (YOY)
Revenue 35%
Operating income 256%
Earnings per share 286%

YOY = year over year. Source: Winnebago.

Inventory and backlog

Winnebago saved the best news for last, saying in its backlog update that dealerships can hardly keep up with RV demand. Orders in the towable division more than tripled year over year, and the motorhome segment notched a 400% backlog spike. Part of that boost is just a temporary restocking from pandemic-related closures earlier in the year. But Winnebago's dealer partners are also responding to strong demand trends, as illustrated by slumping volume of price promotions.

Management said interest in the category is showing no signs of slowing even as winter weather descends on much of the country. Combined with its market share gains and rising profitability, that's a strong indication that Winnebago is setting itself up for a record fiscal 2021. While some important risks threaten that positive outlook, including the potential for a recession that dampens consumer discretionary demand, investors have to be happy with what they're seeing from Winnebago at the close of a volatile 2020.

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