The recreational vehicle industry is booming right now, and Winnebago Industries (WGO -3.39%) is soaking up more than its fair share of the growth. The RV giant just announced another quarter of accelerating growth and spiking earnings. But the best part is that dealership backlog points to a sustained period of high demand through at least the rest of 2021.
Let's take a closer look.
Winnebago is winning on sales
Sales in the second quarter of fiscal 2021 jumped 34% to mark the second straight quarter of acceleration. Revenue gains were 15% two quarters back and sped up to 22% last quarter. The company had been growing at a nice clip before the pandemic struck, and COVID-19 disruptions only slowed it down slightly -- and only for about one full quarter.
Winnebago notched market share wins in all of its main segments. The towable division enjoyed a 55% year-over-year sales spike and motorhome sales were up 18%. Those divisions each benefited from booming demand for RV products in the core Winnebago brand, but also in newly acquired franchises like Newmar and Grand Designs.
Winnebago now accounts for 11.5% of the RV industry, up from 10.6% a year ago, management estimated. "We are pleased with the outstanding market and financial results from our second quarter," CEO Michael Happe said in a press release.
Winnebago is winning on profits
Margins are jumping thanks to the combination of high demand, low inventory, and declining manufacturing costs. Winnebago added 6 percentage points to its gross profit margin as customers enthusiastically paid full price for most RV products. Operating income jumped, too, causing adjusted earnings to more than double for the quarter.
Winnebago had to execute around several challenges in the winter season, including spiking manufacturing volumes and supply chain bottlenecks. It handled the issues almost without a hitch so that net income improved to 12% of sales from 5% a year earlier. "I am especially excited and extremely grateful for our team's ability to deliver strong profitability in the midst of a very dynamic environment," Happe said.
Winnebago's backlog is still elevated, and dealership inventory levels are relatively low. Orders for motorhomes are up 400% from a year ago and towable backlog jumped 300%.
These trends "set the table for robust performance" ahead, management predicted. But beyond that short-term spike, Winnebago thinks there's reason to be optimistic about a long-term shift toward the outdoor recreational niche. "Consumer priorities have changed due to the pandemic," Happe said.
Winnebago is responding by making fundamental upgrades to its production capabilities while being careful not to overreach. The RV market is a cyclical industry, after all, and tends to shrink during recessions.
But for now, Winnebago is pushing the accelerator pedal as it works to fill inventory shortages across its dealership network. Multiple signs, from pricing to backlog, imply sustained high demand through the rest of the year. That should support impressive investor returns for owners of this industry leader.