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Winnebago Keeps Raising Its Outlook

By Demitri Kalogeropoulos - Mar 31, 2021 at 9:13AM

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Highlights from the RV leader's latest call with investors.

Winnebago (WGO 1.41%) is still firing on all cylinders. The leader in the recreational vehicle industry just announced strong operating results that imply a big finish to fiscal 2021 ahead.

In a conference call with Wall Street analysts, CEO Michael Happe and his team broke down the factors that supported surging sales and profits through early February. Executives also added context to their bullish outlook for the rest of the year, and for the period beyond the COVID-19 pandemic.

Let's look at some standout quotes from that presentation.

An RV parked by a lake.

Image source: Getty Images.

The bigger portfolio is working

"While we have undoubtedly been active via acquisitions in the last four-plus years, [this quarter] represents a truly organic year-over-year comparison in total performance." -- Happe

Sales gains have been hard to read in recent quarters due to the addition of big brands like Grand Designs towables, Chris-Craft boats, and Newmar motorhomes to the portfolio. Management predicted that the bigger offering will produce sustainably faster growth, but investors now have some hard evidence backing up that claim.

Sales jumped 34% this quarter in a boost that wasn't impacted by any major acquisition over the past year. The revenue spike just reflected organic, year-over-year demand increases across its outdoor entertainment product lines. The Newmar luxury motorhome franchise was the last big acquisition just over one year ago, and essentially allowed Winnebago to cover all the main RV niches. "Our results," Happe said, "validate a strong, complete, full-line RV strategy is now in place ."

Spiking prices

"Our ability to sell products at attractive margins and continued low levels of discounting...reinforces our brand strength with dealers and end consumers." -- Happe

Winnebago notched an unusually high earnings spike, in part because gross profitability surged higher by almost 6 full percentage points. That success came from the combination of high demand and relatively low dealership inventory, which created an ideal pricing environment for RV sales. Dealers didn't have to issue aggressive promotions to keep towables and motorhomes moving off their lots, and Winnebago more than doubled its adjusted earnings, year over year.

Investors should expect that margin spike to slow, though, since manufacturing costs are projected to rise through the rest of the year. "We took and will take actions to ensure our pricing reflects both the surging demand for our premium brands, but also the input cost inflation that is expected in the coming quarters," Happe said.

A big finish to the year

"We are not seeing any significant decline in retail momentum and outdoor product demand as we turn into the spring 2021 selling season...and our company's retail numbers in the first two to three weeks of March have actually shown sustained strength and even an uptick in certain categories." -- Happe

Winnebago's huge backlog means its factories will likely be operating at close to full capacity for the rest of 2021. Yet management believes that much of the new interest in the RV niche will stick around even after the COVID-19 threat disappears.

That situation sets up an attractive growth scenario in which Winnebago welcomes first-time RV buyers with value-focused models like towables while serving them with more fully featured models down the road. There are two necessary ingredients to make that approach work: growing market share and a wide portfolio of products. Winnebago leads the industry in both of these areas, which means it should continue posting outsized earnings gains as long as the consumer discretionary RV industry keeps growing.

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