Winnebago's (WGO -3.21%) stock has trailed the market by a wide margin over the last few months even though the business is booming. The RV giant enjoyed record demand through 2021 even as prices soared for many of its recreational products.
Investors are perhaps worried that the good times are about to end with sales growth slowing in 2022. Winnebago is also facing more competition from rivals like Thor Industries, which recently said it won market share in some key niches in late 2021.
With that bigger picture in mind, let's look at a few trends to watch when Winnebago reports fiscal second-quarter results on March 23.
Growth and market share
The news has been good on the growth front with sales jumping 46% in the most recent quarter. Some of those gains came from Winnebago's recent acquisitions, but most of it came from gains in its core brands in the towable and motorhome markets. Most investors expect another big jump this quarter with Q2 revenue rising to $1.1 billion from $840 million a year ago.
Keep an eye on market-share trends for any sign of stress. Winnebago said in mid-December that its share of the RV industry was up 1.3 percentage points to over 13%.
Image source: Getty Images.
Yet Thor, a key competitor, announced earlier this month that it is winning share in motorized RVs. Winnebago's wider portfolio would help it navigate through modest share losses, but it still wouldn't be great news for the business to lose ground on this key niche.
Prices and supplies
There was no shortage of operational challenges to deal with during the quarter. Winnebago likely had trouble securing certain parts and keeping its manufacturing and supply chains humming through transportation delays. Costs rose for inputs, labor, and transportation. Winnebago also had to scale up production so that dealerships weren't left with low inventory levels.
Watch Winnebago's backlog figure to see if management is executing well in this tough operating environment. That metric rose to a record $5 billion last quarter but ideally is dropping slowly as the company stocks dealerships with more normal inventory levels. Margins should rise, too, thanks to higher prices and strong demand.
Looking ahead
Winnebago is heading into a potentially challenging year ahead with demand for RV products likely to slow after nearly two years of booming gains. That expected deceleration will make it hard to manage manufacturing output since the company wants to whittle down its backlog without getting ahead of demand.
The RV market is highly sensitive to economic growth, and so the big risk during an inflection point in the industry is getting caught with too much inventory when consumer preferences shift.
CEO Michael Happe and his team might comment on how Winnebago is approaching that risk in 2022. But executives will likely sound positive about at least the first half of the calendar year, since most of those sales are already reserved and sitting in its backlog system.
