Investors had modest expectations heading into Winnebago's (WGO 0.85%) second-quarter earnings results. Sure, the RV giant is enjoying strong demand across its portfolio of vehicles, towables, and powerboats. But Wall Street is bracing for a slowdown ahead while worrying about supply-chain challenges and cost spikes.
Those issues did impact Winnebago's business through early 2022, the company said in a recent press release. But the big-picture trends are all still pointing in the right direction.
Let's take a closer look.
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Sales are rising
Revenue gains did in fact slow, as sales rose 39% compared to the prior quarter's 46% surge. Yet those growth trends contain plenty of good news about the business.
Sales beat expectations, for one, as most investors were looking for revenue to land at $1.1 billion rather than the $1.2 billion that the company logged. Winnebago also gained market share even as peers like Thor Industries boosted sales.
The company now accounts for 14.3% of the U.S. RV market, up from 13.3% a year ago. Its boating, towables, and luxury brands are all finding busy traffic at dealership lots, too. "Winnebago...execut[ed] on sustained, elevated consumer demand for our expanded portfolio of premier outdoor lifestyle brands," CEO Michael Happe said in a press release.
Supply-chain concerns
There were some trouble spots in the report, though. Winnebago's motorhome division only grew sales by 9%, and that boost came mostly from price increases. Production volume was weak due to supply-chain constraints, management said, so backlog soared by 22%. Normally a large backlog is good news, but Winnebago is risking losing some of these sales as its delivery times grow longer.
Still, the company found plenty of room to raise prices to reflect rising input and transportation costs. Gross profit margin held steady at 19% of sales, and operating margin is still sitting at a healthy 12% of sales. "The healthy demand environment, and unique strength of our brands, positioned Winnebago...to take continued pricing actions," Happe said.
Looking ahead
The management team sounded an optimistic note about calendar 2022, confirming what Thor Industries had previously said about how the year would likely represent another strong period of growth for the RV industry following 2021's surge. Winnebago sees room to continue winning market share while working to boost dealership inventories.
Its main challenge is to reduce that backlog, which today represents $4.4 billion in contracted but unbilled sales. For context, Winnebago posted $2.3 billion of revenue over the past six months.
It's a concern that backlog is still growing so quickly, given the company's RV production challenges. Investors will want to watch the motorhome division for signs that management isn't leaving money on the table during the high seasonal demand period in fiscal Q3. But Winnebago is still well positioned to keep boosting sales and earnings in 2022 after two unusually strong years for its business.
An economic slowdown would threaten that growth since the company is firmly planted in a consumer discretionary industry. Yet there's no sign of an impending slump through early 2022, and Winnebago has a massive backlog that gives it some flexibility to invest in its manufacturing network without taking on too much extra risk.
