Grand Design to Market Motorized Units in Late 2024 – RVBusiness – Breaking RV Industry News
EDEN PRAIRIE, Minn. – Grand Design RV Co., a Middlebury, Ind.-based subsidiary of Winnebago Industries Inc., will begin manufacturing motorized units scheduled for release sometime in 2024 and the company’s co-founder, president and CEO, Don Clark, has agreed to a five-year employment extension with Grand Design parent, Winnebago Industries Inc.
Winnebago President and CEO Mike Happe made those announcements Wednesday during a Q4 fiscal 2023 financial results conference call with investment analysts.
“Today marks another milestone in our company’s history as we are excited to announce the forthcoming launch of a Grand Design-branded motorhome lineup, scheduled for release late in our fiscal year 2024,” Happe said. “These new models will represent the inaugural foray into the motorhome market under one of the most successful RV brands created and will be a differentiated and complementary offering to our current Winnebago and Newmar brand motorized businesses. Leveraging Grand Design’s inherent strength and unwavering appeal, along with its dedicated and loyal consumer base, we are poised to make a bold entry into this segment. The Grand Design team is working diligently to bring this exciting launch to life, and we anticipate showcasing prototype models to select dealers in early calendar 2024 with shipments beginning late in our fiscal 2024 year.”
Michael Happe
He continued, “As we are currently active in product development, standing up the manufacturing infrastructure and our supply chain network, and beginning to engage potential dealers for distribution of this new strategy, we wanted to confirm today the increasing positive chatter and rumors in the marketplace.”
He said the bottom line impact to Winnebago Industries will be “meaningfully dilutive” in fiscal year 2024 due to sizable start-up costs with limited revenue, adding, “But this is an incredibly accretive strategy and financial opportunity for the company in future years. In the coming months, we look forward to the Grand Design team sharing more details about our premium product offerings from Grand Design Motorhome.”
Happe then told investors that Clark had agreed to stay with Winnebago for another five years.
“We are thrilled for Don and continue to support and appreciate his contributions to the company. As we enter fiscal year 2024, my confidence in the enduring strength of our diverse portfolio of premium brands within the outdoor recreation industry continues to grow,” Happe said.
The news came amid a Q4, which ended Aug. 26, that saw the company’s net income down 47% to $43.8 million, or $1.28 a share. Revenue was down 35% to $771 million, a bit below Wall Street expectations. Adjusted earnings of $1.59 a share beat expectations.
For the full year, Winnebago had sales of $3.5 billion, down 30% from a year ago, while net income of $219.5 million was down 45%.
Winnebago – as well as companies throughout the outdoor sector – are navigating tough economic conditions as well as a softening of leisure sales in general following a COVID-induced surge.
Happe on Q4, Fiscal 2024 Performance
With regard to the financial results, Happe said, “I am incredibly pleased that the foundation of the transformed company we have built over the last seven years can produce the results we just completed in a difficult market environment. We remain committed to the continuous improvement of our bottom line with a focus on operational excellence, further work on productivity, cost containment, and fixed overhead rationalization along with collaboration with our dealer partners to maintain an appropriate and balanced product mix in the field.”
The entry in into the motorized segment, Happe said, “not only bolsters our resilience, but also places Winnebago Industries in an enviable position to harness the upcoming market recovery and drive our results and share gains. Our unwavering commitment remains fixed on two core objectives. First, the preservation of profitability balanced with the reinforcement of our already robust market share positions. Simultaneously and second, we are resolute in our dedication to amplifying investments that nurture the long-term health and vitality of our enterprise.”
Happe spoke of a “tumultuous consumer outdoor market” continuing in Q4 as lower dealer deliveries and modest retail demand persisted across the RV and marine industries
“Our dealer networks continue to demonstrate discipline as it relates to inventory levels given the current demand environment and an industry-wide focus on selling down prior-year model product,” he said. “Despite these challenges, our teams have remained intently focused on rationalizing our own and channel inventory levels, optimizing our supply chain network and appropriately managing capacity, output, and cost in a strategic manner, sometimes at the expense of short-term market share.”
He said as inventories normalize Winnebago will remain focused on managing production output accordingly.
He noted that the company’s RV market share for August was much steadier than in past months, “a sign of good things to come. Grand Design, Winnebago Towables and Newmar all gained share in the stand-alone August month.”
He anticipates a “gradual easing of pressure on these fronts and expect dealer orders to improve as they prepare for the spring 2024 retail season. We are already seeing a monthly sequential increase in order backlog by our dealers in the Towables RV segment from June through September.”
In product news, he talked about Grand Design’s new Reflection 100 being affordably priced below the current Reflection fifth-wheel model line and the new Winnebago Access stick-and-tin product marking Winnebago’s entrance into the conventional travel trailer market with an MSRP starting below $30,000. He mentioned the new sustainability-focused Solis Pocket 36B, which “packs more into a compact-size product than any other RV, providing customers with many of the features and conveniences of a full-size RV.”
He also touched on the acquisition in Q3 of Lithionics Battery, a leading provider of lithium-ion battery solutions, which, “has bolstered our house battery solutions differentiation, energized our electrical supply ecosystem, and positioned Winnebago Industries as a future leader in electrification.”
Happe and CFO Brian Hughes then took questions from analysts on the call.
On factors contributing to the reluctance of dealers to take inventory:
Happe: I think the dimension you touched on is probably one of the bigger elements, as I think most of us in the industry know the dealers are facing higher floor plan costs due to higher interest rates, and that is certainly factoring into their attention to aging models, but also certainly the total amount of product that they’re willing to carry. I do want to state, though, that on the RV side of our business, specifically, is where we see this element most in play. We are pleased with where we stand with our inventory position as of today.
On the company’s relationship with Camping World, given the new Grand Design-exclusive store in Green Bay:
Happe: Let me start with more of the historical relationship with Camping World that we’ve had in our Winnebago-branded business. We have done business with Camping World through the Winnebago brand for many years – mostly on the motorized side, but off and on, on Winnebago Towables as well. And we continue to do business on the Winnebago side in dozens of different locations and have a healthy relationship with Camping World there.
You did reference the Grand Design Camping World store. We recently co-opened an exclusive Grand Design Store with Camping World in Green Bay, Wis.; looks fantastic. I think the grand opening was this past weekend, and that is an opportunity for us to influence more of the customer experience in an exclusive store format working with the Camping World team. Admittedly, this is Grand Design’s first location with Camping World since the inception of that brand.
On the company’s efforts to address affordability:
Happe: We’re having productive conversations with most of our key suppliers about the need for them to pass on the reductions they are seeing in cost on their raw materials or from their suppliers to us. And in many cases, that is happening. In some situations, we have an index-based relationship with certain suppliers that just follows the curve of those indexes. But we are having good productive conversations with our larger suppliers on cost management.
I would say where those discussions are the most challenging and where we continue to see headwinds concerning cost is in the motorized chassis category. Those suppliers are a little less agile in changing cost and, in some cases, are still experiencing some cost increases that they are needing to pass on to OEMs like us. So net, we’re getting good responses from our suppliers on continuing to manage, in some cases, lower the cost of our bill of materials.
On how Grand Design’s motorized line could impact market share down the road:
Mike Happe: Today, between our two existing brands, Winnebago and Newmar, we run somewhere between – and it varies by quarter and by year – but we’ve run somewhere between 18% to 20% total market share in the motorized segment between those two brands. We absolutely believe that the addition of Grand Design motorized into our business strategy will be net incremental to that market share. I’m not going to share a specific target at this time. But we would not be funding from a capital standpoint, the investment in this business strategy if it didn’t have a stand-alone ROI that was projected to be positive.
We have been very intentional with internal conversations about minimizing cannibalization of our existing motorized revenue and share to the best of our ability as the Grand Design team rolls out this lineup over the course of the next several years. And this will be a graduated rollout of product over probably the next two to three years beginning in probably our fourth quarter of fiscal ’24. So we anticipate that that target will be 20%-plus. As we are ready to unveil some further details we can potentially get more specific on what those aspirations are. But just know that for us, it has to be and will be incremental.
On dealer sentiment at the Open House:
Happe: First, let me talk about what we experienced at Open House with our businesses. So, at Open House, we had each of our three brands displaying – the Winnebago brand essentially has two sub-businesses under Motorhome and Towables. Each of our four businesses at Open House – Newmar, Grand Design, Winnebago Motorized, Winnebago Towables – experienced an order increase at Open House 2023 versus the Open House in 2022. So, we were really pleased coming out of Open House 2023 in spite of a very tepid dealer ordering environment to see that increase.
On which class the Grand Design’s Motorized launch might be focused on:
Happe: We did not mention that because we are not sharing specific details at this time. What we wanted to share with you all this morning was that the business strategy is happening and is being developed and worked on. The Grand Design team will choose the time in the future that they are comfortable sharing specific specs publicly about their new lineup that they’re working on. And you can probably anticipate hearing or seeing something to that, probably in the early part of calendar year 2024.
Source: https://rvbusiness.com/grand-design-to-market-motorized-units-in-late-2024/
