Winnebago’s Happe: Past Year Ushered in ‘New Landscape’

Mike Happe

Soon after Winnebago Industries released its fourth quarter and full year Fiscal 2022 financial performance results – highlighted by Q4 revenues of $1.2 billion, and a record $5 billion for the full year – company President & CEO Mike Happe acknowledged that the “past year has ushered in a new landscape.”

In a conference call with investment analysts Wednesday (Oct. 19), Happe pointed to the explosion of consumer interest in outdoor recreation, which bode well for Winnebago Industries and its family of brands: Winnebago, Grand Design RV Co., and Newmar Corp. in the RV market and Barletta Boats and Chris Craft in the marine industry.

This ongoing trend “will impact our industries forever,” Happe said, before turning his attention to the current market conditions.

“While recognizing the inevitable normalization of short-term outdoor demand, we continue to believe that growing interest in the outdoors by an increasingly diverse range of consumers are lasting in the long term and that we at Winnebago Industries are better positioned more than ever to serve a wide range of consumers with our diversified portfolio,” he said.

“The past year has ushered in a new landscape,” Happe added. “Inflation and rising interest rates are reshaping the economy on a macro level. These trends are certainly impacting the strong retail demand environment that Winnebago Industries has been so successful at capitalizing on. However, we feel confident that our business is positioned to continue to perform well through economic cycles.”

What follows is an edited account of the conference call, which also included Vice President of Investor Relations Ray Posadas and Senior Vice President & Chief Financial Officer Bryan Hughes.

• On the company’s forecast for 2023:

Happe: As mentioned previously, we are monitoring closely the macroeconomic environment to help assess outdoor leisure retail demand. All things considered – and knowing that there are numerous factors that can impact forward-looking estimates materially – we are generally aligned with RVIA’s recently released data and are projecting a range of 490,000 to 500,000 in shipment units for calendar year 2022.

Concerning calendar year 2023, we believe industry RV shipments will likely trend closer to a range of 400,000 to 410,000 units for that period, slightly lower than the latest RVIA forecast. For retail, we estimate 450,000 RV units for calendar year 2022 and retail units equivalent to wholesale shipments in 2023.

• On the recent Elkhart RV Open House:

Happe: I thought we had a really good open house event. And I’ll start, first and foremost, with the quality of the product lines that we showed during open house. In fact, several industry trade magazines in some of their future editions will be awarding many of our brands with some awards concerning the innovative products that we showed at open house.

Secondly, we had great discussions – honest discussions – with our dealers. Open house had not been held since 2019. It was good to see a majority of the country’s dealers show back up in Elkhart County and spend time with not only our brands, but I’m sure all of the other OEM brands that displayed.

Any time you have a chance to spend quality time with one of your customers, you get the chance to share perspectives and talk about the future in a productive manner. As I said at our very small investor event that morning in Elkhart, our programming and pricing for the 2022 open house was, candidly, very similar in terms of discounts or promotions as it had been in the past.

We stated very clearly that we were not showing up in Elkhart that week to offer steep discounts in order to incentivize dealers to take product that, in some cases, they shouldn’t take. Especially on the Towable side, inventory in the field continues to be at a healthy level. And while we would love to collect record-breaking levels of orders at an event like open house, this was not the year to do that, particularly on the Towable side.

So our teams walked away with a solid amount of orders. But more importantly, we probably walked away with better alignment with our dealers about how we’re going to work with them on a daily basis going forward.

• On the production expectations of the company’s towables, motorized and marine operations:

Happe: We continue to maintain that our two Marine businesses are in the healthiest position, both in terms of the industry dynamics and the runway that they have with their dealers.

The Motorized segment has certainly been working its way back to a field inventory position that is healthier. There are pockets of the Motorized RV segment where the dealers still need inventory, and there are, candidly, some pockets where they’re probably reaching where they want to be in terms of a turn level.

We continue to see very solid profitability, particularly on the Class B product line, and some of our Class C. I’ve been very pleased as of late with the way Newmar has been running their business on the Class A side in terms of profitability yield as well.

So, Motorized margins will probably settle a bit as field inventory normalizes to a full extent over the course of fiscal year ’23. But as we’ve intimated, we sincerely believe that Motorized profitability yield on the bottom line will maintain a double-digit position within our portfolio.

Bryan, lastly, talked about the Towables segment. Timing is the biggest element of what you saw in fourth quarter. We made a very conscious decision to take our fall programs to the market ahead of open house, and that pushed some expense into the month of August, specifically. Candidly, as Bryan also talked about, the inflation pricing dynamics also played a role just overall in terms of timing.

As Bryan stated, we believe that Towable margins will maintain an industry-leading position and that you will likely see them stabilize at historically normal levels as we travel through the rest of fiscal ’23. That will be a gradual development, but we have confidence that, that will happen.