Winnebago’s Happe: Retail Demand ‘Inconsistent, Sluggish’ – RVBusiness – Breaking RV Industry News

Michael Happe

While the short term continues to pose a challenge, the long-term forecast for the outdoor recreation industry remains extremely favorable, said Winnebago Industries President & CEO Michael Happe.

In a conference call Thursday (June 20), Happe told investment analysts that the company’s Q3 financial performance was affected by “macroeconomic softness caused by elevated interest rates and pockets of persistent inflation.”

Winnebago’s third quarter consolidated net revenue was $786 million, down 12.7% from the same period in 2023, but up 11.7% sequentially from Q2, supported by the company’s towable RV and marine segments.

“In the eight weeks since our Q2 earnings call,” Happe said, “RV Industry retail demand has remained both inconsistent and sluggish, with limited evidence that economic conditions are improving for outdoor recreation consumers as we move into the fourth quarter of our fiscal year. While this environment necessitates near-term caution and discipline, the secular future growth of outdoor recreation engagement by consumers is undoubtedly a key driver for the health of our business long-term.

“With that in mind,” he continued, “I will emphasize three points to our investors early to frame this morning’s discussion. First, over the long-term, challenging markets make strong companies even stronger. Our focus on maintaining durable margins and resilient profitability relative to competitors through production discipline and intentional sales support is unwavering.

“Our collaborative operating model across our brands and functional centers of excellence ensures the choices we make in the short-term are in our best long-term interest. Maintaining valued product differentiation, premium brand essence, total aftermarket support to our dealers and end customers and relevant share all matter greatly, but must be balanced with the commitment to sustainable profitability,” he said.

“Second, while we expect industry softness to continue in fiscal Q4 on a year-over-year basis in our Motorhome RV and Marine segments, the gradual improvement we are seeing in field inventory composition in these markets is an encouraging sign for calendar 2025 and beyond,” Happe said.

“Third, our healthy balance sheet and strong cash flows enable us to execute on our select growth priorities while maintaining a balanced capital allocation strategy that continues to return cash to our shareholders through dividends and share repurchases. Our cultural, strategic and financial strengths have us poised to successfully pursue the mid-cycle targets communicated in a prior earnings call in the years ahead,” he concluded.

What follows is an edited account of the rest of the conference call:

On the company’s forecast for the RV industry’s performance in 2024:

Happe: Based on industry results to date, ongoing economic softness and reduced order backlogs across the industry, we expect additional destocking by dealers for the remainder of the calendar year. As a result, we have revised our industry RV wholesale shipment forecast for calendar year 2024 to a range of 330,000 to 335,000 units, slightly below the midpoint of the RV Industry Association’s most recent estimate. Our latest retail estimate for the same calendar 2024 period is around 340,000 units.

On Winnebago’s company performance expectations in Q4:

Happe: We do not currently expect a notable improvement in the RV and marine industries through the end of the calendar year. Consumer sentiment impacted by delays to the lowering of interest rates and other difficult macroeconomic factors will continue to weigh on dealer willingness to order and carry inventory.

With these factors in mind, we are anticipating Winnebago Industries Q4 to be flat to slightly down versus Q3 on a sequential basis on the top revenue line.

We expect we will continue to face margin or yield challenges tied primarily to market pressures and pricing in the form of heightened discounts, and we are, therefore, anticipating profitability will be down sequentially as well. These expectations are consistent with the prevailing retail trends in the industry and are also consistent with dealer sentiment and their preference to stay appropriately lean on inventory levels.

On the “frame flex” issue currently buffeting certain fifth-wheel manufacturers, including Winnebago subsidiary Grand Design RV Co.:

Happe: I want to directly address the misinformation that has been disseminated on social media regarding excessive frame flex across the industry, including a small percentage of our large Solitude Momentum fifth-wheel products. In each reported case, the Grand Design team and/or its network of dealers have performed a thorough product review and are collaborating directly with impacted customers to resolve any concerns.

The team has also been working directly with our frame supplier, a third-party structural engineering firm and industry experts to continue to ensure that our products and processes meet and exceed industry standards. Our commitment to customers is absolute, and we continue to stand behind every product we build.

To reinforce that commitment, we recently extended our frame warranty to five years on all Grand Design products. Our one-year base warranty, three-year structural warranty and new five-year frame warranty are also transferable to subsequent owners during the warranty period based on the original purchase date.

These warranties will continue to be honored retroactively from the date of original purchase beginning with model year 2020. Importantly, across Winnebago Industries, three core values guide how we operate every day. Do the right thing, put people first and be the best. These values support our vision to be the trusted leader in premium outdoor recreation and guide interactions with all stakeholders.