Winnebago’s earnings show weak discretionary spending

A Winnebago Industries Inc. travel trailer sits at the Motor Sportsland RV dealership in Salt Lake City, Utah, USA, on Monday, April 6, 2020.

George Frey | Bloomberg | Getty Images

Winnebago closed its financial year with a solid result Fourth quarter results exceeded. Adjusted earnings per share of $1.59 easily beat Wall Street expectations, thanks to the recreational vehicle maker’s ability to efficiently manage costs, production and inventory in the quarter.

But that masked a big problem for the company – weaker discretionary spending. It’s a challenge across multiple sectors, from blue jeans to Pizza delivery serviceas high inflation weighs on consumers.

The company also reported revenue of $771 million on Wednesday, down nearly 35% from a year earlier. It fell short of Wall Street’s expected $784 million as sales in the RV division fell well short of consensus expectations ($318 million versus expected $355 million, according to StreetAccount).

Winnebago blamed “lower unit volumes related to current market conditions and dealers’ efforts to reduce inventory, as well as higher discounts and allowances.” RV shipments fell 52% year-over-year.

Price increases were nowhere near enough to offset weak demand.

CEO Michael Happe said: “The consumer market remains challenged and our fourth quarter results reflect a stubborn retail environment.”

While the company didn’t provide financial guidance, Happe said he expects these trends to continue in the first half of the new fiscal year. However, by the second half of the fiscal year, Happe is optimistic that inventories will normalize and consumer demand will stabilize.

Winnebago shares, which fell 3% on Wednesday, had fallen about 13% in the past three months, far underperforming the broader market. rival Thor Industries was also down about 17% over the same period – a reflection of challenging demand conditions across the industry.

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