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Winnebago: 2024 RV Rebound ‘Far From Certain’

WinnebagoWinnebago is one of the corporations who take ESG (environmental, social, governance) impacts into account in its policy decisions because those things matter to many consumers today.

The following is a report from SeekingAlpha.com.

Winnebago Industries (WGO) is weathering the post-pandemic storm with the stock price holding steady over the last few years. Despite facing an industry-wide drop in RV sales, the company’s growing market share and a more diversified profile following a string of strategic acquisitions have helped to support overall solid fundamentals.

We last covered WGO back in 2021 taking a bullish view, citing the positive trends at the time. Frankly, we’re a bit surprised that shares have delivered a positive return over the period considering conditions have evolved mostly weaker than we expected.

Indeed, our update today highlights that while the macro picture has improved compared to the headwinds of 2022, a recovery in the RV market still faces significant uncertainties. Our call here is for investors to proceed with caution when looking at WGO with 2024 likely being another challenging year.

WGO reported its Q1 fiscal 2024 results back in December covering the three months through November 25th. Non-GAAP EPS of $1.06, missed the consensus by $0.11 and fell by nearly half from $2.07 in the period last year. Revenue of $763 million was down by -20% year-over-year but did come in above estimates closer to $723 million.

The story here considers the sharply lower unit sales with dealers essentially pushing back on new orders while moving through existing inventories.

Across the portfolio, “Towables” have been a strong point with unit deliveries up 9.1% year-over-year, even as segment net revenues fell by 5% given discounting and promotional activities.

On the other hand, the core “Motorhome” RV group saw a -31% decline in unit deliveries while revenues fell by -28% considering efforts to maintain premium pricing. There is also the smaller “Marine” business with brands like “Chris Craft” and “Bartella” where boat deliveries fell by -34% y/y.

The top line weakness translated to a lower gross margin of 15.2%, down 160bps from the period last year. Similarly, the adjusted EBITDA margin at 7.1% was down from 10.2% in Q1 fiscal 2023.

To place these figures in context, consider that the industry faced major supply chain disruptions between 2020 and 2021 leading to widespread shortages and low inventories.

Fast forward and the comparison period from last year fiscal 2023 still captured some of that momentum as Winnebago worked through the record backlog at the time. By this measure, the headline numbers reflect a combination of an industry downturn as well as exceptional volatility over the last few years.

Read the full report from Seeking Alpha here.

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