NewWinnie Q4 Results

What’s up with the Newmar Winnebago deal lately? Winnebago shares. WGO is up, way up. There is a lot more to share about Winnebago and Newmar but let’s take a look at how the shares have performed since the beginning of the year:

At the beginning of the year, the stock was trading in the low 20s. And now? 49.24 at the close of market yesterday.

Shareholders have been well rewarded by Winnebago this year.

I listened in to the analyst call for Winnebago’s latest quarterly report. Aside from all of the financial blah, blah — which I expect is of little interest to most — there were a few interesting comments from President and CEO Michael Happe.

First up was a comment on Winnebago’s motorhome segment.

Revenues in this segment? Down almost 18 percent from last year.

Turning to the Motorhome segment; reestablishing a premium leadership position in this business remains a key priority for us and the launch of new products and designs continues to provide customers with an enhanced lineup of high quality innovative products. For the full year, revenues were down 17.9% from fiscal 2018, in line with the industry, and adjusted EBITDA margin of 3.9% contracted by 20 basis points.

Second, on the transition of Class-A diesel from Oregon to Iowa. Note that this is yet to include the Newmar acquisition. There is another way of saying the company negatively “affected both product availability and gross margin” — we screwed up. But, with high stock prices comes happy shareholders. Management gets cut some slack.

The Motorhome team has dedicated a considerable amount of energy and resources to positioning the business for sustained profitability. One source of market and financial pressure for the Motorhome segment has come from the Class-A Diesel category where our manufacturing and supply chain challenges surrounding our Oregon to Iowa assembly transition affected both product availability and our gross margins.

Where does Newmar fit into Winnebago’s plan to consolidate and centralize the diesel business? Not clear right now. The move to consolidate the Winnebago brand appears to be focused strictly on operational efficiency.

Executing on our plan to consolidate and centralize the Winnebago brand diesel business will improve our overall efficiency and financial strength. Additionally, the acquisition of Newmar, which is the fastest growing brand of Class-A Diesel RVs, aligns with our strategy to reenergize our Motorhome business by enhancing our position and capabilities in the motorhome market and building on the progress we have made driving growth and innovation across our offerings.

Looks like executing on this plan has not gone well. Struggling is the key word here. Happe did not clarify what he meant by the phrase “because of what we’ve done to ourselves” so we can only imagine what that might mean.

The Class A segment is where we have been struggling in part because of what we’ve done to ourselves with the diesel transition from Oregon to Iowa. It will come online with our new production of diesel in May or June of this 2020-year.

As for Newmar? Winnebago will be having “significant” conversations between the two lines of business. My read is that they intend to establish a new product line across Winnebago and Newmar. Perhaps Winnebago will be selling only “entry” coaches and Newmar will be selling only “luxury” coaches. Interesting comment.

As you can imagine as we integrate the Newmar brand, we will be having significant conversations between our Newmar business and our Winnebago business about how we can complement each other in the Class A category with those two brands. Newmar has momentum, but is a luxury line; Winnebago does not have momentum in that particular segment. It is working on some things to improve that, but we will work very carefully to try to create the right mix across both of those brands in the Class A category. So that we can remain competitively relevant going forward.

I expect that we will see some interesting outcomes from these significant conversations between the Newmar and Winnebago business lines.

Let’s hope that the new management team does not do to themselves whatever it was they did to themselves before when they tried to improve their Class A motorhome segment.

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