Winnebago(US:WGO)2025-06-25 15:02Financial Data and Key Metrics Changes - Net revenues declined modestly in Q3, primarily due to a shift in product mix as the new lower ASP Grand Design Transcend series travel trailers outpaced the broader portfolio in terms of units sold [23] - Gross margin decreased by 130 basis points year over year, attributed to higher warranty experience and product mix, partially offset by operational efficiencies [24] - Adjusted EBITDA margin declined by 140 basis points year over year, primarily due to the lower gross margin [24] Business Line Data and Key Metrics Changes - In the Towable RV segment, lower net revenues were largely due to a shift in product mix, with a 2.5% increase in segment unit volume [24] - Motorhome RV results showed a decline in net revenues due to lower unit volume related to market conditions, with total motorhome RV volume down 14.8% compared to the prior year [26] - Marine segment net revenues increased by 15%, driven primarily by higher unit volume and targeted price increases, with unit volume up more than 11% year over year [27] Market Data and Key Metrics Changes - North America RV retail sales declined by 8.2% in April, marking the third consecutive month of retail sales dropping by more than 8% [15] - Wholesale RV shipments increased by 3.4% in April, with towable RVs led by conventional travel trailers rising 4.2% compared to the same month last year [16] - The company lowered its industry forecast for wholesale RV shipments to a range of 315,000 to 335,000 units for calendar year 2025 [18] Company Strategy and Development Direction - The company is focused on executing a comprehensive margin recapture plan centered on refreshing the product line, boosting operational efficiency, and rebuilding sustained profitability beginning in fiscal 2026 [10] - Strategic actions include conducting a capacity utilization analysis, reviewing the manufacturing footprint, and evolving the supply chain in light of expected tariff cost pressure [11] - The company aims to enhance long-term competitiveness and enterprise resilience through disciplined resource allocation and operational efficiency [11] Management's Comments on Operating Environment and Future Outlook - Management noted that growing macroeconomic uncertainty has led to a notable downshift in RV activity, which is expected to continue through the remainder of the calendar year [9] - The company anticipates that the inflection point for recovery in the RV market may not occur as hoped, leading to a tempered outlook for the remainder of calendar year 2025 [50] - Management expressed confidence in the resilience of the brands and the long-term potential of the end markets, driven by the growing appeal of the outdoor lifestyle [35] Other Important Information - The company has been recognized by Newsweek as one of America's most trustworthy companies for the second consecutive year [14] - The company is taking a comprehensive approach to minimize the effects of tariffs, with anticipated modest price increases to offset net remaining exposure of tariffs for fiscal 2025 [30][31] - Free cash flow was negative $81.7 million for the nine-month period, driven primarily by operational inefficiencies and strategic investments [28] Q&A Session Summary Question: Steps being taken to address the Winnebago branded motorhome business - Management discussed significant production reductions to avoid pushing units to the field with high sales allowances, focusing on improving working capital and cash flow [38][39] Question: Profitability decline in the motorized business - Management indicated that the decline is related to deleverage and necessary discounting to push products into the market [44] Question: Outlook for the back half of calendar 2025 - Management refrained from providing specific guidance for calendar year 2026 but acknowledged that the market recovery is not occurring as hoped [50] Question: Impact of tariffs on pricing - Management explained that the anticipated tariff-related costs could lead to price adjustments, with a potential net risk of $0.50 to $0.75 of diluted earnings per share for fiscal 2026 [32][54] Question: Inventory management and turns - Management confirmed that they are targeting a two-turn ratio in the long term, although they do not expect to achieve that by the end of fiscal 2025 [88][92] Question: Performance of Newmar brand - Management highlighted Newmar's strong retail share and profitability, attributing success to a robust product line and effective dealer inventory management [100][102]