Winnebago Reports Blowout 4th Quarter – But There Are Warning Signs

“Motorcycles and motor homes are the kind of things that people think about before they buy.  Nobody needs a Harley.  They’re bought when people want ’em, so they’re poster boys for the economy.”

– Ron Muhlenkamp, Portfolio Manager, Muhlenkamp Fund, and a renowned value investor in The New York Times, “The Muted Roars of Hogs and R.V.’s”, Sunday September 30

Winnebago (WGO), a premier seller of RVs, this morning reported a blowout fiscal year 4th quarter (through August 25th) – revenues were up 14.7% on a 47.8% increase in their more expensive Class A models (Winnebago Product Classification) (4Q FY Press Release). 

Investors liked what they heard and bid up the shares almost 7%.

But there are warning signs beneath the surface.

“Retail motor home sales levels continue to lag behind last year,” said Winnebago President Bob Olson.  “According to the most recent report from Statistical Surveys, Inc., a retail reporting service for the RV industry, retail sales of Class A and Class C motor homes combined for the month of August 2007 were down 11% ….”

A perusal of their quarterly financial statements also reveal a 13% increase in inventories and a 21% decrease in sales order backlog from the previous quarter.

And there is also reason to think that this quarter might be an anomaly due to Winnebago’s introduction of their new 2008 models.  President Bob Olson said this in their 3rd quarter earnings release: “We believe the sales order backlog increase is due to the timing of our Dealer Days event and the acceptance of our new 2008 products at that event and not a reflection of the current market” (3Q FY Press Release).

If the increase in inventories and decrease in backlog is any indication a lot of sales might have been made in this quarter and their 1st quarter of FY 2008 might not be so good.