Winnebago swings to 1Q loss as RV sales swoon

NEW YORK — Motor home producer Winnebago Industries Inc. reported Thursday it swung to a fiscal first-quarter loss, saying customers continued to have difficulty financing RV purchases while the troubled economy kept many away from dealerships altogether.

Chairman and Chief Executive Bob Olson said the company expects sales to remain weak, especially during the seasonally slow second quarter. The company is continuing to look for ways to cut costs, Olson said, and reduced its head count by 12 percent to 1,700 employees since its last earnings report in October.

"This downturn has been one of the most difficult downturns that I have been associated with," Olson said during a conference call with analysts.

Forest City, Iowa-based Winnebago said it lost $9.6 million, or 33 cents per share, in the quarter ended Nov. 29, compared with a profit of $10 million, or 34 cents per share, in the same quarter last year. Revenue tumbled 68 percent to $69.4 million from $215.1 million.

Analysts surveyed by Thomson Reuters expected a smaller loss of 22 cents per share on $77.4 million in revenue, on average.

The recreation vehicle industry has been particularly hard hit by the economic recession, with Winnebago being no exception. Motor homes are discretionary purchases, easy to put off when times are tough and uncertainties over a job or a home become more pressing.

In addition, the tight credit markets have made it more difficult for those in the market for an RV to obtain the needed financing.

"Obtaining credit at both the wholesale and retail level is the No. 1 issue facing our industry today," Olson said. "In talking with our dealers, they believe there are customers who want to purchase our products but due to a variety of challenges the customers cannot secure the financing to do so."

Industrywide RV shipments plunged 53 percent in October to 13,500 units, according to the Recreation Vehicle Industry Association.

Winnebago said inventory reductions during the quarter netted the company $27.3 million. That helped boost its cash and cash equivalents by 61 percent to $28.8 million, the company said.

Olson said the company's dealers have been working to reduce inventory. The company's Winnebago, Itasca and ERA dealer partners had inventory of 3,296 motor homes at the end of the quarter, down 25 percent from the same quarter last year, he said.

But he said the weakness facing the RV industry will persist for some time, possibly into early 2010. He said he was encouraged by the rapid drop in fuel prices — which hindered sales of the gas-guzzling vehicles earlier this year — but other challenges are beginning to emerge, including rising unemployment and falling consumer confidence.

The company is working to find ways to reduce costs, Olson said. One measure for just how much the company has downsized is the degree to which its work force has shrunk over the past several years. Olson said the total number of Winnebago employees has fallen by about 60 percent from its peak in 2004.

Although he did not specify if additional cuts were planned, he said all company personnel — himself included — will be taking an entire unpaid week off during the current quarter. The company will also shutter production for two weeks during the holiday season, though Olson said a one to two week production shutdown is typical each year.

"We will continue to investigate other cost-savings throughout the months ahead," Olson said during the call.

Shares of Winnebago fell 21 cents, or 4.3 percent, to close at $4.73 Thursday. The stock is down 77 percent for the year.

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