Shares of Winnebago Industries (WGO) gave back 5 percent of recent gains on Thursday after the company reported a fiscal second-quarter loss that was wider than analysts expected.
The maker of recreational vehicles said it lost $10.4 million or 36 cents per share for the quarter ended Feb. 28, compared to profit of $2.5 million, or 9 cents per share in the year ago quarter.
Revenue dropped of a cliff — down 81 percent from last year to just $31.8 million. Wall Street analysts were expecting the company to post a loss of 31 cents per share on revenue of $42.7 million, according to a poll conducted by Thomson Reuters.
It was the third consecutive quarterly loss for Winnebago as the locked-up credit markets continue to make it difficult for consumers to get financing. “It’s extremely challenging to compete profitably in a market of this nature,” said Winnebago Chief Executive Bob Olson.
Continuing, Mr. Olson said, “We anticipate continued softness in motor-home sales until we see improvement in the credit markets at the wholesale and retail levels and in consumer confidence levels.”
The recently completed quarter was negatively affected by the decline in motor home delivery volumes, and increased incentives at the wholesale and retail levels. Results were also hurt by a less favorable mix of products sold.
Increased incentives however have failed to lure buyers as RV sales are closely tied to discretionary spending. In 2008 RV shipments fell 33 percent, according the Recreational Vehicle Industry Association. In January they plunged more than 70 percent.
Many RV dealers across the country have been closing their doors. Just this year alone two of Winnebago’s biggest competitors have filed for Chapter 11 bankruptcy, Fleetwood Industries Inc. and Monaco Coach Corp.
Winnebago is trying to avoid a similar fate and has been working to cut costs. Last month it announced a round of pay cuts for its salaried work force, with Mr. Olson taking the largest cut — 20 percent.
Other execs took 10 percent pay cuts and white collar workers saw their pay reduced 3 percent. Hourly and salaried workers took an unpaid one-week furlough in the second quarter, and another is planned for the fourth quarter.
Mr. Olsen said the company is confident of its financial strength and competitive position in this economic recession. “We have enviable brand strength, quality products and financial stability to withstand the downturn,” he said.
In the short-term though he says the company expects added competitive pressure from deeply discounted product in the marketplace from struggling manufacturers, in addition to challenges presented by the ongoing credit crisis.
He says that once the housing and stock markets recover, and personal balance sheets are shored up with increased savings, more normal spending patterns will prevail.
Let’s hope the company can stay solvent long enough to see that happen.
This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.
