Winnebago Industries, Inc. (NYSE:WGO) Q2 2024 Earnings Call Transcript

Bryan Hughes: Yeah, thanks, Fred. It’s a fair question. In fact, I think the target language we use today on mid cycle RV market share was 13% plus. To be quite honest and transparent, we’ve seen a little bit of regression in our current North American RV market share over the last year and a half since we offered those targets. And so some of that lower target that we released today and the future is somewhat attributable to a little bit of the market share pressure we’ve seen in the short term. We actually feel that we fared pretty well considering that we’ve been in a dramatic environment in terms of first hyperinflation and then now an affordability challenge within particularly the RV industry. And we’re a premium branded, premium priced OEM.

And so to hang on to the market share that we have, especially in the last 12 months, we’re not satisfied, but we also believe that that has been pretty reasonable performance. I think as we look forward, we’re just more honest about what I just referenced, the affordability challenges and where we sit in the market. And we want to be — candidly there’s probably a bit of under promising and over delivering that’s associated with that target. We still aspire to 15% to 20% market share for the North American RV business someday in the future, but we think we can grab a couple more points here by the time we get back to mid-cycle, and then anything above that will probably, as you said, be related to strategic growth initiatives like Grand Design motorized and the like.

Just a reminder. When we released some of the targets in November of 2022 for the end of, I think it was our fiscal year ’25 range, we did include some inorganic additions to those targets that we did not speak in detail at the time. So some of those financial and non-financial targets did have some inorganic aspirations in there. These targets this time, in addition to being framed mid cycle, are organic only. And so any M&A activity that we would do in either RV or Marine would be incremental to what we’ve released this morning.

Fred Wightman: Understood. Thank you.

Operator: Thank you. One moment for our next question. And our next question comes from Michael Swartz of Truist Securities.

Michael Swartz: Hey, everyone. Good morning. Maybe just comment on — I think in your prepared remarks and in the press release you talked about within the total RV unit, you kind of called out lower promotion, allowances as being a positive to margins. And I think one of your larger competitors a couple of weeks ago kind of cited higher discounting and allowances as weighing on their quarter. Maybe any commentary you can give us why you think there’s a divergence in the commentary between yourself and your competitor?

Michael Happe: Mike, this is Mike. Good morning. Thanks for the question. I don’t know if we really know the true answer to that, other than obviously Grand Design bears the lion’s weight of our Towable segment, and the team is just being, again, very rational and very targeted with the support that we offer the market, particularly around the aging inventory. So I would hope, Mike, that it’s a combination of our inventory position in the field being very reasonable, our aging inventory being in relatively good shape, all things considered in this environment, and the way we partner with the dealers to still move products at a price point that allows them to make some money and certainly keeps us profitable as well. So our Towable segment is very focused.

We have two brands, one big one, one small one in that segment. So we’re pleased to see that allowance has tempered a little bit in Q2 versus the last two or three quarters. But we’re going to stay focused on it. That doesn’t mean we’re turning away from appropriate support. It just means that we’re being smart about can’t. So I won’t offer any further comparisons to competition because we candidly just don’t know what’s going on inside their businesses in that way.

Michael Swartz: Yeah, understood. Thank you for the commentary and color. And then just a second question. I apologize if I missed this, but did you disclose, I think in the prior quarter you talked about some of the costs related to Grand Design motorized, the startup, and some inefficiencies in the motorized businesses weighing on the prior quarter? But did you quantify what that was this quarter? And then should we still think about the incremental investment for Grand Design motorized being in that $10 million to $15 million range for the full fiscal year?

Michael Happe: Yeah, Mike, that’s still our expectation. I think what we said a couple of quarters ago was that would ramp up during our fiscal year here and get to the $4 million to $5 million investment range by Q4. So we’re ramping up and we continue to do so in accordance with our timing that we expected earlier in the year. So you’re going from — the $1 million we disclosed earlier this year up to a $4 million to $5 million investment by Q4. And we’re still on track with that.

Michael Swartz: Okay. And some of the inefficiencies that you called out last quarter, did you experience those in the second quarter as well?

Michael Happe: We improved from Q2 versus Q1. We’re still less efficient in the current year versus last year. So I think a good way to convey that is that we believe we still have an opportunity to further improve our productivity going forward. And it dragged us year-over-year this year versus last.

Michael Swartz: Got you All right, great. Thank you.

Operator: Thank you. One moment for our next question. And our next question comes from Joe Altobello of Raymond James.

Joe Altobello: Thanks. Hey, guys. Good morning. Most of my questions have been answered here. I did have two quick follow ups. I guess first, of the 13% plus RV market share that you guys are targeting by mid cycle, how much of that is the net impact from the Grand Design motorized launch?