Winnebago's Near-Term Challenges: Analyst Highlights Soft Retail Demand Amid Weak Order Trends

BMO Capital Markets analyst Tristan M. Thomas-Martin reiterated the Outperform rating on Winnebago Industries, Inc. WGO, lowering the price target to $80 from $85. 

WGO reported a Q4 FY23 sales decline of 34.6% Y/Y to $771.0 million, missing the consensus of $784.33 million. 

Revenue was impacted by lower unit sales related to current market conditions and, dealer efforts to reduce inventories, and higher discounts and allowances.

Following the quarterly results, the analyst lowered the price target and estimates to reflect softer volumes in 1H24 and lower ASPs and marine expectations.

The analyst highlights short-term headwinds, mainly soft retail demand, and weak ordering, as dealers prioritize selling down prior model year inventory, overtaking on new inventory. 

Accordingly, 1H24 is expected to be more challenging than 2H24 as dealers wait for retail to improve and are hesitant to hold inventory given high floorplan financing rates, the analyst adds.

WGO announced its Grand Design brand will release a new motorized RV — the analyst forecasts this development to generate a $10 million-$15 million headwind in 2024, with shipments beginning late FY2024 and the new product line becoming accretive in FY2025.

Based on the above, the analyst lowered the FY24 revenue estimate to $3.67 billion from $3.95 billion a year ago.

On the positive side, the analyst notes Winnebago can grow sales and earnings owing to operational improvement, continued market share gains from Barletta, and enhanced product offerings.

Price Action: WGO shares are trading higher by 2.03% to $57.87 on the last check Thursday.