From today’s Des Moines Register-
June 20, 2008
Winnebago profits fall 73 percent
By DAN PILLER
REGISTER BUSINESS WRITER
Forest City, Ia. — Hit hard by record fuel prices, Winnebago Industries inc. said Friday that it earned $3 million for its third fiscal quarter ending May 31 compared to net income of $11.3 million for the same quarter last year.
The profit was due primarily to an $8.9 million tax benefit and a general reduction in its tax rate, the company said. On an operating basis, Winnebago lost $6.9 million for the quarter against an operating profit of $14.7 in the same quarter last year.
Per-share profit for the latest quarter was 10 cents, versus 35 cents per share a year ago. Total revenues for the quarter were $139.7 million, down 40 percent from $231.7 million a year ago.
Winnebago chairman Bob Olson noted that Statistical Surveys Inc., a retail reporting service for the RV industry, reported a 26 percent drop in retail sales of the Class A and Class C motor homes in which Winnebago specializes.
“Discretionary purchases have declined in the United States as the country is faced with unstable fuel prices, consumer confidence at a 16-year low and a tighter credit environment,” Olson said in a statement.
He added “it is an understatement to say that we were not pleased with our operating results in the third quarter.”
Winnebago last month announced the closing of one of its major production lines at Charles City and a layoff of 270 workers effective Aug. 1. That comes after an earlier reduction of 300 workers in March.
Winnebago employment now stands at about 2,600, concentrated primarily at its headquarters plant in Forest City with some operations in Charles City.
The company’s struggle with rising fuel prices as it tries to sell vehicles with a top fuel mileage of 12-14 mpg has been a familiar cycle since the first oil shocks of the 1970s.
The likelihood of a turnaround in light of record high gasoline and diesel prices is uncertain. Analyst Craig Kennison of Robert W. Baird & Co. in Milwaukee said “retail sales will likely remain soft until consumer confidence rebounds and lending rates ease.”
Olson has said that Winnebago’s prime defense against market downturns caused by fuel price problems has been to keep inventories at a bare minimum. He said dealer inventories have been reduced by 10.3 percent during the latest quarter.
Winnebago idled all its production lines for a week in April to let sales catch up with inventories.
“Our dealers continue to emphasize reducing inventories and increasing turn rates for their dealerships, which is evident from the dramatic decline in our current sales order backlog,” Olson said.
