Winnebago's CEO Says The Biggest Risk To Its Business Is Uncertainty

On Friday, December 20, Motor homes manufacturer, Winnebago (NYSE: WGO) reported its fiscal first-quarter earnings, which beat expectations on the top and bottom lines. Winnebago CEO, Michael Happe said that while the stock's shares have been up over 100% since the beginning of the year to present, tariffs on Chinese goods have still taken a toll on the business.

Happe told Yahoo Finance's The Ticker: “The biggest risk to our business is uncertainty. We have been very pleased that the American consumer has been so resilient and adaptable to the tariff and trade environment. We are watching the consumer very carefully to make sure that their shoulders and backs aren't getting too tired from carrying the economy.”

Winnebago Industries Inc., American manufacturer of motor homes ( a recreational vehicle) from its quarterly earnings show that consumers are still active. Revenue increased by 19% year-over-year on strong growth in the Recreational Vehicle space. The company posted adjusted earnings per share of $0.73 on revenue of $588.5 million, and earnings grew 4.3% year-over-year. Despite these reports, Happe says the tariffs from the U.S.-China trade war have affected the way his company does business.

He explained saying: “There was an immediate impact, especially at first with steel and aluminum. Our team is doing everything they can to increase efficiency and negotiate with suppliers fairly to share that pain; maybe even redesign our products to try to manage the cost. But the reality is that it has been a hit to our cogs and we've had to pass along some more frequent price increases to our dealers in this retail environment.”

Even though there are fears of an impending recession over American business, the CEO said he is not so much concerned presently than he was previously.

The CEO said: “This fear of an imminent recession or slow-down has been lessened here in the last probably three to four months. About six to nine months ago, we were probably a little bit more worried about that. What helps us when those times come upon us is that we have a highly variable cost model. We are able to ramp down production relatively quickly, and make sure that we protect the risk of overbuilding or stuffing the channel inappropriately at the wrong time.”

The CEO said he intends to be very strategic in looking for ways to grow and expand the company. In September, Winnebago purchased luxury recreational vehicle manufacturer, Newmar Corporation at a price $344 million. The RV manufactured by Newmar Corp cost about $1 million each.

Happe further said, “We think we've done a really good job in the last three years, adding some very select pieces to the portfolio. Our business development machine is churning inside. We want to de-lever our balance sheet a little bit after this latest acquisition. And then I think we'll be poised to be active again.”