Winnebago Industries Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joe Altobello - Raymond James - Analyst : I guess, first question, I wanted to go back to the guidance for a second. You talked about, obviously, the challenging backdrop as well as tariffs. How much of the, call it, $0.50 cut at the midpoint to EPS is specifically on the tariffs?

Question: Joe Altobello - Raymond James - Analyst : Okay. Understood. And then just a follow-up on that, the pricing point. What price increases would you contemplate if certain tariffs were to go into effect, for example?

Question: Scott Stember - Roth Capital Partners - Analyst : Yes, Mike, when you were talking about a lower shipment guidance for '25. It sounds as if you guys are incrementally more concerned about retail, at least that's the way that it appeared. But what are you seeing right now, at least in March? I know that, that's a little bit ahead of the key months that you talked about. But are you seeing anything in March that is making you more incrementally concerned that the start of the selling season could be at risk?

Question: Scott Stember - Roth Capital Partners - Analyst : Got it. And then the last question is one of your big competitors recently announced that they formed some strategic alliances with some big dealers. Just trying to get a sense of what's your early read on this for the entire industry, the relationship between OEM and dealer? And if you could talk about any potential impact on your guys' business?

Question: Sean Wagner - Citi - Analyst : Is there any color you can give on the phase into the top line or margin in the second half of the year? Or are there any one-offs we should be aware of in either quarter? Bryan Hughes - Winnebago Industries Inc - Chief Financial Officer, Senior Vice President - Finance, IT and Strategic Planning So I don't think you should look for particular one-offs, so to speak. We continue to expect a sequential improvement, both in the top line from a

Question: Sean Wagner - Citi - Analyst : Okay. And I think you mentioned inventory turns currently around 2 times. What is your ideal? Where would you like to end the year? And I guess, any thought on where you would want 2026 or just long term to be? Bryan Hughes - Winnebago Industries Inc - Chief Financial Officer, Senior Vice President - Finance, IT and Strategic Planning Yes. A lot of that will depend on where our dealers drive this, influenced, of course, by the interest rates that they are experiencing. Look, I think they're going to continue to push for higher efficiency in the form of higher turns. And so we'll work closely with them on what that balance looks like. In other words, serving the customer with having inventory available on their lots, that will remain important to us and stocking level and the agreements we have with our dealers will certainly play a role there. On the other hand, we know that they're going to continue to push for higher efficiency. So what that right number is, we don't have a specific guide as it relates to the 2.0 going to 2.5, for example, we don't have a specific target in mind. We want our dealers to serve our customers and have product available. And so that's what we'll continue to work in partner with them on -- is to make sure that they have our full product lineup available and that they've got the floor plans that our customers are wanting.

Question: Tristan Thomas-Martin - BMO Capital Markets - Analyst : Could you maybe just remind everybody that the motorized chassis, particularly like the Bs and the Cs, the Sprinters, the Pro Masters, Transit, all that stuff, where is that manufactured? And then what -- how should we think about where you would source chassis given some of these Mexico auto tariffs? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 27, 2025 / 2:00PM, WGO.N - Q2 2025 Winnebago Industries Inc Earnings Call

Question: Tristan Thomas-Martin - BMO Capital Markets - Analyst : Okay. And then just one quick follow-up. I think in the past, it's -- price increases have always passed through ASP increases. Would there be any thoughts to maybe to like surcharges given the fluidity of everything?

Question: Michael Swartz - Truist Securities - Analyst : Maybe just to start, I think, Mike, in your prepared comments, you talked about resetting the pricing strategy with the Winnebago Towables business. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 27, 2025 / 2:00PM, WGO.N - Q2 2025 Winnebago Industries Inc Earnings Call Maybe provide us a little more context there of what exactly that means? I would assume some of that is maybe going down market a little bit given where the Grand Design mix has gone over the past 12 months or so, but just any context would be helpful?

Question: Michael Swartz - Truist Securities - Analyst : Okay. Great. And then maybe just -- I know you talked about managing or balancing margins and market share. And I think over the past four or five quarters or so, you've pretty consistently undershipped the market. I guess how do you just think about that maybe over the coming 12 months in terms of how you think of market share? Is there a point where you need to put some more product back into the market more on the towable side than maybe what you've been doing over the past couple of quarters?

Question: Andrew Wolf - C.L. King & Associates - Analyst : My question is related to the last question. It's about the sequential change in dealer inventory. And just a similar question, I guess you answered it, but in two of the segments, it was up, which I think is obviously seasonally related, but I wanted to ask if there was any sense of restocking or buying into anticipation of future sales? And I guess, it seems like you answered it in some of the innovation you're doing. But there's also the other -- the motorized where it was down sequentially, which really was contrary to seasonality, should have been up, which is telling us that the dealers are still quite cautious there given the price point. So could you just add any flavor on that in the context in which I'm asking about, potential stocking up in limited areas where the dealers, at least as of the end of last month, might have been feeling there were going to be good future sales?

Question: Andrew Wolf - C.L. King & Associates - Analyst : Just a quick follow-up and this is the last question. How do you feel about the rebate or helping the dealers clear out some of the -- whether it's older Winnebago product maybe more than Newmar on the Motorized side?

Question: Patrick Buckley - Jefferies - Analyst : This is Patrick Buckley on for Bret. Could you talk a bit more about where we are in the marine cycle versus RV? How is the overall dealer help there? And maybe what's the current appetite for restocking versus destocking into the spring and summer seasons?

Question: Michael Albanese - The Benchmark Company LLC - Analyst : Just a quick one. Wondering if you can comment on the increase in the warranty expense in the Towable segment? Maybe just give us an idea, I guess, of the delta year over year or maybe the margin impact? And I guess, really was that -- is it within your expectations and historical cadence? Just any color there would be helpful. Bryan Hughes - Winnebago Industries Inc - Chief Financial Officer, Senior Vice President - Finance, IT and Strategic Planning Yes, I'll cover that first, Mike, and then you can chime in with some additional thoughts if you'd like. I guess there's a couple of comments I'd make. First, our Winnebago Towables business is going through a reconstruction and revitalization as we've talked about earlier in the call here. And as we address the historical quality issues that this business has had, we are certainly experiencing elevated warranty expense as a percent of sales, and we hold this to be more transitory. In our Grand Design Towables business, I'll remind you of the longer history as it relates to warranty expense and experience in this business, where we had a couple of years, fiscal '23 and fiscal '24, where warranty expenses ratio to sales was notably lower relative to the long-term trend. In fiscal '25 now, we have seen warranty expense ratio to sales rise, sales gone through the trough of the cycle to maybe, call it, 30 to 50 basis points higher than historical levels as a result of addressing some broader quality campaigns. The increases versus the low ratio of the sales in fiscal '24 is closer to 1 point of margin probably. We've always emphasized quality and taking care of our customers and Grand Design is noted in the industry for doing so. So I'd say the higher ratio to sales in the current quarter is more a reflection of that practice, combined with going through the current cycles troughing sales. So if you look at the details underneath the businesses there, it's -- there's a couple of different dynamics going on, but that's how I would describe the current quarter performance.