Are There Risks that Could Keep Winnebago Industries, Inc. (WGO) From Enjoying a Smooth Ride? – Ford Motor Company (F), Thor Industries Inc. (THO)

Page 1 of 2

Winnebago Industries, Inc. (NYSE:WGO)Winnebago Industries, Inc. (NYSE:WGO) has long been one of the premier brands in the recreational vehicle — RV — market. Now, I’ll admit to having preconceived notions about the whole RV culture. I imagined a dreary trailer park experience where your neighbors Bubba Ray and Doreen are parked two feet away, play country western music from the 1980’s, and keep inviting you over for “brewskis” and grilled hot dogs. But late last year a friend of mine invited me to go to a large RV show in Phoenix, Arizona, held at the beautiful stadium that is the site of the NFL Arizona Cardinals’ many exciting losses.

There I learned that my notions were completely wrong. The demographics of RV enthusiasts are not only much broader than I imagined, but considerably more upscale. Today’s motor homes and travel trailers are beautifully furnished and comfortable. Think of them as tiny, luxurious New York apartments with the latest high-tech electronics but much more reasonable rent.

Industry Outlook

So after spending a day at the RV show looking at the product offerings of Winnebago Industries, Inc. (NYSE:WGO) and one of its major competitors, Thor Industries Inc. (NYSE:THO), as well as talking to customers, I felt pretty positive about this industry’s outlook. The buoyant stock market makes people feel wealthier and more confident about making big ticket purchases. Interest rates are low, which makes financing an RV less costly. The summer travel season is rapidly approaching, which is the prime time for RV sales. A longer term positive factor is the gradual aging of the US population. Retirees are still an important market for companies like Winnebago.

But as we know, the road to profitability is filled with potholes. And Winnebago, in its 10-K, provides us with a description of some of the risk factors it faces.

Tough Competition

Winnebago Industries, Inc. (NYSE:WGO) cites the strength and size of competitors as a risk, particularly in the towable RV market, which include travel trailers and fifth wheels. Thor Industries, Inc. (NYSE:THO), for example, is a large competitor in that sector. It’s worth noting that Warren Buffett is a participant in this industry. Berkshire Hathaway Inc. (NYSE:BRK.B) owns Forest River Inc., another well respected RV manufacturer. From Winnebago’s standpoint competitive factors include innovations by these companies that result in superior product offerings, greater purchasing power that brings about lower manufacturing costs, and the brand awareness these companies have earned. Winnebago might be guilty of being a bit modest here: on Feb. 14, Statistical Surveys, Inc., a retail reporting service, named Winnebago the top performing motorhome manufacturer. During calendar year 2012, the company had both the largest volume and the largest overall growth in motorhome retail registrations.

Reliance on a Few Dealers and Suppliers

In 2012 one of Winnebago’s dealers accounted for more than one-quarter of the company’s revenues. The loss of a dealer this size could of course be a major blow to sales prospects. On the parts supply side, Winnebago uses chassis built by Ford Motor Company (NYSE:F) and two other suppliers. The risk is that production delays or work stoppages at these suppliers could cause an interruption of Winnebago’s production schedule as well. Chassis suppliers use an allocation system during periods of short supply, based on the volume of chassis purchased in the past. So Winnebago has to keep an eye on how Ford’s operations are going, as well as on the demand for their own products.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!