RV giant Winnebago (WGO) reported fiscal first quarter earnings on Friday that beat expectations on the top and bottom lines. While shares are up over 100% year to date, Winnebago CEO Michael Happe says tariffs on Chinese goods have still taken a toll on his business.
“The biggest risk to our business is uncertainty,” Happe tells Yahoo Finance’s The Ticker. “We've been very pleased that the American consumer has been so resilient and adaptable to the tariff and trade environment…We're watching the consumer very carefully to make sure that their shoulders and backs aren't getting too tired from carrying the economy.”
Happe notes his company produces products for consumers with disposable income, and uncertainty can spook potential buyers. Still, Winnebago’s quarterly earnings show consumers are still active. Revenue increased 19% year-over-year on strong growth in the RV 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.
But Happe says the tariffs from the U.S.-China trade war have affected the way his company does business.
“There was an immediate impact, especially at first with steel and aluminum,” Happe explains. “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.”
And while fears of a recession have loomed over American businesses, Happe says he is less concerned now than he was a few months ago.
“This fear of an imminent recession or slow-down has been lessened here in the last probably three to four months,” Happe says. “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.”
This comes as Happe says he has to be very strategic in looking to expand the company. Winnebago acquired Newmar Corp., a luxury RV manufacturer in September for $344 million. Newmar boasts a line of motorhomes approaching $1 million each.
“We think we've done a really good job in the last three years, adding some very select pieces to the portfolio,” Happe explains. “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.”