2020 has been an up-and-down year for the RV companies, and Winnebago (NYSE: WGO)
has been no exception. Even though a lot of people want an RV, pandemic-related disruptions and economic uncertainty have contributed to fewer people getting new RVs than you might expect.
But even though its been a rocky road in 2020, 2021 promises to be much better. Here are five reasons why the RV industry – and Winnebago in particular – are set for a 2021 boom.
1. RV Industry Association Projects Record 2021
Winnebago has been benefiting from the #Vanlife trend in 2020, but it does not appear that RVs will be a one-year wonder; the RV Industry Association is projecting total shipments of 507,200 units in 2021. That would represent a record total and a 19.5% gain over the full-year 2020 projection.
The full-year 2020 projection of 424,400 equates to a 4.5% gain over 2019. The industry had to contend with a significant slowdown in March, April, and May due to closed dealerships and a painful recession – Winnebago’s sales dipped 41% during those months – so the modest gain looks impressive in that context.
2. Backlogs Hint at Blockbuster 2021
Thor Industries (NYSE: THO), a close comparable of Winnebago, recently reported its Q4 numbers and said it is expecting consolidated growth of around 20% in 2021.
One reason for Thor’s optimism is a record order backlog of $5.74 billion, up 186% yoy.
Winnebago, in its most recently released report in June, said its Towable backlog was up 87% yoy and its Motorhome backlog had increased 99% yoy. Those numbers could be even higher when Winnebago reports later this month.
3. Winnebago is Gaining Market Share
Earlier this year, Winnebago noted that its North American RV retail market share was 11.7%, up 1.7 share points (up 1.2 share points on an organic basis) compared to the same period a year-ago.
Winnebago is in an enviable position as a company getting a bigger piece of a growing pie.
4. First-Time Buyers Fueling Growth
The RV industry is attracting new customers in two ways:
- They go all-in, buying an RV with the intention of taking it on several long trips.
- Instead of buying, they dip their toes in by renting an RV for a week or two.
Yes, the first scenario is preferable to the second, but renting an RV does often lead to buying an RV. A lot of the people that rented an RV this past summer may be ready to buy one in 2021.
Fortunately for Winnebago, the company is attracting a lot of people in both categories. On the Q3 earnings call, CEO Michael J. Happe specifically addressed the influx of new buyers, saying:
“The percentage of first-time buyers varies by product segment within our business. But on average, we believe in past years that that has tended to run around 30% to 35% of the buyers in the past several years have been first-time buyers. We believe in several categories, especially in the Towable segment that that number has increased materially potentially closer to 45% or 50% and maybe even higher in some of the lower price point categories.”
5. Luxury Brands Performing Well
One of the stories of the pandemic has been the smaller effect that the economic slowdown has had on wealthy vs. lower-income individuals. Wealthy individuals are more likely to have jobs or businesses that can be done remotely, and have therefore been more immune from the economic impacts of the virus.
With that knowledge in hand, it’s not too surprising that in Q3, Winnebago’s luxury brands Newmar and Chris-Craft saw “some of their strongest retail and order weeks in memory.”
Shares Look to Be Turning the Corner
Winnebago shares spent the entire summer in pullback mode, but look like they have put in a bottom and are turning the corner.
The $46-48 range acted as support throughout the month of September, which also happened to be just below the 200-day moving average.
The Final Word
The RV road trip has been one of the most popular vacation ideas since the onset of the pandemic. With international travel difficult – at best – people have gotten creative in finding ways to getaway.
The industry faced some roadblocks over the first few months of the pandemic, but appears set to accelerate as we move into 2021. Winnebago’s growing market share and strong metrics make it one of the best RV plays.
I’d look to get in ahead of the company’s next earnings report, set for later this month. Winnebago will likely release outstanding 2021 guidance – or at least hint at an outstanding 2021 – and you could end paying a lot more than you would today.
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