May 25, 2018 / 5:03 AM / 4 months ago

With travel season, pain at the pump could add to Winnebago's woes

    By Stephen Culp
    May 25 (Reuters) - Jim and Jenise Harper, retirees from
Evergreen, Colorado, have been living in their 43-foot Winnebago
motor home for eight years, logging 5,000 to 6,000 miles
annually and getting 7 to 9 miles per gallon.
    Now, a surge in fuel prices has them tightening their budget
while limiting their road plans as summer driving season
arrives. "We're not traveling to the East Coast anymore," said
Jenise, adding that the price of "fuel has definitely played a
role in that." 
    Pain at the pump has also compounded the woes of
recreational vehicle companies whose share prices have crumbled
this year.
    Winnebago Industries        , the leading RV manufacturer
and one barometer for U.S. consumer discretionary spending, has
boasted sales above its 20-year average for four straight
quarters. Still, its shares have lost more than a third of their
value this year in the face of rising inventories, tariff
concerns and an unusually long winter. 
    Shipments to dealers in the sector surged in late 2017,
according to Recreational Vehicle Industry Association data.
Seth Woolf, analyst for Northcoast Research in Cleveland, wrote
that this could lead to a decrease in wholesale shipments in
2018 which in turn could squeeze margins industry-wide at a time
when gasoline prices are at their highest in four years. 
    The American Automobile Association expects gasoline prices
to average $3 a gallon this summer.             The U.S. Energy
Information Administration has projected a 13.7 percent increase
at the pump since last summer. The EIA expects diesel, which
powers many of the largest RVs, to be 12.7 percent costlier this
summer. 
    This could discourage RV owners from roaming and also could
scare off prospective buyers. 
    Winnebago's motor home retail prices range from just over
$20,000 for compact towable models to more than half a million
dollars for semi truck-sized class A mobile mansions like the
Harper's, according to the company's website.
    As of Wednesday's close, Winnebago stock was down about 35
percent since the beginning of the year, with fellow OEM Thor
Industries         off 37 percent and RV services/dealer Camping
World         down 57 percent. 
    In contrast, the S&P 600 Consumer Discretionary index
          has advanced 3.6 percent.
    A Winnebago representative declined to comment for this
article. Neither Thor Industries nor Camping World responded to
requests for comment.
    AAA expects 42 million Americans to travel this Memorial Day
weekend, the most in more than a dozen years. Conference Board
consumer confidence data in April showed more consumers were
planning a road vacation over the next six months than at the
same time last year.
    This data does not factor in those who already own and are
living in their RVs full time, often on a fixed income. The
number of these gypsy types is all but impossible to nail down.
    "We've heard anecdotally that the number of full-timers –
both retirees, and people able to work from the road – have been
growing," said Kevin Broom, Director of Public Relations for the
Recreational Vehicle Industry Association. 
    "There’s certainly a segment of people...working at Amazon
or even packaging vegetables," said Jim Harper. 
    Mr. Woolf said that while fuel prices may have played a role
in WGO's share decline this year, heightened inventories, fears
over potential steel and aluminum tariffs and unusually bad
winter weather have exacerbated the slide. 
    In January Woolf downgraded WGO to neutral. "We ran the math
and the inventory was insane. And once we got into February all
the news about the tariffs caused concern," Woolf said in a
phone interview. 
    Still, when keys are in hand and the road is open, the
wallet can take a backseat to wanderlust. "This lifestyle is
keeping us young," said Jenise Harper. "Will (fuel prices) stop
us from RV-ing? No."

    
 (Editing by Alden Bentley and David Gregorio)
  
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