Winnebago (WGO, Financial) is experiencing a downturn as sluggish demand in 1Q25 led to a third consecutive quarter of missing EPS expectations. Revenue fell by 18% to $625.6 million, marking the ninth straight year-over-year decline, highlighting the RV industry's struggles.

Winnebago's challenges are shared by peers. Thor Industries (THO, Financial) also reported disappointing Q1 results, and REV Group (REVG, Financial) saw a 26.5% drop in its RV segment sales in its latest earnings report.

• WGO's dealer network limited orders due to weak retail demand. High interest rates and cautious consumer behavior have created significant obstacles for the RV sector. Consequently, the Towable RV segment's revenue plummeted over 23% to $254 million, while the Motorhome RV segment saw a 19% decline to $271.7 million, despite increased discounts.
• The promotional environment and lower sales led to a 290 basis point drop in gross margin to 12.3%, following a 340 basis point decrease in the previous quarter. WGO anticipates continued challenges in 2Q24.
• However, there are positive aspects. The Marine segment's revenue rose by 4% to $90.5 million, thanks to market share gains for Barletta and Chris-Craft brands. Additionally, industry-wide RV shipments increased by 2.4% in October, ending a 40-month decline streak.
• CEO Michael Happe expressed optimism due to improved inventory levels, the conclusion of the election, and potential interest rate cuts. However, recent Fed comments suggest a cautious approach to rate cuts as inflation trends are evaluated.

Overall, demand for WGO and the RV industry remains weak due to high interest rates. Long-term prospects are better as healthy dealer inventory levels could support stronger margins and earnings when the downturn reverses.