Winnebago Industries Inc

NYSE:WGO

Earnings Call Analysis

Navigating a Challenging Market Environment

Winnebago Industries faced a difficult retail environment in fiscal 2024, impacting both the RV and marine sectors. The company noted a decline in revenues across segments, attributing this to lower average selling prices, reduced unit volumes, and heightened warranty expenses. Particularly, the Winnebago brand experienced operational challenges linked to a plant consolidation and inventory write-offs. Despite these setbacks, the management remains optimistic about a gradual market recovery anticipated over the next 12 to 15 months, with expectations of more marked improvement in the second quarter of calendar 2025.

Shifts in Leadership and Strategic Direction

To address recent operational and financial challenges, Winnebago has implemented significant leadership changes, particularly within the Motorhome and Towables divisions. These changes are aimed at enhancing performance and stabilizing profitability. Furthermore, the introduction of new products, such as the Grand Design's Lineage Series M, has generated excitement among both consumers and dealers, showcasing the firm's commitment to innovation and quality.

Financial Guidance for FY 2025

For the first time, Winnebago provided fiscal year 2025 financial guidance amidst ongoing market uncertainty. The company forecasts for revenue in the range of $2.9 billion to $3.2 billion, reflecting a cautious but optimistic outlook. The adjusted earnings per share (EPS) are projected between $3.00 and $4.50, indicating a potential 10% growth compared to fiscal 2024. Management is focusing on modest price increases and expects that any declines in revenue or EPS in the first half of FY 2025 will be offset by growth in the second half.

Segment Performance Insights

Breaking down segment performance, the RV segment saw revenue declines primarily due to unfavorable product mix and reduced unit volumes. However, the company anticipates improved performance in its Motorhome business, especially with the new Grand Design entries contributing to market share growth. In the Marine segment, while revenues also decreased, brands like Barletta have begun to gain market share, highlighting the potential for recovery as conditions improve.

Operating and Financial Metrics

As of the fiscal year-end, Winnebago reported a net debt-to-EBITDA ratio of approximately 2.0x, which is slightly above its target range of 0.9 to 1.5x. The company remains committed to returning value to shareholders, having repurchased $10 million of stock during the quarter and paid dividends totaling $37 million in fiscal 2024. The focus on maintaining a strong balance sheet and generating free cash flow continues to underscore Winnebago's strategic financial planning.

Understanding Market Dynamics and Future Outlook

The RV industry is currently experiencing a destocking phase, particularly within the motorhome category, with wholesale shipments down significantly year-over-year. However, Winnebago's efforts to rightsize inventories and respond to evolving consumer demands position the company favorably for the future. The management indicates that improved retail conditions, aided by easing interest rates, could stimulate sales as the market stabilizes, thus enabling Winnebago to capitalize on its robust brand portfolio and innovative offerings.

Earnings Call Transcript 2024-Q4

[Operator]

Good day, and thank you for standing by. Welcome to the Q4 and Full Year Fiscal 2024 Winnebago Industries Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ray Posadas, Vice President, Investor Relations and Market Intelligence.

[Ray Posadas, executive]

Thank you, operator. Good morning, everyone, and thank you for joining us to discuss our fiscal 2024 fourth quarter and full year earnings results. This call is being broadcast live on our website at investor.wgo.net, and a replay of the call will be available on our website later today. The news release with our fourth quarter results was issued and posted to our website earlier this morning. Please note that the earnings slide deck that follows along with our prepared remarks is also available on the Investor Relations section of our website under Quarterly Results.

Turning to Slide 2. Certain statements made during today's conference call regarding Winnebago Industries and its operations may be considered forward-looking statements under securities laws. The company cautions you that forward-looking statements involve a number of risks and are inherently uncertain and a number of factors, many of which are beyond the company's control, could cause actual results to differ materially from these statements. These factors are identified in our SEC filings, which we encourage you to read.

In addition, on today's call, management will refer to GAAP and non-GAAP financial measures and the reconciliation of the non-GAAP measures to the comparable GAAP measures are available on our earnings press release.

Please turn to Slide 3. Joining me on today's call are Michael Happe, the President and Chief Executive Officer of Winnebago Industries; and Bryan Hughes, Senior Vice President and Chief Financial Officer. Mike will begin with an overview of our Q4 and full year performance. Bryan will discuss our financial results at a strategic level, provide some further comments on our forward view of the market and discuss our fiscal 2025 guidance. Mike will conclude our prepared remarks with the business outlook and management will be happy to take your questions.

With that, please turn to Slide 4 as I hand the call over to Mike.

[Michael Happe, executive]

Thanks, Ray. Good morning, and thank you for joining us to discuss our results. Let me begin by thanking the employees across Winnebago Industries and our portfolio of outdoor recreation brands for their hard work and resilience throughout the year.

Although a difficult retail environment made fiscal 2024 a challenging year for the RV and marine industries, the collaborative culture and commitment to excellence at Grand Design, Winnebago, Newmar, Barletta, Chris-Craft and Lithionics all serve as the foundation for a return to growth as market conditions improve in the future.

Before we get into the details of our Q4 and full year results, there are several key messages I want to convey on this morning's call. First, while the retail environment remains challenging in the short term, we anticipate gradual market improvement over the next 12 to 15 months. We would expect this to occur more materially as we move into the second quarter of calendar 2025, our third fiscal quarter, factoring in the projected easing of interest rates and decreased inventory levels in the Motorhome RV category. Second, we have made substantive leadership changes at Winnebago Motorhome and Winnebago Towables to remedy the operational and financial challenges that have affected the performance of those businesses in recent quarters. Third, we are delighted by the enthusiastic consumer and dealer response to the Lineage Series M Grand Design's inaugural entry in the Motorhome RV segment.

The new vehicle was featured at last month's Hershey RV show and RV Dealer Open House. The small number of units began shipping Q4. The Grand Design team, with support from the businesses across our portfolio, have created an RV with benefits that we believe set a new standard for excellence in a Class C coach.

And finally, today, we are providing annual financial guidance for the first time. In light of the continued market uncertainty, we are being appropriately cautious out of the gate. But at the midpoint, we are forecasting modest improvement on the top line and adjusted EPS growth of 10% compared to prior year. There are several positive takeaways from the quarter worth noting, including initial shipments of Lineage Series M. While not a meaningful contributor in Q4, we expect Lineage to gain momentum as production ramps in the first half of fiscal 2025.

In our Marine segment, Barletta continued to take market share in the U.S. aluminum pontoon market. In addition, August marked the fifth consecutive month of year-over-year retail growth Chris-Craft. On a trailing 6-month basis, this iconic brand has grown its retail volume by 32% compared with the same period in fiscal '23, driven in part by its new Launch 27, Chris-Craft's retail share in the 20- to 40-foot fiberglass market has increased in the most recent 3-, 6- and 12-month periods as well.

Despite the weak retail market environment, our strong balance sheet and positive free cash flow enable us to maintain a thoughtful and balanced capital allocation approach. In Q4, we generated free cash flow of $30 million, and returned a combined $19 million to our shareholders in the form of share repurchases and dividend payments, underscoring our confidence in Winnebago Industries' long-term growth prospects.

Turning to Slide 5. The RV Industry Association now estimates calendar 2024 wholesale shipments at a median of about 324,000 units, and we are aligned with that projection. We anchored calendar year 2025 RV industry shipments in the range of 320,000 to 350,000 units. Wholesale towable RV industry shipments were up 10% year-over-year for the month of August and up 14.5% year-to-date through the first 8 months of calendar '24. This reflects continued progress towards rightsizing inventory and in addressing the growing consumer demand for affordability.

Motorhome portion of the industry remains in destocking mode, with wholesale shipments down 31% year-over-year in August and down 24.2% year-to-date. Within our universe of RV dealers, inventory turns were down very slightly in the fourth quarter compared with the year earlier period. Inventory for Winnebago Industries was down 4.5% from Q4 of fiscal '23, which underscores our focus on continuing to aggressively manage production amidst what remains a challenging macroeconomic environment.

Turning to Slide 6. For the trailing 12 months ended August 31, our total market share was 11.1%, down 50 basis points for the same period in '23. As I noted on our Q3 call, we have introduced new products over the past 2 quarters that we believe will contribute to stabilizing our market share in the coming months. We believe this deliberate approach is crucial for fostering strong long-term relationships with our dealer partners. As a result, we were pleased to see positive share gains for our Winnebago brand Class C Motorhome and Newmar's full motorized product lines, both of which showed year-over-year growth across the trailing 3-, 6- and 12-month periods through the end of August.

Slide 7 showcases Barletta's continued momentum in the Marine segment. For the trailing 12 months through August 2024, Barletta's market share increased 200 basis points year-over-year to 9.1%. Our premium pontoons consistently outperform competitors, driving exceptional results for our dealer network and elevating the customer experience.

Turning to recent highlights on Slide 8. During the quarter, we made some strategic changes to our executive team. And the leadership in our Winnebago Motorhome and Winnebago Towables businesses. Chris West, who previously served as Senior Vice President of Enterprise Ops and Barletta Boats was named President of our Winnebago-branded Motorhome and Specialty Vehicles business. Chris, an 8-year veteran of Winnebago Industries, in addition to previous oversight responsibilities of the enterprises manufacturing and supply chain operations, all successfully led the integration of Barletta and played a vital role in the boat brand's achievement of double-digit market share growth. His broad experience will be invaluable as we further enhance the Winnebago brand's influence impact and market share.

Our Winnebago-branded Towables business has underperformed our expectations, and it is imperative that we have 2 strong towables brands to compete successfully in the marketplace. To enable the Winnebago-branded Towables business to reach its full potential, Don Clark has been promoted to Group President of our Towables business, effective November 1. Don will expand his responsibilities to oversee Winnebago Towables in addition to his role as President of Grand Design RV. This change centralizes our towables expertise in Indiana. His insights, operational acumen and extensive knowledge of what it takes to win in the space will make Don the ideal and logical choice to lead the team during their next evolution. Both Chris and Don will continue to report to me. These changes are designed to bolster our position as the trusted leader in the premium outdoor recreation market and drive our next phase of growth.

Turning to our product innovations. I am excited to highlight our bold and innovative model year 2025 lineup, much of which we recently showcased at the Hershey RV show. Across our Winnebago Grand Design and Newmar brands, we introduced nearly 150 new models and floor plans, demonstrating our commitment to technology, design and comfort. As expected, one of the highlights of the Hershey show was the Class C Lineage Series M, Grand Design's first ever motorhome model. From its thoughtfully designed interior to its superior payload capacity and driving performance, Lineage more than lives up to the high expectations and exacting standards of our loyal Grand Design customers. These product innovations across our portfolio of premium brands underscore our dedication to elevating every moment outdoors for our customers.

Now let me turn the call over to Bryan for the financial review.

[Bryan Hughes, executive]

Thanks, Mike, and good morning, everyone. As a reminder, in my prepared remarks, I will focus on the key drivers of our performance. Starting with the consolidated results on Slide 9. Retail demand continued its sluggish performance in the fourth quarter. Operating expenses increased in the fourth quarter, primarily driven by a $30.3 million impairment charge associated with the Chris-Craft reporting unit, start-up costs associated with the launch of Grand Design Motorized business and strategic investments in engineering, digital asset development and increased data and information technology capabilities.

The Chris-Craft impairment was the result of lower current financial performance due to challenging conditions in the recreational marine industry. These factors resulted in adjusted EBITDA margin that was down from the prior year period. Note that adjusted EBITDA shown excludes the impact from the Chris-Craft impairment.

We generated healthy full year cash flow, and our balance sheet remains strong. We paid $9 million of dividends in the quarter and we bought back $10 million of shares in the quarter, bringing the fiscal year 2024 dividend payments to $37 million and repurchases to $70 million.

I also want to call your attention to 2 important housekeeping items. Beginning this fiscal quarter, we are no longer including an adjustment for the impact of the call spread overlay in our calculation of adjusted diluted earnings per share. As previously disclosed, this adjustment was made to represent the economic offset of dilution risk from the call spread overlay on our 2025 convertible notes. This adjustment has significantly decreased from prior year largely due to the note repurchase earlier this fiscal year. There was no impact from the call spread overlay in fiscal Q4 of 2024. You'll note that we have included a table in the appendix of our earnings presentation that shows the historical adjusted EPS, excluding this adjustment.

Next, we wanted to give you early notice that starting with our first quarter fiscal 2025 results, we will no longer be providing segment backlog information. As previously disclosed, backlog may not necessarily be an accurate measure of future sales due to the fact that orders and backlog generally can be canceled or postponed at the option of the dealer at any time without penalty. Also, dealers are typically slow to place orders due to trough in the cycle. Therefore, we do not believe that backlog is a meaningful measure of future performance.

To provide our analysts with more relevant financial and operational insight into how we are thinking about the future, for the first time, we are providing quantitative annual guidance on what we consider to be our key financial KPIs, consolidated revenues and adjusted EPS. I'll have more on this shortly.

Turning to our performance by segment, starting with towable RV on Slide 10. Revenues were down from last year's fourth quarter, reflecting a reduction in average selling price per unit related to product mix, partially offset by an increase in unit volume. Segment adjusted EBITDA margin was down versus last year, which was attributable to higher warranty expense due to a favorable prior year trend, deleverage from a reduction in average selling price per unit related to product mix and operational challenges in our Winnebago-branded Towable business.

These issues in the Winnebago brand are related to a shift in plant production, whereby we consolidated activities under one roof rather than two, and the inefficiencies of making this change. Core inventory management practices for several of the products that led to inventory write-downs and write-offs as well as sales incentives to push these product through to dealers and end customers and high warranty expense in this business due to some elevated quality issues in this brand. We also want to highlight that warranty as a percentage of net revenue in our Grand Design business remains at or below our pre-2023 rates.

Turning to Slide 11. Revenues for the Motorhome RV segment were down from the same period last year. The year-over-year change was attributable to product mix, the decline in unit volume related to market conditions, partially offset by price increases related to higher motorized chassis costs. Segment adjusted EBITDA was down from last year attributable to deleverage operational challenges and higher warranty expense. The operational challenges in the Winnebago brand include higher cost per unit produced as we navigate online supply challenges and issues related to quality sales challenges and higher incentives and promotional activity as we position our premium product portfolio in a very cost-conscious and competitive environment, and costs associated with the manufacturing line consolidation and write-off of inventory related to product lines that we are discontinuing or easing back on. We are looking forward to improved performance of our Winnebago-branded Motorized business following the appointment of new leadership for this business, and we are also excited to see the contribution from Grand Design entering the Motorhome business and the accretion in market share and profits that this should bring.

Moving to our Marine segment on Slide 12. Revenue was down in the fourth quarter, primarily due to product mix and a decline in unit volume related to market conditions and dealer destocking partially offset by targeted price increases. To support dealers in moving inventory and create stronger incentives for customers, discounts and allowances remained elevated in the quarter. Also, net revenue in the fourth quarter was affected by a mix shift toward product offerings such as the Barletta Aria as well as the reduction in Chris-Craft volume year-over-year. Segment adjusted EBITDA margin was down from the prior year, due to volume deleverage and higher discounts and allowances, partially offset by targeted price increases.

Moving on to the balance sheet on Slide 13. At fiscal year-end, Winnebago Industries had a net debt-to-EBITDA ratio of approximately 2x, which is slightly above our targeted range of 0.9 to 1.5x. Last month, we paid a quarterly cash dividend of $0.34 per share. Fiscal 2024 was the sixth consecutive year of dividend increases at Winnebago Industries.

During the quarter, we repurchased approximately $10 million of our stock and at year-end, had $230 million remaining on our repurchase program. In fiscal 2024, we returned $106.8 million to shareholders, consisting of $70 million in share repurchases and $36.8 million in dividend payments.

Wrapping up on Slide 14, let me discuss our financial expectations for fiscal 2025 and the assumptions underlying our outlook. As a starting point, our calendar 2025 outlook for RV wholesale shipments is 320,000 to 350,000 units industry-wide. To put this in context, our midpoint represents about 3% growth from the RVIA's median wholesale shipment forecast in calendar 2024. With this important assumption in mind, we expect fiscal year 2025 revenue in the range of $2.9 billion to $3.2 billion. We also expect fiscal year 2025 adjusted earnings per share in the range of $3 to $4.50. The midpoint of our adjusted EPS range would reflect growth of 10% from fiscal '24. Lastly, we anticipate full year interest expense of approximately $25 million to $30 million.

Based on current trends and due to normal seasonality, we anticipate that revenue and adjusted EPS in the first half of fiscal '25 will be lower than the prior year period, with growth in the second half of the year compared with the same period in fiscal '24. Given the state of field inventories and dealer reluctance to take product as we head into the slow winter months, we expect Q1 revenues to be down sequentially as well as year-over-year, and that profit will be challenged in like fashion. We anticipate that the Grand Design RV motorhome entry will experience fiscal '25 sales of $100 million and could even exceed that amount.

That said, we believe that motorhome dealers are expecting to further reduce inventories across the board during our fiscal year 2025, meaning our existing brands and those of our competitors. Grand Design's motorhome business will be dilutive to the Motorhome segment profit measures initially, particularly in the first half of the year as Grand Design begins ramping up production. And the associated cost in the start-up business are not paired with revenues that are at scale. But we have confidence that this new business will be accretive to our Motorhome profit metrics as we cross into fiscal '26 and beyond.

As a reminder, the costs associated with the start-up of this business have been included in our corporate segment through our Q4 of fiscal '24 and amounted to approximately $5 million in the fourth quarter. Please note, fiscal '25 sales guidance for Grand Design RV motorhome is being provided to help size the initial opportunity only and Grand Design motorhome sales will not be broken out going forward, but will be included in our Motorhome segment results.

In closing, as macroeconomic conditions improve, and the RV and marine industry stage the recovery, we remain confident in our mid-cycle organic targets we shared in March. Specifically, we target sales in the range of $4.5 billion to $5 billion, with EBITDA margins in the range of 11% to 11.5% and free cash flow of $325 million to $375 million. We continue to invest in our core competencies and enhancing the customer experience through new products and technologies while maintaining a balanced approach to capital allocation to drive value creation for our shareholders.

Now please turn to Slide 15 as I turn the call over to Mike for some closing comments. Mike?

[Michael Happe, executive]

Thanks, Bryan. As we look to the future, I am confident in our company's strong positioning and long-term growth potential. Let me highlight the key factors that underpin my optimism. Our portfolio of premium outdoor recreation brands isn't just about market presence. It's a foundation for robust future profitability and long-term margin expansion. We have established enterprise-wide centers of excellence that are more than just organizational structures. They're catalyst for synergies. These synergies are positioned to help us drive accelerated growth and enhance profitability across our operations.

At our core, we're powered by a robust technology engine that we believe sets the pace for the end markets we serve. Our unyielding commitment to quality and continuous product innovation ensures we maintain competitive differentiation. In an ever-changing economic landscape, our flexible integrated operating model and highly variable cost structure are key assets. They enable us to maintain durable profitability regardless of economic cycles, providing stability and resilience. Our strong balance sheet and healthy free cash flows are not just numbers on a page, they represent opportunity. We have ample dry powder to invest smartly in growth initiatives while simultaneously returning capital to our valued shareholders.

Finally, I want to emphasize the strength of our management team. They bring deep operational experience to the table, coupled with a proven track record of executing accretive M&A. This expertise will be crucial as we navigate future opportunities and challenges.

Now Bryan and I will be happy to take your questions this morning. Operator, please open the line for Q&A.

[Operator]

[Operator Instructions] Our first question will come from the line of Joe Altobello from Raymond James.

[Joseph Altobello, analyst]

So a couple of high-level questions on guidance, obviously, breaking with tradition here. In giving guidance, can you give us a sense for why you decided to provide it now and maybe your general philosophy around it? Should we view this as realistic or perhaps conservative?

[Michael Happe, executive]

Joe, this is Mike. The decision to provide guidance at this time was one of thoughtful deliberation and certainly a move that we thought was in the best interest of investors being able to understand future business expectations as well as the company contributing more intentionally to the broader Street narrative around our future in a more formalized way.

I think Bryan reflected appropriately the midpoint of our guidance, reflecting modest expectations on both revenue but also upside possibilities on earnings per share. And I won't comment on whether I think the guidance range is neither conservative nor aggressive, but we're very thoughtful about the numbers we included for this morning's call.

[Joseph Altobello, analyst]

Okay. That's helpful. Maybe just to follow up on that. The EPS range is fairly wide, which I can certainly understand and probably would do the same thing if I was in your shoes, but maybe lay out for us the scenarios that would have to happen to get you to the high end and the low end of those ranges? Is it largely volume and revenue based? Or are there other factors impacting margin? And maybe what are you assuming in terms of market share in FY '25?

[Bryan Hughes, executive]

Yes, Joe, this is Bryan. I'll take that. The EPS range is largely just the flow-through of the market at the $320,000 on the low end and at the $350,000 on the high end. We run a number of different scenarios then somewhat to your -- the point of your question as it relates to market share as well as margin. A lot of the margin assumptions we look at highs and lows based on the leverage equation as well as what we think the market will allow in the form of pricing.

Inflation is certainly incorporated into some of those margin views. And then similarly on the market share, we look at things like the entry of Grand Design into the Motorhome business, which we think should certainly be accretive but balanced with all the other forces going on in the market, including current trends on market share. We factored all those things in and weighed them appropriately to come up with a downside and an upside as well as the midpoint.

Before we move on, I just want to point out to the audience here. We are going to be intentional in the time we allow for Q&A. We've received a lot of feedback in the past that our call can get a little lengthy. So we're going to draw the line at 10:00. If that means that one of you don't get a chance at the question, we'll certainly weigh that on our next quarterly call. And as always, we'll follow up with the sell side in one-on-one calls today and tomorrow.

So I wanted to just point that out upfront. So no one is surprised when we cut the call off at 10:00, it is intentional and by design.

[Operator]

Our next question will come from the line of Scott Stember from ROTH.

[Scott Stember, analyst]

Could you guys talk about what you're seeing at retail as we speak right now. There were some positive vibes coming out of open house regarding the Hershey show. Just trying to get a sense what you're seeing across the entire enterprise for RVs, mainly with rates having come down? And secondarily, are you seeing any signs or green shoots that the lower rates are helping dealers to become more constructive on taking '25 product?

[Michael Happe, executive]

Scott, this is Mike. I'll start with the second half of your question. I believe it's a little early for us to see the impact of the Fed funds rate move several weeks ago with either our channel partners or at the retail level. So at this time, I cannot point to a significant and material impact in retail volume nor wholesale volume solely related to the move by the Fed here recently.

Concerning your question about recent retail activity, my only comment there would be that retail continues to be challenging. Sluggish would even be probably the right word in a comp year-over-year context. And we have not seen a meaningful change in overall retail conditions since the end of our fiscal year, including the open house period in late September.

[Scott Stember, analyst]

Got it. And then just the last question on Motorized EBITDA margins. They have climbed up to double digits or low double digits before the recent fall off in profits. But with Grand Design in the mix, can you maybe just give us a broader view of where you expect margins in Motorized to come back to at some point when we have a more normalized market. And then once -- obviously, Grand Design is really hitting full steam with their new products.

[Bryan Hughes, executive]

Scott, this is Bryan. Our expectations for Motorhome have not changed. I think we feel more bullish about them broadly in the long term with Grand Design in the market and believe that longer term that we can return to that double-digit range of EBITDA margin.

[Operator]

[Operator Instructions] Next question will come from the line of Craig Kennison from Baird. [Operator Instructions] Our next question will come from the line of Michael Swartz from Truist.

[Michael Swartz, analyst]

Maybe just to start on guidance. I think there were some caveats in the press release just talking about your assumption is there's no changes in current market conditions, macros, et cetera. But I'm just wondering, are you embedding any additional interest rate cuts in your current -- or your initial fiscal year '25 guidance?

[Michael Happe, executive]

Mike, this is Mike. I would say that our planning process taps into a variety of sources from an economic projection standpoint. And as you know, there's not necessarily a consensus on the number of or the amount of basis point-wise cuts in the future. I think we all realize that the Fed will probably take that on a meeting-by-meeting basis as they look at the broader health of the U.S. economy. But I would say that our planning would generally factor in an average consensus of cuts.

The reality though is that it's -- as probably most of you on the call know, it's quite difficult to correlate a singular element even one as important as retail interest rates to the trajectory of the future business. And so we have projected here in the call this morning that we do project that based on a combination of factors, easing field inventory, the likelihood of maybe a more retail-friendly environment in the second calendar quarter of 2025, that conditions for retail in the outdoor recreation economy could improve in that time period, which, as we mentioned, would actually be probably more so our third fiscal quarter of this '25 fiscal year.

So no specific number of cuts included in our planning, but general alignment with probably the average economic consensus, and that would be reflected in the high end, most likely of the RV wholesale shipment range that Bryan referenced in his comments this morning.

[Michael Swartz, analyst]

Okay. Fair enough. And then just on the Grand Design business, and I appreciate you sizing that out for us, the $100 million plus in revenue opportunity for fiscal '25. But trying to understand what exactly that is based on? Is that just some kind of base stocking level at the dealers that will be stocking this? Is that based on initial orders you've received from consumers? Just any clarity that you can provide there.

[Michael Happe, executive]

Yes, Mike, as you would expect, the Grand Design team has been busy launching the Lineage Series M both at the wholesale and retail level for many, many months, we have been signing up motorized dealers, some who are existing Grand Design Towables dealers, and some who are not yet part of the Grand Design family of dealers. That dealer list has been built here over the past number of months and will continue to be built out into fiscal year '25. We've also begun to take retail orders through the dealers, whether they're at retail shows like Hershey or Dallas or against the stocking inventory that's beginning to flow into the field. And we have a projection on both wholesale and retail for the Lineage Series M.

The other comment I will make, although we are not providing any details yet at this time of any specificity, is that we've stated consistently that the Grand Design motorhome line will be multifaceted in terms of the number of models in the line. And you can expect by the end of fiscal year for us to potentially be in the market with more motorized models from Grand Design as well. So it's a combination of factors. In the first year of any new business strategy like this, there is inordinately a heavier emphasis on stacking inventory, which the team has a good handle on based on their conversations with dealers, some in the form of firm orders and some candidly in the form, at this point, still of forecasted future orders.

[Operator]

Our next question comes from Craig Kennison from Baird.

[Craig Kennison, analyst]

Okay. Hopefully, you can hear me.

[Bryan Hughes, executive]

Yes, we can this time, Craig.

[Craig Kennison, analyst]

All right. Mike, I was wondering maybe if you would share any mandates or KPIs that you've discussed with Chris West or Don Clark and what should investors expect in terms of a change in performance and where you're focused?

[Michael Happe, executive]

Craig, thanks for the question. I won't get into any KPIs in a short-term time frame, but I'll talk at a higher level, certainly in this way. I'll start with Towables. We believe that it's a strategic imperative that Winnebago Industries has at least 2 strong Towables brands to compete in the North American Towables RV market segment in the future. We are very pleased with the performance of the Grand Design Towables business over time and continue to feel that there's significant runway there. So one of the mandates to Don Clark, candidly, on the Grand Design Towables side is to continue with his team to do everything possible to grow their share and profitability of that business in the future.

On the Winnebago-branded Towables side, this is a business candidly that's probably running at about 1.5% market share of the towable space today. We see no reason why long term, that can't be a brand that is at least double that size in the future and potentially could challenge 5% someday. I'm not putting a timeline on that 3% to 5% range but that is the expectation internally is that we can build a business of that significance to complement the Grand Design Towables business.

Listen, Chris West has been around the company for 8 years. He's had a number of different roles. He understands our expectations on Winnebago-branded Motorhomes in terms of share and profitability. Bryan has talked about some profitability expectations on our different segments over time. So I'm not sure they're much different than historically what we've targeted for in the past. So in the short term, Chris is expected to stabilize the consistent performance of that business quarter-to-quarter, will probably take a couple of quarters for Chris to be able to do that. But then he will begin to build profitable share in that business with his team over time as well.

We are very fortunate now to have 3 brands of motorized product in the market with Winnebago, Newmar and Grand Design, and we have a market share goal for those 3 brands in the Motorized segment that would contribute to our overall North American RV market share goal of 13% that we communicated last March with our mid-cycle targets.

[Operator]

Our next question comes from the line of Tristan Thomas-Martin from BMO Capital Markets.

[Tristan Thomas-Martin, analyst]

Just according to my math, at a retail level, you outperformed the broader industry in the quarter. Can you maybe talk to what drove that outperformance on a relative basis?

[Michael Happe, executive]

Tristan, we are starting to see some early signs of progress on some of the more affordable products that we've introduced into the marketplace, whether that's the Reflection 100 Series at Grand Design along with the Imagine AIM, some of the Transcend models that they've introduced. We are starting to see some traction here in the past month or two that those products will indeed potentially hit the mark and be able to both stabilize our towable share and potentially take it back in the right direction.

The other thing I will note is that all of Newmar's motorized product categories are gaining share. Class A luxury diesel, Class A sort of mainstream diesel, Class A gas and Super C. All 4 of those categories, Newmar continues to gain share on here in the U.S. And we have gained share recently as well on Winnebago-branded Class C product. Our EKKO-branded product has been a hit in the marketplace with retail consumers. And so we are pleased with some of the retail performance here recently on -- in that RV business.

One last comment, I know you didn't ask this, but I'll just offer it up. We noted pretty explicitly in the materials that Barletta continues to take significant share as well in the aluminum pontoon space, now reaching on a trailing 12-month basis 9% share. So while the macro market share story has been certainly slowed or impacted from a numbers standpoint because of some of the towables and Class B math, we are seeing some very positive signs of market share growth in a number of our brands and categories now around the company.

[Tristan Thomas-Martin, analyst]

Okay. Got it. And just quickly on the towable margin headwinds. Could you break out how much of that was Winnebago Towables? How much of that was Grand Design? And then kind of what is transitory in nature?

[Bryan Hughes, executive]

Yes, Tristan, there's a lot of moving pieces here in the Towable margin. I'm not going to necessarily break out or quantify the business unit pieces. I'd say that you've probably got just to give a little bit more substance, 1 point to 1.5 points of deleverage, 2 -- 2.5 points of pricing and mix. I'd say that, that is overweighted to the Winnebago brand as it relates to the net pricing that we're able to achieve in the market right now in that brand and the discounts and the allowances that are necessary.

I would also state though that there was an overweight of Transcend in the Grand Design line up in the quarter as a mix that was shipped into the market. Some of this is just the success Mike was just talking about on the retail expectations as well as some channel fill. So we had overweighted Transcend, which drove some of that pricing mix in the quarter. There's about 1.5 point of warranty year-over-year, remember, we cited that we had favorable warranty in the prior year. So it's really a tough comp that we're facing that's causing that. And then probably another point of let's call it, overall productivity and operational challenges. We cited the Winnebago brand specifically as it relates to some of the profit challenges from an operational standpoint, the consolidation under one roof, some of the inventory write-down, the write-offs that we took in that business and just some inefficiencies that we're experiencing there that we expect to turn around under Don's leadership.

So a lot of things in play there that impacted towable margins, it was a disappointing quarter from our vantage point on the profitability, and we're taking steps to address it.

[Operator]

Our next question will come from the line of James Hardiman from Citi.

[James Hardiman, analyst]

On the fiscal '25 guidance, I don't know which of these you'll sort of get into, but I'm curious about how you see inventory turns finishing the year. You talked about continued destock of Motorized. I'm curious about that, ASPs for the year, and then I think there was a question about market share. I didn't know if you had any -- if we assume the sort of midpoint of your guidance, if that assumes any share gains or share losses.

[Bryan Hughes, executive]

Yes, several points. I'll touch on the ASPs first. James. I'd say ASPs, we're expecting modest increases in ASPs on an apples-to-apples basis within the Motorhome segment. I think Towables will continue to see some headwinds as it relates to mix and the affordability preferences that we had in this past year. I think some of those will persist into the coming year, and you'll see some modest ASP declines from a mix perspective on the Towables business. And then similarly, or probably not too differently, modest headwinds Marine side of the business as it relates to ASPs.

Can you repeat for me that last question you have, James, as it relates to the guidance?

[James Hardiman, analyst]

Yes. There was the inventory turns question for the year and then the market share assumption.

[Bryan Hughes, executive]

Yes, in terms of turns, I think there's still some improvements that dealers will be looking for on the Motorized side specifically. I think, broadly speaking, the Towables business is in a pretty good shape as it relates to dealer inventories on towables. A little bit of work left to do on the marine side of the business as well in terms of bringing inventory levels down. But we really like our position on the Barletta business, in particular. We're increasing our position on dealer lots, some of that enabled by the full lineup now that we have in the Aria. We still don't touch the lowest price points in that aluminum pontoon segment, but we have reach into the biggest sizes or biggest size segments of the pontoon market now with the Aria included. So we're continuing to improve our lot share on the Barletta brand. So that's in good shape.

Market share assumptions that we're making, I would characterize them as no dramatic changes from the current state. As we looked at our low end of the range and the high end of the range, there's just modest assumptions that we factored in, most notably, just to reiterate, the Grand Design Motorhome entry, we certainly expect that to be net accretive. We know that there's going to be some cannibalization of the Winnebago brand, but because of the approach that we're taking in the market there, we think that most of the market share gains from the Grand Design entry there will come from competition. We're also assuming that Barletta will continue to improve some market share as they continue to penetrate dealer lots and have success on the retail side.

So those are the, I'd say, the most notable market share assumptions that we are making as we put together that guidance.

[James Hardiman, analyst]

Got it. And if I could sneak one more in. The Marine business, it seems like you're telling us how great Chris-Craft is doing, but there was a big write-down there. And then I guess more broadly, one of your peers is getting rid of their marine business. So I guess, what's your commitment to the Marine business at this point? And if it's if it is a sort of core competency for you guys going forward, would you potentially be interested in those assets?

[Michael Happe, executive]

James, a few comments related to those questions. Number one, we are committed to the Marine business. We are very proud of both the Barletta and the Chris-Craft businesses. The impairment that was taken on Chris-Craft, both Bryan and I would probably characterize as somewhat of a cyclical trough impairment. The size of the total addressable market for Chris-Craft products, combined with our very intentional efforts to make sure the dealer inventory is rightsized in that business, really led us to almost an analytical place there on the impairment that was taken this quarter.

We still believe that, that's a very solid business for us in that particular segment. As we mentioned in the call, Chris-Craft has had, I believe, 5 straight months through the end of fiscal '24 Q4 of positive retail comp year-over-year. And as Bryan just commented here recently, we feel the Barletta business is in as good a shape as any other pontoon brand in the marine industry at this point in time in the marine cyclical trough. And we've gained share consistently each month throughout sort of the decline of that market, and we believe we are really well positioned going forward into the future.

So I will not make a public comment on the assets that are in the possession of any other company at this time. We just simply have an ambition, as we've stated in our mid-cycle targets, to increase the size and profitability of our non-RV business in a very smart, intentional and accretive way for our shareholders. And so we will continue multiple efforts to do that, including broadening sort of the strength and quality of our Marine business over time at the right times. But again, you should not read anything into the impairment in terms of our confidence in the Chris-Craft business going forward.

[Operator]

Our next question come from the line of Brandon Rollé from D.A. Davidson.

[Brandon Rollé, analyst]

In a couple of questions ago, you had mentioned increased Transcend shipments, we had picked up on change in the chassis provider for those units. And also Transcend changing to BAL products or Norco. Could you talk about the pricing benefits that you might have received from changing the provider there? Or maybe any other diversification efforts that you might be looking into, given the success of your market share during the recent quarter?

[Michael Happe, executive]

Thanks, Brandon. We will not comment publicly on the construction of our bill of materials and individual supplier relationships. I can just tell you that each of our business unit and branded teams are very rigorous in their decisions about what suppliers to work with. Just as we have to earn the business of our channel partners on a daily basis, our suppliers need to earn our brands' business consistently as well.

So -- but I will not get into the specific construction of a bill on any one of our particular brands. I will tell you that, because the Transcend line, particularly the Transcend One and the Transcend XPlor are vital from a pricing standpoint to be able to hit certain targeted price ranges, in instances like that, our teams, probably more than ever, keep all options open on the table in terms of supplier choices to use on those, particularly those opening price point type product. That's all I'll comment on this morning.

[Operator]

Our next question comes from the line of Fred Wightman from Wolfe Research.

[Frederick Wightman, analyst]

Mike, you made a comment about expecting a gradual improvement in retail over the next 12 to 15 months. And I'm wondering if that's RV-only comment, if it includes marine? And maybe if you could just help us think about when each of the different subcategories or sectors would start to see better retail?

[Michael Happe, executive]

Thanks, Fred. The comment was probably intended to simply project that 12 to 15 months from now, retail conditions should be better than they are today. The timing of when that happens, we've hinted that from a planning standpoint, we are projecting some favorability in retail conditions beginning next spring of calendar 2025, second calendar quarter, third fiscal quarter, and how that varies by RV subsegment and marine subsegment, it's difficult for us to be very accurate on that. And so even as we sit here today, 6, 7 weeks into our fiscal first quarter of fiscal '25, we've got some businesses that are positive from a retail comp standpoint year-over-year, and we've got several businesses that are negative. And so they are already moving both in terms of market conditions and our share. They are already moving at slightly different paces as we speak.

So we just feel that the dealers need some more time to manage inventory. Although I will tell you, our aging inventory, as we sit here at the end of fiscal '24, is in meaningfully better shape than it was at the end of fiscal '23. But it still has a little bit of room to go, I'm sure in the dealer's minds, and they'll use the winter and the early spring months. As Bryan said, we'll take care of that and possibly destock a little. And we anticipate once we get past the general election in this country, the Fed has several more meetings to make some decisions on what they're going to do, that the possibility for a healthier retail and wholesale environment could exist in that second calendar quarter. So I would say that's where we're hinging a potential upswing, but really won't get into specific details as to brand by brand or segment by segment.

[Operator]

Our next question comes from Noah Zatzkin from KeyBanc Capital Markets.

[Noah Zatzkin, analyst]

Most have been asked and answered, but just hoping you could provide kind of an update on kind of the state of your dealer base health, both in RV and marine, just kind of any thoughts and sentiment as well?

[Bryan Hughes, executive]

Noah, this is Bryan. No big news on that front. We continue to monitor our dealer channel. I think broadly speaking, there's been some specific dealers public, most notably that people are keeping an eye on, on their cash flow generation, which is clearly the focus right now versus just a P&L focus. It's very much a cash flow environment right now for dealers as they manage through the higher interest rate environment and the impact that, that has on floor plan financing. But I'd say no notable change from the prior quarter as it relates to the dealer network.

[Operator]

Next question will come from the line of Bret Jordan from Jefferies.

[Patrick Buckley, analyst]

This is Patrick Buckley on for Bret. Are there any notable recent trends to call out in the competitive environment within RV. Are you guys seeing more aggressive pricing strategies from anyone looking to take share? Or have things been relatively rational despite the challenging backdrop?

[Michael Happe, executive]

The retail marketplace continues to be aggressive. I wouldn't call it irrational per se, but I would just suggest that the focus on affordability and price points that consumers are open to engaging with, our high-volume, lower-cost competitors innately probably have more of an advantage and an appetite to compete aggressively in those price points. I won't call out specific names, but one of the larger OEMs has been a share gain winner in the industry, and one of the larger dealers in the industry appears to have some share momentum as well.

So -- but as Bryan alluded to in his financial comments, discounts and allowances are elevated across the board, Towables, Motorized, Marine, and that's a reflection, obviously, of competition being aggressive as well in key spots in our respective segments. So -- but that's my comment there.

[Operator]

We have reached the end of the call. I'll turn it back over to Ray Posadas for any closing remarks.

[Ray Posadas, executive]

That is the end of our fourth quarter earnings call. We look forward to seeing some of you at the upcoming Fort Lauderdale boat show later this month. Thank you for joining and enjoy the rest of your day.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

[Ray Posadas, executive]

Thank you.