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Winnebago Industries (NYSE: WGO)
Q4 2024 Earnings Call
Oct 23, 2024, 10:00 a.m. ET
Winnebago Records Earnings Amid Industry Challenges
Key Highlights from the Q4 Earnings Call
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by. Welcome to the Q4 and full year fiscal 2024 Winnebago Industries financial results conference call. At this time, all participants are in a listen-only mode. Please be advised that today’s conference is being recorded.
After the speakers’ presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Ray Posadas, vice president, investor relations and market intelligence.
Ray Posadas — Vice President, Investor Relations and Market Intelligence
Thank you, operator. Good morning, everyone. Thank you for joining us to go over 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. We issued a news release with our fourth quarter results earlier this morning.
For your reference, the earnings slide deck that complements our remarks is available in the investor relations section of our website under quarterly results. Moving to Slide 2, please be aware that some statements made today may be considered forward-looking under securities laws. Winnebago Industries warns that forward-looking statements come with risks and uncertainties that could cause actual results to differ significantly from those anticipated.
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These risks are also detailed in our SEC filings, which we encourage you to review. Additionally, management will discuss GAAP and non-GAAP financial measures today, with reconciliations available in our earnings press release. Let’s turn to Slide 3. Joining me on this call are Michael Happe, president and chief executive officer of Winnebago Industries; and Bryan Hughes, senior vice president and chief financial officer.
Mike will present an overview of our Q4 and full year performance. Bryan will go over our financial results and strategic outlook for the market, along with fiscal 2025 predictions. Mike will wrap up with the business outlook before we open the floor for questions. Without further ado, I’ll pass it over to Mike.
Michael J. Happe — President and Chief Executive Officer
Thanks, Ray. Good morning, and thank you for attending our discussion of results. I want to start by expressing gratitude to Winnebago employees across our outdoor recreation brands for their dedication this past year. The retail climate proved tough, yet our collaborative spirit and commitment at Grand Design, Winnebago, Newmar, Barletta, Chris-Craft, and Lithionics give us a solid foundation for future growth as market conditions improve.
Moving to key messages this morning: First, while immediate retail conditions remain challenging, we foresee gradual market improvement over the next 12 to 15 months, especially as we approach the second quarter of calendar 2025. This forecast factors in anticipated easing of interest rates and decreasing inventory levels in the motorhome RV sector. Second, we’ve implemented notable leadership changes at Winnebago motorhome and Winnebago towables to address previous operational and financial difficulties.
Third, we’re excited about the positive response from consumers and dealers towards the Lineage Series M—Grand Design’s debut in the motorhome RV category. A small number of units began shipping in Q4, following its reveal at the Hershey RV show. This innovative RV sets a new standard for excellence in Class C coaches.
Lastly, we’re providing annual financial guidance for the first time. Given the ongoing market uncertainties, we approach this cautiously, but at the midpoint, we anticipate modest top-line improvements along with a 10% increase in adjusted EPS compared to last year. Noteworthy takeaways from the quarter include the initial shipments of Lineage Series M.
Although their contribution in Q4 was limited, we expect this product line to gain traction as production volumes increase in the first half of fiscal 2025. In the marine segment, Barletta has gained market share in the U.S. aluminum pontoon market, while Chris-Craft reported year-over-year retail growth for five consecutive months, achieving a 32% overall increase in retail volume compared to the previous fiscal year.
Amid a challenging retail environment, our strong balance sheet along with positive free cash flow allows us to remain balanced in our capital allocation. In Q4, we generated free cash flow of $30 million, returning $19 million to shareholders in share repurchases and dividends, reaffirming our confidence in Winnebago Industries’ long-term prospects. Now, turning to Slide 5.
The RV Industry
Winnebago Industries Updates on RV Shipments and Strategic Leadership Changes for 2024
Wholesale RV shipments for calendar 2024 are projected at around 324,000 units, aligning with industry estimates. For calendar year 2025, shipments are expected to range between 320,000 and 350,000 units. In August, wholesale shipments in the towable RV sector rose by 10% year-over-year, and up 14.5% for the first eight months of calendar ’24. This positive growth reflects ongoing efforts to balance inventory with the rising consumer demand for affordable options.
Challenges in the Motorhome Segment
The motorhome segment is currently reducing its inventory, evident as wholesale shipments in August dropped by 31% compared to the same month last year, and decreased 24.2% year-to-date. Within our network of RV dealers, inventory turnover saw a slight decline in the fourth quarter compared to the previous year. Winnebago Industries’ inventory fell by 4.5% from the fourth quarter of fiscal ’23, reflecting our commitment to effectively manage production amid challenging economic conditions. Moving on to Slide 6.
For the 12-month period ending August 31, our total market share was at 11.1%, a decline of 50 basis points from the same timeframe in ’23. As noted during our Q3 call, several new products launched in the last two quarters are anticipated to stabilize our market share going forward. This careful strategy is essential for developing robust long-term relationships with our dealer partners. Encouragingly, the Winnebago brand Class C motorhome and Newmar’s full motorized product lines experienced year-over-year growth over the three, six, and 12-month periods concluding in August.
Barletta’s Rising Influence in the Marine Sector
Slide 7 highlights Barletta’s growth in the marine industry, with its market share increasing by 200 basis points year-over-year to 9.1% for the 12 months ending August 2024. Our premium pontoons continuously outperform competitors, yielding strong results for our dealers and enhancing customer satisfaction. Now, let’s examine recent developments on Slide 8.
Executive Leadership Changes
During the quarter, we made strategic adjustments to our executive leadership, particularly in our Winnebago motorhome and towables divisions. Chris West, once the senior vice president of Enterprise Operations and Barletta Boats, was appointed president of our Winnebago-branded motorhome and specialty vehicles business. An experienced veteran of eight years with Winnebago Industries, Chris has played a crucial role in integrating Barletta and driving its notable market share growth.
The Winnebago-branded towables sector has not performed as expected. To optimize this segment, Don Clark will step up as group president of our towables division starting November 1. Don will oversee Winnebago towables along with his current role as president of Grand Design RV. This leadership change centralizes our expertise in Indiana, ensuring we have strong competition in the towables market. Both Chris and Don will continue to report directly to me. These adjustments aim to solidify our role as a leading figure in the premium outdoor recreation market and propel our next growth phase.
Exciting Product Innovations for 2025
Now, let’s delve into product innovations. I’m pleased to discuss our 2025 lineup, which we recently unveiled at the Hershey RV show. Across our Winnebago, Grand Design, and Newmar brands, we introduced nearly 150 new models and floor plans, showcasing our dedication to technology and comfort. A standout at the Hershey show was the Class C Lineage Series M, marking Grand Design’s inaugural motorhome model. From its thoughtful design to its outstanding performance capability, the Lineage aligns with the high expectations of our loyal customer base at Grand Design. These innovations reflect our commitment to enhancing outdoor experiences for our customers. I’ll now turn it over to Bryan for the financial review.
Bryan L. Hughes — Senior Vice President, Chief Financial Officer, Finance, IT, and Strategic Planning
Thank you, Mike, and good morning to everyone. I will focus on the key points of our performance, starting with consolidated results shown on Slide 9. Retail demand has remained weak in the fourth quarter.
Operating expenses increased in the fourth quarter, mainly due to a $30.3 million impairment charge connected to the Chris-Craft reporting unit, costs from launching the Grand Design motorized business, and investments in engineering and digital asset development. The impairment was linked to reduced financial performance stemming from challenges in the recreational marine industry. These factors contributed to a decline in the adjusted EBITDA margin compared to the prior year. It is important to note that the adjusted EBITDA excludes the impact of the Chris-Craft impairment.
Despite these challenges, we generated strong cash flow for the full year, keeping our balance sheet solid. We distributed $9 million in dividends during the quarter and repurchased $10 million in shares, totaling $37 million in dividend payments and $70 million in repurchases for fiscal year 2024. Additionally, I want to notify you that starting from this fiscal quarter, we will no longer adjust for the call spread overlay in our calculation of adjusted diluted earnings per share.
This adjustment was previously used to mitigate dilution risk from the call spread overlay related to our 2025 convertible notes. Due to the repurchase of the notes earlier in the fiscal year, there is now negligible impact from this adjustment. A table outlining historical adjusted EPS, excluding this adjustment, is included in the appendix of our earnings presentation.
We would also like to inform you that from our first quarter fiscal 2025 results onward, we will discontinue providing segment backlog information. As mentioned earlier, backlog is not a reliable indicator of future sales since orders can be canceled or postponed by dealers without consequence. Additionally, dealers often delay orders during low cycles. Therefore, we believe backlog does not accurately reflect future performance.
To give analysts more relevant financial insights, we will provide quantitative annual guidance for our key financial KPIs beginning this year, including consolidated revenues and adjusted EPS. I will discuss these details shortly. Turning now to our segment performance, we’ll start with towable RVs on Slide 10. Revenues showed a decline from last year’s fourth quarter, largely due to a decrease in the average selling price per unit, which was partially offset by an increase in unit volume.
Winnebago Industries Faces Challenges but Holds Optimistic Outlook for Growth
The adjusted EBITDA margin at Winnebago Industries declined compared to last year. This decrease stemmed from an increase in warranty expenses, a drop in average selling prices due to product mix changes, and operational hurdles in their Winnebago-branded towable business. The operational issues arose from consolidating production facilities, moving from two plants to one, which resulted in temporary inefficiencies. Core inventory management also faced challenges, leading to write-downs and write-offs, while high warranty expenses were related to quality concerns within the Winnebago brand. Encouragingly, warranty costs as a percentage of net revenue in the Grand Design division remained stable, adhering to pre-2023 levels.
RV Segment Revenue and Operational Hurdles
Moving to Slide 11, revenue for Winnebago’s motorhome RV segment saw a decline compared to last year. The main factors included changes in product mix and a decrease in unit volume due to market conditions. However, this decline was partially offset by price increases linked to higher motorized chassis costs. The adjusted EBITDA for this segment also fell as a result of operational challenges, warranty costs, and reduced unit volume.
Challenges in Production and Market Strategies
The Winnebago brand is currently tackling higher production costs driven by supply chain challenges and quality issues. Additionally, the competitive market necessitates increased sales incentives and promotional activities. The consolidation of manufacturing lines also contributed to write-offs related to discontinued product lines. Looking ahead, the appointment of new leadership is expected to improve the performance of the Winnebago-branded motorized unit. The Grand Design acquisition, entering the motorhome segment, is also anticipated to enhance market share and profitability.
Marine Segment Developments
On Slide 12, we observe that revenue from the marine segment dropped in the fourth quarter, primarily due to changes in product mix and dealer inventory adjustments, partially offset by strategic price increases. Discounts and allowances remained high to support dealers in moving excess inventory. The overall adjusted EBITDA margin for this segment decreased due to volume challenges, even as price increases provided some relief.
As of the fiscal year-end, Winnebago Industries reported a net debt-to-EBITDA ratio of approximately two times, slightly exceeding the targeted 0.9 to 1.5 times. The company recently paid a quarterly cash dividend of $0.34 per share, marking six consecutive years of increased dividends. In the recent quarter, Winnebago repurchased about $10 million of its stock, leaving $230 million available under its repurchase program.
Fiscal 2025 Projections and Market Expectations
Looking ahead to fiscal 2025, Winnebago anticipates RV wholesale shipments to reach between 320,000 to 350,000 units, reflecting about 3% growth from the RVIA’s forecast for 2024. Consequently, revenue is projected to fall between $2.9 billion and $3.2 billion, with adjusted earnings per share expected between $3 and $4.50, indicating a potential 10% growth from fiscal 2024. Interest expenses for the upcoming year are estimated to be around $25 million to $30 million.
The company expects weaker revenue and adjusted earnings per share during the first half of fiscal 2025 compared to last year, with expectations for growth in the latter half. Dealer reluctance and high field inventories could lead to a decline in revenues and profits in the first quarter. Notably, the Grand Design RV motorhome segment is forecasted to generate $100 million in sales.
Looking Toward Future Growth
While Grand Design will initially dilute profits as it ramps up production, management is optimistic about its long-term contribution to profitability. The costs incurred during the startup phase of this new segment totaled about $5 million in the last quarter.
In conclusion, as economic conditions improve, Winnebago Industries aims for a mid-cycle target of $4.5 billion to $5 billion in sales, with EBITDA margins of 11% to 11.5% and free cash flow between $325 million and $375 million. The company continues to invest in enhancing customer experiences and maintaining a balanced capital allocation to foster value creation for shareholders.
Final Remarks
Michael J. Happe — President and Chief Executive Officer
As we look ahead, I remain confident in Winnebago’s strong position and long-term growth potential. Our premium outdoor recreation brands provide a solid foundation for future profitability and margin expansion. We have created centers of excellence to drive synergies that enhance growth and profitability across the organization.
Our commitment to quality and product innovation ensures we remain competitive in a changing economic landscape. Our adaptable operating model enables sustainable profitability regardless of economic cycles, offering stability and resilience for our business.
Management Discusses Growth Opportunities and Market Considerations in Recent Q&A
Free cash flows signify more than just figures; they symbolize investment opportunities. The company has significant capital to invest in growth projects while also rewarding our loyal shareholders. I must highlight the expertise of our management team, whose extensive operational experience and proven success in mergers and acquisitions will be vital as we address both upcoming opportunities and challenges. Now, Bryan and I are ready to answer your questions. Operator, please open the line.
Q&A Session Begins
Operator
[Operator instructions] Our first question comes from Joe Altobello at Raymond James. Your line is open.
Joe Altobello — Analyst
Thank you, good morning. I’d like to ask a broad question about your guidance, as this marks a shift from past practices.
What prompted you to give this guidance now, and what is your overall approach to it? Should we view this guidance as realistic or conservative?
Michael J. Happe — President and Chief Executive Officer
Good morning, Joe. This is Mike. We decided to offer guidance after thoughtful consideration, believing it was in the best interest of our investors. We want to provide clearer expectations for the future while contributing more effectively to the market narrative about our company. Bryan’s figures reflect a balanced approach, setting modest revenue expectations along with potential upsides in earnings per share. While I won’t classify the guidance as conservative or aggressive, we are deliberate about the numbers we shared today.
Joe Altobello — Analyst
That’s helpful. Following up, your EPS range appears quite broad. Can you explain the scenarios that could lead to the high or low ends of that range? Are these variations mostly due to volume and revenue, or are there other factors that could influence margins, including your market share assumptions for FY ’25?
Bryan L. Hughes — Senior Vice President, Chief Financial Officer, Finance, IT, and Strategic Planning
Yes, Joe, this is Bryan. Our EPS range connects to market flows, with the low end at $320,000 and the high at $350,000. We evaluate various scenarios around market share and margins, considering pricing power and inflation. For market share, we analyze elements such as Grand Design entering the motorhome segment, which we view positively, while also weighing current market conditions.
Joe Altobello — Analyst
Thanks, that clarifies things.
Bryan L. Hughes — Senior Vice President, Chief Financial Officer, Finance, IT, and Strategic Planning
Before we proceed, please note that we will limit the Q&A session to 10:00 AM. We received feedback that calls can sometimes run overly long. If we cannot take your question today, we will prioritize it for our next quarterly call, and we will hold follow-up one-on-ones afterward.
Operator
Thank you. Our next question comes from Scott Stember at ROTH. Your line is open.
Scott Stember — Analyst
Good morning, and thank you for taking my questions. Can you discuss the current retail environment? Positive sentiment has arisen from recent events like the Hershey show. What trends are you observing across the RV market, especially with interest rates decreasing? Are dealers becoming more optimistic about taking in ’25 products?
Michael J. Happe — President and Chief Executive Officer
Good morning, Scott. As for the second part of your question, it may be premature to identify significant effects from the recent changes in the Fed funds rate—both at retail and wholesale. Retail conditions remain challenging, and we have not observed a notable change since the end of our fiscal year, which includes the late September open house.
Scott Stember — Analyst
Understood. Also, regarding motorhome EBITDA margins, which previously reached low double digits before recent declines, what is your outlook with Grand Design now included? When can we expect margins to stabilize in a normalized market?
Bryan L. Hughes — Senior Vice President, Chief Financial Officer, Finance, IT, and Strategic Planning
Good morning, Scott. We maintain a positive outlook for motorhomes, especially with Grand Design’s entry into the market. We fully expect that we will return to double-digit EBITDA margins in the long term.
Scott Stember — Analyst
Thank you.
Operator
[Operator instructions] Our next question will come from Michael Swartz at Truist. Your line is open.
Mike Swartz — Truist Securities — Analyst
Good morning. To begin, your press release noted conditions are presumed unchanged. Do you anticipate any interest rate cuts impacting your fiscal year ’25 guidance?
Michael J. Happe — President and Chief Executive Officer
Good morning, Mike. Our planning considers various factors…“`html
Winnebago Industries Discusses Economic Outlook and Business Growth Strategies
Market Predictions and Fed Decisions
As we assess the economic landscape, it’s key to note that opinions vary on the number of future interest rate cuts by the Federal Reserve. The central bank is likely to evaluate these decisions based on overall economic health during each meeting. Our approach reflects an average consensus on potential cuts, although correlating retail interest rates to future business direction remains a challenge.
Today, we predict that several factors, including reduced inventory levels and a potentially more favorable retail environment in the second quarter of 2025, could enhance conditions in the outdoor recreation market during that time. This aligns with our third fiscal quarter of the 2025 fiscal year. While we haven’t specified the exact number of cuts in our forecasts, we expect to align with the upper end of the RV wholesale shipment range mentioned earlier.
Insights on Grand Design’s Revenue Opportunities
Turning to the Grand Design segment, we see a promising revenue opportunity exceeding $100 million for fiscal ’25. This projection is based on several factors, including the level of dealer inventory and the initial orders we’ve received from customers. Our Grand Design team is actively launching the Lineage Series M at both wholesale and retail levels. Over the last few months, we have expanded our network of motorized dealers, both new and established partnerships. This dealer base will continue to develop as we move into fiscal year ’25.
Additionally, we are beginning to receive retail orders through these dealers, whether at retail shows like those in Hershey or Dallas or against the growing inventory destined for the market. While we are not revealing specific details at this time, we expect the Grand Design motorhome line to feature a range of models, with more to be introduced by the end of the fiscal year. The first year of any new business initiative typically sees significant emphasis on stocking inventory, a process that is informed by dealer feedback and projected future orders.
Strategic Focus on Growth through Towables
Regarding potential performance changes, I want to emphasize our commitment to maintaining at least two strong towable brands in North America. Winnebago’s towable brand currently holds about 1.5% of the market share, but we believe there’s potential for it to grow to 3% to 5% in the long run, though I won’t provide specific timelines. Our expectation is to build up this business further to complement Grand Design’s success in the same segment.
Chris West, who has been with the company for eight years in various roles, understands our expectations for Winnebago-branded motorhomes in terms of market share and profitability. Initially, he is tasked with stabilizing business performance. Following this, we anticipate an increase in market share driven by new strategies. We now have three motorized brands—Winnebago, Newmar, and Grand Design—and we aim to reach a North American RV market share goal of 13% as communicated in our mid-cycle targets last March.
Analyzing Outperformance in Retail
Good morning, everyone. Recently, we’ve seen promising signs of progress from our more affordable products, such as the Reflection 100 Series at Grand Design and the Imagine AIM, along with several Transcend models. Early traction suggests these products could stabilize and even boost our towable market share. Additionally, every category of Newmar’s motorized products is performing well, gaining share across various segments, including Class A luxury, mainstream diesel, gas, and Super C models as we continue to make gains in the U.S.
“`
Positive Trends in Winnebago-Branded Products
Recently, we have seen an increase in market share for our Winnebago-branded Class C products. The EKKO-branded line has especially appealed to retail customers, resulting in strong performance in the RV market.
Additionally, while macro trends have introduced challenges, our Barletta brand made noteworthy strides in the aluminum pontoon market, capturing a trailing 12-month market share of 9%. This reflects our ongoing growth across several brands and product categories, despite some declines in overall market numbers.
Analyzing Towable Margin Headwinds
Tristan Thomas-Martin — BMO Capital Markets — Analyst
Could you provide details on how much the towable margin headwinds were affecting Winnebago and Grand Design specifically? Also, how much of this will be temporary?
Bryan L. Hughes — Senior Vice President, Chief Financial Officer
Thank you for the question, Tristan. The situation with towable margins is complex. While I’m not breaking this down by specific business units, I can share that we faced a 1 to 1.5 point deleverage and a 2.5 point impact from pricing and mix, primarily affecting the Winnebago brand due to current pricing pressures and necessary discounts.
Grand Design’s Transcend line predominantly influenced mix during this quarter. The favorable retail performance contributed to increased inventory levels, resulting in pricing challenges. Year-over-year warranty claims added about 1.5 points to the mix, as last year’s figures were notably favorable. Additionally, we’re confronting about 1 point of productivity challenges due to operational inefficiencies within the Winnebago brand, including recent inventory write-downs. Overall, this was a tough quarter for profitability, but corrective actions are underway.
Fiscal 2025 Guidance and Market Outlook
James Hardiman — Citi — Analyst
I have a quick question about your fiscal ’25 guidance. What are your expectations for inventory turns, average selling prices (ASPs), and market share dynamics?
Bryan L. Hughes — Senior Vice President, Chief Financial Officer
Regarding ASPs, we anticipate modest increases in the motorhome sector. However, our towables may continue to face challenges related to product mix and affordability, leading to potentially lower ASPs in that category. Similarly, we expect slight headwinds within our marine sector.
Concerning inventory turns, dealers are looking to optimize their motorized inventories. The towables side appears stable, but there is still some work to achieve desired inventory levels in the marine segment. Specifically, we see positive growth potential with the Barletta brand, particularly aided by our recent launch of the Aria model.
When discussing market share, our projections do not account for drastic changes. In our fiscal guidance ranges, we expect some modest adjustments. The introduction of the Grand Design motorhome will likely cause some competition with the Winnebago brand, but we believe it will primarily attract customers from other brands. Additionally, we anticipate further improvements in Barletta’s market share as we expand our dealer relationships.
Commitment to the Marine Industry
James Hardiman — Citi — Analyst
While you’ve mentioned the successes of Chris-Craft, can you clarify your commitment to the marine sector in light of recent write-downs? Would you consider acquiring assets from a competitor shedding their marine business?
Michael J. Happe — President and Chief Executive Officer
We’re firmly committed to our marine business, particularly with brands like Barletta and Chris-Craft. The impairment related to Chris-Craft can be viewed as a cyclical adjustment, influenced by the need to rightsize dealer inventories. Despite this, we remain confident in the long-term potential of Chris-Craft and the marine segment overall. With five consecutive months of positive sales for Chris-Craft, we plan to build on this momentum moving forward.
The retail landscape has shown some decline, yet Bryan noted that the Barletta brand remains competitive among pontoon manufacturers, even in this cyclical downturn. Remarkably, our market share has steadily increased despite these challenges. Our ambition continues to focus on expanding our non-RV operations in a deliberate and beneficial manner for our shareholders. Therefore, we plan to enhance the strength and quality of our marine business over time.
However, it’s important to clarify that the recent asset impairment does not reflect our faith in the Chris-Craft brand’s future performance.
Operator:
Thank you. We will now take the next question. Brandon Rolle from D.A. Davidson is on the line.
Brandon Rolle: — D.A. Davidson — Analyst
Good morning. I appreciate your taking my question. Earlier, you mentioned increased shipments for Transcend, alongside a change in chassis providers. Could you discuss any pricing advantages from this change? Additionally, are there other diversification strategies you’re considering, given your recent market share growth? Thank you.
Michael J. Happe: — President and Chief Executive Officer
Thanks, Brandon. Good morning. While we cannot discuss specifics about our material suppliers, I can assure you that our business units make careful choices about who they partner with. Just as we need to earn the business of our channel partners daily, our suppliers must also earn our brands’ trust consistently. The Transcend line, especially models like Transcend One and Transcend XPlor, is crucial for reaching our targeted price points. Consequently, our teams remain flexible and open to various supplier options to ensure competitiveness.
Brandon Rolle: — D.A. Davidson — Analyst
Thank you.
Operator:
Next, we have Fred Wightman from Wolfe Research on the line.
Fred Wightman: — Wolfe Research — Analyst
Hello, everyone. Mike, you mentioned expecting a gradual improvement in retail over the next 12 to 15 months. Is this projection specific to RVs, or does it include marine as well? Could you outline when various segments may begin to see improvements?
Michael J. Happe: — President and Chief Executive Officer
Thanks, Fred. Good morning. The outlook I shared anticipates that retail conditions will improve overall within the next 12 to 15 months. We are optimistic about some improvement beginning in the second quarter of 2025. However, the timing may vary across different RV and marine segments, making it challenging to provide precise predictions. Presently, we see a mix within our businesses, with some areas showing positive year-over-year comparisons, while others remain negative as they adjust to market dynamics. Ultimately, our dealers will need additional time to manage their inventory effectively.
It’s worth noting that our aging inventory is in significantly better shape compared to last year, yet there’s still more work ahead. As the winter and early spring approach, we expect dealers will continue to destock. Following the general elections and crucial meetings by the Fed, there may be favorable conditions for a healthier retail and wholesale environment by the second quarter of the year.
Operator:
Thank you. We will now take our next question from Noah Zatzkin from KeyBanc Capital Markets.
Noah Zatzkin: — KeyBanc Capital Markets — Analyst
Hi. I appreciate you taking my question. Most have been covered, but could you share an update on the health of your dealer network, especially regarding sentiment in both RV and marine sectors?
Bryan L. Hughes: — Senior Vice President, Chief Financial Officer
Noah, this is Bryan. There are no major updates to report. We continue to observe our dealer channel closely. The focus is currently on cash flow generation, especially amid the pressures of higher interest rates affecting financing costs. Generally, there has been no significant change in the dealer network compared to previous quarters.
Noah Zatzkin: — KeyBanc Capital Markets — Analyst
Thank you.
Operator:
One moment for our next question from Bret Jordan from Jefferies.
Patrick Buckley: — Jefferies — Analyst
Good morning, everyone. This is Patrick Buckley standing in for Bret. Could you highlight any recent trends in the competitive RV sector? Are you noticing any aggressive pricing strategies from competitors, or is the marketplace generally stable despite the current challenges?
Michael J. Happe: — President and Chief Executive Officer
Good morning. The retail environment remains competitive. While I wouldn’t characterize it as irrational, there is certainly a focus on affordability and attractive price points. High-volume, lower-cost competitors appear to have the edge, particularly as consumers are drawn to more affordable options. It’s notable that one of the larger original equipment manufacturers (OEMs) is currently gaining market share, alongside one of the more significant dealers in our industry who is also seeing momentum.
Competitive Discounts Highlighted in Recent Earnings Call
Market Strategies Under Pressure
During the earnings call, it was noted that discounts and allowances for towables, motorized units, and marine products are currently elevated. This increase stems from aggressive competition within key segments. As highlighted, this trend showcases how market dynamics are influencing pricing strategies.
Patrick Buckley – Jefferies – Analyst
Great. I’ll keep at one as we hit the end here. Thanks, guys.
Operator
Thank you. We have reached the end of the call. I’ll turn it back over to Ray Posadas for any closing remarks.
Ray Posadas – Vice President, Investor Relations and Market Intelligence
This concludes 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
[Operator signoff]
Duration: 0 minutes
Call Participants:
Ray Posadas – Vice President, Investor Relations and Market Intelligence
Michael J. Happe – President and Chief Executive Officer
Bryan L. Hughes – Senior Vice President, Chief Financial Officer, Finance, IT, and Strategic Planning
Mike Happe – President and Chief Executive Officer
Joe Altobello – Analyst
Bryan Hughes – Senior Vice President, Chief Financial Officer, Finance, IT, and Strategic Planning
Scott Stember – Analyst
Mike Swartz – Truist Securities – Analyst
Craig Kennison – Analyst
Tristan Thomas-Martin – BMO Capital Markets – Analyst
James Hardiman – Analyst
Brandon Rolle – D.A. Davidson – Analyst
Fred Wightman – Wolfe Research – Analyst
Noah Zatzkin – KeyBanc Capital Markets – Analyst
Patrick Buckley – Jefferies – Analyst
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