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Winnebago Industries(NYSE: WGO)
Q3 2024 Earnings Call
Jun 20, 2024, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and thank you for standing by. Welcome to the Q3 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. [Operator instructions] I would now like to hand the conference over to your speaker today, Ray Posadas, vice president of investor relations and market intelligence.
Ray Posadas -- Vice President, Finance
Thank you, Josh. Good morning, everyone, and thank you for joining us to discuss our fiscal 2024 third quarter earnings results. This call is being broadcast live on our website at investor.wgo.net, and the replay of the call will be available on our website later today. The news release with our third 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, let me remind you that 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.
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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 in 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 Q3 performance, and then Bryan will discuss our financial results at a strategic level. 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.
Mike Happe -- President and Chief Executive Officer
Thanks, Ray. Good morning, everyone, and thanks for joining us to discuss our third quarter, fiscal '24 financial results. In the eight weeks since our Q2 earnings call, RV industry retail demand has remained both inconsistent and sluggish, with limited evidence that economic conditions are improving for outdoor recreation consumers as we move into the fourth quarter of our fiscal year. While this environment necessitates near-term caution and discipline, the secular future growth of outdoor recreation engagement by consumers is undoubtedly a key driver for the health of our business long term.
With that in mind, I will emphasize three points to our investors early to frame this morning's discussion. First, over the long term, challenging markets make strong companies even stronger. Our focus on maintaining durable margins and resilient profitability relative to competitors through production discipline and intentional sales support is unwavering. Our collaborative operating model across our brands and functional centers of excellence ensures the choices we make in the short term are in our best long-term interests.
Maintaining valued product differentiation, premium brand essence, total aftermarket support to our dealers and end customers, and relevant share all matter greatly, but must be balanced with a commitment to sustainable profitability. Second, while we expect industry softness to continue in fiscal Q4 on a year-over-year basis in our motorhome RV and marine segments, the gradual improvement we are seeing in field inventory composition in these markets is an encouraging sign for calendar 2025 and beyond. Third, our healthy balance sheet and strong cash flows enable us to execute on our select growth priorities while maintaining a balanced capital allocation strategy that continues to return cash to our shareholders through dividends and share repurchases. Our cultural, strategic, and financial strengths have us poised to successfully pursue the mid-cycle targets communicated in a prior earnings call in the years ahead.
Turning now to our results. In the third quarter, we continue to experience the effects of macroeconomic softness caused by elevated interest rates and pockets of persistent inflation. Our highly variable cost business model remains a strategic advantage in this market environment as we continue to focus on ensuring that capacity, output, and costs are aligned with retail and wholesale order patterns and inventory levels. Third quarter consolidated net revenue was $786 million, down 12.7% from the same period in 2023, but up 11.7% sequentially from Q2, supported by our towable RV and marine segments.
Adjusted earnings per share for the quarter were $1.13, with adjusted EBITDA of $58 million. While not a financial contributor to our third quarter performance, we did officially announce the introduction of Grand Design's new Lineage Class C product, marking that brand's inaugural entrance into the motorized RV segment. Meanwhile, in our marine business, we are exceptionally pleased with the powerful performance of our Barletta brand, which increased its trailing 12-month share of U.S. aluminum pontoons to 8.6% for the period ending in April.
More importantly, trailing three- and six-month performance has Barletta running in the low double-digit percentage share zone, signaling increased momentum for that brand at retail. Turning to recent RV industry trends on Slide 5, as anticipated, dealers remain cautious with respect to orders in the third quarter, resulting in a higher level of promotional activity on some products compared to the same period last year. The recent RV Industry Association data supports our view that towable RV inventories have been largely right-sized from a quantity standpoint as we head into the summer selling season. We also believe that more time and work is needed, though, to further reduce prior model year inventory across the industry.
April wholesale shipments in towable RVs were up 14.2% year over year and 15.4% year to date from the first four months of calendar '23. By contrast, wholesale industry shipments in the motorhome RV category were down 19.4% in April and 21.5% on a year-to-date basis from 2023. The motorhome portion of the RV industry still has a little work to do in terms of bringing down total industry -- inventory levels. 2024 RV shipments through April total more than 120,000 units, 9.4% ahead of last year's pace.
But while the growth in shipments is encouraging, the industry's retail recovery is not occurring as rapidly as industry stakeholders anticipated. Based on industry results to date, ongoing economic softness, and reduced order backlogs across the industry, we expect additional de-stocking by dealers for the remainder of the calendar year. As a result, we have revised our industry RV wholesale shipment forecast for calendar year 2024 to a range of 330,000 to 335,000 units, slightly below the midpoint of the RV Industry Association's most recent estimate. Our latest retail estimate for this same calendar 2024 period is around 340,000 units.
Moving to Slide 6 and our recent RV market share performance. For the trailing 12 months ended April 30th, it totaled 11.2%, which is down 70 basis points from the same period in 2023. While not what we would ideally like to see, this share loss is due in part to our commitment to hold integrity in wholesale and retail pricing models that we see is important to healthy channel relationships in the future. While we have worked intently to increase the strength of our opening price point skews in our RV lineups, seeing slight share loss in an environment where affordability is being so strongly emphasized is not to be unexpected for a premium portfolio such as ours.
We are confident this trend will reverse in future years with new innovative products in our pipeline and an upward cyclical move to more stable market pricing. Looking at the marine segment on Slide 7, our Barletta products continue to deliver superior results for its dealer network and an exceptional experience for their customers. The Barletta team is passionately focused on serving our end customers, cultivating lasting relationships with our channel partners as well and building the best premium pontoons in the market. The path to our 13% mid-cycle share target is about Barletta remaining innovative and focused on customer needs to reach a top two or three position over time.
Turning to recent highlights on Slide 8, In April, Grand Design introduced its first motorized RV in its history, the Lineage Series M. The name reflects the brand quality and service excellence Grand Design has embodied since its inception in 2012. What is particularly exciting to us is the opportunity for Grand Design to partner with the leading dealers across the country to market this new Class C product to a new customer base. To celebrate the launch of the lineage, we are hosting an ultimate glamping pop-up this Saturday, the 22nd of June, in New York City's Bryant Park from 11:30 a.m.
to 5 p.m. Eastern. The new lineage will be on display at the event, and we invite those of you in the area to come down and see Grand Design's terrific new motorized RV in person. As I noted on our Q2 call, initial limited shipments of lineage are on track to begin late this quarter.
Most of the stocking deliveries for the lineage product, however, will take place in the fiscal 2025 year. Before turning it over to Bryan for the financial review, I want to directly address the misinformation that has been disseminated on social media regarding excessive frame flex across the industry, including a small percentage of our large Solitude or Momentum fifth wheel products. In each reported case, the Grand Design team and/or its network of dealers have performed a thorough product review and are collaborating directly with impacted customers to resolve any concerns. The team has also been working directly with our frame supplier, a third-party structural engineering firm, and industry experts to continue to ensure that our products and processes meet and exceed industry standards.
Our commitment to customers is absolute, and we continue to stand behind every product we build. To reinforce that commitment, we recently extended our frame warranty to five years on all Grand Design products. Our one-year base warranty, three-year structural warranty, and new five-year frame warranty are also transferable to subsequent owners during the warranty period based on the original purchase date. These warranties will continue to be honored retroactively from the date of original purchase, beginning with model year 2020.
Importantly, across Winnebago Industries, three core values guide how we operate every day: do the right thing, put people first, and be the best. These values support our vision to be the trusted leader in premium outdoor recreation and guide interactions with all stakeholders. With that, I'll now hand the call over to Bryan Hughes.
Bryan L. Hughes -- Senior Vice President, Chief Financial Officer
Thanks, Mike, and good morning, everyone. As a reminder, in my prepared remarks, starting on Slide 9, I will focus on the key drivers of our performance. Please refer to our earnings release and earnings supplement documents for a detailed overview of our key financial results. Winnebago Industries delivered a solid third quarter.
The year-over-year decrease in consolidated net revenue reflected a shift in product mix with customers demonstrating a preference for lower-priced units, primarily in the towable RV segment, as well as lower unit volumes in our motorhome RV and marine segments as we continue to aggressively manage production amid challenging retail market conditions. Gross margin for the third quarter was 15%, primarily reflecting the deleveraging effect of lower sales and competitive marketplace pricing with elevated discounts, as well as operational efficiency challenges. We are addressing those challenges through a range of cost containment initiatives, including flex production days, product line consolidation, and the deferral of certain capex projects. Warranty expense, although up year over year comparing against favorable expense in last year's third quarter, has returned to historical rates.
Lastly, and while not shown on this slide but worthy of a callout, we continued to generate robust free cash flow, which totaled 88.4 million in fiscal Q3. During the quarter, we executed 20 million of share repurchases, bringing the year-to-date total to 60 million. Turning to our performance by segment starting with towable RV on Slide 10. Revenues were up 35.7% from the second quarter of 2024 or sequentially.
Revenue was up 0.6% from Q3 of last year reflecting an increase in unit volume, partially offset by a reduction in average selling price per unit related to product mix. Segment-adjusted EBITDA was down 22% versus the prior year, or 310 basis points of margin, partly reflecting operational efficiency challenges as we worked through a plant consolidation in the Winnebago-branded towable business and production ramp up of new product. And for the towable RV segment more broadly, there was a difficult comp, with Q3 of last year benefiting from favorable warranty expense expressed as a percentage of sales. Fiscal 2024 third quarter warranty expense for this segment remains lower-than-average warranty rates prior to fiscal 2023.
Importantly, we do not expect our warranty expense, including the expense associated with the excess frame flex issues and the warranty changes recently introduced by Grand Design, to cost meaningfully elevated warranty expense as a percent of sales. While we had these headwinds to profitability broadly, we experienced a decrease or favorable impact to profitability in the level of discounts and allowances in the towable RV segment in the third quarter of fiscal 2024 as compared to the third quarter of fiscal 2023. This is a direct result of our highly disciplined production utilization as the industry moves its way through the current trough in retail demand. Towable RV backlog was down 35.1% in dollars from the prior year, reflecting current industry and demand trends.
Turning to Slide 11, revenues for the motorhome RV segment were down 20.1% from the prior year on lower unit volume and an increased level of discounts and allowances as we continue to work closely with our dealer partners to strengthen the health of their inventory. This was partially offset by price increases related to higher motorized chassis costs. With strict credit standards and elevated interest rates affecting consumer lending, retail and wholesale shipments both remain stubbornly soft during the May and June selling season. Segment-adjusted EBITDA decreased 50.2%, or 270 basis points of margin, compared to Q3 last year.
The variance reflected volume to leverage and operational efficiency challenges, partially offset by cost containment efforts. Sequentially, motorhome margins were down 320 basis points due to deleverage and higher discounts and allowances as the anticipated strengthening of the retail market in April and May failed to materialize. Backlog in the motorized RV segment was down 55.7% in dollars from the prior year. We expect to maintain heavy discipline and capacity utilization in our upcoming fourth quarter, considering dealer inventory levels and the tepid retail demand for this segment.
Moving to our marine segment on Slide 12. Given current economic conditions, revenues in the third quarter were down 31.8% from the prior year, in line with expectations, driven by soft retail demand and a cautious dealer network. Inventory levels continue to be elevated relative to dealer preferences, considering higher interest rates, and the cost of carrying inventory. These factors caused our shipments to be down in the quarter compared to the prior year.
In addition, net revenue was impacted by a shift in product mix toward lower-priced product offering. For example, the introduction of Barletta's Aria offering in the past year. Marine segment adjusted EBITDA margin decreased 370 basis points versus the prior year. This was primarily due to volume deleverage, partially offset by cost containment efforts.
Backlog for the marine segment was down from the prior-year period. Moving now to the balance sheet on Slide 13. As of the end of the quarter, Winnebago Industries had a net debt to EBITDA ratio of approximately 1.7 times, which is slightly above our targeted range of 0.9 to 1.5 times. This month, we will pay a quarterly cash dividend of $0.31 per share to common shareholders of record as of June 12th, marking the 40th consecutive quarter Winnebago Industries has paid a dividend.
This record speaks to the board's sustained confidence in our strategy, performance, and growth prospects. During the quarter, we repurchased approximately 318,000 shares of stock at a total cost of 20 million. At quarter end, we had 240 million remaining in our repurchase program. We have repurchased 60 million of stock in our fiscal year to date and have paid 28 million of dividends.
Before turning the call back to Mike, let me provide some color on our near-term expectations. Based on the current business environment, we anticipate the retail market will remain sluggish through the end of our fiscal fourth quarter, reflecting the dealer caution and tepid consumer sentiment that have marked the early part of the selling season. Our commitment remains steadfast. We will use our capacity wisely, maintain our premium positioning, introduce exciting new products tailored to our customer bases preferred price points, and prioritize long-term profitability across our brand.
This commitment will guide us as we navigate the current industry downturn and its short-term effect on market share. Now, let me turn the call back to Mike to provide some closing comments. Mike, back to you.
Mike Happe -- President and Chief Executive Officer
Thanks, Bryan. Turning to Slide 14. As we think about the future of our business, we continue to believe that over the long term, fortune will favor the companies with the best brands who drive for mutual success with their dealer partners and a seamless, joyful, end-to-end experience with their customers. We have been making steady investments in engineering, data, digital asset development, and IT capabilities to ensure we have the right product offerings and tools to appeal to various segments of the future market and stay close to our customers.
When I say the best brands, I'm not talking only about a multitude of floor plans and comfortable sofas within those brands. It's also about making sure that our owners get outstanding service and support, have great technology at their fingertips, and become customers for life. Some of that is certainly dependent on having great dealer relationships. And that is an area where Winnebago Industries continues to lean in.
As demand trends settle back into a more normalized pattern, dealers are beginning to shed the smaller brands and focus instead on much deeper relationships with trustworthy OEMs. We are seeing more dealers seeking preferred and even exclusive relationships with Winnebago Industries family of brands because they know they can count on us through the peaks and values of outdoor recreation cycles. The dealer partnerships we have built over time provide our end customers with real advantage over the life of their ownership. To expand on Bryan's comments on Q4, we do not currently expect a notable improvement in the RV and marine industries through the end of the calendar year.
Consumer sentiment, impacted by delays to the lowering of interest rates and other difficult macroeconomic factors, will continue to weigh on dealer willingness to order and carry inventory. With these factors in mind, we are anticipating Winnebago Industries Q4 to be flat to slightly down versus Q3 on a sequential basis on the top revenue line. We expect we will continue to face margin or yield challenges tied primarily to market pressures and pricing in the form of heightened discounts, and we are, therefore, anticipating profitability will be down sequentially as well. These expectations are consistent with the prevailing retail trends in the industry and are also consistent with dealer sentiment and their preference to stay appropriately lean on inventory levels.
This guidance for our financial performance is also consistent with the full calendar year retail and hotel shipment expectations in our share, therefore, of that we mentioned earlier. We will provide further updates on expectations for the remainder of calendar year 2024 and for calendar year 2025 during our fourth quarter earnings call in October. That said, the future of our business remains bright. Our most recent Winnebago Industries Spotlight Survey continues to show strong demand for outdoor recreation, with 86% of participants saying they plan to increase or maintain their current participation level in outdoor activities.
Winnebago Industries is better positioned today than at any time in our storied history. If you compare our position today to where we were in 2014, when RV industry retail performance was similar to what we are experiencing in 2024, we are in a much better position in terms of market share, breadth of portfolio, and financial performance. Likewise, if you compare where our portfolio brand sits today compared to pre-pandemic 2019, we have a more robust portfolio of products across all our brands, reaching a broader range of customers with a wider array of features, as well as price points. All of this has translated to much stronger financial performance and a more robust balance sheet.
We are extremely proud of the high level of trust and confidence customers have in our brands, putting us in a great position as the market recovers and consumers regain their economic footing. In closing, let me acknowledge the work of almost 6,000 team members across Winnebago Industries. The Grand Design, Winnebago, Newmar, Chris-Craft, and Barletta nameplates carry a unique appeal to the customers of each of those premium brands, an attraction that signifies quality, safety, and reliability. Our new strategic technology vertical, Lithionics Battery, is also positively disrupting the mobile lithium battery space and winning new business in both the outdoor industry and across specialty vehicle applications.
The people who support, design, and build these brands are our strongest asset, and I am extremely proud of the value they deliver every day to enable our customers: to be great outdoors. With that, I will turn the call back over to the operator, who will open the line for your questions.
Questions & Answers:
Operator
[Operator instructions] Our first question comes from Tristan Thomas-Martin with BMO Capital Markets. You may proceed.
Tristan Thomas -- BMO Capital Markets -- Analyst
Hey, good morning. Mike, the profitability headwinds in the fourth quarter, is that tied to clearing kind of the remaining carryover inventory or just incentivizing dealers to order? And then while you're at it, where do you think carryover inventory is for you guys meant for the industry?
Mike Happe -- President and Chief Executive Officer
Yeah, good morning, Tristan. I'd like to start with the back half of your question first. In terms of carryover inventory. We are generally pleased with the composition of the inventory, given the type of market conditions we're facing as we sit today.
The total inventory levels, you know, for us in the towable space seem very appropriate for where we're at. We prefer for aging inventory in our towable field inventory base to be a little bit better, but we continue to work on that quite specifically. Our motorized RV inventory may be slightly higher in the field than our dealers might like, but not by very much. And again, we actually think our aging inventory position on the motorized side is as competitive as any other OEM in the market.
Lastly, on the marine side, specific to Barletta and pontoons, while we are gaining significant retail share in that particular market segment, we continue to partner in a very positive way with dealers to position their field inventory to a position that they feel comfortable. And that will continue to put a bit of pressure on shipments on that brand here over the next quarter at a minimum. But all in all, we generally feel OK about the field inventory levels and continue to work on obviously transitioning the composition of that inventory to more, you know, recently aged inventory. We have actually slightly delayed some of our model year 2025 introductions so that we can continue to work, as an example, on some of the model year 2023 or 2024 product.
Bryan, I might ask you to talk about the profitability drivers in Q4.
Bryan L. Hughes -- Senior Vice President, Chief Financial Officer
Yeah, we talked about it sequentially, right? And I think the biggest driver, you kind of alluded to it, Tristan, is going to be continued marketplace pressures on discounting allowances, just a tougher environment than what I think the industry was anticipating as we get through the selling season and start to ease in the June, July, August period, our Q4, in terms of dealer's willingness to take on product. Also, you have some seasonality of sorts on the marine side, for example. We have interest reimbursement programs that start to kick in, in our Q4 versus Q3. So, I think, broadly speaking, I would characterize, you know, that profit guidance we provided as a bit of a seasonal, as well as an expectation of continued very tough market conditions and dealer sentiment.
Tristan Thomas -- BMO Capital Markets -- Analyst
OK. Thank you. I'll hop back in the queue.
Operator
Thank you. Our next question comes from James Hardiman with Citi. You may proceed.
James Hardiman -- Citi -- Analyst
Hey, good morning. Thanks for taking my question. So, on the inventory front, maybe a little surprised to hear you say you're actually pushing back the introduction of some of the model year '25. Certainly, some of the commentary that we've heard from dealers is that they're actually waiting for the model year '25 to make orders because they don't want to further exacerbate the aging issue.
Maybe speak to the thought process there. Do you think it'll be a catalyst once the '25 begin to make their way into the channel? And I think there's been some discussion at an industry level of moving up that model year change, or any thoughts there.
Mike Happe -- President and Chief Executive Officer
Yeah, good morning, James. This is Mike. Let me be more specific on my comment about model year '25. My comment does not apply to the entire portfolio in the same way.
There are certain pockets of our portfolio where we are being very intentional in the timing and delivery of model year '25 product for two reasons. One, we may still have a little bit of model year '24 carryover on our own lots. And number two, we, with the dealers, you know, think it is best to continue to work on any of the aged inventory in the field. Our model year '22 inventory is virtually nonexistent at the end of third quarter, very small number of units.
And we continue to put some of our select promotional support dollars on the age side against a number of the model year '23 products. So, that is really our focus there on '25. In terms of timing, I would actually say the -- you know, it appears to me that the RV industry continues to probably move toward a more common model year, future model year release window. And in my opinion, based on, you know, the activity that I'm seeing and hearing, I don't believe that that window in future years will move up.
I actually think it will stay in the mid-summer period. And, hopefully, we will continue to see good discipline by other OEMs across the industry to make a reasonable model year transition in a time period that makes sense.
James Hardiman -- Citi -- Analyst
Got it. OK.
Bryan L. Hughes -- Senior Vice President, Chief Financial Officer
And there's been some outliers on the towable side to that summertime model year introduction, just a couple outliers. I think the big players for the most part are disciplined in that regard. The motorhome has been less disciplined. You know, so if you were look at it segment by segment motorhome has certainly had a history and continued this year to introduce the the next model year earlier than the summer period here in July when the industry, largely shakes hands and agrees is the model year turnover.
Some of that driven by the OEM, the chassis providers on the motorized side having a different timing of model your change over, too.
James Hardiman -- Citi -- Analyst
Got it. And then, any quantification you could give us on the flex frame issue, both the extending of the warranty and the transferability of the warranty. Sounds like you don't think it's going to be a meaningful driver to increase warranty. But so, maybe walk us through the major assumptions that lead you to that conclusion.
Thanks.
Mike Happe -- President and Chief Executive Officer
James, this is Mike. Let me put this in perspective for everybody. Less than 1% of all Grand Design fifth wheels built in the entire history of its company have experienced any sort of excessive frame flex issue. This is an issue which is not as large in actuality from a unit impact standpoint, nor in financial impact as several stakeholders perceive it to be.
The impact of warranty to date in fiscal year '24 regarding excessive frame flex has been nominal. And as Bryan alluded, we are maintaining historical warranty levels now around most of our businesses, including Grand Design. In the announcement that the Grand Design business made candidly to signal to its consumers that we have maximum confidence in our products and that we will provide the utmost and complete support to customers in the future will come with very little financial impact in the rest of this fiscal year or future fiscal years, given the current warranty rate we're seeing on this topic. So, that's why I use the word misinformation in my prepared comments.
This topic is not having a significant impact on our warranty expense line now, and we don't anticipate that to be the case in the future.
Bryan L. Hughes -- Senior Vice President, Chief Financial Officer
Yeah, and just to add a little bit to that, you know, as Mike said, the experience rate is so low on this. We do have some, of course, experience where we've seen it, as Mike said, less than 1%. And on those instances where we have seen it, the cost per fix is likewise not meaningful. And then, lastly, you know, Grand Design has always taken care of the customers, OK? So, call it goodwill practices.
I think most in the call know what that means from an industry perspective. Even in other words, outside of warranty, Grand Design has historically taken care of customers on these types of issues as well. So, it's already effectively in the run rate we feel this additional warranty that was just extended. So, for all those reasons, you know, hopefully, that gives you some perspective on why we think this is not any kind of financial event, call it, as we try to put this -- our customers at ease through this extended warranty.
James Hardiman -- Citi -- Analyst
It does. That's a good perspective. Thanks, guys.
Operator
[Operator instructions] Our next question comes from Bret Jordan with Jefferies. You may proceed.
Bret Jordan -- Jefferies -- Analyst
Hey, good morning, guys.
Mike Happe -- President and Chief Executive Officer
Good morning.
Bret Jordan -- Jefferies -- Analyst
Could you talk a bit more about the general -- the relative health, I guess, of the dealer channel, marine versus RV. Obviously, the marine downturn started after the RV downturn but might be a little deeper at the moment. Maybe could you talk about, you know, are we going to see attrition or meaningful incremental attrition on either one of those channels given just inventory carrying costs and slow retail sales?
Mike Happe -- President and Chief Executive Officer
Bret, good morning. This is Mike. As we've stated before, we can discuss specifically the marine market segments that we're in. And so, I'll focus my comments here on pontoons, because that is where the -- you know, that's obviously where the majority of our marine volume lies.
I am extremely pleased with our Barletta branded business and the way they've been managing both their support of increasing retail market share in a difficult environment, but also their prudence and discipline around field inventory. And this is a business, as an example, where, at the end of our third quarter, we didn't have a single model year 2025 product in the channel yet. And I'm not even sure that's the case today. I don't think it is.
So we continue to focus on running out our model year '24s and are working with the dealers to make sure that the turn rate that they desire, in light of some of the pressures they're facing on inventory flooring costs, as an example, across all of their lines, not just Barletta, that we're a good partner in making sure that their Barletta inventory levels are in a position to both drive double-digit market retail share, but also help them drive acceptable profitability on their retail transactions and manage any carrying costs that they have. And so, we've actually brought down Barletta total inventory as of the end of the third quarter by probably somewhere in the range of, you know, 800 to 900 units. And we anticipate, you know, also driving that field inventory position a little bit lower here, particularly over the fourth quarter. And we think that is the best thing to do for our dealers without sacrificing our ability to go after double-digit market share so that we can position ourselves for an even stronger model year '25 line release that will happen probably in the August, you know, time period.
So, you know, our marine inventory position is in, I think, really decent shape to begin with, and we're going to make it even stronger here over the next 90 to 120 days. And then, hopefully, market conditions will be in a place where, you know, we can stabilize and get back to a 1-to-1 retail-to-shipment ratio in that particular business.
Bryan L. Hughes -- Senior Vice President, Chief Financial Officer
Hey, Bret, if you were asking about broader dealer health in general, you know, as both RV and Marine get through the selling season here, I think it's the best time of year for them. They'll have decent cash flow and at least some profitability to get them through the selling season. I think there is some exposure, call it, remaining in marine, heightened above RV. But what I am certainly hearing and want to acknowledge is that the marine OEMs, broadly speaking, of which, again, we're a very small piece, are doing a very good job at pulling back on production and making sure that the dealers only have what they need really to get through the selling season and trying to help them with carrying costs.
So, if that was your broader question, just wanted to throw that in, too.
Bret Jordan -- Jefferies -- Analyst
Great. Thank you. Appreciate it.
Operator
Thank you. Our next question comes from Michael Swartz with Truist Securities. You may proceed.
Mike Swartz -- Truist Securities -- Analyst
Hey guys, good morning. Maybe just drilling down a little bit into profitability and, more specifically, the motorized business. I think EBITDA margins were in the four or five range this quarter and over the past year or -- so as productions come down, they've really been kind of sticking in that 7% range. So, maybe help us understand, I guess, one, what changed during the third quarter to drive it down about 300 basis points.
And then, I guess, two, how do we? How should we think about that going forward?
Bryan L. Hughes -- Senior Vice President, Chief Financial Officer
Yeah, certainly -- Mike, good morning. Certainly, deleverage continues to weigh heaviest. We talked about how the market wasn't seeing any improvement as we thought it might on retail in April and May. That affected us.
It also caused, I'd say, the Winnebago brand to get a little bit ahead of the market in terms of its production and then be faced with higher discount pressures as a result of that. There was some certain specific brands that we needed to be really aggressive on considering the market conditions. And so, that was a big impact. Productivity, you know, as the market slowed down and as our product mix becomes one of those things that you have to juggle from a production perspective, that drove our productivity below where we were expecting and wanting to see as well.
So, that in the form of both direct labor, productivity and direct labor in getting the units out the door. So, those were the biggest things that we fought here in our Q3.
Mike Swartz -- Truist Securities -- Analyst
OK, and on the new Grand Design lineage, I know this product hasn't officially launched yet, but any color or context you can give us around just the response from the dealer base. And any way to think about maybe the initial distribution opportunity there, maybe the number of doors, and then, you know, what maybe the initial stocking levels will look like on that business?
Mike Happe -- President and Chief Executive Officer
Good morning, Mike. This is Mike. As I mentioned in our comments, we will actually be unveiling more specifics about the product this Saturday in New York City. We will not, you know, share at this time the number of dealers that we have mutually committed to on the product line.
But I can say that the quality of that dealer stocking list is every bit as impressive as what we have on our Grand Design towables list. In fact, it includes several of the same loyal and fantastic Grand Design dealers that carry towables. But it also includes a few new dealers to the Grand Design brand for specifically the motorized launch. As I said earlier, we will have a very light amount of shipments late in fourth quarter, probably in the month of August, on this product.
And then, the majority of the stocking orders and deliveries will begin in fiscal '25. And so, as we firm up those orders here, we will -- we begin to reflect those to you all as well in the backlog. I don't believe our current motorized backlog includes any Grand Design orders at this time. But those conversations, obviously, on a stocking order commitment are very much happening.
And so, you will begin to see the impact of that probably when we announce our fourth quarter earnings in October. The other thing that I will mention, and we're not providing specifics on this yet, is the Class C lineage is the first of several Grand Design motorized products that are on the drawing board. And over the next, you know, probably six months, you will hear more from Winnebago Industries and Grand Design about our intentions on a couple other products that we could be bringing to the market here in the next, you know, I would say probably nine to, you know, 15 months as well. So, this is the beginning, and more details to come as we're comfortable.
Mike Swartz -- Truist Securities -- Analyst
OK, great, thanks.
Operator
Thank you. Our next question comes from Noah Zatzkin with KeyBanc Capital Markets. You may proceed.
Noah Zatzkin -- KeyBanc Capital Markets -- Analyst
Hi. Thanks for taking my question. I guess just kind of related to the kind of affordability concerns in the industry, just wondering if you could kind of provide any color on how you're thinking about ASPs across segments. And then, somewhat relatedly, yeah, I think we had kind of picked up from some other industry participants that they're expecting motorized chassis price increases from the auto OEMs.
So, as it relates to the motorized side and model year '25, like is ASP an offset there? How are you thinking through those kind of cost increases? Thanks.
Bryan L. Hughes -- Senior Vice President, Chief Financial Officer
Hey, Noah, this is Bryan. I'll start with the second part of your question. Yeah, I did see your note on chassis costs. I think, frankly, the industry has seen most of those increases.
It's in the rear view mirror. There's still some inflationary pressures remaining on motorized chassis that we're anticipating but nothing of the magnitude that you cited. We certainly -- I don't want to minimize the size of increases we've seen in motorized chassis over the last three years because they have been high, but the remaining increases, you know, I think will be modest and will be digestible as it relates to our ability to price for those remaining increases in the coming years. So, I guess I'd start with that.
And then, it kind of gets into the affordability question that you raised broadly. So, I'll shift to that part of the question. On the towable side, we're seeing very benign cost environment. So, on an apples-to-apples basis, if we look at our bonds from model year '24 to '25, they're very neutral.
And so, pricing as a result will likewise be neutral on an apples-to-apples basis. What we're doing to address, you know, that customer preference for lower price points is introducing a lot of new product that allows us to do that without compromising our premium brand position. So, products like the new Transcend One is an example, Reflection 100, the Influence, all those on the Grand Design side, the Access, the Stick-and-Tin product for the Winnebago-branded, these are examples of price point model introductions that we think will help maintain our premium position, but also start to defend some of the market share more aggressively. So, I'd say that's what we're doing on the towable side.
On the motorized side, we don't expect -- you know, going back to my earlier comments, we don't expect significant apples-to-apples increases, more in the modest 2% to 3%. And so, we will address those accordingly with pricing where we think it's appropriate, as well as some new product introductions that the teams are working on. Certainly, the Grand Design entry will help us on the motorized side in terms of positioning a product that we think will be really well-received by the dealers and the end customers at price points that they find to be very competitive.
Noah Zatzkin -- KeyBanc Capital Markets -- Analyst
Thank you.
Operator
Thank you. Our next question comes from Craig Kennison with Baird. You may proceed.
Craig Kennison -- Robert W. Baird and Company -- Analyst
Hey, good morning. Thanks for taking my question. You've addressed most of them already, but I wanted to follow up on Mike's question earlier regarding Grand Design and motorhomes and scaling that opportunity. What's the philosophy around the margin profile of that brand within motorhomes? Would you expect it to be accretive to margin in motorhomes over time in the way that it is in towables?
Mike Happe -- President and Chief Executive Officer
Good morning, Craig. Appreciate the question. The answer is yes. We do anticipate that we will have motorized profitability that is, first of all, probably accretive to our overall portfolio profitability yield.
But we expect that Grand Design motorized profitability will be very comparable candidly to the profitability of their towables business. Certainly, that will vary by product type. But, you know, our team is very committed at Grand Design to have differentiated, highly valued, and sought-after premium profitable motorized product in the market. Grand Design has often stated their intent to major in the majors.
And so, their motorized product will be pointed at some of the higher-volume sub-segments of that category. And we anticipate, based on what we've seen so far with the lineage work but also some of the projections on future products, that the profitability on that line should be quite acceptable. So, time will tell. The team will need to execute to what I just stated.
And certainly, competition isn't going to hand Grand Design market share very freely. So, you know, we anticipate an intense battle, but we have a very strong and focused team on that product line.
Bryan L. Hughes -- Senior Vice President, Chief Financial Officer
In the initial months, of course, Craig, initial quarters will require some scale-up. So, it's not expected immediately to be accretive, but it certainly will very soon.
Craig Kennison -- Robert W. Baird and Company -- Analyst
That's great. And then, maybe to follow up, you made some comments about Q4 revenue and margin profile, profitability profile. I'm wondering if you could just help us think through like segment EBIT assumptions in that. And in particular, I'm guessing, you know, motorhomes could stick around that 4.5% range.
Is that what you're suggesting?
Bryan L. Hughes -- Senior Vice President, Chief Financial Officer
Yeah, I think, Craig, we're going to refrain from getting into the segment level conversations that we've been, you know, providing the last couple of quarters. We'll come back in the fall as part of our 2024 wrap up and looking forward into 2025 and provide some, we think, better guidance, forward-looking guidance, whether that be industry and more specifically Winnebago-related. But we're going to refrain from getting into a segment level forward discussion at this time.
Craig Kennison -- Robert W. Baird and Company -- Analyst
Sounds good. Thanks.
Operator
Thank you. Our next question comes from Scott Stember with ROTH. You may proceed.
Scott Stember -- ROTH MKM -- Analyst
Good morning, guys, and thanks for taking my questions. Mike, you made a comment about how dealers -- it sounds like they're starting to go back to some of their prior pre-COVID ordering patterns, which would help your share. But then you also mentioned that at least, I guess, on the total Grand Design that you expect some near term pressure on market share. Can you maybe just talk about those, you know, two opposing comments? Or does some of it have to do with -- I know there's a couple of new players in the market, you know, that maybe giving a couple of headwinds.
Just trying to parse that out.
Mike Happe -- President and Chief Executive Officer
Yeah, good morning, Scott. Appreciate the question. We do believe that the dealers have been actively trimming and focusing their brand assortments here really over the better part of the last year as market conditions have gotten more challenging, and they have tried to narrow their focus on profitable products that turn. We do believe that in a high majority of the cases that our brands are not just survivors but winners, you know, on those lots as dealers make those trimming decisions.
That does not mean, however, that there is not still intense competition across all of the segments, but particularly towables with several of the new entrants that you mentioned in your question as well. You know, Grand Design is very familiar with the competition from new entrants, particularly on the fifth wheel side, with a couple of the newer companies in Elkhart County. And they continue to, you know, do what they think is necessary at Grand Design to combat those new competitive challenges. But, you know, some of the share results specific to that brand probably do reflect some of the success of the new start-up brands.
But, you know, this is a battle that will be ongoing. And the Grand Design team is very focused on, you know, being one of, if not the top, fifth wheel manufacturers in the towable industry. We believe on the towable side there is significant runway on towable -- excuse me, travel trailer market share for both our Winnebago and Grand Design brands. And you're seeing quite a bit of work from Grand Design, as Bryan alluded to earlier, on their Transcend line, to make headway on the travel trailer segment going forward.
So, competition in macro has been relatively rational. We have seen, though recently, some spots from some of our bigger OEM competitors with some quite aggressive incentives for -- especially, you know, volume buys into the industry. And this is where we just have to weigh, you know, the benefits of a short-term response versus, you know, long-term pricing integrity for our brand. So, competition, Scott, remains intense.
Scott Stember -- ROTH MKM -- Analyst
Got it. And then, just the last question, you made a comment that there's really no '22s left and '23s and '24s out in the field on the RV side. Could you -- I don't know if you gave the information of how much of it is '23s versus '24s in a percentage standpoint.
Mike Happe -- President and Chief Executive Officer
Scott, I can share a little bit more detail with you here this morning. On the RV -- in the RV business, model year '23 is at the end of our third quarter, so the end of May. Probably we're in the low teens percentage in the field. That is probably a little bit better than actually where we were a year ago on RV to year-ago model inventory at that same time.
It is historically on the higher side when you look at pre-COVID. But again, I would say that at the end of May in the RV segment we were probably in that, you know, 12% to 14% percent range for model year '23 inventory in the field. And certainly, that's now one of our focuses as we work with dealers to, you know, reduce that as the model year '25 product comes in. Again, we don't think it's in a position which is existentially dangerous, you know, for OEMs or dealers, but it is historically, you know, too high, and we need to continue to focus on it.
And our teams will do so to that end. So, it's trending in the right direction. By the way, our June retail to date is trending better than our May retail performance, you know, across the RV brands. And so, we are hopeful that that retail trend in June is helping to bring that inventory down from prior model years as well.
Scott Stember -- ROTH MKM -- Analyst
Gotcha, that's all I have. Thank you.
Operator
Thank you. Our next question comes from Joe Altobello with Raymond James. You may proceed.
Joe Altobello -- Raymond James -- Analyst
Thanks. Hey, guys. Good morning. Mike, I just want to pick up on that last comment you made about June being a little bit better than May.
I guess, first, was that an industry comment as well, or was it just Winnebago specific?
Mike Happe -- President and Chief Executive Officer
No, Joe. Good morning, by the way.
Joe Altobello -- Raymond James -- Analyst
Good morning.
Mike Happe -- President and Chief Executive Officer
My comment was specific to Winnebago Industries RV brands. We have about three weeks of retail. You know, it's a five-week month the way we kind of count it fiscally, but we have about three weeks of retail under our belts in June. And the total retail performance from a comp standpoint versus last June is running at a more favorable rate than our May comp rate actuals.
It is still inconsistent. This is a bit of a maddening environment. You can see one week where you think blue skies are emerging. And then, the next week, you'll see a more difficult retail week.
The dealers that we speak to are echoing that. The foot traffic remains steady. But retail is inconsistent. But in macro, we're seeing a little bit better retail in June sequentially than we were in May.
And again, that's for Winnebago Industries. We don't yet have insight into the industry yet.
Joe Altobello -- Raymond James -- Analyst
OK, helpful. And just to follow up on that, I mean, obviously, you mentioned, you know, cautious dealer network several times this call and other calls. What do you think your dealers need to see, you know, to start ordering at a more normal rate? I mean, obviously, one or two good months probably isn't going to do it. But what are you hearing from dealers in terms of what would cause them or push them to start ordering at a more normalized order pattern?
Mike Happe -- President and Chief Executive Officer
That is the ultimate question, Joe, I think. And obviously, our dealers would be best positioned to answer that. When you ask that question, where my head heads is the following. Number one, they'd like to see their prior model year inventory from, in this case '24 and '23, in a little bit better position than it is today, especially the '23 inventory.
Number two, they'd like to have a higher level of confidence that retail in the future is, you know, what I'll call stabilized, and that there is a shot of flat to positive retail for an extended period going forward. Third, I think they want to make sure that they understand, you know, that OEM pricing on model year '25 product that is rolling out is competitive and that the support is there. And then, lastly, probably number four is some sort of signal of relief on some of those macroeconomic pressures that end up being real cost to them, i.e., the cost of carrying inventory, you know, or the retail cost of financing, you know, for a consumer that at times they buy down either directly or through negotiations on the trade ends. So, I think it's a combination of those factors, and we believe that, you know, the world's getting a little bit more stable across the board on that.
Bryan referenced, you know, inflation is really nominal in our bill of materials these days. We're able to see price stability with our future lineups. OEMs are working hard on more competitive and affordable price points. So, I think the pieces are coming together.
June retail is a little bit better than May. So, you know, listen, nobody's been able to call accurately the sort of the, you know, pivot here to an upside cycle beginning. And we indicated under our prepared comments that the rest of calendar 2024, you know, could remain sluggish. But, you know, we think conditions are slightly improving.
in terms of the timing of that to come around.
Joe Altobello -- Raymond James -- Analyst
Got it, very helpful. Thank you.
Operator
Thank you. Our next question comes from David Whiston with Morningstar. You may proceed.
David Whiston -- Morningstar -- Analyst
Thanks. Good morning. In the press release, you called out inefficiencies on towables and motorhomes. I'm just curious, is the motorhome inefficiency, is that chassis related, or is it more the other variables you were talking about earlier like direct labor?
Bryan L. Hughes -- Senior Vice President, Chief Financial Officer
It's more direct labor, David. And then, on the towable side, as I mentioned, we had some plant consolidation in the Winnebago line. We had some new product launches that didn't go as we would have liked them to in terms of the productivity. So, those things that I mentioned are really the drivers.
David Whiston -- Morningstar -- Analyst
OK, and in marine, revenue was down 32% there, but you also talked about rising Barletta share. So, I'm just curious if there are more headwind maybe on the Chris-Craft side, where that customer is maybe on the sidelines a bit too much right now?
Bryan L. Hughes -- Senior Vice President, Chief Financial Officer
No, I don't think that that's the case, David. You know, Chris-Craft is a niche segment. It's too small to really impact our story there on the marine segment. It's really the result of a broad sense of the dealer network having too much inventory.
Pontoon, not just the Barletta brand, but all the other brands on dealers' lots are certainly impacting the willingness by dealers to take additional product, even when we've got terrific momentum on the Barletta side and conversations with dealers about expanding on their lots in terms of our presence versus some of the competitor presence, some expansion of the dealer network itself, expansion of the product line, as I mentioned, with the Aria earlier. So, it's more related to dealer appetite to carry inventory in the marine side right now, coming off some really high levels of inventory over the past six to nine months in particular.
Mike Happe -- President and Chief Executive Officer
David, I'll specifically mention on Chris-Craft that we've actually seen positive comp year-over-year retail each of the last four months on that brand. So, that's really promising. Dealer inventory, to Bryan's point, is probably a little higher on that brand than we would like it to be currently. And if you look at Slide 17 of the supplemental slides that we provide as well during this day, you'll see a new product from Chris-Craft called the Sportster 25, which is, you know, a premium sort of water sports enthusiast product, you know, under the Chris-Craft brand that we think, with an MSRP starting at $150,000, which is quite attractive for a Chris-Craft brand, that -- you know, could make some waves, no pun intended, in a positive way in the future for that business.
So, as Bryan said, it's a brand cherry on top of the sundae for us. It's 150 years old, but we're also very serious about remaining competitive on that brand as well, and the team's working hard to that end.
David Whiston -- Morningstar -- Analyst
Thank you. And just one last question on the direct labor issue we talked about earlier. Is that a quality-related issue or something else?
Bryan L. Hughes -- Senior Vice President, Chief Financial Officer
Yeah, in certain instances, there's some quality things that we've been dealing with on the portfolio. I wouldn't say that it's at the top side of that, but it's not the main driver. The main driver is just, you know, the level of shipments, the deleverage that occurs, and the product mix shifts that need to be done in an environment like this. So, I would characterize it more related to that.
We have had some new product introductions that have caused some initial productivity challenges as well. But that's not terribly unusual relative to our past.
David Whiston -- Morningstar -- Analyst
You're not furloughing anybody, are you?
Mike Happe -- President and Chief Executive Officer
David, we worked responsibly over the last several years to react to the market downturn. We employ around 6,000 employees today. We were at a peak of almost 7,700 employees back in, you know, probably fiscal '21, fiscal '22. And so, we've been very carefully and hopefully respectfully right-sizing, you know, our workforce to, you know, the size of the market and the size and the health of our business.
And so, you know, we make adjustments in the workforce both from a manufacturing and/or office standpoint very carefully. And we've been, you know, doing that diligently over the past couple of years, you know, as we've managed this down market. So, no new news on that front but just a constant management of having, you know, the right quantity and certainly great quality of teammates, you know, here at our businesses.
David Whiston -- Morningstar -- Analyst
OK, thank you. Appreciate it.
Operator
Thank you. I would now like to turn the call back over to Ray Posadas for any closing remarks.
Ray Posadas -- Vice President, Finance
Thank you for joining us this morning. We have a number of investor conferences and nondeal road shows planned throughout the summer, and we look forward to meeting with you throughout the summer. This concludes our Q3 earnings call. Please enjoy the rest of your day.
Operator
Thank you. This concludes the conference. Thank you for your participation. [Operator signoff]
Duration: 0 minutes
Call participants:
Ray Posadas -- Vice President, Finance
Mike Happe -- President and Chief Executive Officer
Bryan L. Hughes -- Senior Vice President, Chief Financial Officer
Tristan Thomas -- BMO Capital Markets -- Analyst
Bryan Hughes -- Senior Vice President, Chief Financial Officer
James Hardiman -- Citi -- Analyst
Bret Jordan -- Jefferies -- Analyst
Mike Swartz -- Truist Securities -- Analyst
Noah Zatzkin -- KeyBanc Capital Markets -- Analyst
Craig Kennison -- Robert W. Baird and Company -- Analyst
Scott Stember -- ROTH MKM -- Analyst
Joe Altobello -- Raymond James -- Analyst
David Whiston -- Morningstar -- Analyst
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