Fleetwood Says Fed Hikes Are Pinching Profit

Fleetwood Enterprises Inc., a maker of motor homes and manufactured houses, warned Thursday that fiscal first-quarter results will be just above break-even because higher interest rates are eroding demand.

The Riverside-based company had net income of $26.4 million, or 72 cents a share, in the year-ago quarter. It was expected to earn 55 cents in the quarter ending July 30, according to one analyst surveyed by First Call/Thomson Financial.

It is Fleetwood’s second profit warning in four weeks. The Federal Reserve’s recent decisions to increase interest rates has made it more expensive for consumers to borrow to finance purchases. Motor-home sales, orders and backlogs are below last year’s levels because of high dealer inventories and lower demand, the company said.

Fleetwood fell 50 cents to close at $14.25 on the New York Stock Exchange, and earlier touched a 52-week low of $13.25. The shares have fallen about 43% in the last year.

Manufactured-home builders including Fleetwood and Champion Enterprises Inc., the top U.S. maker of the homes, have warned over the last year that they would miss earnings estimates amid an industry-wide glut of homes and interest rate increases that make it harder for people to buy homes.

Earlier this month Auburn Hills, Mich.-based Champion said it closed two manufacturing plants in response to the lessened demand. Champion shares dropped 19 cents to close at $4.75 on the NYSE.

Fleetwood will reduce its motor-home production schedules because dealers have been hesitant to add to inventory as the end of the model year nears. Earnings will be affected by the falling value of some of the company’s inventory.

The company expects business for motor homes to improve once the transition to 2001 model year products is complete in August.