Camping World (NYSE:CWH) Q3: Beats On Revenue, Stock Jumps 11.1%
Recreational vehicle (RV) and boat retailer Camping World (NYSE:CWH) reported Q3 FY2023 results topping analysts' expectations , with revenue down 6.79% year on year to $1.73 billion. Turning to EPS, Camping World made a GAAP profit of $0.32 per share, down from its profit of $0.97 per share in the same quarter last year.
Is now the time to buy Camping World? Find out by accessing our full research report, it's free.
Camping World (CWH) Q3 FY2023 Highlights:
Revenue: $1.73 billion vs analyst estimates of $1.7 billion (1.72% beat)
EPS: $0.32 vs analyst estimates of $0.10 ($0.22 beat)
Free Cash Flow of $272.7 million, similar to the same quarter last year
Gross Margin (GAAP): 30.2%, down from 32% in the same quarter last year
Same-Store Sales were down 13.7% year on year (in line)
Store Locations: 209 at quarter end, increasing by 16 over the last 12 months
Marcus Lemonis, Chairman and Chief Executive Officer of Camping World Holdings, Inc. stated, “We are laser focused on the final stages of cleansing our inventory going into 2024. These actions have come with near-term gross margin compression, but we believe now is the moment to put the finishing touches on our industry-leading inventory position and prepare the business for the next up-cycle. In 2024, we expect total company revenue, same store unit sales, total gross margin, and earnings to increase year over year.”
Founded in 1966 as a single recreational vehicle (RV) dealership, Camping World (NYSE:CWH) still sells RVs along with boats and general merchandise for outdoor activities.
Vehicle Retailer
Buying a vehicle is a big decision and usually the second-largest purchase behind a home for many people, so retailers that sell new and used cars try to offer selection, convenience, and customer service to shoppers. While there is online competition, especially for research and discovery, the vehicle sales market is still very fragmented and localized given the magnitude of the purchase and the logistical costs associated with moving cars over long distances. At the end of the day, a large swath of the population relies on cars to get from point A to point B, and vehicle sellers are acutely aware of this need.
Sales Growth
Camping World is larger than most consumer retail companies and benefits from economies of scale, giving it an edge over its competitors.
As you can see below, the company's annualized revenue growth rate of 6.84% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was mediocre, but to its credit, it opened new stores and expanded its reach.
This quarter, Camping World's revenue fell 6.79% year on year to $1.73 billion but beat Wall Street's estimates by 1.72%. Looking ahead, the analysts covering the company expect sales to grow 4.55% over the next 12 months.
The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.
Number of Stores
A retailer's store count is a crucial factor influencing how much it can sell, and store growth is a critical driver of how quickly its sales can grow.
When a retailer like Camping World is opening new stores, it usually means it's investing for growth because demand is greater than supply. Since last year, Camping World's store count increased by 16 locations, or 8.29%, to 209 total retail locations in the most recently reported quarter.
Taking a step back, the company has opened new stores quickly over the last eight quarters, averaging 5.65% annual growth in new locations. This store growth outpaces the broader consumer retail sector. With an expanding store base and demand, revenue growth can come from multiple vectors: sales from new stores, sales from e-commerce, or increased foot traffic and higher sales per customer at existing stores.
Same-Store Sales
Camping World's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 5.66% year on year. This performance is quite concerning and the company should reconsider its strategy before investing its precious capital into new store buildouts.
In the latest quarter, Camping World's same-store sales fell 13.7% year on year. This decrease was a further deceleration from the 4.8% year-on-year decline it posted 12 months ago. We hope the business can get back on track.
Key Takeaways from Camping World's Q3 Results
With a market capitalization of $746.2 million, Camping World is among smaller companies, but its more than $53.3 million in cash on hand and near break-even free cash flow margins puts it in a stable financial position.
We were impressed by how significantly Camping World blew past analysts' EPS expectations this quarter. We were also excited its revenue outperformed Wall Street's estimates. There was quite a bullish statement by management in the release saying that the company is in the final stages of rightsizing inventory going into 2024. For the full year 2024, Camping World expects year on year growth in revenue, gross profit and EPS. The stock is up 11.1% after reporting and currently trades at $19.2 per share.
So should you invest in Camping World right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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The author has no position in any of the stocks mentioned in this report.
