The boom in recreational vehicles has come as a big surprise to many investors, and Camping World Holdings (NYSE: CWH) has worked hard to try to build up its position in the RV industry. Moreover, it's also looked at ways to expand its scope to include not only RVs but other outdoor products in related areas.
Coming into Thursday's fourth-quarter financial report, investors were prepared for ongoing challenges to affect the company to a certain extent. However, Camping World's final numbers included an unexpected net loss, and that made some shareholders nervous that the retailer's efforts to achieve a higher-growth strategy for the future might run into unanticipated obstacles.
Image source: Camping World.
Camping World hibernates for the winter
Fourth-quarter results were mixed. Revenue of $982.4 million was far better than the $965 million that most of those following the stock were looking to see, representing growth of almost 11% from the year-earlier quarter. However, net losses of $71.5 million were disappointing, and even after adjusting for a one-time goodwill impairment charge and other extraordinary items, adjusted losses of $0.26 per share were far worse than the consensus forecast among investors for an $0.18-per-share profit.
Camping World's different segments revealed the company's weak spots. The dealership segment saw revenue drop 0.8%, on a 7.5% decrease in same-store sales across 105 of its locations. Although used-vehicle unit sales volume climbed 7% to move above 6,500, the number new vehicles sold fell 6% to less than 11,300. That led to an overall volume decline of 1.6%. Moreover, pricing came under pressure as well, with average sales prices falling 1.5% overall. Same-store unit volume plunged 13%, and dwindling gross margin also weighed on the segment's results.
The retail segment was the saving grace for Camping World's top line, but it stemmed largely from the addition of Gander Outdoors stores to the company's store base. Revenue for the segment soared 85%, but same-store sales were down almost 4% across legacy Camping World RV locations. A big drop in gross margin also affected this part of the company's business.
Trends toward reduced inventory also continued during the period. Camping World said that new-vehicle inventory per dealership was down 20% from year-earlier levels, and it took the doubling of retail inventory from newly added Gander Outdoors stores to keep overall inventory levels climbing.
What's next for Camping World?
CEO Marcus Lemonis put the results in perspective. "After several years of very strong growth," Lemonis said, "our sales of new RVs began to moderate in the second quarter of last year. While this trend accelerated through the end of the year, sales of used RVs were up in every quarter last year."
However, it's what's coming next that has some nervous about Camping World's strategic vision. As the CEO pointed out, Camping World decided to move toward a leaner-inventory model, even though it meant sacrificing its margin performance to put that strategy in place. Now, a lot of how the RV segment does will rely on whether manufacturers provide interesting vehicle models for the coming season.
Nevertheless, Camping World is optimistic about the fundamentals of the business. The company's Good Sam Club membership jumped by almost 17% to 2.1 million members over the past 12 months, and participation in its clubs, roadside assistance, and other programs climbed above the 3 million mark during the quarter.
Camping World investors weren't sure how to take the RV retailer's most recent results, and after initially falling as much as 9% early Friday morning following the Thursday night announcement, the stock recovered and even posted gains by midday. With the share price still down almost 70% from this time last year, though, Camping World has a lot more work to do to recover fully.
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