Camping World Holdings (NYSE:CWH) has been a big beneficiary of the rise in consumer demand for recreational vehicles, as the niche market has seen a resurgence unlike any since the 1970s. Although Camping World initially positioned itself to be a leading retailer for the RV lifestyle, it also had more ambitious plans to go beyond recreational vehicles toward becoming an all-purpose retailer of all things related to outdoors pursuits like camping, hunting, and fishing.

Coming into Tuesday's third-quarter financial report, Camping World investors had wanted to see good sales growth from the retailer, even though they were ready for the bottom line to suffer somewhat. Camping World's results weren't good enough to satisfy even these modest expectations, and some continuing headwinds could remain for the retailer to overcome heading into the end of the year.

Camping World storefront as seen from outside on a partly cloudy day.

Image source: Camping World.

Why Camping World couldn't find the gas pedal

Camping World Holdings' third-quarter results didn't provide the confidence that many people were looking for. Sales were up just 6% to $1.31 billion, and that growth rate was less than half what those following the stock were expecting. Adjusted net income did even worse, falling 20% to $18.2 million, and the resulting adjusted earnings of $0.49 per share was $0.12 per share less than the consensus forecast among investors.

A new corporate structure separated out Camping World's business into different segments. The largest is the dealership segment, which includes vehicle sales, and that unit saw sluggish revenue gains of just 0.7%. Vehicle unit sales were higher by 2.3% to almost 28,300, with fairly similar gains in both new and used RVs. However, same-store sales of new RVs fell 4.5%, with motorized RVs suffering a nearly 20% plunge in comps. Average selling prices were also down nearly 3% to around $31,600, with modest gains in used vehicle prices getting outweighed by a 4% decline in new vehicle prices. New vehicle inventory levels were also sharply lower, down 12% with a particularly big drawdown of 38% in motorized unit inventory levels.

The retail segment, which includes Camping World's results from product sales other than vehicles, saw a greater than 50% rise in revenue, driven largely by acquisitions. Yet same-store sales among Camping World RV locations were down more than 10%.

Finally, Camping World's consumer services and plans segment enjoyed healthy gains. Revenue was higher by 13% year over year, and almost 96,000 new Good Sam Club members during the quarter helped send total membership to record heights above the 2 million mark.

CEO Marcus Lemonis praised his company's approach. "At a time of excess channel inventory, rising input costs, rising interest rates, volatility in the stock market, and uncertainty around the broader economy," Lemonis said, "we aggressively managed our RV inventory levels, controlled [overhead] expenses, stayed disciplined on our pricing, and focused on margins and cash flow." The CEO said that the company is now "in an opportunistic buying position" for the immediate future.

Can Camping World bounce back?

One interesting aspect of Camping World's expansion strategy involves taking the acquisitions it's made and trying to take greater advantage of opportunities to boost exposure to recreational vehicles. Lemonis explained during the quarterly conference call that he expects nearly 40 Gander Mountain locations to incorporate RV sales to some extent over the long run, and new dealerships might well incorporate either the Camping World or Gander brand name.

Yet Camping World is also realistic about where the RV industry is right now. The company acknowledged that most publicly traded RV manufacturers have reported weaker shipments recently, and backlog figures point to at least some softening in the market. Camping World has tried to put its own inventory in position to handle that slowdown, but at the same time, weakness in the industry could help it buy up small competitors and continue its long-range strategy of consolidating a highly fragmented dealership industry.

Camping World investors didn't like the company's financial results, though, and the stock fell 7% on Wednesday morning following the Tuesday night announcement. If the big boom in RVs is finally coming to an end, then Camping World will have to be especially careful with its strategic moves to ensure that it can weather the industry storm and emerge stronger than ever.

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