Please ensure Javascript is enabled for purposes of website accessibility

A Tough RV Market Hits Camping World Again

By Dan Caplinger – May 9, 2019 at 7:29AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The outdoor retail specialist had to deal with more red ink.

Camping World Holdings (CWH -0.37%) found itself in the right place at the right time a few years ago. With the unexpected boom in the recreational vehicle industry, Camping World had a huge opportunity to take full advantage of high demand. The company did so by not only expanding its reach in the RV world, but also by looking at other ways to broaden its business toward becoming a more all-purpose outdoors retailer.

Coming into Wednesday's first-quarter financial report, Camping World investors were ready to see flat sales and a substantial pullback in profit. However, the outdoors retailer's results included substantial losses, calling into question some of the assumptions that shareholders have made regarding the extent of weakness in the recreational vehicle market and Camping World's part in it.

Small conversion van crossing a bridge over a river going between mountains.

Image source: Camping World.

A slow start to 2019 for Camping World

Camping World Holdings' first-quarter results weren't particularly inspiring. Revenue was mixed. Revenue of $1.06 billion was up a fraction of a percent from year-ago levels, and that was more or less in line with what most of those following the stock had expected from the retailer. However, the company again posted adjusted net losses, this time amounting to $24.9 million. That led to adjusted losses on a per-share basis of $0.67, dramatically missing the $0.14-per-share profit that represented the consensus forecast among investors.

One big change that Camping World investors will notice is that the company made changes to its various reporting segments. Rather than breaking down results by dealership and retail, the outdoors specialist used a more holistic approach that incorporated the integration of various businesses within the company. The Good Sam services and plans segment saw revenue climb 5%, with higher gross profit and a modest rise in segment income. Membership counts rose 17% to 2.15 million, but same-store products, service, and other revenue saw a large 9.6% drop.

The much larger RV and outdoor retail segment saw more struggles. Segment revenue was up 0.4%, but same-store revenue plunged 11% as demand for RVs hit a rough patch. Pressure on gross profit helped contribute to reversing year-ago segment profit with a modest loss in the current year's period.

Vehicle-based metrics were also weak. Vehicle units fell 5.5% to around 23,200, with new vehicles seeing even more dramatic drops of 7.9% to just over 15,000 units. Used vehicle units saw a more modest 0.9% decline to just under 8,200 units. In terms of pricing, used vehicles saw a 5.5% rise to just over $22,000 per unit, but new vehicles saw prices decline 0.8% to around $35,250. That sent overall average selling prices down 0.1% for the quarter.

Can Camping World get back in the black?

CEO Marcus Lemonis wasn't at all alarmed about the losses. "We are excited about the progress we have made in our business," Lemonis said, and "our financial results for the quarter and the directional trends in our business were essentially in line with our full-year guidance expectations." The CEO pointed to improved sales trends that began at the end of the first quarter and have continued into April and early May as being encouraging for the future.

Camping World also took the opportunity to make some revisions in order to correct what it called immaterial errors. The adjustments were indeed relatively small, but they did result in lower reported earnings for last year's first quarter than it had originally reported.

Camping World investors didn't seem immediately concerned about the new losses, and the stock was down only a fraction of a percent in after-hours trading following the announcement. With a major shareholder having added to its stake in the company, some believe that a larger potential transaction might come soon. In any event, it'll be important for Camping World to see its RV business start to show positive results again soon, because otherwise it could be problematic for the outdoors retailer to make the most of what has been an important profit-making machine over the past several years.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Camping World Holdings. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Camping World Holdings Stock Quote
Camping World Holdings
CWH
$26.79 (-0.37%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
339%
 
S&P 500 Returns
109%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.