What happened

Thor Industries (THO -3.11%) shareholders lost ground to the market this week. The recreational vehicle giant's stock was down 13% through Thursday trading, according to data provided by S&P Global Market Intelligence. The broader S&P 500 index fell 2.8% over that time. The RV producer's stock is now down 24% so far in 2022 compared to a 17% decline in the market.

This week's slump was powered by an earnings update that left Wall Street feeling disappointed.

So what

Thor Industries said on Wednesday that sales dropped 22% in the period that ended in late October. That slump came after soaring growth over most of the past two years and reflected worsening conditions in the RV market.

Sales volumes are dropping, in part because interest rate spikes have raised the cost of financing these large purchases. "The RV market has been negatively affected by macroeconomic headwinds," CEO Bob Martin said in a press release.

Thor Industries is busy cutting costs and reducing its production pace. It maintained relatively high profitability and is generating positive cash flow. Yet net income still fell to 4.4% of sales compared to 6.1% a year ago.

Now what

Investors are more worried about the short-term outlook, which is weakening. Thor's order backlog is down, implying more sales declines ahead. To that end, management issued a wide forecast for the current fiscal 2023 year, with revenue likely landing anywhere from $11.5 billion to $12.5 billion. For context, revenue last year jumped 32% to $16.3 billion.

Much of that 2022 increase is now likely to reverse itself in 2023. But Thor Industries has been through several cyclical downturns in the past. Its leadership position in the industry, meanwhile, should help it navigate this environment without posting large losses or being forced to slash research and development investments. That spending will lay the groundwork for Thor's return to growth once the consumer discretionary industry stabilizes again.