What happened
Camping World Holdings (CWH 1.18%) stock fell this week, shedding 10% through the end of Thursday trading compared to a 1.6% decline in the wider market, according to data provided by S&P Global Market Intelligence. The recreational vehicle specialist remains in positive territory for the year, though, up 5% so far in 2023.
This week's drop came following a fourth-quarter earnings update Tuesday that described mounting pressures on the RV industry.
So what
After several years of above-average demand growth, consumers' appetite for RVs is waning. Camping World Holdings reported $7 billion of revenue for Q4, translating into an increase of less than 1%. Meanwhile, gross profit margins declined due to pricing and cost pressures. Adjusted earnings for the full year fell to $654 million from $942 million in 2021.
Management said they noticed the demand shift early on, though, and they highlighted aggressive actions they took to cut costs starting in late Q3. Still, the company swung to a net loss of $57 million in Q4 compared to a net profit of $59 million a year earlier.
Now what
The RV industry is cyclical, and slumps like these are no reason to abandon the bullish thesis for Camping World Holdings. The company has been through several pullbacks and has gone on to set new sales and earnings records following each one.
Still, management has to walk a fine line between cutting costs and reducing manufacturing output on the one hand while still investing in things like R&D and the supply chain in preparation for the next cyclical upswing. Sales and earnings trends will likely be muted in the meantime, and demand could fall hard if a recession strikes. Yet this industry leader is taking the right steps to ensure it can thrive through whatever selling environment develops in 2023 and beyond.
