What happened
Shares of Bluegreen Vacations Holding (BVH) fell hard despite a rising market this week. The vacation property specialist's shares declined 15% through Thursday trading compared to a 2% increase in the wider market, according to data provided by S&P Global Market Intelligence. That drop didn't erase all of the gains that shareholders have seen this year, though, and the stock is still in positive territory so far in 2023.
The decline was sparked by an earnings report that showed mounting pressures on the business.
So what
Bluegreen Vacations announced on Monday that revenue rose 17% for the fourth quarter, which ran through late December. This increase added to a record year of demand for its timeshare and vacation ownership packages. But Wall Street was more interested in the weaker outlook for 2023.
Management said that the volume of vacation package sales fell in the fourth quarter, in part due to lower traffic at the company's marketing kiosks and challenges in fully staffing these locations. These package sales often mark the beginning of Bluegreen Vacation's sales funnel, and so a slowdown implies weaker revenue results ahead.
The company noted financial challenges, too, as free cash flow turned negative following the purchase of a new resort in Florida.
Now what
Management says it is focused on cutting marketing costs this year. The company has already closed several underperforming kiosk locations in hopes of boosting efficiency. Yet the combination of rising interest rates and weaker demand is likely to pressure sales and earnings in 2023.
Bluegreen Vacations has access to plenty of cash today, meaning the risk is relatively low that an industry recession sparks a cash crunch. Still, investors should brace for potentially weak earnings results in the year ahead as the consumer discretionary company adjusts to a tougher operating environment.
