What happened
Shares of Camping World Holdings (CWH 1.18%) were moving higher Wednesday after the country's largest RV dealership chain posted better-than-expected results in its first-quarter earnings report.
As of 1:30 p.m. ET, the stock was up by 13%.
Image source: Getty Images.
So what
Camping World, which is still facing tough comparisons to pandemic periods during which social distancing promoted a boom in RV sales, said that its revenue fell 10.6% year over year to $1.49 billion, just above the average analyst estimate of $1.48 billion.
Used vehicle sales, a strategic priority for the company, rose by 10.4% to $444.7 million, and used vehicle unit sales jumped 13.3% to 12,432. Camping World's Good Sam loyalty program also grew modestly.
Due to the mix shift from new vehicles to used vehicles, however, gross margin fell by 404 basis points to 29.7%, and higher interest expenses also ate into the company's profits.
As a result, adjusted earnings tumbled from $1.15 per share to $0.14 per share, but that still handily beat analysts' consensus expectation for a loss of $0.06 per share.
"As we predicted, despite softer new vehicle demand and gross margin in the quarter, we saw record-setting gross profit performance in used vehicles and Good Sam Services and Plans," CEO Marcus Lemonis said in the earnings press release.
Lemonis also noted that the current market environment has created a bevy of dealership acquisition opportunities -- good news for a company that has historically grown through acquisitions, using a roll-up strategy to consolidate its leadership in RV retail.
Now what
The company didn't offer guidance in the earnings release, but the pipeline of acquisition opportunities should be reassuring for investors.
Camping World is also known for its juicy dividend, which at current share prices yields 11%, and the company posted strong free cash flow of $174 million in the quarter as inventory fell by $172 million from a year ago, meaning its dividend is well covered. Management has also committed to protecting it.
Camping World is a seasonal business, and its profitability should improve in the next two quarters, so investors can count on that high-yielding dividend to keep flowing. If you're looking for income, this still looks like a top stock to own.
