There's been a huge boom in interest in recreational vehicles lately, with a new generation of travelers seeing the benefits of bringing your own lodging with you. Camping World Holdings (CWH 1.18%) has sought to be the one-stop shop for those seeking to follow the RV lifestyle, and since its IPO two years ago, the company has done a good job of taking full advantage of the boom in RV sales. At the same time, Camping World has larger aspirations to capture the entire outdoors market through strategic acquisitions of companies in adjacent industries like hunting and fishing gear and apparel.
Coming into Tuesday's second-quarter financial report, Camping World investors were hoping that the company would continue to see sustained growth from high demand for RVs. Camping World did indeed see some growth, but the pace of gains was slower than what most had wanted to see, and that has some investors wondering with the big boom in recreational vehicles might be coming to a close.
Image source: Camping World.
Camping World hits the brakes
Camping World Holdings' second-quarter results showed continued expansion, but not to as large an extent as hoped. Revenue climbed 13% to $1.45 billion, but that was slightly slower than the 16% growth rate that those following the stock had hoped to see. Similarly, adjusted net income was higher by 11% to $85.6 million, but the resulting adjusted earnings of $0.96 per share fell $0.10 per share short of the consensus forecast among investors.
Fundamentally, there were plenty of positive signs in Camping World's results. Total RV unit sales rose 8.5% to more than 33,600, producing revenue in excess of $1 billion. Nearly 21,750 new towable RVs were sold, rising 14% from year-ago levels, and same-store new towable sales counts rose 5.1% while corresponding comps figures for travel trailers were higher by 6.7%. Those same-store sales numbers accelerated from the first quarter of 2018, reflecting solid conditions in the industry. Customers preferred new units to used ones, with new RV sales jumping nearly 12% even as used sales were up just 1%.
As we've seen in past quarters, though, pricing played a negative role in Camping World's success. Average selling prices per RV fell almost 2%, with an even bigger 5% decline in new vehicle pricing to just over $33,000 per unit. However, the used RV market reversed its past downward trend, picking up more than 6% and coming in at an average of $22,900 per unit.
Elsewhere, Camping World enjoyed solid results in its consumer services and plans division, including a nearly 10% rise in revenue that translated to 15% growth in segment income. Membership in the Good Sam Club RV community jumped by 85,000 to more than 1.92 million members, hitting an all-time high. Camping World also saw demand for parts and other RV services climb dramatically, with gains of greater than 40% for the division.
CEO Marcus Lemonis explained some of the cross-currents in the quarter. "While the early part of the RV selling season was impacted by unseasonal weather," Lemonis said, "we saw nice improvements as the second quarter progressed, and our team did an excellent job of balancing our promotional activity to maintain strong profitability while driving sales growth and dramatically lowering our inventory levels of new RVs." The CEO also pointed to a combination of acquisitions and new store openings as key contributors to growth.
What's next for Camping World?
The efforts that Camping World has made on the growth front are extensive. In addition to expanding its Gander Outdoors unit, Camping World bought six dealerships during the second quarter and also signed an agreement to purchase another RV operation in south central Washington state. Moreover, plans to roll out Gander RV Sales locations could boost overall RV sales opportunities by more than 30% in the coming year.
However, there are some concerns about the RV industry's future. Some worry that proposed tariffs could increase the costs of production of RVs, eating into manufacturers' profit margin and forcing retailers like Camping World either to boost prices or accept lower margins of their own. However, industry experts note that millennials remain committed to supporting RV sales, and they might even be willing to pay higher prices in order to support their lifestyle choices.
Camping World investors weren't satisfied with the shortfalls in revenue and profit growth, and the stock fell 5% in after-hours trading following the announcement. At this point, the RV industry still looks healthy, and investors shouldn't be immediately concerned about an end to the boom. It makes sense, though, to look on the horizon to make sure minor worries don't turn into major obstacles in the near future.
