8-K: Camping World Holdings Reports Mixed 2023 Results, Sees Positive Unit Growth in Early 2024

Camping World Holdings reported a decrease in revenue and net income for 2023, but saw positive new vehicle unit growth starting in December and continuing into early 2024.

Summary

• Camping World Holdings, Inc. announced its financial results for the year and fourth quarter ended December 31, 2023.
• Full-year revenue decreased by 10.6% to $6.2 billion, while used vehicle revenue reached a record $2.0 billion, a 5.4% increase.
• New vehicle revenue declined by 20.2% to $2.6 billion, and new vehicle unit sales decreased by 16.6%.
• The average selling price of new and used vehicles decreased by 4.3% and 4.8%, respectively.
• Gross profit for the year was $1.9 billion, a decrease of 17.0%, with a total gross margin of 30.2%, down 230 basis points.
• Net income for the year was $50.6 million, a decrease of 85.6% compared to the previous year.
• Adjusted EBITDA was $286.2 million, a decrease of 56.2%.
• For the fourth quarter, revenue decreased by 13.4% to $1.1 billion.
• Used vehicle revenue decreased by 18.1%, while new vehicle revenue decreased by 6.7%.
• The company experienced a net loss of $49.9 million for the fourth quarter.
• However, new vehicle same-store unit growth turned positive in December, with January and February trending up from mid-single to low-double digits.
• The company is aiming for 320 locations by 2028.

Sentiment

Score: 5

Explanation: The document presents mixed results. While there are positive signs of recovery in unit sales, the overall financial performance for 2023 was significantly worse than the previous year. The company is facing challenges related to declining prices and rising interest rates, but management is optimistic about future growth.

Positives

• New vehicle same-store unit growth turned positive in December 2023 and continued into early 2024.
• Used vehicle revenue and unit sales reached record levels for the full year 2023.
• The company has significantly improved its new unit inventory position.
• Camping World is outpacing the industry with a high percentage of 2024 models in stock.
• The company is seeing positive demand trends and is implementing cost reductions.
• The Good Sam segment and the service and parts portion of the business showed strength.
• The company is continuing its acquisition pace.

Negatives

• Full-year revenue decreased by 10.6% to $6.2 billion.
• New vehicle revenue declined by 20.2% to $2.6 billion.
• Net income for the year decreased by 85.6% to $50.6 million.
• Adjusted EBITDA decreased by 56.2% to $286.2 million.
• The company experienced a net loss of $49.9 million for the fourth quarter.
• Average selling prices for both new and used vehicles declined.
• Products, services, and other revenue decreased by 12.9% for the full year and 24.6% for the fourth quarter.
• Floor plan interest expense increased by 97.7% for the full year and 24.1% for the fourth quarter due to rising interest rates.
• Other interest expense increased by 78.6% for the full year and 36.2% for the fourth quarter due to rising interest rates.
• The company reduced its annualized cash dividend by $1.00 per share.

Risks

• General economic conditions, including inflation and interest rates, could impact the business.
• The availability of financing to the company and its customers is a risk.
• Changes in consumer preferences could affect demand.
• Competition in the industry could impact market share.
• The company's ability to manage inventory is a risk.
• The cyclical and seasonal nature of the business could lead to fluctuations in sales.
• Dependence on third-party suppliers and lending institutions is a risk.
• The company faces risks related to data privacy and cybersecurity.
• Ongoing or future lawsuits against the company and its officers and directors are a risk.
• Risks related to climate change and other environmental, social, and governance matters could impact the business.

Future Outlook

The company expects to deliver unit volume and strong earnings growth in 2024, while continuing its march to 320 locations by 2028. They also anticipate gross margin improvement beginning in the second quarter and continuing through the balance of the year.

Management Comments

• Marcus Lemonis, Chairman and CEO, stated that new vehicle same store unit growth turned positive in December, with January and February trending up.
• Matt Wagner, COO, commented that any reduction of new model pricing causes a reset of used vehicle values and a slowdown in used RV inventory purchases.
• Mr. Wagner also stated that positive demand trends, inventory discipline, strength in the Good Sam segment, acquisitions, and cost reductions give them confidence in delivering unit volume and strong earnings growth in 2024.

Industry Context

The RV industry has seen a slowdown in demand after a surge during the COVID-19 pandemic. Camping World's results reflect this trend, with decreased revenue and profitability. However, the positive unit growth in early 2024 suggests a potential recovery. The company's focus on used vehicles and its Good Sam segment aligns with broader industry trends of diversifying revenue streams.

Comparison to Industry Standards

• Camping World's performance is mixed when compared to industry standards. While the company experienced a significant decline in new vehicle sales, the used vehicle segment showed strength, which is a common trend in the current market.
• Companies like Thor Industries and Winnebago have also reported decreased sales in new RVs, indicating a broader industry slowdown. However, Camping World's focus on acquisitions and expansion to 320 locations by 2028 is a more aggressive growth strategy than some of its competitors.
• The company's gross margin decline is also in line with industry trends, as manufacturers and dealers are offering discounts to clear excess inventory. However, Camping World's ability to achieve positive unit growth in early 2024 is a positive sign compared to some competitors who are still struggling with inventory issues.
• The company's focus on the Good Sam segment is a differentiator, as it provides a recurring revenue stream that is less dependent on new RV sales. This is a strategy that other RV retailers are also exploring, but Camping World has a significant advantage due to its established brand and customer base.

Stakeholder Impact

• Shareholders will be impacted by the decreased net income and reduced dividend.
• Employees may be affected by cost-cutting measures.
• Customers may benefit from lower prices on new and used vehicles.
• Suppliers may experience changes in demand due to inventory adjustments.
• Creditors may be impacted by the company's financial performance and debt levels.

Next Steps

• The company will continue to focus on delivering unit volume and strong earnings growth in 2024.
• The company will continue its march to 320 locations by 2028.
• The company will focus on improving gross margins, particularly in the used vehicle segment.
• The company will continue to manage inventory levels and reduce costs.

Key Dates

Keywords

RV, Recreational Vehicles, Camping World, CWH, Financial Results, Revenue, Net Income, EBITDA, Used Vehicles, New Vehicles, Gross Margin, Inventory, Acquisitions, Good Sam, Retail