8-K: Camping World Holdings Reports Mixed Q3 Results: New Unit Sales Surge, Used Unit Sales Decline

Camping World Holdings saw a 29% year-over-year increase in same-store new unit sales in Q3 2024, while used unit sales declined, and overall revenue was slightly down.

Summary

• Camping World Holdings reported a revenue of $1.7 billion for the third quarter of 2024, a slight decrease of 0.3% compared to the same period last year.
• New vehicle revenue increased by 21.5% to $824.9 million, with unit sales up by 31.2% to 19,943 units.
• Used vehicle revenue decreased by 24.2% to $447.2 million, with unit sales down by 17.9% to 14,065 units.
• Combined new and used vehicle unit sales increased by 5.2% to 34,008 units.
• Same-store new vehicle unit sales increased by 28.8%, while same-store used vehicle unit sales decreased by 20.5%.
• The average selling price of new vehicles decreased by 7.4%, and used vehicles decreased by 7.7%.
• Gross profit decreased by 4.7% to $498.5 million, with a total gross margin of 28.9%, a decrease of 134 basis points.
• Net income was $8.1 million, a decrease of 73.9%, and adjusted EBITDA was $67.5 million, a decrease of 28.9%.
• Diluted earnings per share of Class A common stock was $0.09, a decrease of 71.9%, and adjusted earnings per share was $0.13, a decrease of 66.7%.

Sentiment

Score: 5

Explanation: The document presents a mixed picture with strong new unit sales but significant declines in used unit sales and profitability. While there are positive signs of recovery and future growth potential, the overall sentiment is neutral to slightly negative due to the current financial results.

Positives

• New vehicle sales saw a significant increase in both revenue and units sold.
• Same-store new vehicle unit sales increased by 28.8% for the quarter.
• The company's focus on product development and affordability is driving new unit market share.
• Used unit volume trends are showing sequential improvement in October.
• The company anticipates a meaningful recovery in used unit volume next year.
• The Good Sam and fixed operations businesses provide stability.
• The company is well-positioned for future growth through M&A and organic expansion.

Negatives

• Used vehicle revenue and unit sales decreased significantly.
• Overall revenue saw a slight decrease of 0.3% compared to the same period last year.
• Gross profit and gross margin declined due to lower average selling prices on new and used vehicles.
• Net income and adjusted EBITDA decreased substantially.
• Average selling prices for both new and used vehicles declined.
• Products, services, and other revenue declined by 4.6% due to the divestiture of the RV furniture business and fewer used vehicles sold.
• The total number of store locations decreased by two compared to the previous year.

Risks

• The company faces risks related to general economic conditions, including inflation and interest rates.
• There are risks associated with the availability of financing to the company and its customers.
• Changes in consumer preferences and competition in the industry could impact results.
• The company's ability to manage inventory and fluctuations in same-store sales are ongoing risks.
• The cyclical and seasonal nature of the business presents challenges.
• The company is dependent on relationships with third-party suppliers and lending institutions.
• There are risks associated with selling goods manufactured abroad, data privacy, and cybersecurity.

Future Outlook

The company anticipates a meaningful recovery in used unit volume in 2025, with modest growth in new units, and expects average selling prices to increase modestly year-over-year. They also believe they are well-positioned for dealership M&A and organic growth in 2025 and beyond.

Management Comments

• Marcus Lemonis stated that the combined new and used same store unit sales returned to positive growth for the first time in 10 quarters.
• Marcus Lemonis noted that the record new unit market share is a direct result of the company's focus on product development and affordability.
• Matt Wagner commented that the company's calculated approach to inventory has yielded market-leading results.
• Matt Wagner believes that the company's rigor will lead to a meaningful recovery in used unit volume next year.
• Marcus Lemonis concluded that the strength and stability of the Good Sam and fixed operations businesses are proven differentiators.

Industry Context

The results reflect a mixed picture in the RV industry, with strong new unit sales but a decline in used unit sales. This suggests a potential shift in consumer preferences or market dynamics. The company's focus on affordability and product development appears to be paying off in the new unit segment, while challenges remain in the used unit market.

Comparison to Industry Standards

• Camping World's new vehicle gross margins in Q3 2024 were within the range of pre-COVID-19 pandemic periods, indicating a return to historical norms in this area.
• However, used vehicle gross margins were negatively impacted by discounting, suggesting a need to adjust pricing strategies to maintain competitiveness.
• Compared to pre-COVID periods, the unit sales mix has shifted, with a higher proportion of new vehicle sales in Q3 2024 (58.6%) compared to 2019 (64.9%), 2018 (69.0%), 2017 (69.1%), and 2016 (64.2%).
• The company's performance in new unit sales is strong compared to industry trends, while the used unit sales decline is a common challenge across the industry.
• Companies like Thor Industries and Winnebago, which also operate in the RV sector, have faced similar challenges in used vehicle sales, indicating a broader industry trend.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income and adjusted EBITDA.
• Employees may be affected by potential cost-cutting measures or restructuring initiatives.
• Customers may benefit from the company's focus on affordability and product development.
• Suppliers may be impacted by changes in the company's inventory management approach.
• Creditors may be concerned about the company's financial performance and ability to meet debt obligations.

Next Steps

• The company will focus on an improved 2025, with a calculated approach to inventory.
• The company will continue to focus on product development and affordability.
• The company will pursue dealership M&A and organic growth opportunities.
• The company will hold a conference call on October 29, 2024, to discuss the results.

Key Dates

Keywords

RV, Recreational Vehicles, Camping World, New Vehicle Sales, Used Vehicle Sales, Retail, Market Share, Financial Results, EBITDA, Gross Margin