Camping World Holdings (CWH) is a leading retailer of recreational vehicles (RVs) and outdoor lifestyle products, with a rich history spanning over two decades. The company has carved out a unique position in the RV industry, leveraging its extensive distribution network, contract manufacturing capabilities, and data-driven market intelligence to drive consistent growth and profitability.
Business Overview and History: Camping World was founded in 1966 as a single retail location in Bowling Green, Kentucky, offering a range of camping and RV accessories. Over the years, the company has expanded its footprint, both organically and through strategic acquisitions, to become the world's largest retailer of RVs and related products and services. As of 2023, Camping World operates over 200 locations across the United States, serving a diverse customer base of RV enthusiasts and outdoor adventurers.
In 2003, the company made its first strategic acquisition, setting the stage for its rapid growth trajectory. Since then, Camping World has successfully integrated numerous RV dealerships, expanding its reach and enhancing its market share. The company's acquisition strategy has been a key driver of its success, allowing it to consolidate the highly fragmented RV industry and solidify its position as the industry leader.
Camping World's growth continued throughout the 2000s and 2010s, with the company consistently expanding its network of RV dealerships. A significant milestone was reached in 2016 when Camping World went public on the New York Stock Exchange, raising capital to fuel its ongoing growth strategy.
In 2019, Camping World implemented a strategic shift to refocus on its core RV competencies. This restructuring process, which was substantially completed by the end of 2021, involved exiting certain non-core business lines and closing underperforming retail locations. While this strategic shift presented challenges, including lease termination costs and other associated expenses, it ultimately strengthened the company's focus on its primary market.
Throughout its history, Camping World has demonstrated resilience in the face of industry downturns. The company successfully navigated the challenges posed by the COVID-19 pandemic in 2020, maintaining its leading market share despite the disruptions to the broader economy. This resilience can be attributed to Camping World's extensive nationwide footprint of RV dealerships and its diversified product and service offerings.
Business Segments: Camping World operates through two main reportable segments: Good Sam Services and Plans, and RV and Outdoor Retail.
The Good Sam Services and Plans segment offers various services, protection plans, and products targeting the RV lifestyle and outdoor recreational activities. Key offerings include extended vehicle warranty programs, roadside assistance plans, property and casualty insurance products, travel planning and directories, and publications. This segment generates revenue primarily through membership fees, underwriting profit sharing, and commissions from its various services and plans. In the third quarter of 2024, Good Sam Services and Plans revenue was $50.84 million, representing 2.9% of total revenue, with a gross profit margin of 61.3%.
The RV and Outdoor Retail segment encompasses Camping World's core RV business, including the sale of new and used RVs, as well as related products, services, and finance and insurance offerings. Key components of this segment include new and used vehicle sales, parts, accessories, and other retail products, RV service and repair, and finance and insurance (F&I) products. In Q3 2024, new vehicle sales revenue was $824.92 million (47.8% of total revenue), used vehicle sales revenue was $447.24 million (25.9% of total revenue), and F&I revenue (net) was $166.25 million (9.6% of total revenue). Gross profit margins were 13.5% for new vehicles, 18.2% for used vehicles, and 100% for F&I in Q3 2024. Overall, the RV and Outdoor Retail segment generated $1.67 billion in revenue in Q3 2024, making up 97.1% of Camping World's total revenue.
Financials and Operational Highlights: Camping World's financial performance has been impressive, with the company consistently generating robust revenue and profitability. In the fiscal year 2023, the company reported revenue of $6.23 billion and net income of $31.04 million. The company's strong financial position is further evidenced by its healthy balance sheet, with $39.65 million in cash and cash equivalents as of December 31, 2023.
For the most recent quarter (Q3 2024), Camping World reported revenue of $1.72 billion, net income of $8.06 million, operating cash flow of $324.20 million, and free cash flow of $304.56 million. While revenue remained flat year-over-year, net income decreased by 73.9%, primarily driven by lower gross margins in the used vehicle segment. However, both operating cash flow and free cash flow increased year-over-year.
One of Camping World's key strengths is its diversified revenue streams. The company generates revenue from various sources, including new and used RV sales, finance and insurance services, Good Sam Club memberships, and the sale of RV parts, accessories, and services. This diversification has helped the company weather various industry cycles and mitigate the impact of volatility in any single revenue segment.
Liquidity and Financial Health: As of the end of 2023, Camping World had a Debt/Equity ratio of 13.4x, with $2.87 billion in net debt and $214.21 million in total equity. The company's liquidity position remains strong, with $28.38 million in cash and cash equivalents as of the end of Q3 2024. Additionally, Camping World had $572.83 million in unencumbered borrowing capacity under its Floor Plan Facility and $22.75 million in additional borrowing capacity under its Revolving Credit Facility.
The company's current ratio stands at 1.21x, while its quick ratio is 0.19x, indicating a relatively healthy short-term liquidity position.
Expansion and Growth Strategies: Camping World's growth strategy is multi-faceted, focused on both organic expansion and strategic acquisitions. The company has a proven track record of identifying and integrating high-performing RV dealerships, which has allowed it to expand its geographic footprint and enhance its market share. In the past five years, Camping World has acquired over 80 RV dealerships, solidifying its position as the industry's leading consolidator.
Additionally, Camping World has invested heavily in its contract manufacturing capabilities, partnering with major RV manufacturers to develop exclusive product lines. This strategy has enabled the company to offer unique and differentiated RV models, catering to the evolving preferences of its customer base. The company's data-driven approach to product development and market intelligence has been instrumental in its ability to anticipate and capitalize on emerging trends in the RV industry.
Industry Trends and Outlook: According to the RV Industry Association, RV wholesale shipments in 2023 were 313,170 units, down 36.5% from 2022. However, the industry is forecasted to see a 3.5% increase in 2024 to approximately 324,000 units and a 6.8% increase in 2025 to 346,000 units.
Camping World has provided guidance for 2025, expecting used unit volumes to improve by over low double digits year-over-year, SG&A as a percentage of gross profit to improve by 600-700 basis points as used gross profit returns to the system, and average selling prices to modestly increase year-over-year. The company also anticipates vehicle gross margins to be within their historical range and a modest year-over-year increase in new unit sales.
The company is forecasting the broader RV industry retail sales to be in the 350,000 to 360,000 unit range in 2025, a slight uptick from 2024. Camping World is taking a conservative approach in their 2025 forecast, only forecasting a 0.25% rate cut by the Fed, despite many expecting larger cuts.
In terms of expansion, Camping World is targeting 12-15 dealership acquisitions per year but believes 2025 will be a year they can exceed that range. The company sees a path to strong recovery in 2025 independent of broader industry or economic conditions.
Recent Performance and Market Share: Camping World achieved material market share gains in both July and August of 2024, with a nearly 30% increase in new sales in those months. The company's strong results continued throughout September and into October, with October month-to-date new sales up solidly in the double digits. Additionally, Camping World was able to stabilize the used vehicle marketplace and thoughtfully procure used assets in specific segments to fulfill local dealership needs, ending Q3 2024 with nearly the same amount of used units compared to the previous year.
Risks and Challenges: While Camping World has demonstrated remarkable resilience and adaptability, the company faces several risks and challenges inherent to the RV industry. The cyclical nature of the RV market, influenced by factors such as consumer confidence, interest rates, and macroeconomic conditions, can impact the company's sales and profitability. Additionally, the RV industry is highly competitive, with Camping World competing against both local and national dealerships, as well as online marketplaces.
Another potential risk is the company's reliance on its relationships with RV manufacturers. Any disruptions or changes in these relationships could have a significant impact on Camping World's ability to source and sell RVs. The company also faces regulatory risks, as changes in laws and regulations governing the RV industry could affect its operations and compliance requirements.
Conclusion: Despite the challenges, Camping World's outlook remains positive. The company's diversification strategy, investments in contract manufacturing, and focus on data-driven decision-making have positioned it well to navigate the evolving RV market. Additionally, the company's successful integration of acquired dealerships and its ability to capitalize on industry trends have contributed to its consistent financial performance.
As Camping World continues to expand its footprint and enhance its product offerings, the company is well-positioned to maintain its leading position in the RV industry. With a focus on operational excellence, strategic acquisitions, and innovative product development, Camping World is poised to continue delivering value to its shareholders and customers alike.