Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Camping World Holdings Inc (CWH, Financial) achieved record market share and double-digit new same-store sales growth, outperforming the industry.
- The company opened 16 new locations and saw record gross profit for its Good Sam business.
- CWH successfully liquidated older inventory, positioning itself well for new model year sales.
- The company has a strong acquisition strategy, turning around distressed dealerships quickly.
- CWH's digital marketing and lead management processes are driving significant customer engagement and sales.
Negative Points
- The company faced challenges with liquidating older inventory, impacting margins.
- High inflation and interest rates have increased costs, affecting profitability.
- CWH's used vehicle volume and margins are under pressure, with lower-than-expected performance.
- The company is experiencing higher SG&A expenses due to investments in infrastructure and training.
- There are concerns about the overall health of the larger dealer body and the impact of aged inventory on the market.
Q & A Highlights
Q: Marcus, you mentioned you feel like 2025 will be a better year. Can you give us a hint of what you think 2025 looks like and how you might be approaching merchandising or building your book of business for next year?
A: We feel confident with our rapid increase in new same-store sales, indicating an inflection point for year-over-year improvement in 2025. We expect margin stabilization in the 15% range for new units and anticipate becoming aggressive in our used acquisition process again. Additionally, we foresee growth in our Good Sam business as customers start using their rigs more frequently.
Q: Can you explain why Good Sam is not seeing as much momentum as new unit sales?
A: Good Sam has been steady, but the way we record revenue is deferred. We also transitioned from a traditional membership model to a national loyalty program, which initially reduced membership size but increased benefits and pricing. This change has led to early success and better profitability.
Q: Are you still anticipating that pricing for the 2025 model year will be flat to up modestly?
A: We expect pricing to be up modestly, similar to historical norms. The stabilization of new pricing with small, normal inflationary increases is anticipated. We are also focusing on affordability, especially in motorized segments, to meet consumer demand.
Q: Can you provide more details on the reconfiguration of your dealer portfolio and changes with underperforming dealers?
A: We are converting some underperforming locations to exclusive stores or consignment stores. This strategy has shown success in improving margins and return on investment. For example, our RV Arizona consignment model has been profitable and scalable, and we plan to expand this approach.
Q: How do you view the competitive environment, especially with your focus on lower-priced entry models?
A: We anticipated the shift to lower-priced units and have a commanding market share in segments under $15k. We expect competitors to follow, but we have already worked with manufacturers to enhance value at lower price points. Our digital marketing and lead management processes also give us an edge in attracting and converting customers.
Q: What are your expectations for the overall RV market in 2025?
A: We expect a decent increase in shipments and retail sales over 2024, but not a return to 400,000 units immediately. We anticipate a gradual rise, potentially reaching 355,000 to 360,000 units next year, with further growth in subsequent years.
Q: How do you plan to manage SG&A expenses in the back half of the year?
A: We expect SG&A to be higher than desired due to lower gross profits and increased costs. However, we are focused on risk mitigation, capital preservation, and maintaining our growth infrastructure. We aim to bring SG&A back in line as gross profits and volumes improve.
Q: Can you elaborate on the impact of consignment sales on your margins?
A: Consignment sales have a lower margin profile (16-17%) compared to purchased units (20%). However, they reduce carrying costs and floorplan interest. We plan to grow our consignment business while balancing it with purchased units to optimize overall margins.
Q: What are your targets for inventory turns on new and used units?
A: For new units, our target is 2.4 turns annually. For used units, we aim for turns north of 3.5. Achieving these targets involves maintaining a wide selection of inventory and leveraging our digital marketing and lead management processes.
Q: How do you view the potential impact of interest rate cuts on your business?
A: Each quarter-point rate cut could lead to higher average selling prices (ASPs) and improved gross profit per unit. We believe a 200 basis point reduction would significantly widen the affordability band for customers, driving higher volumes and better margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
