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Camping World (CWH)

campingCamping World (CWH)

This afternoon, after the closing bell, Camping World (CWH) announced financial results for the quarter ending June 30, 2018. Initially the stock dropped considerably from a close of $22.21 to a low of $19.30. I was watching closely due to having skin in the game with 1000 shares covered by 10 Aug $22.5 PUT options. My max loss, regardless of how low CWH goes, is capped at $1200.00. I was willing to risk $1200.00 because I believed this company would report good earnings.

So what happened?

Well, CWH missed market expectations with revenue and earnings per share (EPS). This was initially perceived as horrible and the algo’s started selling. I did not panic because I see this far too often. What I did do was go read the earnings information and conference call transcript. Below is what I found and, if you ask me, the algo’s got it wrong. Sure, someone had the overall expectation too high, but holy cow are they executing on a high level. I believe this company (and stock) has plenty of room to run and I will be holding my 1000 shares. Read below and see what you think. Feel free to send me your thoughts – James R. Day

Earnings Statistics and Highlights

  • Total revenue of $1.445 billion, an increase of 13.0%, and an all-time Company high – uh, yeah that’s a bad thing?
  • Record total gross profit of $416.2 million, an increase of 11.7% – uh, yeah that’s a bad thing?
  • Sales of new and used recreational vehicles (“RVs”) were over $1.0 billion, an increase of 6.5% – uh, yeah that’s a bad thing?
  • A record 33,637 new and used RVs sold, an increase of 8.5% – uh, yeah that’s a bad thing? (seeing a pattern here)
  • A record 21,745 new towable units sold, an increase of 14.1% in total and 5.1% on a same store basis, with travel trailer same store units increasing 6.7% – uh, yeah that’s a bad thing??
  • Finance and insurance revenue and gross profit of $124.1 million, an increase of 23.7%, and an all-time high – uh, you get the picture…
  • Good Sam Club file size of over 1.92 million members, an increase of 9.2% over the prior year, and the highest since inception
  • Income from operations, net income and diluted earnings per share of Class A common stock decreased to $120.2 million, $81.8 million, and $0.72, respectively, and included $15.4 million of pre-opening expenses related to the Gander Outdoors store openings
  • Adjusted pro forma net income(1) increased 10.6% to $85.6 million, and adjusted pro forma earnings per fully exchanged and diluted share(1) increased 6.8% to $0.96
  • Adjusted EBITDA(1) decreased 1.2% to $140.2 million – at first this would bother me, but with all the changes and acquisitions and execution I’m shocked this is not worse. Hats off to the staff. 

Strategic Growth Initiatives

Look at what they (the staff) can accomplish in a single quarter! I cannot find anyone to do anything and somehow Marcus can find staff and execute at a very high level. I have great respect for any team of people that can accomplish such things on such a large scale.

The Company continues to pursue opportunities to expand its customer base and grow its market share in the RV, outdoor and active lifestyle categories. Recent strategic highlights include:

  • Completed six dealership acquisitions and added new RV dealerships in Sioux City, SD; Sherwood, AR; Nashville, TN; Redding, CA; Oklahoma City, OK and Newport News, VA in the second quarter 2018
  • Opened 52 Gander Outdoors stores in key markets with very strong RV registrations in the first half of 2018
  • Added RV sales to the Gander Outdoors stores in Kenosha, WI and Fayetteville, NC in the second quarter 2018
  • Signed agreement to purchase Russ Dean RV in the Pasco, Washington market
  • On track to add RV parts, accessories and services to all Gander Outdoors locations and operate co-branded Camping World and Gander Outdoors stores by the end of 2018
  • Announced plans to expand the number of RV sales locations by more than 30% through next year with the launch of Gander RV Sales in up to 40 locations, new store openings and continued acquisitions

Consumer Services and Plans

  • Consumer Services and Plans revenue increased 9.7% to $52.7 million
  • Consumer Services and Plans segment income(2) increased 15.2% to $27.6 million

    Other highlights:

    • The number of RV-related active customers increased 4.6% to 3.714 million over the prior year
    • The number of members in Good Sam Club increased 4.6%, or 85,000, from March 31, 2018 and membership reached an all-time-high of more than 1.92 million members


  • Retail revenue increased 13.1% to $1.392 billion – uh, hello?! 
  • Retail segment income(2) decreased 18.4% to $95.5 million

    Other highlights:

    • Vehicles sold increased 8.5% to 33,637 units
      • New vehicles increased 11.5% to 24,442 units
      • Used vehicles increased 1.3% to 9,195 units
    • Average selling price per unit sold decreased 1.9% to $30,269
      • New vehicles decreased 4.8% to $33,038 per unit
      • Used vehicles increased 6.3% to $22,909 per unit
        Ok, this is one of the few negatives I see. Basically, they had to decrease the cost of the units in order to move inventory.  I will keep an eye on this in future earnings.
    • Same store unit volume of new vehicles increased 2.4%, with travel trailers increasing 6.7%
    • New travel trailer unit sales to total new unit sales increased 259 basis points to 72.2%, contributing to the decrease in average selling price per vehicle
    • Gross profit per vehicle sold including finance and insurance decreased 2.2% to $8,384
    • Finance and insurance revenue as a percentage of total vehicle revenue increased 170 basis points to 12.2%
    • Inventory of new vehicles decreased 14.2% in total and 17.5% on a per dealership basis from March 31, 2018
    • There were 223 retail locations as of June 30, 2018, including: 147 Camping World retail locations, 54 Gander Outdoors locations, two Overton’s locations, two TheHouse.com locations, two W82 locations, five Uncle Dan’s locations, four Erehwon locations and seven Rock Creek locations
    • Of the 223 locations, 132 sold recreational vehicles

In conclusion: the Company’s working capital and cash and cash equivalents on June 30, 2018 were $593.2 million and $212.4 million, respectively, compared to $478.7 million and $224.2 million, respectively, at December 31, 2017. Total inventories increased 5.0% to $1.49 billion on June 30, 2018 from $1.42 billion on December 31, 2017, primarily from the new stores acquired or opened. New vehicle inventory decreased 12.7% to $971.6 million and new vehicle inventory per dealership decreased 18.0% to $7.4 million on June 30, 2018 from $1,113.2 million and $9.0 million, respectively, on December 31, 2017. Parts, accessories, and miscellaneous inventory increased $212.8 million to $409.4 million on June 30, 2018 from $196.5 million on December 31, 2017, primarily attributable to the growth in the Outdoor and Active Sports businesses.

At June 30, 2018, the Company had $24.4 million of borrowings under its revolving line of credit as part of its Floor Plan Facility, $1.16 billion of term loans outstanding under the Senior Secured Credit Facilities, and $854.6 million of floor plan notes payable under the Floor Plan Facility.

I am long CWH and consider it a buy with a $28.00 twelve (12) month price target. 

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