Tag: Camping World Holdings

RV red flags keep popping up all over

Representatives of RV manufacturers and campground owners keep radiating good cheer about the upcoming season, paying extravagant notice to every uptick in sales and reservations. And indeed there is cause for cautious optimism, with new RV shipments having arrested last year’s free-fall and notching slight gains, while KOA has reported that 64% of campers already have made reservations “for some sort of trip” in 2024. So maybe the first day of spring truly is a sunny one.

Yet it’s also clear that industry participants remain leery of what lies just over the horizon, and there’s good reason for that, too. Short-seller interest in Thor Industries and Winnebago Industries, the two 800-pound gorillas in the RV manufacturing segment, is high, not least because Thor earlier this month slashed its 2024 outlook based on soft demand and high interest rates. Winnebago, meanwhile, will be announcing its 2nd quarter results tomorrow, following an 11% drop in share price this month.

Late last week, meanwhile, Marcus Lemonis, chief executive officer of Camping World Holdings, unloaded nearly a fifth of his company’s stock holdings, selling 100,000 shares at an average price of $25.63. The $2.56 million payday comes several weeks after Camping World announced a 10.6% decline in revenues for 2023, with new vehicles sales for the year down 16.6%. Investor interest in this company also is bearish, with 17.53% of the float sold short.

As the Camping World example illustrates, the industry’s ongoing problem is a post-pandemic hangover that just won’t quit. The explosion in RV sales that started in 2020, while a short-term windfall for manufacturers and dealers, has proven to be too much of a good thing: too many units were cranked out in too short a time, resulting in significant production quality issues, while unceasing demand drove prices way too high. When the wind dropped out of the industry’s sails, dealers were left with too much outdated inventory that is still clogging their lots even as newer—and lower-priced—models are being delivered.

Lemonis tried to put a bright face on his company’s year-end report by noting that used vehicle sales were up even as new vehicle sales dropped, but as overall revenue figures suggest, that wasn’t nearly enough: while used vehicle revenue increased $102 million, new vehicle revenue dropped $651.8 million. And the average selling price of both new and used RVs declined—4.3% and 4.8%, respectively—further underscoring how greatly inflated the industry’s entire pricing structure had become. Indeed, the monthly Black Book reports on wholesale auctions have recorded six consecutive months of price declines for towables, while motorhome value trends have trended downwards since October of 2021, albeit in seesaw fashion.

Meanwhile, general economic news provides little to no reason to think demand will pick up significantly. With interest rates still high because of ongoing inflation anxieties, Americans are either tapped out or turning to deficit spending to sustain their lifestyles. Credit card debt is up and is taking longer to get paid down, with unpaid balances surpassing 2019 for the first time and delinquency rates continuing a steady rise since 2021. With record numbers of Americans unable to afford their rent, and many costs related to car ownership outpacing the consumer price index—AAA calculates that the the total annual cost of owning a new car was $12,182 last year, up from $10,728 in 2022—more people are using their 401(k) accounts as piggy banks. As reported by The Wall Street Journal, 3.6% of Vanguard’s 401(k) plan holders took early withdrawals last year for financial emergencies, nearly double the pre-pandemic average of about 2%.

All of which explains why the nearly 200 respondents to a recent Wells Fargo/RV Business survey of RV dealers had, at best, a tepid outlook for the coming year. More than a third (39%) expect a flat-to-down year, while an almost equal percentage (38%) expect growth of 0- 10%. Asked to describe the general state of the RV market, only 14% agreed “it’s solid, despite increasing interest rates, soft demand and other headwinds.” At the other extreme, 19% said it’s the “worst it’s been since the 2008-09 recession, ” while 39% admitted to being “nervous about inflation, potential recession and other challenges.”

Some of the dealers’ comments, meanwhile, echoed what many RV campers have been saying for several years. When it comes to repairs, for example, “parts and service has only gotten worse and the factories do not care at all,” while “manufacturers underpaying for warranty work is a major problem.” Or as another respondent observed, “It appears most industry executives, both suppliers and builders, are under the impression their quality is good. In most cases this is laughable.”

And on a more poignant note that should touch a nerve in all corners of the RV and campground ecosystem, there’s this: “I think the industry has lost touch [with] what camping was all about. Where has affordable family fun gone?”

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RVers adopt a wait-and-see attitude

It is a given that industry representatives will insist the sun is shining even as thunderheads pile up on the horizon—and really, who can blame them? But for everyone else, being lulled by rosy forecasts that ignore storm clouds can result in a good soaking. Or worse.

Having declared a month ago that the 2023 camping season was off to a strong start, which is demonstrably true, KOA went out on a limb by assuring the public that campers “are also starting to make solid plans for the rest of the year.” But “solid” requires some context. As previously reported, a year-over-year comparison of KOA’s surveys actually showed a remarkable softening: fewer than half as many campers had made reservations by February for this season as had in 2022 for that year.

The hesitation continues. KOA today released its March monthly report, flagged with the optimistic headline “Rise in camping continues” and citing strong camping turnout at the start of the year. But again it went a step too far, with senior vice president Whitney Scott announcing in a press release that “we’re seeing more bookings made earlier”—yet KOA’s own figures show that 27% of their survey respondents have booked some or all of their 2023 camping trip thus far this year, compared to 50% at this time last year.

There is, undeniably, strong interest in the idea of camping. KOA’s surveys show that, and certainly this year’s near-record turnout at the big RV shows underscores the point. People are looking and day-dreaming, pressing their noses against the display windows of their imaginations as they conjure visions of sweeping vistas and crackling wood fires—they’re just not committing. They’re keeping their powder dry, whether it’s by deferring RV purchases—dealers have been complaining that RV show interest is not translating into sales—or by merely bookmarking campgrounds and RV parks on their computers for a later decision.

The downturn in RV sales, despite industry efforts to characterize it as a return to pre-pandemic norms, is notably larger than expected. Market-leading Thor Industries—whose flagship labels include Jayco and Airstream—earlier this month posted steeper than predicted declines in sales and profits for its second quarter, contending that the sharp slowdown “is proof that our consumer is being impacted by elevated prices, higher interest rates and inflation.” Meanwhile, Winnebago Industries today reported second-quarter results that actually cheered Wall Street because the hole it’s in is not as deep as they’d expected: sales declined from $1.2 billion a year ago to just $866.7 million, or almost $60 million more than the consensus forecast. But helping plug the hole was Winnebago’s 16.1% increase in boat sales, to $112.9 million—apparently a segment that is not taking on water.

A similar pull-back was reported last month by Camping World Holdings, which posted a double-digit decline in same-store new vehicle sales for its fourth quarter—and which cut nearly 1,000 jobs. That mirrors trends in Elkhart, Indiana, where the great majority of U.S. RVs are manufactured and where the unemployment rate in January jumped to just a hair under 5%, more than doubling over the past year.

All this is more suggestive than definitive, as KOA and other industry leaders will be quick to aver. Americans have bought a lot of RVs in the past couple of years, and they’re going to want to use them. An RVing trip is still one of the cheapest ways for a family to go on vacation. Working away from an office is still a thing, and especially among a younger generation of technologically savvy nomads who have been the single biggest demographic of new RV buyers.

All true. But so are the statistics that show millennials are piling on debt to unsustainable levels, while Americans overall increased their credit card debt in 2022 by a record $180.3 billion—and today’s Fed decision, pushing interest rates to a range of 4.75% to 5%, means additional billions in costs in the months ahead. Moreover, millennials and others with college debt can expect an end to the government moratorium on their payments in a few months, further undercutting their ability to afford even relatively cheap vacations—and those, too, are becoming more illusory. RV parks have done themselves no favors by relentlessly increasing their prices the past couple of years.

Recent events have demonstrated just how quickly an apparently stable financial system can get shaken up. Alert RVers are paying attention to the gathering storm clouds, and park owners would be smart to do likewise, regardless of how many rosy forecasts they hear .

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