KeyBanc Downgrades Camping World, Asks 'Where's The Profit?'

The recreational vehicle market remains healthy, but KeyBanc's first hand-checks point to numerous concerning trends at Camping World Holdings Inc (NYSE: CWH)

The Analyst

KeyBanc's Brett Andress downgraded Camping World from Overweight to Sector Weight with no price target.

The Thesis

First-hand checks at multiple Gander Outdoors retail stores questions the "health and execution" of Camping World's business, Andress wrote in the note. Inventory of vehicles looked "illogical" and elevated across multiple product categories. Markdowns were also wide-spread, which limits any upside margin potential.

Meanwhile, Andress said Gander Mountain's overall RV sales based on SSI data look "tepid" with expectations for 125 new unit sales per store, or 200 for new and used units. Camping World's recent appointment of Peter Jelinek as of SVP of Merchandising and Product Development could help reverse a recent loss momentum but not until late fiscal 2020. The only near-term "quick fix" would come from a large-scale Gander restructuring.

Camping World's guidance of full year EBITDA of $320-$340 million looks "well out of reach" and expectations for the company to surpass fiscal 2017's peak gross margin of 29.1 percent is unrealistic. The analyst said the stock's risk-reward profile is now skewed modestly to the downside, especially if the RV cycle slows down over the longer term.

Price Action

Shares of Camping World were trading lower by 1.7 percent at $12.06 Friday morning.

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