Camping World Holdings (CWH 0.80%) investors lost ground to a declining market this week. Shares were down 14% through Thursday trading compared to a 2.7% slump in the wider market, according to data provided by S&P Global Market Intelligence. That slump added to a tough year for owners of the recreational vehicle seller, whose stock is down over 40% so far in 2022.
The decline came as investors became more pessimistic about the short-term outlook for the industry.
Camping World Holdings’ stock was pressured by news from a rival that suggests more pain ahead for the RV industry. Thor Industries said this week that sales dove 22% in the selling period that ended in late October. Rising interest rates, plus added pressure on consumer spending from inflation, has reduced demand for discretionary purchases like RVs.
Thor Industries projected a significant sales decline ahead for the current fiscal year, too. The weakening outlook for the RV industry understandably pressured Camping World Holding’s stock, as it likely means lower sales and earnings ahead for the business in 2023.
Investors can expect to see similarly downbeat results from Camping World Holdings over the next few quarters as the industry moves through a cyclical downturn. Such swings are common, though, and don’t challenge the long-term investing thesis for an automotive stock.
The main challenge ahead for the business is to cut costs and reduce inventory to align better with current demand. Camping World Holdings needs to achieve this goal without sacrificing future growth, for example by slashing production levels too deeply.
The company has managed this balance in prior pullbacks and will likely do so again this time. Yet Wall Street is more focused on the high likelihood of weaker results ahead through at least the first half of 2023.
Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Camping World and recommends the following options: short December 2022 $24 puts on Camping World. The Motley Fool has a disclosure policy.