Camping World Holdings, Inc. Q1 FY2024 Earnings Call

Ladies and gentlemen, good morning, and welcome to the Camping World Holdings' Conference Call to discuss financial results for the first quarter of fiscal year 2024. Please be advised that this call is being recorded and the reproduction of the call in whole or in part is not permitted without written authorization from the company. Joining on the call today are Marcus Lemonis, Chairman and Chief Executive Officer; Brent Moody, President; Karin Bell, Chief Financial Officer; Matthew Wagner, Chief Operating Officer; Lindsey Christen, Chief Administrative and Legal Officer; Tom Kim, Chief Accounting Officer; and Brett Andres, Senior Vice President, Investor Relations. I will now turn the call over to Ms. Christen to get us started. Please go ahead.

Thank you, and good morning, everyone. A press release covering the company's first quarter 2024 financial results was issued yesterday afternoon, and a copy of that press release can be found in the Investor Relations section on the company's website. Management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These remarks may include statements regarding our business plans and goals, industry and customer trends, inventory expectations, the expected impact of inflation, interest rates and market conditions, acquisition pipelines and plans, future dividend payments and capital allocation and anticipated financial performance. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the Risk Factors section in our Form 10-K, our Form 10-Qs and other reports on file with the SEC. Any forward-looking statements represent our views only as of today and we undertake no obligation to update them. Please also note that we will be referring to certain non-GAAP financial measures on today's call, such as EBITDA, adjusted EBITDA and adjusted earnings per share diluted, which we believe may be important to investors to assess our operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial statements are included in our earnings release and on our website. All comparisons of our 2024 1st quarter results are made against the 2023 1st quarter, unless otherwise noted. I'll now turn the call over to Marcus.

Thanks, Lindsey. Good morning, and welcome to our 2024 first quarter call. On today's call, the team will cover both the operational and financial highlights of the quarter while providing comments on the exciting future ahead. As we entered the quarter, we had very specific targets to execute on, gaining market share on new while improving year-over-year margins. The recalibration of our used inventory levels driven by the unparalleled reduction of new pricing, opening up 14 new locations and eliminating nonperforming assets. The double-digit same-store sales momentum and market share growth during both the first quarter and the second quarter to date improves our thesis around demand and its interdependency on lower-priced units, essentially affordability. We continue to feel strongly about driving our efforts towards the intersection of strong demand and affordability. We expect the average selling price of new units in our company to be at or below $38,000 and could see flexibility up slightly once interest rates retreat in 2025. Consumers ultimately build their monthly financial models around monthly payments. So in addition to change in mix and average selling price, we continue to be successful in working with retail lending partners in a higher rate environment to provide intelligent and thoughtful solutions around financing. This strategy has led to delivering another successful quarter, both in finance income and product penetration, which ultimately enhances the total gross profit per unit. In working to achieve our 2024 earnings growth, we identified the need to continue to eliminate underperforming or noncore assets. Through the quarter, we have sold 1 RV dealership location and signed a definitive agreement to sell our furniture manufacturing business. These moves are not only unleashing locked up capital, but have evolved in 1 case into a holistic strategic partnership that we believe will provide material sales and margin improvement in our parts and aftermarket business. The sale and entrance into a new parts and aftermarket supplier agreement will positively impact our financial results going forward. In addition to the above, our earnings growth goals have required us to make tough cuts around SG&A in the last 6 months. Our target on SG&A as a percentage of gross has and always will be rooted in the low 70% range. We believe that we have made the cuts that allow us to return to that level once gross profit sequentially returns to normal levels. As we unpack the quarter on SG&A, only our January and February results were outside of our standards, but it was exclusively driven by the temporary compression on RV margins caused by our rigorous inventory management plan. March started to return to a more acceptable range, and we expect that to improve in Q2 and then seasonally sequentially improve as margins normalize. As a reminder, our business is largely built around the installed base of RV-ers and that is evidenced by our continued solid performance in Good Sam and our parts and service business. Those categories provide unparalleled stability and predictability unmatched by anyone else. As one would expect, our management team has the responsibility of always looking at ways to improve and unlock value in the company. We've been working with Goldman Sachs to explore alternatives as it relates to our Good Sam business, which was coming off a record year in 2023. Through that process, we have been pleased by the number of interested parties who see the strength of the brand and the opportunity and the value associated with it. Our team has continued to discuss this internally, and we believe that our ability to grow this business by allowing our Good Sam team the flexibility to expand into the larger recreational space, not just RVs, would not only yield enhanced earnings but would allow us to widen our prospect audience from the boating and power sports categories, while we continue to explore alternatives.

Thank you, Marcus. As mentioned, we are experiencing meaningful new unit sales growth to start the year, with same-store new units increasing 16% and momentum continuing through April. Our new unit trends are significantly outpacing the broader industry, resulting in material market share gains in both January and February based on the most recently reported stat survey information. We attribute this performance to our intentional and disciplined inventory management, supporting our previously stated thesis that lower-priced RVs are highly elastic goods. Today, we are sitting with less than 3,800 model year 2023 continuing to significantly outpace the industry with almost 90% of our new inventory currently being model year 2024s. We sold nearly 16,900 new units in the first quarter, an increase of over 20%. As we move throughout the year, we anticipate that new average selling prices will hover around the $38,000 range. Against this backdrop, we maintained a regimented approach to procuring used inventory, having purchased 60% less used through the first 4 months of this year. As we sit here today, we have 35% fewer used in inventory compared to last year. We largely did this because the used RV market lacks the infrastructure and institutional participation needed to create an efficient market. We responded to this need and we launched CW auctions in December. We witnessed immediate interest from consumers, wholesalers, banks and manufacturers alike. Over the course of the last 5 auctions, we amassed over 2.2 million unique views and hundreds of unit sales during the soft launch period. As this business matures over the coming quarters, we see this serving as a profitable, cost-effective remarketing channel that has never existed in this industry at scale, allowing for greater use procurement flexibility while improving the velocity of our sales. We continue to expect our used volumes to improve over time as appropriately valued inventory is intelligently brought back into the system. We expect our used margins to improve sequentially starting the second quarter and to normalize to historical levels by the fourth quarter. As part of our growth plan for 2024, we'll continue to focus on expanding upon the tremendous progress that we have made with Good Sam service, our used RV business, all while focusing on market share growth of new RVs and continue to add accretive acquisitions to our dealer network. We opened 13 net dealership locations in the first quarter, 5 of which were manufactured exclusive locations, and we plan to continue to remain acquisitive with the goal of growing our store count to 320 stores by the end of 2028. I'll now turn the call over to Tom Kirn to discuss our financial results.

Thanks, Matt. For the first quarter, we recorded revenue of $1.4 billion, a decline of roughly 8% from last year, driven primarily by used unit volume, while new vehicle revenue of $656 million marked the first year-over-year increase in 6 quarters. Our Good Sam Services and Plans segment continued to post record quarterly gross profit of $30.5 million. Within our products, services and other revenues, our core service revenues showed continued growth, while product sales declined primarily due to lapping our active sports restructuring from last year and lower retail attachment due to fewer used vehicles being sold. Our adjusted EBITDA for the first quarter was $8.2 million, with the primary drivers of the year-over-year decline stemming from used vehicle gross profit pressure. About $10 million to $20 million of which was related to rebalancing the age of used inventory, as Matt mentioned. We also incurred a couple of additional expenses worth highlighting, including new store and auction start-up costs as well as professional fees that represented approximately $7 million of impact to the quarter. As we remain focused on extracting additional value from certain noncore and underperforming assets and returning cash to our business. On the balance sheet, we ended the quarter with about $177 million of cash, including $148 million of cash and the floor plan offset accounts. We also have about $220 million of used inventory net of flooring and roughly $219 million of parts inventory. Finally, we own about $116 million of real estate without an associated mortgage. Marcus?

Thanks, Tom. Our strategy and execution is keeping us well ahead of our competitors, and the trend lines are clear. We expect 2024 to be a much better year. I'd like to turn the call over now to the operator for Q&A.

Our first question is from Joe Altobello with Raymond James.

I just want to start with demand. Have you guys seen any improvement as the spring has progressed overall? And how did your new unit sales on a same-store basis look in April?

We continue to see demand, Joe. The challenge for our company has not been demand. What we've faced in the latter half of 2023, and likely across the industry, has been an affordability issue. That's why we emphasized at the start of the year the importance of reducing average selling prices to align with new interest rates at a payment level that consumers can manage. So, we don't have a demand issue. Our challenge has been in conversion, prompting us to shift significantly towards lower-priced units to capture market share. April has seen strong performance in double digits on a same-store basis, and frankly, we don't anticipate that slowing down. Looking ahead for the remainder of the year, we believe there's a chance to further increase that, but we need some support from the broader economic situation to truly reach our goals. The macro environment has been challenging over the first four months. We're very proud of our team and the positive outcomes, especially in February, when we achieved the highest market share in our company’s history.

Very helpful. And just on the affordability issue in terms of pricing, it sounds like you don't think we need a further decline on invoice prices on new RVs next year. Maybe talk about the thinking on that.

Look, I always would love to have lower prices because lower prices means that the funnel is wider. But I don't anticipate any time soon that we're going to see any material movement of the '24 pricing. I want to make a finer point about that, though, because as we finish the back half of 2023, we still internally had a lot of uncertainty around where invoice pricing would settle. We did a great job of negotiating like-for-like pricing down on '24 models, but we were still feeling a little flat-footed on could that continue to decline. That is why you saw us pull back so feverishly and so disciplined on our procurement of used. And when you look at the used results for the first quarter, I want to make sure that people hear me loud and clear that there is no issue with RV demand on used units. We made the conscious decision to not put the shareholders' money at risk by investing in assets while we believe there was potentially still a falling sort. Now that we feel more confident that the pricing on new units has relatively stabilized. And that doesn't mean they couldn't go up by a percentage or down by a percentage. But no violent moves up or down that would cause our used inventory to be out of whack, we will start to step on the gas again probably around the middle of May and slowly and cautiously start to ramp back up again as we get back to levels that we believe we need to have in stock to meet our sales goals. So when you look at the overall financials, we want you to not be alarmed by the drop in used sales because it is not a function of a drop in demand. It is a function of us carrying materially less than we did a year ago, and we think it was prudent, and us deciding to take a lot of pain in Q1 and a little bit in Q2 as it related to our used margins so we can right size our inventory. We never want our shareholders to feel that we're holding onto assets that we don't really feel strongly about the value. So we made that aggressive move.

Our next question is from the line of James Hardiman with Citi.

So Marcus, you mentioned the pricing related to the model year '25, but can you explore the overall situation regarding that model year transition? It feels like a repeat experience as we prepare for the changeover. Is there any possibility that the timing of the release might change? Also, what potential challenges do you foresee, especially regarding how much dealers and possibly some competitors are waiting for the '25 models and whether there's going to be sufficient inventory available to meet retail demand in the meantime?

Yes. I mean, that's something that we're thinking about every day. One of the things that we are concerned about, and it definitely went into our used thesis is, unfortunately, the number of 22s and aged inventory that is sitting on our competitors' lots. And there seems to be gridlock. And that was the gridlock that we told all of you, both in the Q4 call and in our investor conferences that we were unwilling to participate in. We were going to take whatever financial pain on a short-term basis that we needed to. We don't believe that every dealer has necessarily taken the steps to do that. So that's probably why you see us a little tepid on leaning into used because we don't know if there's going to be some surplus of 22s that could be out there in a foreclosure or liquidation scenario. We believe that the manufacturers have been very intelligent and very smart and listening to the dealer body around the rollout of the 25s. And we're anticipating probably a late summer, July, August start on the 25s. For the most part, there may be a few motor home manufacturers in very small scale that start to leak out some 25s. This idea that our competitors are sort of waiting to buy 25s, I sure hope that nobody is running their business that way because they're going to miss an entire selling season. That entire selling season is going to lead to a lack of cash flow, a lack of margin and continued aging on their part. And when you look at shipments, we still do believe that shipments and retails are going to be in the $335,000 to $345,000 range. So we could be off by a couple of thousand, but that's kind of where we see the general ball of wax. When we see that, we know that there has to be some replacement because if you have retails and replacements, we don't believe that there's going to be destocking here in 2024, and we're hopeful, like in our business that we're going to accelerate into better same-store sales and then a restocking in the back half. But we don't think that the manufacturers are going to play any buggy man surprise on us because it's not in their best interest. If they roll out 25s earlier, than they should or earlier than they've committed to, they're kind of doing themselves a disservice at the same time because there are still 22s out there, there are still 23s out there. We're down to, I think, Matt, you had said like 3,500 or 3,800 in that range, we're much better than we were a year ago. I can't say that for everybody, but we're prepared for it. We also do believe that certain dealers have made some miscalculations on bringing in fresh inventory. We don't know if it's miscalculations on their part or the floor plan lenders preventing them from bringing new inventory in while they still have aged. That's why we feverishly wanted to get rid of that.

To add to that, James, regarding the model year changeover, I believe that motorized model year 2025 will gradually start to enter the market over the coming months, beginning this month, with an acceleration expected in the following months. However, motorized units have not been a significant issue concerning aged model year units; towables could be a concern in the future, but we are confident that we have managed our inventory effectively. We anticipate that the model year 2025 towable units, including travel trailers and fifth wheels, will start production in July, but significant quantities won’t hit the market until around October, November, or December. Compared to this time last year, we have improved by at least 1,000 units in terms of removing aged models. Looking at our recent wholesale shipment numbers, the travel trailer segment saw an increase of about 10,000 units. Just to clarify, we had a total increase of around 10,000 units in wholesale shipments during that same period. We have been strategic in our approach compared to our peers, identifying specific segments and price points that have turned, which has helped us gain significant market share. We believe this strategy will continue to hold true for the rest of the year, positioning us well by September and October to re-engage in the market and start a new cycle, while leveraging the momentum from new units to benefit the used side as well. We are optimistic about our current standing, but we will check back in three months to ensure we are meeting all our targets.

Got it. That's really helpful. And then obviously, over the last month or two, the financial markets appear to be pricing in or at least bracing for rates to be higher for longer. Maybe walk us through sort of the RV ecosystem and whether or not you think the various players have adjusted any of their activity as a result of that. I guess, first, starting with lenders, like how have rates trended as of late? And then customers to the April question, did things get a little bit better, a little bit worse in the month of April relative to sort of that 1Q run rate? And then, I guess, lastly, dealers. You guys have made it no secret that a lot of your peers have been sort of unwilling to take their medicine, maybe hoping that they'll get bailed out by lower rates. Any change in that stance?

I will begin with our own operations since that is the most important aspect. The anticipated delay in rate reductions, which now appears more certain than a few months ago, adversely affects everyone as it impacts affordability. We are working closely with our retail lenders to find solutions that make things more affordable for consumers. The unfortunate reality is that due to the absence of rate reductions we had anticipated, our floor plan interest will be $15 million higher than we initially expected at the start of the year. Despite factors beyond our control, we need to find that $15 million elsewhere. We do believe consumers have started to adjust to current rates. While they may not be completely accepting of them, they are no longer as overwhelmed as they were when rates were rising sharply throughout 2023. We have had to significantly adjust our product mix, which has resulted in two benefits: firstly, this change in mix, by reducing average selling prices, has allowed us to reach a broader audience, as evidenced by unprecedented market share growth. Secondly, lower average selling prices have improved the performance of our finance and insurance business. If we had not lowered these prices, we believe our sales volume and finance and insurance performance would have been diminished. When customers factor in monthly payments that include essential warranties, roadside assistance, and other products we offer, our ability to lower prices—even at the cost of margin—has helped us recover some of that margin later on. We strongly encourage stakeholders to consider the overall combined gross profit from both front-end and back-end sales when evaluating our performance. We are open to various ways of achieving growth and have been successful with our strategy. However, I am concerned about a small group of dealers, ranging from 4,000 to 6,000 units, who still have 2022 inventory and are hesitant to face the necessary adjustments. Some of these dealers might struggle financially to take on that burden. Our strong balance sheet and our ability to dispose of non-core assets provide us with the flexibility to manage these challenges. We believe we have handled our balance sheet effectively, which allows us to invest further in our company when needed. We are not satisfied with our first-quarter financial results; however, if margins were normalized to standard levels for used vehicles, our earnings before interest, taxes, depreciation, and amortization would have been adequate. We consciously decided to absorb gross profit losses to invest in market share, clean inventory, and acquire stores at favorable multiples, and we have added about 33 new locations over the past year. Those new locations will start to yield returns. We encourage thorough examination of our financials. There has been pressure to reduce our workforce, but we believe in investing in our people as our market share relies heavily on their performance. The success of our service and parts business also hinges on our team. We are hesitant to make layoffs because we recognize how quickly this business can rebound—growth can go from 10% to 25% in just a few months. Growth requires adequate staffing. Investing in our people is critical, as reflected in our all-time high Net Promoter Scores in service, which have risen significantly from negative scores just three years ago. We have committed several million dollars to improve our processes and staffing to better serve our customers. These investments are crucial for capturing greater market share in the next 12 to 24 months. Matt and I are dedicated to managing our balance sheet wisely, utilizing our cash effectively, divesting non-core assets, and reinvesting in our team, used inventory, market-making capabilities, and strategic acquisitions.

Our next question is from the line of Scott Stember with ROTH MKM.

Can you maybe talk about the, I guess, the tenor of sales in April. You said that they were still up double digits. Has there been an acceleration on the new side from new units from March into April?

There has been an acceleration in our same-store sales. We're currently maintaining a similar pace, but it's important to note that we had a strong April last year. So while our sales are up by double digits in April, it actually suggests we're performing even better than in March, which was a tougher month for us last year. In March, we experienced mid-double digit growth, around 15 to 16 percent, while coming off a low comparison. April was a strong month for us last year. Given the calendar and how weekends fell, we were up against a favorable number, and we still managed to achieve double-digit growth. Therefore, we believe we either matched or slightly exceeded our March performance on a comparative basis.

I mean, Scott, we oftentimes look week-to-week, and it's consistently through the first 4 months of the year, oscillated between high single digits to 20-plus percent week-to-week in terms of our year-over-year gains. That's actually the cleanest way to look at it. And through the balance of the quarter, it all just shakes out.

Got it. On the products and services side, if you exclude the furniture business and the discontinued active sports business, how is the pure service parts and service segment performing? In your prepared remarks, you mentioned it was doing quite well. Can you provide some insight into how that business is faring?

Yes. So we look at our parts and service business in 2 distinct categories. Our external work, which is when we're taking in customer pay work, which is up nicely over a year ago. That's always, by the way, a great bellwether for the health of the industry is are people coming in, booking appointments, getting repair work, our customer pay, which is actually not provided by us internally. Our customer pay work is up over last year. Our internal work, that's the work that we do to repair trade-ins or purchases that we make is down, but it's down because we elected not to go out and procure a year's inventory. We could have easily manipulated that number by chasing used inventory, buying things we shouldn't be buying and that number would have looked good. So we know that when the used business is down, we know the internal work is down. When the used business is up, the internal work subsequently goes up. But we determine the health of our overall industry and our company based on how customers show up to actually give us currency to repair and replace things on their units. So we feel very good about that indicator.

Got it. And then just the last question. It seems like you're looking for lower retail sales for the industry this year. Is that changing your view of Camping World's ability to sell more units at retail this year? And also, I think last quarter, you gave just some EBITDA growth expectations. Is there an update on that?

Yes. I wouldn't call them expectations. I would definitely call them goals. Our goals haven't really moved. We know what we need to do to deliver value to our shareholders. We're facing a few more headwinds that we didn't anticipate that have nothing to do with us, like the fact that the rates aren't going to drop or the fact that the macro isn't that good. But Matt and I, along with Tom and Lindsey and the rest of the team have said, okay, we have to figure out what other pivots we have to make. If we can't control certain factors in the marketplace, there are things we can control. So we have to be very prudent about how we're opening stores and how we're thinking about that. As a small example of that, we have 2 stores that are ready to open. The stores are built, they're ready to go. We have elected to push those off to the end of the year or the first of next year because every single choice that we make has an impact on the bottom line. And we have a goal of achieving that, our own goals we don't want to do anything that's going to put those goals in jeopardy at least in the areas that we have control of. We expect our sales, Matt at and even just to hopefully rely largely upon that stat survey information, I think we've proven that we could buck the trend of the larger industry. So regardless of what's happening, we feel like we've hit the goals that we set forth and broadly proclaim that we're going to hit double-digit new same-store sales. And we're going to continue to experience growth in that new same-store number heading into the back half of the year. I believe, pretty material growth based upon how we played our hand with our inventory procurement.

Got it. That was great.

We wouldn't mind if they dropped the rates a little bit. We could use a little interest expense relief for sure.

Our next question is from Noah Zatzkin with KeyBanc Capital Markets.

Not to put too fine a point on this, but in terms of kind of the 30% adjusted EBITDA growth goal for the year, working towards that, has anything changed in terms of the calculus to get there you noted expecting around the $38,000 level on the new ASP. And I think used margins came in a bit stronger than I was expecting. So just wondering how you're kind of thinking through kind of the new and used businesses maybe relative to a few months ago as you kind of work towards that goal?

Yes, that's a great question. Our goals remain unchanged, but we are facing new challenges that require us to find new opportunities. The interest rate expense on the floor plan is significant, amounting to $15 million. This is a certainty, not a possibility. Additionally, if interest rates had begun to drop, we might have seen some positive changes by summer, but now we have completely removed any expectations of interest rate cuts from our planning. This situation is applying some pressure on average selling prices (ASPs). As we lower ASPs to gain market share, it affects our gross profit on the front end. Even if the margin percentage remains the same, lower ASPs result in reduced gross dollars. This has created some challenges that we're working to navigate. We will continue to push forward as we have seen positive outcomes from rebalancing our inventory. We anticipate ongoing pressure on the used side, both in terms of margin and demand in April, extending into May. Matt and I are prepared to face the challenges ahead, believing it's the right business decision. We are encouraged by the outcomes of our strategic decisions to lower ASPs and remove underperforming units, which motivates us to continue pursuing these strategies. While the immediate results may not show the progress we aim for, we believe that our market share growth, achievements in other areas like Good Sam, and strong internal customer pay work and finance & insurance results indicate that we are on the right track. We hope you share our optimism about these results.

I couldn't be more proud of how we navigated the used portfolio, which was a significant factor that disrupted some of our short-term plans. We experienced a decline of about 60% in used procurement during the first four months of the year, an outcome we hadn't fully anticipated. However, we believe this decision was the right one for our company and investors, especially given our cautious approach in a volatile market during that period, while we faced an unprecedented industry decline in new invoice prices. Now that the market for new vehicles has stabilized, it is positively affecting the used market, providing us with a clearer focus and strategy to ramp up procurement. As Marcus mentioned earlier, it will take us until around mid-May to fully get this process back on track and start targeting the price points that will deliver the highest return on investment.

And it isn't because the machine isn't ready to rev. It's because him and I kind of wake up every morning and we're like, are we there yet? Should we just wait a little bit, let's test it in this market. And Matt has been the absolute genius in setting up this auction idea, and we're excited. We'll be glad to post a link on maybe even our investor site just to show people what this auction process is looking at. We've had both in-person and virtual auctions and we were just in the early stages of testing it. We only ran 500 units, plus or minus through the auction process. We had dealers, consumers around the country flying to places to see it. There is no market maker for the RV industry. And we believe for the growth of our new business, because we need to be able to take in a creative blend of trade for the growth of our used business, we have to firm ourselves up between our Good Sam RV valuator and our CW auctions, we now believe we will become the market maker on establishing used values. When you control 20-plus percent of the new side and you control the largest portion of the used side, and you can create a market through this open, independent process, you now start to establish yourself as the authority. And that is really the investment that we spent. We spent about $7 million launching the auction process in the first quarter. We know that that $7 million is a very, very small price to pay to become the market maker in the industry.

Our next question is from the line of Mike Swartz with Truist Securities.

Marcus, I wanted to follow up on the CW Auction business. I'm curious about what led to that decision and how much you are investing. I believe you mentioned $7 million in the first quarter, but what is your planned annual spending for that? Additionally, what do the economics look like for Camping World in this business?

So Mike, let me take a step back. And the impetus behind auctions was to enable us to procure more used assets. In some respects, site unseen when I say like virtual, we could take pictures; we could basically explore the assets, but we had no idea what it actually smelled like. There are some finer details that require someone actually to go out there and inspect the asset. We could never quite figure out a way whereby we could buy more assets, site unseen, but all flowed in case we made a slight mistake. And really, that's representative of an efficient marketplace in a free enterprise environment within the used side of the business, which has never existed. So we have largely been a bit timid from a centralized perspective to buy too much because we didn't want to make too many mistakes. The auction concept really sprung out of that. And that's what we've been working diligently for the past couple of years to figure out, okay, how do we centralize more function of used procurement while at the same time knowing that if we step into something and unfortunately make a mistake here or there or if we want to just allow more assets to be run through the market to procure more information and actually start to set more accurate market day supply pricing of all the used marketplace, we knew that the auctions needed to take form. Through this process, we've learned a tremendous amount and in a lot of ways, we've had to build the market and prime the pump for this marketplace, which is why these are largely just upfront onetime costs that we referenced with the $7 million. This is not going to be an annualized expense. Rather, we view this as a business that we're building. And we've realized how much bigger this business could be than more than we even imagined at first, given that wholesalers, banks, different manufacturers, consumers alike have altered the raise their hand and participate. Yesterday, for example, we held our first-ever virtual auction. And what I mean by that is it was literally entirely online. We ran just 35 through the shot. We were able to sell 31, and these consumers and/or wholesalers and/or banks, whoever was bidding, literally did not even see these assets. This is the first time they are bidding on them. And for us to successfully sell through that many tells us that, wow, we could actually improve this velocity of sales and even greater extent. Furthermore, as Marcus referenced earlier, when we think about the opportunity on trade-ins that are coming in, we think that we could open up all these trades, whether we want to retail it, we could do that as we always do, and that's just our normal course of business. Or if we need to get a wholesaler bid, we think we can get more real-time feedback quicker to turn around and make a quick buck. Where today, we're wholesaling about 8,000 units on an annualized basis. I believe we can pull down at least another couple of hundred dollars of front-end gross profit. Never mind the fact, too, that we're going to start to be able to run different bank repos as well as different wholesalers that want to list their own assets. Off of that concept, we've taken a page out of the larger auction houses books where we'll be able to charge sellers and buyers fees on both sides of the transactions. And as this thing starts to expand, we'll have an auction at least every other week beginning this month somewhere in the country, be it a virtual auction, an in-person auction, where we see a lot of consumers looking to participate. I'm super excited for this on the backside of this, of how this becomes a true revenue stream and profitable for our business.

One thing to keep in mind, it is acting independently of our dealership operations so that we truly believe that the values are not contaminated by any influence other than whatever the free market provides. And when we run our own units, we adhere to that free market principle. And so when you look at the losses, some of those or us taking some of those losses through the auction, some of it was the cost to stand it up. But just to reiterate, it is not $7 million on an annualized multiplied times 3 more quarters of that, you should not expect that at all. We feel like we've gotten it down to a bit of a science, and we've taken kind of the big steps that we needed to, to launch it.

I appreciate that information. My second question is about your expectations for new door additions. This has always been challenging for most of us to predict in terms of timing. You've provided some guidance on how many doors you anticipate opening this year, but it seems like some of those plans may have been put on hold or delayed due to broader economic factors. Can you provide an updated perspective on the number of doors you expect to open this year?

Yes. So we opened 14 already. We did mention that we sold 1 location. We actually sold that location, I think, for around $3 million. It was much more than we had in that transaction. So we netted to 13. We have 2 more stores that we expect to open internally by year-end, potentially 3. And then as always, we're always looking for opportunistic acquisitions. As we look at the landscape of dealers who potentially are sitting with more inventory than they would like to were always a great source. We did fall off a number of deals that we had contemplated. And we didn't fall off because of anything internally on our side. We fell off because through the diligence process, they didn't meet certain standards, and they weren't willing to do the things that we felt were necessary to receive our money, quite frankly. We are not in the business of just adding doors. We are in the business of being accretive in our acquisitions, which means I'm not going to pay much and we expect to get a lot out of it. And anything absent of that, we're not interested in. So I would expect that we'll have no less than 17, potentially 1 or 2 more than that. But we could turn around in the fourth quarter and see a dilution of opportunities and capitalize on 4, 5, 6 of them. We're not going to do anything that's going to flex our own business or put our own balance sheet at risk or put our own human capital at risk for anybody or anything.

Our next question is from the line of Bret Jordan with Jefferies.

On the Good Sam continuing to explore alternatives comment, I guess it sounds like you're also simultaneously expanding the business into things like marine. Should we expect that, that's going to sort of push back the alternatives that you're pursuing there as you develop more of the in-house strategy?

No. I think what happened was when we discussed this internally before announcing it to the market. We have a unique relationship within our company between the Camping World management team and the Good Sam management team. Matt and I often find ourselves in the middle of that dynamic. The Good Sam team has certain aspirations, while the dealership team wants to ensure their interests are protected. We advised everyone to focus on their respective responsibilities and financial incentives for running their business. The Good Sam team responded positively and is eager to pursue their opportunities. While Camping World is not in the boat dealership business, that does not prevent Good Sam from exploring the recreational market. We have the necessary policies, processes, and vendor relationships in place. Matt and I have authorized the Good Sam team to expand their business in ways they believe will financially benefit the company. If they decide to enter the boat warranty or power sports sectors, it does not affect Camping World dealerships. Historically, we tried to keep everyone satisfied, which may have held back progress a bit. This is a lengthy process, but we will keep exploring ideas. As I noted in the first quarter, I have a specific view on the value of that business, projecting a $100 million contribution for 2023, and I believe the market does not fully appreciate its worth. The interest Goldman received following our statement was surprising and positive. Meanwhile, the Board wants to understand how this aligns with various factors. We will provide the Board with all the necessary information over the next few months, but that does not hinder the Good Sam management team from advancing their initiatives concurrently. We see those efforts as running in parallel. Our immediate focus is on business growth, and Goldman will manage that process. If any compelling opportunities arise, we will present them to the Board, evaluate all options, determine what makes sense for shareholders, and make decisions accordingly. For now, we are still exploring.

Okay. And then you also commented on a new aftermarket supplier agreement. Is that changing your strategy around the aftermarket side of the business? And I guess who is the agreement with or is it at scale?

We believe that as we analyze our retail operations, which can often be seen negatively, we need to reevaluate our strategy in the parts and aftermarket segment, a core component of our stores under the Camping World brand. It's clear that we need to change our approach to market engagement, financial investment, and inventory management, as well as our partnerships. In the past, we acquired a furniture business that was producing items we successfully sold in the aftermarket and directly to OEMs. We have established strong relationships with major players like Lippert, Furrion, Solera, and CURT hitches. To mitigate risk in this area and improve product development and launch strategies, we signed an agreement to sell our furniture business to Lippert. As part of this deal, we secured a supplier agreement that ensures favorable pricing based on the business volume we provide. This will enable margin growth for both parties, and we can earn extra rebates linked to our performance. I believe concentrating on a limited number of suppliers—Lippert, Airxcel, and LKQ—will sharpen our focus on the product range in our stores. We need improved returns and margins in this segment, and we are confident that will occur. We plan a comprehensive overhaul of our retail operations in 2024, investing around $10 million to standardize all our stores. Over the years, we have accumulated 200 stores with various configurations due to the different phases of our business evolution; now, we are committed to unifying them. We have developed the right product mix for aftermarket parts, repairs, replacements, and enhancements, primarily collaborating with Lippert and, to a lesser extent, Airxcel, a company we value greatly. While we will still import products for better margins, various other vendors will be involved as well. We recognized the need to implement a similar strategy on the retail side that has contributed to our success in RV sales. Previously, we offered a wide range of products, but now we focus specifically on THOR companies, Forest River, and Winnebago, applying the same strategy of engaging with fewer partners to enhance our impact on our bottom line.

Our next question comes from the line of Brandon Rollé with D.A. Davidson.

Just piggybacking on the supplier environment right now. I think back in 3Q, you had talked about wanting a diversification of sourcing within the industry. Could you update us on kind of what you've seen over the past 6 months? And in terms of maybe new suppliers entering the market and maybe having a say within the model year '25 bidding process?

Brandon, we are actively collaborating with THOR, Forest River, and Winnebago to develop products. A testament to our success is our work with Coleman. About ten years ago, Matt and I ventured into the Coleman licensing business, and we established a partnership with Coleman and THOR. It seems that, at least for January and February, Coleman will be the top-selling travel trailer in America, and importantly, that product is exclusive to us. Our capacity to influence production, design, and engineering is stronger than ever, not due to a heavy hand but because of the valuable data at our disposal. This data aids manufacturers, whether they are analyzing repair records, churn rates, average selling prices, or trends in innovation. Our influence is significant, but it's crucial to recognize that the entire industry benefits from it. For our company to achieve our revenue targets of over $10 billion to $12 billion, the total addressable market needs to expand. This growth can only occur if the industry remains healthy, and we can foster that health by sharing our data and insights. We need to communicate what we know to facilitate progress. While some information needs to remain proprietary, to achieve a collective goal of manufacturing, shipping, and selling 750,000 units, we must be willing to share aspects of our expertise. This means collaborating with partners like Lippert to improve hitching solutions, or working with THOR, Airxcel, Keystone, JCO, and Forest River on innovative products. It's our responsibility to contribute to the overall growth of the industry, as we are major beneficiaries of that progress.

Our next question is from the line of Tristan Thomas-Martin with BMO Capital Markets.

I think last quarter, you said 25 to 30 new dealerships by the end of the year, now it's 13. Is that just due to falling off some deals? Or did something else change there?

No, we didn't say 13. We've already opened 13 as we sit here. You said 13. So we've opened 14 since January 1. We sold one, so that's a net of 13. We have 2 to 3 stores that will more than likely open, hopefully by the end of the year. And that's before we even open the doors to look at what acquisitions are out there in the back half. But I'm not going to meet a number by just buying something. We know that deals are brought to us every day and every week. Right now, as we sit here today in May, June and July, Matt and I are focused on 1 thing, and that's crushing our same-store new number and growing our market share. The deals that are out there are going to be out there in the fall, in the winter, and we believe they're only going to get better. So we're not in a rush to have money leave our vault at a level that we believe we could deploy that later and get better. The goal is always going to be to do acquisitions. That's the blueprint of our company from the beginning of time. And whether it ends up being 25 or 35 or 18, it always needs to be smart, profitable and accretive.

Our next question comes from the line of Alice Wycklendt with Baird.

On for Craig this morning. I think just 1 question. I wanted to dig in on the new margin side. I mean, I think the gross profit dollars came in around 5,400 per unit gross margin percentage just under 14%. It sounds like there maybe weren't any significant transitory factors from OEM support in the quarter. But how should we think about that number through the balance of the year?

I think that this is largely indicative of what we normally see in the first quarter of most years. If you look at pre-pandemic margin levels, so I would suggest then that for the next 2 quarters, probably could bump up around that 15% range, if not a little bit higher, depending upon what that general mix is of inventory. And then generally, the fourth quarter kind of settles in, once again, a little bit lower, but perhaps like 14.5%, give or take.

So to your point, Alice, there was no manufacturer assistance putting that number at 14%. That was true performance. I'm hoping, and I think Matt and I are definitely on the same page about this. As we work through the last 3,800 model year 2023 units and sort of shrink that down, that is really what could prop it up to 15%. I think 15% is probably a good number for Q2 and Q3. We obviously still want to take care of the customer. We still want to actually grow market share. And then as you get back into the fourth quarter, it's going to fall back down again because we want to clean inventory going into the end of the year, things are a little quieter. You have to incentivize the customer a little bit more, but we're feeling good about where our new margins are. We always want to have more. One of the downsides of driving ASPs down is even though you open up the dam and you find more people, the total gross profit dollars on the front end when you lower ASPs, even when margins are good, they're a little lower. So hopefully, over time, as interest rates come back down and affordability becomes a little easier, those ASPs could start to rise 1,000 here, 1,000 there and get us back to where we think it really should be, which is right around that $39,000 to $40,000 range.

Ladies and gentlemen, this concludes our question-and-answer session. I would now hand the conference over to Marcus Lemonis for his closing comments.

Great. Thank you so much for joining the call. As we continue to deal with the headwinds, we want the market to understand that we are very disciplined about our balance sheet. We're very focused on delivering on the results, and we thank you for your support. So we'll see you on the next call. Take care.

Thank you. The conference of Camping World Holdings Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.