The current coronavirus pandemic has had some significant effects on several aspects of the global economy. As stock markets and healthcare systems continue to be overwhelmed by panic and increased cases, the camping industry is also feeling the heat.
Earlier this week, Seeking Alpha published an outline of Camping World Holdings – a retail company that sells RVs, rents the vehicles, and procures parts – and how its operations have now been affected due to the novel virus.
The Virus Tarnished a Possibly Bright Future
As the news medium explained, Camping World was seeking a new beginning that would have seen it focus more on its core RV business. After the firm had made some mistakes in its retail operation, it figured that a back-to-basics approach would have been the best thing.
When company chief executive Marcus Lemonis announced the refocus at the firm’s latest earnings call, the market appreciated the move quite a lot.
The RV business has been famous for being rather seasonal. This means that for companies in this space, the second and third quarters of the year are the most important. Anyone looking to make the best of their year will need to focus on these six months. From all indications, Camping World was ready. But, COVID-19 had other plans.
From its emergence in China to spreading across Europe and eventually encompassing the world, the virus has hit travel and tourism businesses everywhere. Camping World is now facing another disappointing year, as parks and recreational activities have been grounded in major parts of the United States for a while.
In the past few weeks alone, several camping hotpots have closed their doors to the activity. Just this week, Wyoming State Park announced that all of its camping facilities would be shutting down. While the parks will be open for day use, all night activities have been shut and will remain so until further notice.
A similar report was published by authorities in Fayetteville, Arkansas. Park amenities across the city – including trails, water fountains, and sporting facilities – will be closed until further notice.
With states like New York and California already under mandatory stay-at-home orders, there’s no telling how bad this could be.
Bad Loans are Putting More Pressure on the Firm
As for the prospect of sitting on its inventory, Camping World might find that almost impossible to do.
“The problem is that Camping World carries quite a bit of financial leverage, both on its RV inventory and the overall corporation. The balance sheet is in bad shape to withstand the economic recession that COVID-19 is bringing upon the world,” the news source explained.
The company’s latest filings showed that it had $1.1 billion in RV inventory, with $849 million of that financed with floor plan debt – the interest rate that holds as long as the firm can sell its RVs in a specified period.
It’s almost certain the firm would have difficulty selling its inventory, it would most likely end up at the mercy of the banks with bad debts piling up.
Thus, a combination of bad luck and unfavorable inventory has now stymied the firm significantly. Depending on how long this pandemic lasts, Camping World could be in for the fight of its existence.