For Camping World, RVs come first and retail comes second. And yet, there's a striking similarity between the company's strategy in the RV space and its recent spate of outdoor retail acquisitions.

During its first quarter earnings report for 2018, the company spoke candidly about acquiring independent RV dealers as "a fast and capital efficient alternative to new retail location openings." The company applied much of the same logic to its interest in some of the outdoor retailers it also recently bought, explaining that it plans to target a "broader group of outdoor and active sports enthusiasts" whose outdoor interests might overlap with the camping space.

"By expanding our array of products and services to include outdoor products, apparel and gear, and active sportswear and gear to target this broader group of outdoor and active sports enthusiasts, and by enhancing the benefits of membership in our Good Sam Club to provide additional benefits and savings to this broader group of outdoor and active sports enthusiasts, we believe we have the opportunity to expand our base of Active Customers and enhance the long-term value of the Good Sam consumer services and plans," the company wrote.

Essentially, the strategy announced in Q1 is to acquire outdoor retailers and use them to bolster the Good Sam Club membership program — a possible reason for why the largest retail acquisition for the company so far, Gander Mountain (now Gander Outdoors), was bought out of bankruptcy rather than paying a much higher price for a retailer like REI. It's nevertheless a curious acquisition strategy, one based more on the potential for the RV business than for the retailers themselves, and that carries risks.

"The way I look at it, they've always been acquisitive," Cort Jacoby, a partner in the consumer and retail practice of A.T. Kearney, told Retail Dive in an email. "I think they've been acquisitive in the camper space — let's call it geographical depth or breadth. I think these particular retail locations make it a sort of category breadth."

The question is what they intend to do with that category breadth, and how it might impact outdoor retail. Camping World did not respond to multiple requests for an interview with Retail Dive, but analysts and earnings reports help shed some light on the company's acquisition strategy.

Retail as a side business

Gander Mountain and Overton's were acquired out of bankruptcy in April of 2017, and were arguably the first stops on Camping World's retail acquisition route. Gander Mountain rebranded as Gander Outdoors in December of the same year and started opening stores, with plans for between 55 and 65 within the year and 40 Gander RV sales locations by the spring of 2019.

To date, Gander Outdoors has 59 open locations, with four "coming soon," according to the company's website, an aggressive opening strategy considering the circumstances, Dennis Cantalupo, president at Pulse Ratings, told Retail Dive in an interview.

"Operationally, the old Gander Mountain — they struggled," he said. "They were always kind of, tight margins, the merchandising wasn't always ideal. It was a curious acquisition, in my opinion, because of the issues that Gander had already had."

Cantalupo also noted that Camping World initially closed all existing Gander Mountain stores after buying the retailer, an unusual move in an acquisition, even one out of bankruptcy. In fact, bankrupt retailers are usually quick to announce that their stores will remain open for the duration of their restructuring, a reassurance of sorts to customers that the company hasn't gone out of business.

"In this case, the stores closed for a significant period of time and in my experience, one of the most difficult things in retail is winning back a shopper when they've found somewhere else to shop," Cantalupo said. "Even those customers who were still shopping Gander prior to the bankruptcy, they were forced to go somewhere else during the months where Gander was closed."

However, if Camping World is able to bring customers back into the fold at Gander Outdoors, both that business and the company's other retail acquisitions promise more recurring revenue for Camping World in the form of shopper signups to the Good Sam Club. They could also provide Camping World with some financial support.

While it seems odd to talk about retail as a form of financial support in a time when so many retailers are filing for bankruptcy and mall vacancy rates are at all-time highs, retail as an industry may be better suited to support Camping World if the economy takes a toll on its core business.

"Campers — that is a hugely variable business, so if the economy goes south, that business is hit really hard," Jacoby said. "So there is something to be said about maybe taking a little of the volatility out of the portfolio and acquiring some businesses that might be able to contribute higher margins to the bottom line to at least create a little bit more of a moat from a profitability perspective."

Why buy multiple?

There's a difference between buying an outdoor retailer to add some padding to profit margins and buying several smaller, niche retailers to the same effect. While Gander Outdoors might be able to drive more signups to the Good Sam Club, and provide another series of locations for Camping World to sell RVs, the retailer's smaller acquisitions, including Erehwon, Uncle Dan's Outfitters and W82, among others, don't seem to lend themselves to that mission.

Jacoby points out that the acquisitions were not particularly expensive for Camping World, but they do come with additional costs. In the case of Gander Outdoors, the company had to re-open stores, hire or re-commit employees and win back customers. For the smaller companies, the cost of acquisition might also be offset by capabilities Camping World is acquiring.

"I don't think that they're acquiring just to have a bunch of cats and dogs. I think that there's probably a broader strategy behind it," Jacoby said. He points to Uncle Dan's Outfitters as a higher-end outdoor retailer, which doesn't necessarily match with Gander Outdoors and Camping World.

"Maybe right now, it's 'I'm going to take an e-commerce capability from this company,' 'I'm going to take customer database and marketing capabilities from this company,' and maybe potentially merge it all together," he said. "Take a little bit of the best of some of these smaller guys and then put your muscle behind one or two of these companies."

Whether or not Camping World has snatched up smaller retailers simply to reap their capabilities and scoop up more Good Sam members (the program offers an RV trip planner, as well as discounts on fuel, propane, and parks and campgrounds, among other things), analysts point out again and again that the retail business at Camping World is a relatively small part of the pie.

"Unfortunately, it's getting to be a smaller part of the business every month," Ray Hartjen, director of marketing and corporate communications at RetailNext told Retail Dive in an email. "Retail revenues are up thanks to the Gander Mountain acquisition, but the stores, now Gander Outdoors, are experiencing sales drops at an alarming rate. A couple of stores have closed suddenly, rather unexpectedly, and the trend is likely to continue as executive leadership has warned that under-performers still need to [be] addressed."

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"I would be surprised if we continue to see additional acquisitions."

Dennis Cantalupo

President of Pulse Ratings

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While Cantalupo agrees that the success of Gander Outdoors is an open question, calling it an "aggressive move" to open up so many stores in such a short time, he also questions how serious Camping World's intentions are in the outdoors space. As long as Camping World derives some kind of value from the acquisitions, it might not matter how well they perform given their relatively low cost.

"I don't know how committed they would be to it if it's burning cash," he said, "but I'm sure they're gleaning some value from those acquisitions. They didn't pay a lot of money for them. I wouldn't be surprised if they do try to merge some of the businesses, but it's unclear exactly what their intentions are. With that said, I would be surprised if we continue to see additional acquisitions. I think we're going to start seeing them be a little bit more conservative."

Indeed, a recent press release from the company announced several changes to leadership, including Brent Moody's appointment to president of the company, Thomas Wolfe's to president of Good Sam, Melvin Flanigan to CFO and the resignation of Roger Nuttall, who was previously president of the retailer's dealership group. In the meat of the news — the release of which preceded a significant drop in the company's stock — Lemonis was sharply focused on the strength of the Good Sam business and unflinching about the possibility of store closures.

"We will also have an intense focus on dramatically reducing our retail inventory levels and aggressively reducing capital expenditures to maximize and drive free cash flow," he said in the release. "As previously indicated, we will not hesitate to close underperforming locations, and we have recently closed four unprofitable RV dealership locations in addition to eight retail locations that we felt would not be accretive long term."

Should outdoor retailers worry?

Acquisition has long been a strategy for entering a different, perhaps complementary sector of retail. Recently, that's manifested itself in big retailers like Walmart and Amazon buying up category or service expertise, including companies like Eloquii, Ring and Flipkart. Other retailers in the space have also forged forward-looking deals, including Macy's acquisition of Story, which came at a time when the retailer was exploring shop-in-shop formats as a new way to approach the department store.

The question with Camping World is how seriously the company is about entering the outdoors space, and what it plans to do with a slew of niche retailers, one that sells snowboarding gear, another that is nearly exclusive to the Midwest and yet another that had to file for Ch. 11 in its first life. A case could be made that these retailers sell products that are tangential to Camping World's space — that someone who snowboards might also be someone who hunts and might also be someone who likes RVs — but expanding local retailers is tough work, and selling RVs isn't the same as selling outdoor apparel and gear.

"The more that you could be a one-stop shop and provide the adjacent type of products, that you could then go and obtain through acquisition, great," Jacoby said. "The question is: why is the consumer going to go to Camping World's locations as opposed to shopping online, as opposed to going to Cabela's and Bass Pro, even Walmart that has a fairly substantial business in that space?"

Finding a differentiation point is one problem, but Camping World has also been saddled with expenses from all of the store openings in 2018. So the performance of its experiment with Gander Outdoors will only start to reveal itself this coming year. To Cantalupo, that means its largest acquisition in the outdoor retail space is still largely a question mark, and thus, so is its impact on other outdoor retailers.

"I still think there's plenty of acquisition opportunity in the RV business and that they're going to continue to be a bigger player there. But in the outdoor category, who are they impacting?" Cantalupo said. "It's unclear if they're taking market share away from anybody at this point. They're certainly trying to gain some scale."

Even gaining scale comes with challenges, though. Many retailers have been shrinking their brick-and-mortar footprints as of late, and outdoor retail is not an easy market to break into right now. Doing so with a recently bankrupt retailer and a host of regional players will push any potential entrance far into the future.

"Bigger super stores like Bass Pro take a lot of shopper attention, and other stores like REI have fiercely loyal customer bases," Hartjen said. "Gander Outdoor will be hard pressed to reinvent their stores to be more experiential in nature, something Bass Pro and REI have been doing for years. If it's not that direction, they need to become even more value-based, and competition on that end is every bit as fierce."

Maybe Camping World's moves are just a pile of sticks in the grand scheme of outdoor retailing. Or maybe the company is pitching its tent for the long haul.