SKY Q1 Earnings Call: Sales Growth Amid Margin Pressure and Shifting Consumer Trends

Modular home and building manufacturer Champion Homes (NYSE:SKY) missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 10.7% year on year to $593.9 million. Its non-GAAP EPS of $0.65 per share was 15% below analysts’ consensus estimates.

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StockStory’s Take

Champion Homes’ Q1 results were shaped by a combination of mixed consumer demand, shifts in product preferences, and regional variations in market activity. CEO Tim Larson described the quarter as one marked by “more serious buyers in the market,” even as in-store traffic varied by region and consumer confidence softened. The company’s expansion of digital lead generation and financing programs supported sales, while weather-related challenges in the South and slower recovery in Florida impacted order flow. Management noted the continued growth in its community channel, now representing 28% of overall unit sales, and highlighted ongoing investments in technology and marketing to drive awareness and capture new buyers. CFO Laurie Hough pointed to higher selling prices and a greater share of sales through company-owned retail centers as supportive factors, but cited increased SG&A from industry shows and technology investments as contributors to near-term margin pressure.

Looking ahead, Champion Homes expects near-term demand to remain unpredictable, with management forecasting low single-digit revenue growth for the next quarter. Larson emphasized the company’s strategy of expanding its captive retail footprint, including the acquisition of Iseman Homes, as a way to drive market share and improve the customer experience. He also pointed to ongoing regulatory discussions—such as the potential removal of the permanent chassis requirement for manufactured homes—as a possible catalyst for further market expansion. CFO Laurie Hough stated, “We do think that lowering to the 25%-26% range [for gross margin] is just for the short term,” attributing this outlook to softening consumer confidence, inflation in input costs, and a shift toward smaller, lower-featured homes. Management remains cautious, focusing on agile cost management and selective price adjustments to mitigate inflation and tariff headwinds.

Key Insights from Management’s Remarks

Management attributed sales growth to targeted investments in digital platforms, product innovation, and expansion of its retail network, while acknowledging margin pressures from input costs and changing buyer preferences.

• Digital channel investment: Champion Homes continued to advance its dealer portal and digital marketing initiatives, resulting in increased digital leads across key regions. Early adopters of the dealer portal reported improved engagement and faster response times to customer inquiries. This digital shift is seen as critical for attracting new buyers and integrating the sales process from lead generation to fulfillment.
• Retail network expansion: The company announced its acquisition of Iseman Homes, adding 10 retail centers in the Plains region. Management views this move as a strategic step to drive growth in underpenetrated markets and leverage synergies with existing company-owned retail operations. The integration is expected to bring incremental volume and operational efficiencies over time.
• Product mix shift: Management observed a trend toward smaller, more affordable homes with fewer features and upgrades, driven by consumer sensitivity to monthly payment amounts. This mix shift is impacting gross margins, as higher-margin option content now represents a smaller share of total sales.
• Input cost and margin dynamics: CFO Laurie Hough detailed that elevated material costs, particularly for components purchased on both spot and contract, and lower capacity utilization contributed to sequential margin compression. While certain wood products saw price relief, inflation in other materials and regional pricing pressures have offset these benefits.
• Regulatory and market advocacy: The company is actively engaged with policymakers to advance zoning reform and the potential removal of the permanent chassis requirement for manufactured homes. Management believes these regulatory changes could expand the addressable market and enable more flexible, cost-effective product designs, particularly for builder-developer customers seeking alternatives to traditional site-built housing.

Drivers of Future Performance

Champion Homes’ outlook centers on adapting to consumer uncertainty, expanding its retail presence, and navigating inflationary and regulatory pressures.

• Retail and M&A expansion: The integration of Iseman Homes and continued pursuit of other regional acquisitions are expected to grow the captive retail channel, increase market share, and improve the customer buying experience. Management believes this will help offset regional demand fluctuations and support long-term revenue growth.
• Product innovation and regulatory shifts: Ongoing investment in new home designs and features—especially in response to potential regulatory changes like the removal of the chassis requirement—may unlock new market opportunities and appeal to a broader spectrum of buyers. The company is positioning itself to benefit from increased zoning flexibility and evolving consumer preferences.
• Margin management and input costs: The company is proactively managing SG&A expenses and implementing selective price adjustments to counteract inflation and tariffs. However, persistent input cost volatility and the trend toward lower-priced homes with fewer upgrades present ongoing headwinds to margin recovery in the near term.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will watch (1) the integration of Iseman Homes and its effect on retail channel growth, (2) stabilization of gross margins as the product mix and input costs evolve, and (3) progress on regulatory initiatives that could reshape zoning and manufacturing requirements. Execution on digital platform enhancements and demand recovery in key regions will also be critical markers.

Champion Homes currently trades at a forward P/E ratio of 17.8×. At this valuation, is it a buy or sell post earnings? The answer lies in our full research report (it’s free).

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