Cabela’s Q4 Comps Dip 0.5%; Earnings Flat

For the quarter, the retailer reported GAAP net income of $16.6 million and diluted earnings per share of 24 cents a share as compared to GAAP net income of $49.4 million and diluted earnings per share of 74 cents in the year ago quarter.

Retail store revenue increased 8.0% to $463.8 million; and direct revenue increased 1.3% to $406.0 million. For the quarter, financial services revenue increased 18.6% to $45.2 million.

In the fourth quarter, the additional week generated revenue of $34 million and $17 million for the retail and direct segments, respectively. Comparable store sales on a like calendar basis decreased 0.5%.

Special charges include restructuring charges as well as the impact of valuations of our interest-only strips associated with its securitized loans. In the fourth quarter of 2009, impairment and restructuring charges include non-cash pre-tax impairment charges of $48.9 million related primarily to certain property and equipment and pre-tax restructuring charges of $3.9 million related to severance.

“Our fourth quarter and full year results exceeded our expectations and reflect the significant progress we have made related to our strategic initiatives,” said Tommy Millner, Cabela’s Chief Executive Officer. “As we discussed last quarter, our strategic initiatives are to improve retail profitability, increase returns on invested capital, improve inventory levels, and increase profitability at World’s Foremost Bank while preserving the brand loyalty of our cardholders.”

“Profitability in our retail segment improved as operating margins increased 70 basis points for both the quarter and year as we improved advertising and labor efficiency in our retail stores,” Millner said.
“Additionally, we made improvements in retail store merchandising processes, as well as distribution and logistics, and continued to focus on improving customer service through training and mentoring programs. We are confident we will continue to improve the four wall contribution of our retail stores.”

“We also significantly improved return on invested capital for the year,” Millner said. “Return on invested capital increased 150 basis points to 11.1% at the end 2009 as compared to 9.6% at year end 2008. Increases in return on invested capital were mainly a result of strengthening our balance sheet and converting non-productive assets into cash. Throughout the year, we significantly reduced inventory levels, sold two non-core businesses, improved working capital, reduced debt levels, and generated a record $294 million of cash flow from operations.”

“World’s Foremost Bank also had a very good year despite the economic turmoil and significant increases in unemployment,” Millner said. “For the year, managed revenue as a percent of managed credit card loans declined just 20 basis points despite a 210 basis point increase in our provision for loan losses. Charge-offs continue to be below industry average due to our conservative underwriting standards. For the year, total revenue increased 7.8% and average active accounts grew 9.1%.”

“Another important long-term initiative is expanding merchandise gross margins,” Millner said. “For the year, merchandise gross margins declined 70 basis points to 34.6%. This is significantly less margin deterioration than we experienced last year. Improving merchandising gross margins will be a key focus over the next several years and will be a significant contributor to further improving retail profitability.”

“Throughout 2009, we improved operations in our retail business,” Millner said. “As a result we have gained sufficient confidence to announce that we are in final negotiations to open two new stores in the United States. Both of these stores are expected to open in 2011 and will be our smaller, more efficient, next generation store format. We will announce more specific details when negotiations are complete.”

“Additionally, since our acquisition of S.I.R. Warehouse Sports Store in Canada in 2007, we have been upgrading the infrastructure for our further expansion into Canada,” Millner said. “With these efforts well underway, and our very strong results in Canada as revenue more than doubled in 2009, we are pleased to announce that we are also in final negotiations to open two new stores in Canada; both scheduled to open in 2011. Both stores will be our next generation store format, and we are very excited about expanding further into the Canadian market.”

“We are cautiously optimistic for 2010 and are comfortable with current external estimates related to both revenue and earnings per share,” Millner said. “This takes into consideration the new credit card regulation/legislation and net charge-offs at World’s Foremost Bank being between 5.75 and 6.25%.”