Cabela’s Boasts 24 Percent Q1 Comp Gain

Cabela’s Inc. reported net income jumped 72.9 percent in the first quarter, to $49.8 million, or 70 cents a share, compared to $28.8
million, or 40 cents, in the year ago quarter. Revenue increased 28.7 percent to $802.5 million as comparable store sales surged 24.0 percent.

For the quarter, Retail store revenue increased 41.0 percent to $486.7 million; Direct revenue increased 18.4 percent to $225.2 million; and Financial Services revenue increased 2.8 percent to $85.8 million.

“First quarter results exceeded our expectations on every line of the income statement,” said Tommy Millner, Cabela’s Chief Executive Officer. “In addition to expected increases in firearms and ammunition sales, we saw particularly strong performance in softgoods and footwear. Revenue increases in the latter part of March were stronger than anticipated, which allowed us to outperform our March 12th earnings pre-announcement.”

“We are particularly pleased with the broad strength we saw in comparable store sales,” Millner said. “Comp store sales increased in all stores and in 10 of 13 merchandise subcategories. In addition to firearms and ammunition, we realized particularly strong growth in softgoods, footwear, optics and archery. Excluding firearms and ammunition, comp store sales increased 9 percent.”

“We are further encouraged with the exceptional performance of our new stores,” Millner said. “During the quarter, we opened two next-generation stores in Columbus, Ohio, and Grandville, Michigan, as well as an Outpost store in Saginaw, Michigan. These stores opened very strong, are exceeding expectations and are not cannibalizing nearby legacy stores. Sales and profit per square foot in new stores continue to perform 30-40 percent better than legacy stores. Given the strong performance of new stores, our Board of Directors is confident in our continued Retail store expansion as witnessed by our new store announcements earlier this morning.”

“In addition to the strong performance in our Retail segment, we are very pleased with the strong growth in our Direct channel,” Millner said. “We are still in the early stages of our Direct business turnaround and are encouraged with the early results of our omni-channel marketing initiatives and print-to-digital transformation. Our new advertising campaign has been extremely well received and provides a very deep emotional connection with our customers. As we look forward, we expect further refinements in site content, navigation and overall experience to further benefit our now growing Direct business.”
Merchandise gross margin increased 110 basis points to 35.6 percent compared to the prior year quarter. Merchandise margin increased in 11 of 13 subcategories. Higher margins in nearly all categories, including firearms and ammunition, combined with strong sales of softgoods and footwear, as well as fewer sales discounts, more than overcame the mix effect of lower margin firearms and ammunition.
Tight management of operating expense is another key focus of ours,” Millner said. “During the quarter, operating expenses as a percent of revenue dropped 330 basis points compared to the prior year quarter.

This expense management, combined with higher gross margin, resulted in first quarter operating margin of 9.9 percent, a new first quarter record. For the remainder of the year, we continue to expect operating expenses to grow at a slower rate than revenue.

The Cabela’s CLUB Visa program had yet another solid quarter. During the quarter, growth in average active credit card accounts accelerated to 10.2 percent due to retail store expansion and increases in new customers in all channels. Revenue in the year ago quarter benefited from a $6.3 million reduction in the allowance for loan losses. This benefit was just $0.9 million in the first quarter of this year. This difference impacted Financial Services revenue growth by 650 basis points. For the quarter, net charge-offs as a percentage of average credit card loans decreased 14 basis points to 1.86 percent compared to 2.00 percent in the prior year quarter.

“These strong results led to further improvements in return on invested capital, which increased 210 basis points compared to the prior year quarter,” Millner said. “This is the 15th consecutive quarter of increasing return on capital. With our strong operational improvements, we are confident in our ability to generate even further improvements in return on invested capital.”

“We are extremely pleased with our strong first quarter results and our ability to increase sales and margin while controlling costs,” Millner said. “Our Retail stores are performing at very high levels, and our Direct business is starting to show real improvement. As a result, we expect our outperformance in the first quarter to flow through to our full year results, and we are comfortable with the current quarterly breakdown of external earnings estimates for 2013.”