Cabela’s Comps Rose 4.4 Percent in Q2

Earnings exclude impairment and restructuring
charges of $1.0 million in the second quarter of 2011 and $1.8 million
in the second quarter of 2010. The Company reported GAAP net income of
$21.7 million and earnings per diluted share of $0.31 as compared to
GAAP net income of $18.0 million and earnings per diluted share of 26
cents a share in the year ago quarter.

For the quarter, adjusted for divestitures, total revenue increased 7.7 percent to $562.1 million; Retail store revenue increased 12.0 percent to $329.2 million; Direct revenue decreased 4.6 percent to $159.6 million; and Financial Services revenue increased 24.4 percent to $70.3 million. For the quarter, comparable store sales increased 4.4 percent. On a reported basis, total revenue increased 6.9 percent and Direct revenue decreased 7.0 percent.

“We are very pleased with the improvements in virtually all elements of our areas of strategic focus,” said Tommy Millner, Cabela’s chief executive officer. “These include increases in comparable store sales, higher gross margins and record second quarter operating margins. Also, for the longer term, we are glad to see increased customer satisfaction and expanded market share. These strong results led to further increases in after-tax return on invested capital.”

“The increase in after-tax return on invested capital marks the ninth consecutive quarter of expansion,” Millner said. “We expect to realize further increases in return on capital as we continue to increase profitability and tightly manage our balance sheet for the rest of the year and beyond.”

“Stronger retail segment profitability and return on capital give us the green light for accelerating new store openings,” Millner said. “Additionally, the initial performance of our recently opened next generation stores is very encouraging as they are each generating sales and profitability per square foot higher than the corporate average. This provides us with increased confidence to invest in more next generation retail stores. For 2012, we now expect to open five stores, four in the United States and one in Canada, increasing our retail square footage nearly 10 percent. This is the largest number of store openings in four years.”

“Merchandise gross margin increased 80 basis points in the quarter,” Millner said. “Improvements were broad based as margin increased in 10 of 13 merchandise sub-categories. We are very confident our initiatives to increase merchandise margins are working and expect to realize continued improvements throughout the rest of the year.”

“Operating expenses as a percent of total revenue increased 140 basis points compared to the prior year quarter,” Millner said. “However, virtually all of this increase was a result of increased pre-opening costs, the write-off of certain receivables and additional IT costs related to our customer relationship management system project. Since these expenses will be reduced significantly during the remainder of the year, we expect operating expenses for the second half of the year to increase at approximately the same rate as revenue.”

The Cabela’s CLUB® Visa program also posted very strong results in the quarter. For the quarter, net charge-offs decreased 244 basis points to 2.34 percent compared to 4.78 percent in the prior year quarter. This is the lowest level of net charge-offs in the past three years. For the quarter, the Company lowered its allowance for loan losses $5.0 million as compared to an $8.9 million reduction in the prior year quarter. Primarily due to lower charge-offs, Financial Services revenue increased 24.4 percent in the quarter to $70.3 million.

Adjusting for divestitures, for the quarter, Direct revenue fell 4.6 percent. The entire decline was a result of ammunition and shooting categories returning to more normal levels from last year’s inflated levels. For the quarter, the number of multi-channel customers increased 2.8 percent.

“Our strategies are working,” Millner said. “Given the continued improvements in profitability and increases in merchandise margin, we are optimistic about our full year 2011 prospects and expect our full year 2011 earnings per share to meet or exceed current external expectations.”