Cabela’s Expansion Continues Despite Slowdown…

While the Cabela’s expansion strategy managed to boost overall sales, the company still saw a heavy impact from back-to-back Gulf Coast hurricanes and the ensuing “CNN effect” that kept consumers at home watching TV and away from retail. This effect not only slowed traffic in Cabela’s retail stores, but also slowed its direct business considerably. The company also said that increased gas prices are having a negative impact on store traffic.

The company’s direct business was essentially flat to last year in spite of a 6% increase in catalog costs. Cabela’s produced more than 70 titles, shipping different content to different consumers based on spending habits. In addition to the impact from Hurricanes, the company is seeing some cannibalization of its direct business due to brick & mortar stores opening in new areas of the country. Web site traffic increased 43% during the quarter.

Management said that the two new Texas stores were performing below expectations due to grand opening timing issues and they expect them to be “on-track” as hunting season ramps up later in the year. In spite of these slow performances, Cabela’s management believes that their expansion strategy is the correct course, and will not slow down store opening plans.

Cabela’s has made two important shifts in its store opening strategy. First, the company will be opening stores closer to urban centers, in an effort to make them easier for customers to access. Second, Cabela’s will be increasing the amount of selling space as a percentage of total square footage in order to increase their sales per square foot.

Looking forward, Cabela’s had previously said they hoped for mid-teens sales and earnings growth, but now the company will fall “somewhere slightly below that range.” This is due to predictions of “only modest income growth” in the fourth quarter.