Cabela’s Fourth Quarter Comps Surge on Gun and Ammo Sales

“Every area of our company performed at very high levels in the fourth quarter,” said Cabela’s CEO Tommy Millner. “Sales and profit per square foot at our next-generation stores were 40 percent higher than our legacy stores. Comparable store sales, aided by a surge in firearms and ammunition, increased 12.0 percent, a new record, and our Direct business grew 1.7 percent, the first increase in 11 quarters. Assuming more normalized sales of firearms and ammunition, comparable store sales would have increased 5.0 percent. These strong results combined to improve ROIC by 160 basis points to 15.9 percent for the full year, the highest level we have seen in eight years.”

 

For the quarter, adjusted for certain items, total revenue increased 15.2 percent to $1.13 billion. Retail store revenue increased 26.3 percent to $663.6 million, while Direct revenue increased 1.7 percent to $385.5 million, and Financial Services revenue increased 7.2 percent to $83.2 million. For the quarter, comparable store sales increased 12.0 percent.

 

During the quarter, the company recognized a $12.5 million revenue reduction in its Financial Services business related to the previously disclosed Visa antitrust settlement. On a reported basis, total revenue increased 13.9 percent and Financial Services revenue decreased 8.9 percent.

 

For the quarter, net income increased 19.7 percent to $89.8 million compared to $75.0 million in the year ago quarter, and earnings per diluted share were $1.25 compared to $1.06 in the year ago quarter, each adjusted for certain items.

 

The company reported GAAP net income of $68.0 million and earnings per diluted share of 95 cents as compared to GAAP net income of $69.8 million and earnings per diluted share of 99 cents in the year ago quarter. Fourth quarter 2012 GAAP results include impairment charges of $20.3 million primarily related to land held for sale and a $12.5 million revenue reduction related to the Visa antitrust settlement. Fourth quarter 2011 GAAP results include impairment charges of $7.8 million mostly related to the value of economic development bonds.

For fiscal 2012, net income increased 29.5 percent to $195.3 million compared to $150.8 million last year, and earnings per diluted share were $2.72 compared to $2.12 a year ago, each excluding certain items. The company reported GAAP net income of $173.5 million and earnings per diluted share of $2.42 as compared to GAAP net income of $142.6 million and earnings per diluted share of $2.00 a year ago. Fiscal 2012 GAAP results include impairment charges of $20.3 million primarily related to land held for sale and a $12.5 million revenue reduction related to the Visa antitrust settlement. Fiscal year 2011 results include impairment and restructuring charges of $12.2 million. See the supporting schedules to this earnings release labeled “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of the GAAP to non-GAAP financial measures.

“During the quarter, we made significant additional omni-channel investments in advertising,” Millner said. “These investments helped accelerate comparable store sales and growth in Direct revenue. This acceleration has continued into the first quarter of 2013. Additionally, we are very encouraged with increases in new customers as it further expands our market share and has a positive long-term impact on our consumer franchise.”

For the quarter, excluding firearms and ammunition, merchandise margin increased 60 basis points. Merchandise margin increased in each of the company’s 13 merchandise sub categories, including firearms and ammunition. Ongoing focus on Cabela’s branded products, improved markdown management and greater vendor collaboration contributed to this improvement. Consolidated merchandise gross margin declined 20 basis points as a direct result of the mix effect from the firearm and ammunition surge.

The Cabela’s CLUB Visa program also posted very strong results in the quarter. For the quarter, net charge-offs as a percentage of average credit card loans decreased 21 basis points to 1.91 percent compared to 2.12 percent in the prior year quarter. During the quarter, growth in average active credit card accounts accelerated to 9.4 percent due to retail square footage growth and increases in new customers in all channels. Additionally, average active credit card balance increased 2.9 percent.

“During the quarter, we opened our first Outpost store in Union Gap, Washington,” Millner said. “This store is running ahead of our expectations, and we are thrilled with how this store is performing. As a result, our Board of Directors has authorized us to open an additional ten Outpost stores over the next four years. These stores will be a more effective tool for us to reach smaller markets across North America and further grow our market share. Our strategy is to use our significant cash flows to fund retail store expansion, and we expect to be able to open all of our planned stores in 2013 and 2014 with no external financing.”

As previously announced, the company’s Board of Directors has approved a share repurchase program designed primarily to offset shareholder dilution resulting from the granting of equity-based compensation awards. As a result, the company intends to repurchase up to 750,000 shares of its common stock in open market transactions through February 2014.

“So far this year, our revenue and profit growth remains strong,” Millner said. “This growth, along with the strong performance of our new stores, makes us comfortable with the external earnings estimates for 2013.”