Cabela’s Grows Q2 Comps 9 percent, Excluding Firearms

“This strong showing reflects excellent performance by our next-generation stores and our omni-channel marketing efforts,” said Tommy Millner, Cabela's CEO. “Retail expansion continues as a highlight. Our next-generation stores provide the combination of exceptional customer experience and great use of retail space. These next-generation stores continue to yield sales and profit per square foot an extraordinary 40-plus percent better than our legacy stores. Additionally, our legacy stores continue to show improvement in revenue and profit per square foot themselves. We are excited as we continue to accelerate retail square footage expansion.”

 

The 10.5 percent increase in comp store sales is the seventh consecutive quarter of comp store sales improvement. Excluding firearms, comp store sales increased 9.0 percent with comp store sales increasing in 32 of 33 stores and in 10 of 13 merchandise subcategories. Furthermore, next-generation stores generated comp store sales that were 600 basis points higher than the legacy stores. In addition to firearms and shooting, hunting apparel, archery and optics were particularly strong.

 

“Direct revenue increased for the third consecutive quarter,” Millner said. “We have made substantial progress in improving our Direct business with more improvement to come. During the quarter, we increased our marketing efforts behind special events such as Spring Great Outdoor Days and Father's Day. In the second half, our omni-channel initiatives will be focused on seamlessly providing the best possible customer experience across all sales channels.”

 

Merchandise gross margin improved 30 basis points to 37.7 percent compared to the prior year quarter. Merchandise margin increased in 10 of 13 subcategories. Higher margins in most subcategories more than offset the mix effect of lower margin firearms and ammunition.

 

“It is important to note that our strong sales, improved merchandise margin and a favorable tax rate together allowed us to sharply increase our business building expenditures in the quarter,” Millner said. “Our plan to do so was discussed in our first quarter earnings conference call. Specifically, we raised our national advertising, direct marketing spend, and store opening and store labor expense, all while still exceeding our profit objectives. Early success of our 'It's In Your Nature' campaign led us to significantly expand the scope of this national brand advertising.”
The tax rate in the quarter was 30.5 percent compared to 35.9 percent in the year ago quarter. More effective tax planning in the second quarter of 2013, as well as a state income tax settlement in the second quarter a year ago, led to this reduction in the tax rate. The tax rate is expected to be 32.5-33.5 percent for the remainder of 2013 and should continue throughout 2014.

 

The Cabela's CLUB Visa program had another solid quarter. During the quarter, growth in average active credit card accounts accelerated to 10.7 percent due to increases in new customers, primarily in the Retail and Internet channels. For the quarter, net charge-offs as a percentage of average credit card loans increased to 1.87 percent compared to 1.86 percent in the prior year quarter. Increased financial services revenue was driven by increases in interest and fee income as well as interchange income.

 

“Return on invested capital improved by 160 basis points over the same quarter a year ago,” Millner said. “With our strong operational improvements, we are confident in our ability to generate even further improvements in return on invested capital.”

 

“We are certainly pleased with our strong second quarter results and investments we have made to further build the future health of our Company,” Millner said. “Our retail stores are performing at very high levels, and our Direct business is showing continued improvement. As a result, we are comfortable with the current external earnings estimates for the third and fourth quarter of