Cabela's Incorporated  reported revenue increased 20.7 percent to $756.8 million for the second quarter ended June 29.  Retail store revenue increased 25.8 percent to $483.9 million; Direct revenue increased 13.7 percent to $180.1 million; and Financial Services revenue increased 11.7 percent to $88.6 million. Comparable store sales increased 10.5 percent and 9 percent excluding firearms.

For the quarter, net income increased 31.5 percent to $44.5 million compared to $33.9 million in the year ago quarter, and earnings per diluted share were $0.62 compared to $0.47 in the year ago quarter. Year to date cash flows from operations were $183 million compared to $70 million for the same period a year ago.

“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

(Dollars in Thousands Except Earnings Per Share)

Three Months Ended

Six Months Ended

June 29,
June 30,
June 29,
June 30,
Merchandise sales $ 663,684 $ 542,662 $ 1,375,397 $ 1,077,939
Financial Services revenue 88,578 79,267 174,350 162,722
Other revenue 4,543 5,325 9,555 10,097
Total revenue 756,805 627,254 1,559,302 1,250,758
Cost of revenue:
Merchandise costs (exclusive of depreciation and amortization) 413,465 339,782 872,092 690,502
Cost of other revenue 595 68 634
Total cost of revenue (exclusive of depreciation and amortization) 413,465 340,377 872,160 691,136
Selling, distribution, and administrative expenses 275,468 229,049 540,155 455,218
Impairment and restructuring charges 937 937
Operating income 66,935 57,828 146,050 104,404
Interest expense, net (3,914 ) (6,444 ) (9,270 ) (10,948 )
Other non-operating income, net 1,108 1,450 2,647 2,851
Income before provision for income taxes 64,129 52,834 139,427 96,307
Provision for income taxes 19,584 18,964 45,035 33,611
Net income $ 44,545 $ 33,870 $ 94,392 $ 62,696
Earnings per basic share $ 0.63 $ 0.48 $ 1.34 $ 0.90
Earnings per diluted share $ 0.62 $ 0.47 $ 1.32 $ 0.87