Cabela’s Inc. reported strength in key business segments, improving margins and solid comps drove earnings more than 5% for the third quarter ended Oct. 2, outpacing the forecasts of most analysts.

 

Total revenues for the World’s Foremost Outfitter edged up 3.0% on burgeoning strength from the company’s Financial Services segment and core Retail division, which offset low-single-digit declines from the company’s Direct business. Subsequently, the company reported that it anticipates meeting or exceeding its prior 2010 earnings forecasts and also expects fiscal 2011 earnings to grow by double-digits.
Third-quarter gross margins improved 210 basis points to 40.2% of sales.


Results for the third quarter included a non-cash impairment charge of three cents per diluted share related to the recently-completed sale of the company’s Van Dyke’s Restorers business. Exclusive of impairment charges, for the quarter, net income was $21.6 million compared to $19.0 million in the year-ago period and diluted earnings per share were 31 cents compared to 28 cents a year ago.


Cabela’s management said that merchandising sales improved 2.3% on strength from hunting equipment, clothing and footwear, which offset softness from fishing and marine. 


Retail segment revenues increased 6.0% to $368.7 million in Q3 and operating profits jumped 28.2% to $51.9 million for the period, marking the sixth consecutive quarter of growth in operating margins for the business segment. Same-store sales were up 2.4%. In a conference call with analysts, President and CEO Tommy Millner attributed margin improvement to a reduction in expenses as a percent of sales and positive returns from the company’s next-generation stores. Millner said Cabela’s has hired additional employees for the sales floor in preparation for the holiday season.


Direct business sales dipped 3.4% to $218.6 million on a year-over-year basis but improved significantly from the second quarter of this year, which management attributed to enhancements to the company’s cabelas.com e-commerce site. Millner added that Cabela’s also mailed additional catalogs and increased circulation by about 12% to help heighten brand awareness and loyalty.

 

Millner added that Cabela’s will stay committed to its “multi-channel” strategy by continuing to invest money in cabelas.com while bolstering catalog presence.  Operating profits in the Direct business fell 8.0% to $31.5 million for the period.


For the Financial Services segment, profits grew 4.6% on fewer charge-offs, an indication that the credit health of the outdoor consumer is slowly rebounding. Segment revenues increased 10.9%.