Shortly after reporting a 2010 first quarter that saw a 58% spike in earnings decimate forecasts, Cabela’s Inc. management useed its annual shareholders meeting to outline growth initiatives for building upon the early success in 2010 that has enjoyed strength from the company’s resurging direct-to-consumer business.
Following up on a January shareholder’s meeting that keyed on CAB’s renewed focus on building its eCommerce channel, expanding retail and enhancing the company’s CLUB segment, management held a meeting on May 11 to update shareholders on progress and goals for 2010.
In its year-ago meeting, newly-minted CEO Tommy Millner pledged to reduce costs and operating margins, improve Return On Invested Capital, and to ramp up focus in the core consumer to build multi-channel channels,
Looking back, Millner confirmed that increased efforts in all of these initiatives had yielded positive results for the self-proclaimed World’s Foremost Outfitter. With regard to focusing on the core customer, Millner said Cabela’s increased the number of multi-channel customers by 10.6% to more than 2.7 million consumers during 2009. Likewise, the company’s “Voice of the Consumer” score, a metric derived from direct input from customers, was up slightly to 93.2% from 91.8% a year ago.
Millner said that the company improved operating margin in its Retail and Direct segments by 70 basis points and 50 basis points, respectively, by increasing labor efficiency, improving distribution efficiency, reducing marketing costs and managing corporate overhead more tightly.
Subsequently, Millner said the combination of improved profitability and a tightly managed balance sheet yielded a ROIC improvement of 150 basis points.
While Millner said the company was happy with the goals reached during 2009, he outlined several new initiatives CAB will implement to build upon achievements and promote company-wide growth. First, Millner said Cabela’s will focus less on non-core customers and more on catering to core avid customers – a faction of the market Millner said is “central to everything we do.” Millner reinforced the company’s policy of focusing on four key markets, which CAB has dubbed the “Youngs,” the “Hunts,” the “Woods” and the “Goldens.”
Millner also said that Cabela’s goal is to improve merchandise margins 200 to 300 basis points by 2012. In doing so, he said, the company will employ several strategies, including SKU reduction efforts, greater vendor collaboration, better in-season planning, improved in-season management and price optimization. “We are making progress in a number of areas but we’ve still got a lot of work to do,” Millner said.
Millner also confirmed Cabela’s would focus on improving retail profitability throughout the year as the company returns to “expansion mode.” To accomplish this, Millner said management has decided to replace the aforementioned Voice of the Customer surveys with a “more comprehensive solution” that he expects to allow the company to capture improved data and thus be more responsive to its customer.
Cabela’s has also incorporated additional technology in-store to improve customer service and will update floor plans and assortments with the arrival of fall inventory.
Regarding retail expansion, Millner said Cabela’s will focus on areas conducive to the strength of the brand, incorporating a “mix of re-purposed real estates and green field sites” for new store fronts. New stores will utilize the retailer’s next generation store format, which ranges from 80,000 sq. ft. up to 125,000 sq. ft.
Millner also cited Canada as a “tremendous opportunity” for retail growth.
For its growing Direct business, Cabela’s hopes the newest edition of cabelas.com set to launch this summer will incorporate new navigation tools, international eCommerce capabilities and more to build upon the Direct business.
Finally, Millner said Cabela’s will place an increased focus on building Cabela’s bank, which he called “the cornerstone of our business model.” Millner said management would continue to focus on the Visa Loyalty Program.
In closing, Millner said the company was pleased with 2009 results and the start of 2010, but added that management would continue to explore opportunities to streamline operations and supplement profitability across all channels.