Cabela's Inc. reported that total revenue for the third quarter increased 2.0% to $624.3 million compared to $611.8 million for the third quarter of 2008. Retail store revenue increased 6.1% to $348.0 million led by a 3.5% increase in comparable store sales; direct revenue decreased 6.2% to $226.2 million as the company lowered direct marketing costs 15.1% resulting in increased revenue per catalog page; and financial services revenue increased 15.0% to $48.2 million.

Consolidated operating income increased 53.1% in the quarter to $31.9 million as compared to $20.8 million in the year ago quarter. For the quarter, consolidated operating margins increased 170 basis points over the prior year quarter. Net income for the quarter increased 93% to $18.8 million compared to $9.7 million in the year ago quarter. Earnings per share for the quarter increased 87% to $0.28 compared to $0.15 in the year ago quarter.

“We are delighted that several of our strategic initiatives showed early signs of improvement during the third quarter,” said Tommy Millner, Cabela’s Chief Executive Officer. “These initiatives are improving the profitability of our retail stores, increasing returns on capital through better balance sheet management, improving inventory levels, and increasing profitability at World’s Foremost Bank while preserving the brand loyalty of our cardholders.”

During the third quarter, the company reported the following results on these strategic initiatives:

Retail profitability increased 240 basis points from 9.2% to 11.6% as the company gained efficiencies in the utilization of its advertising and labor resources.

Borrowings on the company’s revolving credit facility were $29 million at quarter end as compared to $199 million at the same time last year due to better management of inventory and working capital.

Inventory levels were $572 million at quarter end as compared to $649 million at the same time last year while the company increased in stock percentage in its retail business.

Return on invested capital improved 90 basis points.

Financial services revenue increased 15.0% and the average number of active accounts increased 8.7%. Charge-offs were 5.02% as compared to 5.24% in the second quarter of 2009. Charge-offs improved sequentially for the first time since the second quarter of 2007.

“Although there is much work ahead of us, we are very pleased with the results so far,” Millner said. “We have seen solid improvement in retail profitability, balance sheet management, return on invested capital and profitability/customer loyalty at World’s Foremost Bank. And, it is important to note, we have significant opportunities to continue to improve operating efficiencies in these areas for the next several years.”

“Another vitally important strategic initiative is expanding merchandise gross margins, which have been impacted by product mix and our efforts to liquidate unproductive inventory,” Millner said. “During the third quarter, we began to see growth rates in firearm and ammunition sales moderate, and we have begun to see sales trends in all four of our other categories improve.”

“Changes in accounting rules will require Cabela’s to provide an additional $200 million of capital to World’s Foremost Bank in the first quarter of 2010,” Millner said. “During 2009, we have generated excess cash internally to meet this capital need. We expect to have sufficient cash available at the end of the year to meet World’s Foremost Bank’s capital needs for 2010. We are pleased that we will not be required to raise any capital through the equity or long term debt markets to meet this capital need.”

“Our credit facility limits further capital contributions to our financial services subsidiary,” Millner said. “Therefore, in order to inject additional capital into World’s Foremost Bank, we intend to amend our credit facility. We expect to amend our facility in the fourth quarter of 2009 without materially impacting future borrowing costs.”

Cash flows from operations improved significantly for the year-to-date period. For the nine months ending September 26, 2009, cash flows from operations improved $57 million to a positive $24 million as compared to a negative $33 million in the same period a year ago. Capital expenditures during the quarter were $8 million. The company continues to expect capital expenditures for the year to be $40 million to $50 million.

“As we look ahead into the fourth quarter, we are encouraged by the strength we are seeing in sales in the first four weeks of the quarter,” Millner said. “For the full year 2009, we continue to expect direct revenue to decline at a low to mid-single-digit percentage rate. Due to favorable trends that we have seen in our business, we now expect full year 2009 total revenue growth and comparable store sales to increase at a mid-single-digit percentage rate as compared to our prior guidance of a low single-digit percentage rate. Additionally, we now expect net charge-offs at World’s Foremost Bank to be between 5.1% and 5.3% for the full year as compared to our previous guidance of 5.1% to 5.5%. As a result, we now expect full year earnings per diluted share to increase at a mid-single-digit percentage rate with an opportunity to exceed these results should the strength we have seen in October continue for the remainder of the year. This compares to our previous forecast of full year earnings per diluted share to be roughly equal with 2008 levels.”