Cabela’s Q1 Comps Climb 8.9 Percent

On a reported basis, total revenue increased 4.8 percent and Direct revenue decreased 6.9 percent.

For the quarter, the company reported GAAP net income of $17.8 million compared to $8.1 million in the year ago quarter and earnings per diluted share of 25 cents compared to 12 cents in the year ago quarter.

First quarter 2010 results include an $11.9 million after-tax charge related to a 2009 FDIC compliance examination. Adjusting 2010 results for this FDIC charge, net income for the quarter was $17.8 million compared to $20.0 million in the year ago quarter and earnings per diluted share were 25 cents compared to 29 cents in the year ago quarter, also adjusted.

“We are very pleased by our performance in the quarter as it provides strong ongoing validation our strategies are working,” said Tommy Millner, Cabela's chief executive officer. “Furthermore, investments in our Retail business that we began last fall and continued into the first quarter drove higher comparable store sales, increased customer satisfaction, and expanded market share. Exceptional results in Retail revenue and segment profitability, record performance at our Cabela's CLUB Visa program, and strong consolidated gross margin results led to further increases in one of our vitally important metrics – after-tax return on invested capital.”

“The 230 basis point increase in after-tax return on invested capital marks the eighth consecutive quarter of expansion and is a result of our continual focus on increasing profitability while tightly managing our balance sheet,” Millner said. “Over the past eight quarters we have increased after-tax return on invested capital more than 400 basis points and there continues to be further opportunities for us to improve after-tax return on invested capital.”

“Sales increased in each of our 29 comparable stores in the quarter; a first for Cabela's,” Millner said. “Retail segment operating margins increased for the eighth consecutive quarter to a first quarter record 11.6 percent, as our stores benefited from our integrated business model with the Cabela's CLUB Visa program. Our newest retail store opened just two weeks ago in Allen, Texas, to a crowd of several thousand loyal customers. This 100,000 square foot next generation store will allow us to further increase our market share in the important Dallas-Fort Worth market.”

The Cabela's CLUB Visa program also posted very strong results in the quarter. Throughout the quarter, the Company realized a significant acceleration in improvements in delinquencies and charge-offs. For the quarter, net charge-offs decreased 222 basis points to 2.74 percent compared to 4.96 percent in the prior year quarter. This is the lowest level of net charge-offs in the past three years. For the quarter, average active accounts increased 7.7 percent, the highest growth rate experienced in the past six quarters. Primarily due to these lower charge-offs, Financial Services revenue increased 20.7 percent in the quarter to $72 million, a new all-time record for any quarter.

Consolidated gross margin increased 70 basis points to 41.8 percent in the quarter – a new first quarter record since going public in 2004. This impressive result further validates Cabela's unique integrated business model between its merchandise business and the Cabela's CLUB Visa program. Merchandise gross margin declined slightly in the quarter to 33.0 percent from 33.3 percent. Margin improvements from pre-season planning, in-season management and vendor collaboration were more than offset by increased transportation costs.

Adjusting for divestitures, for the quarter, Direct revenue fell 4.9 percent. Approximately half of this decline came as a result of ammunition and shooting categories returning to more normal levels following unusually high levels in the first four months of last year. For the quarter, the number of multi-channel customers increased 2.5 percent.

“During the quarter, as a result of our strong revenue and consolidated margin expansion, we made certain additional investments in our business,” Millner said. “These investments were highlighted by an increase in Retail Outfitters in our stores to better serve our customers, a trend we began last fall. We also made investments in other business building initiatives, including technology infrastructure and merchandising. Investments in new stores in Allen, Texas; Springfield, Oregon; and in Canada were made in the quarter to increase growth rates and market share in the future.”

“Our strategies are working,” Millner said. “We feel increasingly optimistic about our full year 2011 prospects and expect our full year 2011 earnings per share to meet or exceed current external expectations.”