Cabela’s Q1 Comps Up 8.2%; Earnings Fall on Bad Debt Expenses

Cabela’s Incorporated reported first quarter fiscal 2009 retail store revenue increased 8.3% to $275.5 million, driven by an 8.2% increase in comparable store sales. Direct revenue decreased 4.7% to $225.4 million while financial services revenue decreased 16.7% to $33.9 million. Total revenue for the first quarter of 2009 increased 0.7% to $539.5 million compared to $535.5 million for the first quarter of 2008.

Management said the company was also able to lower direct channel marketing costs by 13.0% while holding revenues to only a 4.7% decline.

“Our focus on sustainable improvements in operating efficiencies and our ongoing focus on the balance sheet reaped benefits during the quarter as inventories decreased $47 million and cash flow from operations improved $104 million, each compared to the prior year quarter,” said Thomas Millner, CEO of Cabela's. “Additionally, total debt was reduced by $151 million compared to the prior year quarter.”

Gross margin, while lower in the quarter due to a product mix shift, came in slightly above external estimates. Due to ongoing efforts to reduce costs and improve efficiencies, SG&A expenses declined as a percentage of total revenue to 37.2% of sales from 37.5% of sales in the year ago quarter.

As of March 28, 2009, the company had $541.0 million in cash and cash equivalents compared to $78.0 million as of March 29, 2008. Inventories totaled $574.0 million at the end of the first quarter 2009, a decrease of 7.6% compared to inventories of $621.0 million at the end of the first quarter 2008. Total debt as of March 28, 2009, was $475.0 million compared to $626.0 million as of March 29, 2008, a decrease of $151.0 million or 24.2%.

Mr. Millner continued, “We are pleased with the progress we made to control costs, drive operational excellence, strengthen our balance sheet, and improve liquidity at our wholly-owned subsidiary, World’s Foremost Bank. While bad debts at World’s Foremost Bank have increased due to the economy, we are adjusting pricing and implementing new products to help mitigate the impact throughout the year. We have made considerable progress generating increased liquidity at World’s Foremost Bank having successfully raised $425 million through the issuance of a three-year securitization transaction under the TALF program in addition to increasing outstanding certificates of deposit by $121 million during the quarter. With our strong cash position and the completion of this securitization, we don’t expect to complete another term securitization until the second quarter of 2010.”

“…we are increasing our revenue guidance for both comparable store sales and total revenue,” he continued. “Reflecting our improved expectations, we now forecast comparable store sales and total revenue growth to be at least flat for 2009 as compared to our previous guidance of down low-single digits. Due to recent trends in our credit card portfolio, we now expect charge-offs to be between 5.1% and 5.5% for 2009 as compared to our previous guidance of 4.5-4.6%. Higher revenue expectations in our retail segment are expected to be offset by lower revenue in our financial services segment; therefore, we continue to expect earnings per share for 2009 to be roughly equal with 2008 levels.”

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