Cabela's reported revenues for the second quarter of 2009 increased 4.4% to $549.2 million from $526.0 million a year ago. Net income climbed 24.7% to $9.1 million, or 14 cents a share, from $7.3 million, or 11 cents, a year ago.

Retail store revenue increased 10.2% to $301.6 million led by a 6.1% increase in comparable store sales; direct revenue decreased 3.6% to $199.5 million as the company reduced direct marketing costs 10.1% resulting in increased revenue per catalog page; and financial services revenue increased 15.4% to $44.1 million.

“We are very pleased to post another solid quarter,” said Tommy Millner, Cabela’s Chief Executive Officer. “Our 6.1% increase in comparable store sales, driven by strength in hunting equipment, represents our third consecutive quarter of positive gains. We continue to gain momentum in the hunting equipment category, as we take market share from our competitors and leverage our multi-channel model to provide our customers with a great value proposition.”

Merchandise gross margin improved 62 basis points in the quarter. These improvements were realized across virtually all of the company’s product categories as a result of lower promotional costs, reduced transportation costs and reduced discounts and markdowns, all of which more than offset the mix shift to lower margin hard goods.

Additionally, the company continues to reduce costs and improve operating efficiencies. Operating margin in the company’s retail segment increased 310 basis points as the company reduced labor expense in its retail stores and increased productivity of its marketing materials. In the company’s direct segment, operating margin improved 360 basis points due to higher gross margin and increased revenue per catalog page.

“Our efforts to improve merchandise margins and operating efficiencies led to higher operating margin in both our direct and retail segments,” Millner said. “Improved inventory levels led to reduced costs and fewer discounts and markdowns which helped increase merchandise margins, while our employees’ hard work and extra efforts in controlling costs and improving operating efficiencies in all areas of our business helped improve operating margins.”

Included in the quarter are two non-cash items that impacted the company’s reported financial results. The first is a non-cash charge related to the write down of excess real estate, and the second is a non-cash increase in the valuation of the company’s retained interest in securitized assets.

“As I shared with you last quarter, part of our strategy is to control costs, generate cash and improve return on invested capital,” Millner said. “As a part of this strategy we performed a thorough review of all the land we own for future store locations to determine the future potential of these sites. We have completed this review and have made the decision not to build a store in Greenwood, Indiana. As a result of this decision, we recorded a pre-tax non-cash impairment charge of $11.7 million related to the write-down of excess land. This charge reduced earnings by $0.11 per diluted share in the quarter. “

Additionally, the company’s wholly-owned subsidiary, World’s Foremost Bank, recently completed a competitive pricing analysis of its credit card portfolio and has made the decision to re-price the portfolio based on this analysis and changing market conditions. These pricing changes are expected to take effect in the third quarter. As a result, the valuation of the company’s interest-only strip associated with its securitized credit card receivables increased by $8.5 million in the quarter, which increased earnings by $0.08 per diluted share in the quarter.

The company ended the quarter with total debt outstanding of $490 million as compared to $634 million at the end of the second quarter of 2008. In addition, the company continued to tightly manage inventory as inventory decreased $44 million to $587 million as compared to $631 million at the end of the second quarter of 2008.

Due to ongoing efforts to control costs and tightly manage the balance sheet, cash flow used in operations improved significantly for the year to date period. For the six months ending June 27, 2009, cash flows used in operations were $47 million as compared to $143 million in the same period a year ago. Capital expenditures during the quarter were $10.0 million. The company continues to expect capital expenditures for the year to be $40-50 million.

“As we look ahead into the third quarter, we are even more encouraged by the favorable trends in our retail and direct segments and our ability to tightly manage costs,” Millner said. “For the full year, we now expect total revenue growth and comparable store sales to increase at a low single digit percentage rate as compared to our previous forecast for total revenue growth and comparable store sales to be approximately flat. We continue to expect direct revenue to decline at a low to mid-single digit rate and net charge-offs at World’s Foremost Bank to be between 5.1% and 5.5% for the full year. While we continue to expect full year earnings per diluted share to be roughly equal with 2008, should the momentum we realized in the first half of the year continue into the second half, earnings per diluted share could exceed 2008 levels.”





































































































































































































































































































































































CABELA'S INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except Earnings Per Share)
(Unaudited)




















Three Months Ended
Six Months Ended


June 27,
June 28,
June 27,
June 28,


2009
2008
2009
2008
Revenue:







Merchandise sales
$ 501,145

$ 480,640

$ 1,002,023

$ 971,551
Financial services revenue

44,129


38,253


78,023


78,961
Other revenue

3,962


7,059


8,730


10,979
Total revenue

549,236


525,952


1,088,776


1,061,491









Total cost of revenue (exclusive of depreciation and amortization)

326,060


316,386


652,374


630,188
Selling, distribution, and administrative expenses

192,536


194,714


391,758


395,365
Impairment and restructuring charges

11,692





13,370



Operating income

18,948


14,852


31,274


35,938









Interest expense, net

(6,054 )

(7,748 )

(11,888 )

(14,889 )
Other non-operating income, net

1,654


1,755


3,700


3,614
Income before provision for income taxes

14,548


8,859


23,086


24,663
Provision for income taxes

5,425


1,580


8,835


7,428









Net income
$ 9,123

$ 7,279

$ 14,251

$ 17,235









Basic net income per share
$ 0.14

$ 0.11

$ 0.21

About The Author

Thomas J. Ryan

Thomas J. Ryan Senior Business Editor | SGB Media tryan@sgbonline.com | 917.375.4699

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