Cabela's Inc. reported second-quarter earnings jumped 56.2 percent to $33.9 million, or 47 cents a share, compared to $21.7 million, or 31 cents, a year ago. For the quarter, total revenue increased 11.6 percent to $627.3 million; Retail store revenue increased 16.9 percent to $384.7 million; Direct revenue decreased 0.7 percent to $158.5 million; and Financial Services revenue increased 12.8 percent to $79.3 million. For the quarter, comparable store sales increased 4.7 percent.

“This strong performance is company-wide and shows that our strategic initiatives have generated major improvements in our business,” said Tommy Millner, Cabela's Chief Executive Officer. “Every key line of our income statement benefited. Retail and Direct channel revenue, merchandise margin, operating margin, expenses as a percentage of revenue, inventory turns, earnings per share and return on capital all improved.”

“Retail revenue growth was particularly encouraging,” Millner said. “Comparable store sales accelerated in the quarter and increased 4.7 percent. It's great that our smaller next-generation stores continue to generate higher revenue and profit per square foot than our legacy stores. Additionally, each of our three new stores opened this year exceeded our expectations in the quarter, which reinforces our decision to accelerate retail store expansion.”

“Our Direct channel experienced its best revenue performance in eight quarters,” Millner said. “Direct revenue improved significantly from the first quarter, declining just 0.7 percent due to stronger growth in Internet sales and reduced declines in call center sales.”

Merchandise margin increased 70 basis points to 37.4 percent, the highest level in more than five years. Ongoing focus on Cabela's branded products, improved in-season and pre-season planning, and greater vendor collaboration contributed to the strong performance. These positives more than overcame strong sales of firearms, ammunition and powersports, which had a negative affect on merchandise margin.

“Operating expense management remains a key focus,” Millner said. “Our disciplined approach to managing operating expenses led to our third consecutive quarter of operating expenses growing at a slower rate than revenue. We are confident in our ability to continue to tightly manage operating expenses as we accelerate growth.”

The Company realized significant increases in Retail segment contribution margin. For the quarter, Retail segment operating margin increased 230 basis points to 18.5 percent, a new second quarter record. This represents the 13th consecutive quarterly increase in Retail segment contribution margin.

“These strong results led to another quarter of improvement in return on invested capital,” Millner said. “Return on invested capital improved 190 basis points. Key operational improvements and the strong performance of our new stores give us confidence in our ability to increase return on capital going forward.”

The Cabela's CLUB Visa program also posted very strong results in the quarter. For the quarter, net charge-offs decreased 48 basis points to 1.86 percent compared to 2.34 percent in the prior year quarter. This is the lowest level of net charge-offs in five years. Primarily due to higher interest and fee income and reduced interest expense, Financial Services revenue increased 12.8 percent in the quarter to $79.3 million.

“We are optimistic about our prospects for the remainder of 2012 and 2013,” Millner said. “Our strategies are working well and our next-generation stores are achieving superior results. Accordingly, we believe that our full year 2012 earnings per share should exceed current estimates by 1-3 percent.”

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 30, 2012
July 2,
2011

June 30,
2012

July 2,
2011

Revenue:









Merchandise sales


$

542,662



$

488,409



$

1,077,939



$

997,519


Financial Services revenue


79,267



70,277



162,722



142,648


Other revenue


5,325

 


3,414

 


10,097

 


8,644

 

Total revenue


627,254

 


562,100

 


1,250,758

 


1,148,811

 









 

Cost of revenue:









Merchandise costs
  (exclusive of depreciation and
amortization)


339,782



309,233



690,502



650,443


Cost of other revenue


595

 


3

 


634

 


3

 

Total cost of revenue
  (exclusive of depreciation and
amortization)


340,377



309,236



691,136



650,446


Selling, distribution, and administrative expenses


229,049



214,600



455,218



429,214


Impairment and restructuring charges




 


955

 




 


955

 









 

Operating income


57,828



37,309



104,404



68,196










 

Interest expense, net


(6,444

)


(6,123

)


(10,948

)


(12,145

)

Other non-operating income, net


1,450

 


1,993

 


2,851

 


3,957

 









 

Income before provision for income taxes


52,834



33,179



96,307



60,008


Provision for income taxes


18,964

 


11,479

 


33,611

 


20,523

 









 

Net income


$

33,870

 


$

21,700

 


$

62,696

 


$

39,485

 







About The Author

Thomas J. Ryan

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

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