Very strong results from firearms and hunting equipment, along with efforts to significantly improve inventory levels helped Cabelas to sustain only modest declines in sales and gross profit for the fourth quarter of fiscal 2008. Amid a harrowing environment that has most retailers in a near-panic, management for Cabelas said they managed to keep traffic flat and increase average ticket prices in the low-single digits for the quarter.
Strength in firearms and related accessories – which has become a recurring theme since the November election and downturn of the economy – drove the outdoor retailer to a 2.2% comp gain versus the same period last year.
Management also noted that inventory levels decreased 15.0%, or $90 million, to $518 million compared to $608 million at the end of 2007. In an effort to “tighten up” inventory levels, management said the company made efforts to clean out inventory that wasnt eliciting demand from the consumer. “ I think were flowing goods to stores in a much more efficient manner,” said Brian Linneman, SVP, Global Supply Chain, Operations, “ it is the cleanest we have been in the companys history.” Management estimated that inventory levels per square foot were off 9.1% for the year.
For the fourth quarter, consolidated revenues were $879.4 million, down 1.0% from $889.5 million reported in the year-ago period. Direct revenues declined 8.0% to $410.4 million from $446.9 million a year ago, while retail revenues increased 6.9% to 429.5 million from $401.8 million a year ago. Earnings for the quarter dropped 12.0% to $49.4 million, or 74 cents per diluted share, from $56.2 million, or 85 cents per diluted share, in the year-ago period.
Gross margins were 39.3% of sales in Q4 versus 41.9% in Q4 last year, a 260 basis point decline that management said is largely due to mass liquidation of higher margin softgoods.
Other factors contributing to same-store sales growth were a significant year-over-year increase in Internet sales, an improvement in distribution costs, and the continued strength that the World Foremost Bank continues to bring to the company. Management said the companys website saw business increase 32.0% for the year, results that were likely slightly inflated due to high fuel prices in the summer. Cabelas reported that it ranks in the top 40 of all retail websites and saw 8.0% growth in year-over-year revenues from online sales.
Distribution costs as a percent of revenues improved 40 basis points for the year, driven by improvements the company said it made to its warehouse management system as well as improved vendor compliance and merchandise planning.
The average number of active accounts for the Worlds Foremost Bank increased 15.5% to 1.14 million for 2008, an improvement that was credited to The Cabelas CLUB Visa loyalty programs, which management said gives the company a distinct advantage over competitors. For the fourth quarter, the average account balance increased 5.9%, while overall revenue at the credit card segment for the quarter was up slightly, from $37.8 million a year ago to $38.1 million.
Management said they expected bad debt levels to be in the range of 4.5% to 4.6% for 2009 compared to bad debt levels of 2.95% for 2008. Consolidated revenues are expected to decline slightly, while comps and direct revenue growth are expected to decline low-singles for the year. EPS is expected to be roughly equal to 2008 levels.
