Following up on a second quarter where earnings nearly doubled despite struggling Direct sales, management for Cabela’s said the company will continue to focus on the “core” hunt/fish/camp customers while focusing less on non-core customers. During the company’s presentation at Imperial Capital's conference, CEO Tommy Milner added that the company’s goal by 2012 was to accomplish a 200 to 300 BPS improvement in merchandise margins though five different initiatives SKU rationalization and reduction, a “greater spirit” of vendor collaboration, achieving supply chain assistance with managing large categories, implementing a pre-season plan before launching new products, and managing in-season products to reduce markdowns.
For the Direct business, Milner said CAB will continue to divert focus to internet sales as opposed to the catalog business, which he said is “clearly mature” and is becoming “less and less important.” Milner said management would emphasize the utility of online social networks like Facebook and Twitter over the next two years.
Milner placed a particular emphasis on the company’s CLUB Visa loyalty program, which he called “the glue that sticks the customers to [the] brand.”
Milner said average FICO scores across CAB’s 1.2 million cardholders has improved to 787, which has helped insulate the company from credit challenges in recent years. Milner added that August charge-offs were 3.99%, which he called a “favorable trend.” He elaborated, “When we put a Visa CLUB card in someone’s hands, they spend twice as much money with us because [of the points they earn,].” The retailer gave away $123 million in free goods through its VISA card during 2009, he added.
Milner also pointed to opportunities for retail expansion, including Cabela’s establishing a more significant footprint in the Western and Prairie provinces of Canada.
Cabela’s has announced plans to build a store in Edmonton next year along with store openings scheduled for Springfield, OR and Allen, TX. Milner said retail expansion would be “measured and prudent” going forward as Cabela’s focuses on its strongest regions the Upper Midwest, Northeast, Texas, Rocky Mountains, Pacific Northwest and Canada. New stores will reflect a refined format the company has adopted over the past two years with large 200,000 sq. ft.-plus locations making way for more efficient stores in the 80,000 sq. ft. to 125,000 sq. ft. range, a size range that management said promotes a higher return on capital.
