Cabela’s Sees Strong Bottom Line Finish to 2005 Despite Weak Comp Store Sales Results…

Cabela’s finished the year off with a strong quarter, with revenue increasing in all three of the retailer’s channels – brick & mortar, direct, and financial services. However, the company’s destination retail stores continue to comp down and several initiatives are underway to correct this problem. During the quarter, total revenue increased 16.6% to $675.4 million compared to $579.1 million in 2004.

Direct revenue for the quarter increased 7.1% to $404.9 million compared to $378.0 million in the same quarter a year ago. Sales gains out-paced catalog costs associated with the segment increased 4.7%.

Brick & mortar retail revenue for the quarter increased 40.3%, to $240.9 million versus $171.6 million in the same period last year. Results here were positively impacted by Cabela’s four new store openings in 2005 although comparable store sales for the quarter declined 4.7%. Management feels that this is much improved over the results in the first three quarters of the year. The Owatonna, Minnesota location was the biggest contributor to the negative comp for the quarter, because it was seeing some cannibalization from the new location in Rogers, Minnesota. Excluding the Owatonna store, comps would have been down just 2.6% for the quarter.

Both Cabela’s Wheeling, W.V., and Hamburg, Penn., stores comped in line with the other stores. During a conference call with analysts and the media, Cabela’s management said, “We do not expect to talk about the comp of these stores in 2006. So far, in 2006, comps have continued to show improvement.” Cabela’s other new stores in Rogers, Minn., and Lehi, Utah have performed above internal expectations, both for the quarter and for the year, while the new stores in Texas have fallen short of expectations. Nonetheless, overall new store revenue for Q4 exceeded internal expectations and for the year, revenue from new stores was in line with internal projections. In 2005, Cabela’s added 700,000 square-feet to its current operations. For 2006, all new store openings will occur in the second half of the year with a total of five stores in 2006 and at least six stores in 2007.

In 2005, comparable store sales represented less than 25% of Cabela’s total revenue and the company is taking “significant steps” to improve this trend. Year-to-date, for the first quarter of 2006, comparable store sales have continued to improve over the fourth-quarter results. The company recently began implementing a new replenishment system at all stores at the end of January. Next, the company has become “very focused” on improving inventory turns. Finally, the company implemented a space planning tool to help merchandising.

For the quarter, financial services revenue rose 23.9%, to $30.2 million versus $24.4 million in the fourth quarter of last year.

Gross margin was up 90 basis points to 42.7% in the quarter compared to 41.8% in the same quarter a year ago. Merchandise gross margins were up 50 basis points to 39.9% in the fourth quarter versus 39.4% last year. This increase is mostly due to less promotional activity and better merchandizing practices. Net income for the fourth quarter of 2005 increased 10.5% to $42.5 million, or 64 cents per diluted share, compared to $38.5 million, or 58 cents per diluted share, for the fourth quarter of 2004. Cabela’s stated that their long-term objectives are to grow revenue and profits at a mid-teens growth rate. Looking ahead to the full year of 2006, the company said that they are confident that they will achieve these long-term objectives.