Retail outfitter Cabela’s Inc. (NYSE:CAB) will slow down its new store growth during the next two years as same-store sales fell 4.2 percent (including a 3.3 percent drop in the United States) for the third quarter 2015.
Overall quarterly revenue from the retailer’s 74 stores, including 10 new stores in the past year, rose 4.6 percent to $926.5 million, while quarterly profits fell 19 percent to $43.7 million or 62 cents per share, versus $53.8 million a year ago. Wall Street consensus estimates had been revenue of $971 million with earnings expectations of 75 cents per share. Investors sent Cabela’s stock down more than 15 percent after the earnings release on Thursday.
“The U.S. stores we opened this year have underperformed our expectations,” Cabela’s CEO Thomas Millner told investors Thursday.
The company is reducing its planned new-store count from 11 to seven 2016 and no more than seven in 2017, he said. Those new stores are also likely to be smaller, as officials plan to target smaller markets where they expect greater success.
A drop in apparel and footwear sales also contributed to same-store sales declines as warmer-than-normal early fall temperatures tempered consumer demand for cold-weather goods. Gains in camping equipment, powersports, home and gifts, and firearms and ammunition couldn’t offset the declines. Neither could a 6.6 percent increase in active accounts of Cabela’s CLUB loyalty and credit card program.
Inventory levels increased 14 percent year-over-year to $1.1 billion. Looking ahead, officials lowered their full-year 2015 forecast to a high-single-digit percentage gain, and dropped earnings per share expectations to $2.88 (flat from 2014) versus a previous prediction of $3.14 to $3.17 per share.
Millner said Cabela’s is working on several initiatives to rebound sales, including deepening its merchandise and focus on its core areas of the hunter, angler, camper and recreational sports shooter.
“We're also testing some alternate labor models that would give us expertise and consistent coverage on our apparel pads going forward and it stands to reason that if somebody's there selling, we have a higher likelihood of actually selling something,” he said to investors.
Finally, Cabela’s has seen success with its recent shop-in-shop concepts for national apparel brands, which it is testing in more than a quarter of its stores, and plans to continue expanding the concept.