Despite a low-teens increase in third quarter revenues, diminishing customer traffic and a volatile retail environment kept comps for Cabela’s Inc. in the red for the period ended Sept. 27. The outdoor retailer reported comps were down 9%t for the quarter, while total revenue increased 11.9% to $611.8 million compared to $546.8 million for the third quarter of 2007.  Increased sales were largely due to new revenue generated by two new stores opened in 2008.


Net income for the third quarter was $9.7 million, or 15 cents per diluted share, compared to $13.2 million, or 20 cents per diluted share, for the year-ago period.


Management for Cabela’s said that while customers had clearly “traded down” for lower priced value items and merchandise, average ticket totals on comp stores were consistent with the year ago period.


Despite the introduction of four new catalogs during the quarter, direct sales for the third quarter were $241.1 million, a modest .3% decline from $241.9 million reported in the year ago period. Management said sales held up in the central and northeast regions of the country but that direct sales suffered in areas where Cabela’s had recently opened stores. 


Management remains very optimistic about the company’s e-commerce site, which generated twice as much traffic as the company’s closest competitor. Revenue reports specific to Internet sales are not supplied by Cabela’s.


The retail business, which the company said is the “largest and fastest growing segment,” generated $328 million for the quarter, a 27.5% increase from last year’s third quarter. As mentioned, the third quarter increase was generated from the two new stores. Cabela’s has plans to open two more stores during fiscal 2009.


To boost retail sales, management for Cabela’s said the company was improving labor productivity by streamlining the flow of goods into stores and managing store staffing levels. In early October, Cabela’s cut approximately 140 jobs in its corporate headquarters located in Sydney, NE.


Financial services revenue, impacted by higher charge offs and lower net interest spreads, were down 6.4% from the year ago period. Management said the company would continue to closely monitor delinquencies and charge offs, but maintained that Cabela’s only saw a slight increase in bad debts for the quarter.
 
SG&A expenses were $214.9 million for the third quarter as compared to $199.8 million for the third quarter of 2007. Operating income for the quarter was $20.8 million, a 14% decrease from $24.3 million reported in the year ago period.


Inventories decreased $20.4 million from the year ago quarter and management expects to show “significant improvements” in inventory levels as the anniversaries of 2007 store openings approach. Despite the opening of two new stores in 2008, Cabela’s expects to end the year with slightly less inventory than 2007.


Citing economic weakness, Cabela’s adjusted its guidance for 2008. The company is now expecting high-single digit revenue growth as compared to mid-teens growth. Comp declines, originally projected to be 5%-7%, have been adjusted to 7%-10%. Bad debt levels are expected to be between 2.9% and 3%, as opposed to the original projection of 2.7%-2.9%.


“We head into the fourth quarter fully cognizant of the current environment and its potential impact on the upcoming holiday selling season,” said Dennis Highby, president and CEO. “Therefore, we believe it is prudent to adopt a more conservative outlook.”