Cabela's Inc. Reports First Quarter 2014 Results

Cabela's Incorporated (NYSE:CAB) today reported financial results for first quarter fiscal 2014.

For the quarter, total revenue decreased 9.6% to $725.8 million; Retail store revenue decreased 9.4% to $440.9 million; Direct revenue decreased 20.3% to $179.4 million; and Financial Services revenue increased 14.9% to $98.6 million. During the period, comparable store sales decreased 21.7%. Net income was $25.7 million compared to $49.8 million in the year ago quarter, and earnings per diluted share were $0.36 compared to $0.70 in the year ago quarter.

“In the first quarter, we anniversary the most difficult comparisons versus the firearms and ammunition surge last year,” said Tommy Millner, Cabela’s Chief Executive Officer. “As we cycle through the unprecedented comparisons from 2013, we are encouraged by our strong fundamentals. Specifically, these include: excellent new store performance, increased penetration of Cabela’s branded softgoods and growth in our Cabela’s CLUB loyalty program. First quarter profits were within our guidance as tight expense management and strong profits from Cabela’s CLUB offset weaker revenue and lower merchandise margin.”

New stores continue to perform at high levels, and for the trailing twelve months, the 14 new stores opened for the full period averaged sales per square foot of $497. With continued strong new store performance, retail store expansion remains on track with plans to open approximately one million square feet per year for the next several years.

“Another important aspect of achieving our 2014 targets is tightly managing growth in operating expenses,” Millner said. “As we expand into our national footprint, expense control will be vitally important, and we are pleased to see first quarter operating expenses less than our internal plan. In the first quarter, we kept operating expense growth to just 4.7% as we grew retail square footage 14%. The initiatives already in place will continue to yield benefits for the remainder of 2014 as we expect mid to high single-digit expense growth for each of the remaining quarters in 2014.”

Cabela’s branded product penetration in softgoods and footwear accelerated in the quarter increasing 470 basis points from 54.0% to 58.7%. Cabela’s branded products continue to be a core focus of the Company. Early reaction to XPGTM (Extreme Performance Gear) softgoods and footwear, Cabela’s Guidewear®, and Wildlife and Land Management products has been very positive. These results provide confidence in the prospects for future growth in Cabela’s branded products.

“Merchandise margin was down 120 basis points,” Millner said. “This drop was primarily due to lower margins in firearms, ammunition and shooting, which are returning to pre-surge levels. Margin rate in these categories declined versus last year as a result of improved supply and testing of certain promotions within specific categories of firearms and ammunition. We expect improvement in merchandise margin in the second half of the year due to new product performance in softgoods and more normalized firearm and ammunition promotions.”

“Comparable store sales for the quarter decreased 21.7% as firearms and ammunition declined 39% and 32%, respectively,” Millner said. “Through the first six weeks of the quarter, comparable store sales were down 25% to 30%. Comparable store sales improved each month through the quarter, and we expect this trend to continue throughout the second quarter.”

Direct revenue declined 20.3% for the quarter as a result of the sharp decline in ammunition and other shooting related categories compared to the unprecedented levels from the same quarter a year ago. Direct sales of hunting equipment, hunting apparel and footwear were encouraging. For the quarter, conversion rates from both desktop and mobile devices increased.

The Cabela's CLUB Visa program had another solid quarter. During the quarter, growth in average active credit card accounts was 7.9% due to new customer acquisitions in our Retail and Internet channels. For the quarter, net charge-offs remained at historically low levels of 1.80% compared to 1.86% in the prior year quarter. Additionally, greater than 30-day delinquencies continued to improve and were just 0.68% compared to 0.73% in the year ago quarter. Increased Financial Services revenue was driven by increases in interest and fee income as well as interchange income. Growth in average balance per active credit card account was 4.0%, and growth in average credit card loans was 12.3%.

"Expense initiatives already in place together with strong new store performance, increases in Cabela’s branded products and growth in Cabela’s CLUB will drive earnings growth for full year 2014," Millner said. "As a result, we reaffirm our previous full year guidance and continue to expect 2014 earnings per diluted share to increase at a high single-digit to low double-digit rate versus 2013 adjusted earnings per diluted share of $3.32. Furthermore, we expect full year 2014 revenue to increase at a mid to high single-digit rate. Due to carryover in the surge in firearms and ammunition sales from a year ago, we expect second quarter 2014 revenue to grow at a low single-digit rate and earnings per diluted share to be between $0.45 and $0.55. For the third quarter, we expect revenue to increase at a low double-digit rate and earnings per diluted share to be between $0.85 and $0.95."

Conference Call Information

A conference call to discuss first quarter fiscal 2014 operating results is scheduled for today (Thursday, April 24, 2014) at 11:00 a.m. Eastern Time. A webcast of the call will take place simultaneously and can be accessed by visiting the Investor Relations section of Cabela's website at www.cabelas.com. A replay of the call will be archived on www.cabelas.com.

About Cabela's Incorporated

Cabela's Incorporated, headquartered in Sidney, Nebraska, is a leading specialty retailer, and the world's largest direct marketer, of hunting, fishing, camping and related outdoor merchandise. Since the Company's founding in 1961, Cabela's® has grown to become one of the most well-known outdoor recreation brands in the world, and has long been recognized as the World's Foremost Outfitter®. Through Cabela's growing number of retail stores and its well-established direct business, it offers a wide and distinctive selection of high-quality outdoor products at competitive prices while providing superior customer service. Cabela's also issues the Cabela's CLUB® Visa credit card, which serves as its primary customer loyalty rewards program. Cabela's stock is traded on the New York Stock Exchange under the symbol "CAB".

Caution Concerning Forward-Looking Statements

Statements in this press release that are not historical or current fact are "forward-looking statements" that are based on the Company's beliefs, assumptions, and expectations of future events, taking into account the information currently available to the Company. Such forward-looking statements include, but are not limited to, the Company's statements regarding opening approximately one million square feet of retail space per year for the next several years; mid to high single-digit expense growth for each of the remaining quarters in 2014; merchandise margin improvement in the second half of the year; comparable store sales continuing to improve throughout the second quarter; 2014 earnings per diluted share increasing at a high single-digit to low double-digit rate versus 2013 adjusted earnings per diluted share of $3.32; full year 2014 revenue increasing at a mid to high single-digit rate; second quarter 2014 revenue growing at a low single-digit rate and earnings per diluted share being between $0.45 and $0.55; and third quarter revenue increasing at a low double-digit rate and earnings per diluted share being between $0.85 and $0.95. Forward-looking statements involve risks and uncertainties that may cause the Company's actual results, performance, or financial condition to differ materially from the expectations of future results, performance, or financial condition that the Company expresses or implies in any forward-looking statements. These risks and uncertainties include, but are not limited to: the state of the economy and the level of discretionary consumer spending, including changes in consumer preferences, demand for firearms and ammunition, and demographic trends; adverse changes in the capital and credit markets or the availability of capital and credit; the Company's ability to successfully execute its omni-channel strategy; increasing competition in the outdoor sporting goods industry and for credit card products and reward programs; the cost of the Company's products, including increases in fuel prices; the availability of the Company's products due to political or financial instability in countries where the goods the Company sells are manufactured; supply and delivery shortages or interruptions, and other interruptions or disruptions to the Company's systems, processes, or controls, caused by system changes or other factors; increased or adverse government regulations, including regulations relating to firearms and ammunition; the Company's ability to protect its brand, intellectual property, and reputation; the Company's ability to prevent cybersecurity breaches and mitigate cybersecurity risks; the outcome of litigation, administrative, and/or regulatory matters (including a Commissioner's charge the Company received from the Chair of the U. S. Equal Employment Opportunity Commission in January 2011, audits by tax authorities, and compliance examinations by the Federal Deposit Insurance Corporation); the Company's ability to manage credit, liquidity, interest rate, operational, legal, regulatory capital, and compliance risks; the Company's ability to increase credit card receivables while managing credit quality; the Company's ability to securitize its credit card receivables at acceptable rates or access the deposits market at acceptable rates; the impact of legislation, regulation, and supervisory regulatory actions in the financial services industry, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; and other risks, relevant factors, and uncertainties identified in the Company's filings with the SEC (including the information set forth in the "Risk Factors" section of the Company's Form 10-K for the fiscal year ended December 28, 2013), which filings are available at the Company's website at www.cabelas.com and the SEC's website at www.sec.gov. Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. The Company's forward-looking statements speak only as of the date they are made. Other than as required by law, the Company undertakes no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.