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Cabela's Management Discusses Q2 2012 Results - Earnings Call Transcript

Now I will turn the call over to Tommy Millner, Cabela's Chief Executive Officer.

Thomas L. Millner

Thanks, Chris, and good morning, everyone. Normally, great news like today, takes my breath away. Today, it seems like great news and the worst cough and cold I've had in 5 years is doing the trick. So if during the script or during the call, I sound like I'm dying, I'm actually not, but bear with me. Well on with the script.

Our record second quarter financial results validate that our growth strategy is working well. For the quarter, we realized strong growth in comp store sales, improved revenue performance in our Direct business, higher merchandise and operating margins, strong revenue and profit growth in our Cabela's CLUB Visa program and increases in market share. This strong performance led to record second quarter earnings and further increases in return on invested capital.

We are particularly pleased with continued strength in comp store sales, which increased 4.7% in the quarter. The increase in comp store sales was broad-based as sales increased in 25 of our 30 comp stores, and in 12 of 13 merchandising subcategories. For the quarter, average ticket increased 4% and we are particularly pleased that transactions increased for the first time in 5 quarters.

In addition to strong comp store sales, we also realized very strong performance from our new stores. For the quarter, sales per foot in the 6 new stores, not in the comp base, was meaningfully higher than our legacy store base. This is extremely encouraging as we continue to accelerate retail store expansion.

For the quarter, merchandise gross margin increased 70 basis points to 37.4%. This is the highest second quarter merchandise margin in more than 6 years. Similar to last quarter, we continued to see significant strength in the firearms and shooting categories, which caused a material mix shift into these lower margin categories. For the quarter, these adverse mix resulted in roughly 24 basis point headwind to merchandise margin.

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