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 XPG TM (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 A replay of the call will be archived on

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 and the SEC's website at 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.
(Dollars in Thousands Except Earnings Per Share)
      Three Months Ended
March 29, 2014     March 30, 2013
Merchandise sales $ 620,197 $ 711,713
Financial Services revenue 98,578 85,772
Other revenue   7,048     5,012  
Total revenue   725,823     802,497  
Cost of revenue:
Merchandise costs (exclusive of depreciation and amortization) 406,643 458,627
Cost of other revenue   1,322     68  
Total cost of revenue (exclusive of depreciation and amortization)   407,965     458,695  
Selling, distribution, and administrative expenses   277,005     264,687  
Operating income 40,853 79,115
Interest expense, net (3,685 ) (5,356 )
Other non-operating income, net   2,102     1,539  
Income before provision for income taxes 39,270 75,298
Provision for income taxes   13,521     25,451  
Net income $ 25,749   $ 49,847  
Earnings per basic share $ 0.36   $ 0.71  
Earnings per diluted share $ 0.36   $ 0.70  
Basic weighted average shares outstanding   70,766,568     70,157,744  
Diluted weighted average shares outstanding   71,758,033     71,372,824  
(Dollars in Thousands Except Par Values)
March 29, 2014 December 28, 2013 March 30, 2013
Cash and cash equivalents $ 484,586 $ 199,072 $ 363,747
Restricted cash of the Trust 24,609 23,191 19,401
Accounts receivable, net 27,959 42,868 26,826

Credit card loans (includes restricted credit card loans of the Trust of $3,726,122,  $3,956,230, and $3,375,103), net of allowance for loan losses of $51,010,  $53,110, and $64,700
3,698,529 3,938,630 3,334,619
Inventories 742,021 644,883 613,065
Prepaid expenses and other current assets 92,650 90,438 147,782
Income taxes receivable and deferred income taxes   58,229     47,430     46,954  
Total current assets 5,128,583 4,986,512 4,552,394
Property and equipment, net 1,366,298 1,287,545 1,074,169
Economic development bonds 80,056 78,504 84,463
Other assets   43,689     44,303     49,211  
Total assets $ 6,618,626   $ 6,396,864   $ 5,760,237  
Accounts payable, including unpresented checks of $26,824, $22,717, and $41,442 $ 250,181 $ 261,200 $ 388,286
Gift instrument, credit card rewards and loyalty rewards programs 277,185 291,444 248,902
Accrued expenses 123,723 204,073 126,899
Time deposits 212,141 297,645 355,722
Current maturities of secured variable funding obligations of the Trust 50,000
Current maturities of secured long-term obligations of the Trust 255,000
Current maturities of long-term debt 8,422 8,418 8,406
Deferred income taxes, current   757          
Total current liabilities 1,127,409 1,112,780 1,128,215
Long-term time deposits 728,000 771,717 613,645
Secured long-term obligations of the Trust, less current maturities 2,452,250 2,452,250 2,154,750
Long-term debt, less current maturities 540,587 322,647 319,923
Deferred income taxes 7,346 3,118 14,669
Other long-term liabilities 131,090 128,018 100,395
Preferred stock, $0.01 par value; Authorized – 10,000,000 shares; Issued – none
Common stock, $0.01 par value:
Class A Voting, Authorized – 245,000,000 shares;
Issued – 71,009,175, 70,630,866, and 70,545,558 shares
Outstanding – 71,009,175, 70,630,866, and 70,494,063 shares 710 706 705
Additional paid-in capital 348,162 346,535 338,465
Retained earnings 1,286,566 1,260,817 1,086,274
Accumulated other comprehensive income (3,494 ) (1,724 ) 5,982
Treasury stock, at cost – 51,495 shares at March 30, 2013           (2,786 )
Total stockholders’ equity   1,631,944     1,606,334     1,428,640  
Total liabilities and stockholders’ equity $ 6,618,626   $ 6,396,864   $ 5,760,237  
(Dollars in Thousands)
Three Months Ended
March 29, 2014 March 30, 2013

Retail $ 440,949 $ 486,749
Direct 179,416 225,158
Financial Services 98,578 85,772
Other   6,880     4,818  
Total revenue $ 725,823   $ 802,497  

Operating Income (Loss):
Retail $ 52,298 $ 84,678
Direct 33,130 44,897
Financial Services 33,102 24,101
Other   (77,677 )   (74,561 )
Total operating income $ 40,853   $ 79,115  

As a Percentage of Total Revenue:
Retail revenue 60.8 % 60.6 %
Direct revenue 24.7 28.1
Financial Services revenue 13.6 10.7
Other revenue   0.9     0.6  
Total revenue   100.0 %   100.0 %

As a Percentage of Segment Revenue:
Retail operating income 11.9 % 17.4 %
Direct operating income 18.5 19.9
Financial Services operating income 33.6 28.1
Total operating income as a percentage of total revenue 5.6 9.9
(Dollars in Thousands)

Financial Services revenue consists of activity from the Company's credit card operations and is comprised of interest and fee income, interchange income, other non-interest income, interest expense, provision for loan losses, and customer rewards costs. The following table details the components and amounts of Financial Services revenue for the periods presented below.
Three Months Ended
March 29, 2014     March 30, 2013
Interest and fee income $ 94,219 $ 81,249
Interest expense (15,886 ) (13,851 )
Provision for loan losses   (12,714 )   (12,775 )
Net interest income, net of provision for loan losses   65,619     54,623  
Non-interest income:
Interchange income 82,427 77,630
Other non-interest income   755     1,283  
Total non-interest income 83,182 78,913
Less: Customer rewards costs   (50,223 )   (47,764 )
Financial Services revenue $ 98,578   $ 85,772  
The following table sets forth the components of Financial Services revenue as a percentage of average total credit card loans, including any accrued interest and fees, for the periods presented below.
        Three Months Ended
March 29, 2014     March 30, 2013
Interest and fee income 10.0 % 9.7 %
Interest expense (1.7 ) (1.7 )
Provision for loan losses (1.4 ) (1.5 )
Interchange income 8.8 9.3
Other non-interest income 0.1 0.2
Customer rewards costs (5.3 ) (5.7 )
Financial Services revenue 10.5 % 10.3 %

Key statistics reflecting the performance of the Financial Services business are shown in the following charts for the periods presented below.
Three Months Ended
March 29, 2014     March 30, 2013 Increase %
(Decrease) Change

(Dollars in Thousands Except Average Balance per Account)
Average balance of credit card loans (1) $ 3,757,216 $ 3,346,588 $ 410,628 12.3 %
Average number of active credit card accounts 1,762,782 1,633,551 129,231 7.9
Average balance per active credit card account (1) $ 2,131 $ 2,049 $ 82 4.0
Net charge-offs on credit card loans (1) $ 16,919 $ 15,585 $ 1,334 8.6

Net charge-offs as a percentage of average credit card loans (1)
      1.80 %     1.86 %     (0.06 )%        
(1) Includes accrued interest and fees
To supplement our consolidated statements of income presented in accordance with generally accepted accounting principles ("GAAP"), we have disclosed non-GAAP adjusted financial measures of operating results that exclude certain items. Total revenue; selling, distribution, and administrative expenses; impairment and restructuring charges; operating income; interest expense, net; provision for income taxes; net income; and earnings per diluted share are presented below both as GAAP reported and non-GAAP financial measures excluding (i) adjustments to interchange income for the Visa settlement, (ii) certain employee related expenses, (iii) impairment losses primarily related to two retail stores, (iv) adjustments to interest expense on certain unrecognized tax benefits, and (v) adjustments to the provision for income taxes related to changes in our assessments of uncertain tax positions. In light of the nature and magnitude, we believe these items should be presented separately to enhance a reader's overall understanding of the Company's ongoing operations. These non-GAAP adjusted financial measures should be considered in conjunction with the GAAP financial measures.
We believe these non-GAAP adjusted financial measures provide useful supplemental information to investors regarding the underlying business trends and performance of our ongoing operations and are useful for period-over-period comparisons of such operations. In addition, we evaluate results using non-GAAP adjusted operating income, adjusted net income, and adjusted earnings per diluted share. These non-GAAP adjusted financial measures should not be considered in isolation or as a substitute for operating income, net income, earnings per diluted share, or any other measure calculated in accordance with GAAP. The following table reconciles these financial measures to the related GAAP adjusted financial measures for the fiscal year ended December 28, 2013.

Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures (1)
Fiscal Year Ended December 28, 2013
GAAP Basis   Non-GAAP   Non-GAAP
As Reported Adjustments Amounts
(Dollars in Thousands Except Earnings Per Share)
Total revenue (2) $ 3,599,577 $ (3,167 ) $ 3,596,410
Selling, distribution, and administrative expenses (3) $ 1,201,519 $ (735 ) $ 1,200,784
Impairment and restructuring charges (4) $ 5,868 $ (5,868 ) $
Operating income $ 361,361 $ 3,436 $ 364,797
Interest expense, net (5) $ (17,833 ) $ 3,648 $ (14,185 )
Income before provision for income taxes $ 343,528 $ 7,084 $ 350,612
Provision for income taxes (6) $ 119,138 $ (6,783 ) $ 112,355
Net income $ 224,390 $ 13,867 $ 238,257
Earnings per diluted share $ 3.13 $ 0.19 $ 3.32
(1)     The presentation includes non-GAAP financial measures. These non-GAAP financial measures are not prepared under any comprehensive set of accounting rules or principles, and do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP.
(2) Reflects adjustments to the liability for the Visa settlement.
(3) Reflects certain employee related expenses primarily related to severance benefits.
(4) Reflects impairment losses of $4,931 related to a retail store site and $937 related to the closure and relocation of a retail store in May 2013.
(5) Reflects interest adjustments related to certain unrecognized tax benefits.
(6) Reflects the estimated income tax provision on the non-GAAP adjusted income before provision for income taxes and tax adjustments related to changes in assessments of uncertain tax positions.

Copyright Business Wire 2010

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