We maintain our long-term "Outperform" recommendation on
), one of the leading specialty retailers and direct marketers of
hunting, fishing, camping, and related outdoor merchandise, with a
price target of $58.00.
Cabela's next generation store format, multi-channel strategy
and seasonal product assortments enable it to focus on increasing
its stores' productivity and sales per square foot while lowering
Cabela's multi-channel model facilitates consumers to purchase
directly from retail stores or order products through catalog and
Internet channels, and have them delivered to the retail store of
their choice, without incurring shipping costs. This multi-channel
approach gives the company an advantage over its competitors.
Cabela's remains confident regarding its improving balance sheet
with the long-term return on invested capital expected to range
from 12% to 14%. The new store model of a standard size requires
less capital investment and enhances store productivity.
The company's Financial Services Business segment plays an
integral part in supporting the merchandising business by
encouraging customers through a loyalty rewards program.
Eventually, it leads to increases in revenues, profitability and
customer retention at its Retail and Direct businesses, and in turn
overall growth in sales and earnings.
In order to capitalize on the under-penetrated markets, the
company unveiled its new 'Outpost' store format spanning 40,000
square feet that adopts a "core-flex" merchandise strategy
(selected core assortment of products and flexible seasonal
Cabela's opened 3 retail outlets during the first-half of fiscal
2012. The company also opened 3 next-generation stores during the
same time frame in Wichita, Kansas; Tulalip, Washington; and in
Saskatoon, Saskatchewan, Canada. The company plans to open two more
next-generation stores in Rogers, Arkansas and Charleston, West
Virginia, along with its first 'Outpost' store, in Union Gap,
Washington. This increases the retail square footage by
approximately 10%.Moreover, the company also announced its plans to
open six domestic next generation stores in Columbus, Ohio;
Grandville, Michigan; Louisville, Kentucky; Thornton, Colorado;
Lone Tree, Colorado; and Green Bay, Wisconsin; and 2 Outpost stores
in fiscal 2013. In fiscal 2014, the company plans to open a
next-generation store in Anchorage, Alaska.
Cabela's Inc. delivered solid second-quarter 2012 results,
backed by robust comps growth, healthy performance of retail
stores, strong growth at financial services division, elevated
merchandise and operating margins and lower expenses.
The quarterly earnings of 47 cents a share exceeded the Zacks
Consensus Estimate of 39 cents, and jumped 46.9% from 32 cents
earned in the comparable prior-year quarter. Total revenue,
comprising retail, direct and financial services revenues,
increased 11.6% year over year to $627.3 million, ahead of the
Zacks Consensus Estimate of $603 million.
The above analysis supports our unbiased view, and advocates our
bullish stance on the stock, which is well defined through our
Zacks #2 Rank that translates into a short-term "Buy" rating.
Boasting of a sturdy balance sheet, feasible strategy and operating
efficiencies, Cabela's, which competes with
Wal-Mart Stores Inc.
), offers investors one of the strongest growth profiles.
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