Cabela's Inc
. (
CAB
), one of the leading specialty retailers of hunting, fishing,
camping, and related outdoor merchandise, delivered
better-than-expected fourth-quarter 2011 results. The results were
backed by healthy performance of retail stores, strong growth at
financial services division and elevated merchandise gross
margin.
The quarterly earnings of $1.06 a share surpassed the Zacks
Consensus Estimate of 99 cents a share and jumped 23.3% from 86
cents delivered in the prior-year quarter.
However, including one-time items, quarterly earnings came in at
99 cents a share compared with 95 cents in the prior-year
quarter.
Quarterly Performance
Total revenue, comprising retail, direct and financial services
revenues, increased 5.3% year over year to $983.7 million,
exceeding the Zacks Consensus Estimate of $965 million. However,
adjusted for divestitures, total revenue increased 5.4%.
Total merchandise revenue, including retail and direct revenue,
increased 4.4% to $903.9 million. Merchandise gross margin expanded
40 basis points to 36.4% during the quarter, reflecting strong
sales in the firearms and shooting categories.
Cabela's witnessed retail revenue of $525.6 million, up 9.8%
year over year. Cabela'sstrategic merchandising and inventory
planning, strong advertising and excellent in-store customer
service facilitated the company to register a 1.7% increase in
comparable store sales.
Direct revenue dropped 2.1% to $378.9 million. However, adjusted
for divestitures, direct revenue inched down 1.9%. Other revenue
declined sharply during the quarter to $1.5 million compared with
$11 million in the prior-year quarter.
Credit card charge-offs for the quarter contracted 126 basis
points to 2.12% from 3.38% in the prior-year quarter. The decrease
also marks the lowest level of charge-offs in the last four years.
Financial services revenue jumped 34.5% to $77.7 million,
reflecting higher interest and fee income as well as reduced
interest expense.
During the reported quarter, adjusted operating income increased
24.8% to $117.7 million compared with $94.3 million in the
prior-year quarter.
Other Financial Aspects
The company ended the quarter with cash and cash equivalents of
$304.7 million, long-term debt of $336.5 million and shareholders'
equity of $1,181.3 million.
Expansion on the Palate
Boasting a sturdy balance sheet, feasible strategy and operating
efficiencies, Cabela's offers its investors one of the strongest
growth profiles. The company registered a 120 basis points rise in
return on invested capital to 14.3% and remains on course to
increase it further in the coming quarters.
Going ahead, Cabela's expects to repurchase 800,000 shares to
balance shareholder dilution arising out of equity based
compensation awards. The company plans to repurchase shares from
open market through February 2013.
Cabela's next generation store format, multi-channel strategy
and seasonal product assortments enable it to focus on increasing
stores productivity and sales per square foot while lowering its
labor costs.
In addition, the company aims to capitalize on the
under-penetrated markets and unveiled its new 'Outpost' store
format. The relatively smaller size store will provide shoppers
with Cabela's retail experience. The company expects to open its
first Outpost store in Union Gap, Washington in the fall of
2012.
The company expects to accelerate its retail square footage
growth plans by opening 5 stores during fiscal 2012 along with its
first 'Outpost' store. In fiscal 2013, the company expects to open
six next generation stores and three additional Outpost stores.
Further, Cabela's CLUB Visa program continues to register strong
growth, reflecting increase in average active accounts with
enhancements in delinquencies and net charge-offs along with lower
funding cost.
However, the outdoor recreation and casual apparel and footwear
markets are highly fragmented and competitive. Cabela's faces stiff
competition from discount stores, such as
Wal-Mart Stores Inc
. (
WMT
) and
Target Corporation
(
TGT
).
Currently, we maintain a long-term 'Outperform' rating on
Cabela's. However, the company holds a Zacks #4 Rank, which
translates into a short-term 'Sell' recommendation.
CABELAS INC (
CAB
): Free Stock Analysis Report
TARGET CORP (
TGT
): Free Stock Analysis Report
WAL-MART STORES (
WMT
): Free Stock Analysis Report
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