Outdoor outfitterCabela's (
) is on the hunt.
It wants real estate, part of a stepped-up strategy to expand
its 44-store footprint in the U.S. and Canada.
Fourteen stores are currently earmarked for openings,
including three just announced for Cheektowaga, N.Y., Lubbock,
Texas, and Berlin, Mass.
"We think over time there is an opportunity to grow to 150 to
200 stores," said Credit Suisse analyst Seth Sigman. "Obviously,
that would increase merchandise sales significantly."
Even with just 40 stores at year end, Nebraska-based Cabela's
took in $3.1 billion in revenue in 2012, up 11% from the prior
year. Most of it was from retail sales and to a lesser extent,
direct sales from the Internet and catalogs.
Analysts estimate revenue will grow 17% this year to more than
At over 60% of the total, retail stores are becoming a bigger
part of revenue compared with catalog and Internet sales.
They're also becoming more economically productive as the
company continues to open smaller format "new-generation" stores
and even smaller "Outposts."
New-generation and Outpost stores perform 30% to 40% better
than large legacy stores in sales and profit per square foot, CEO
Tommy Millner has said.
While the stores are smaller, they're also "putting them in
better locations" to generate more traffic, says Sigman.
"Operating costs are lower in smaller stores," he said. That,
and higher sales per square foot, he adds, lead to better margins
Retail operating income in the first quarter rose to 17.4%
from 12.8% in the earlier year. Net income jumped 73% to $49.8
million, or 70 cents a share vs. 40 cents.
Total revenue grew 28.7% to $802.5 million. Retail store
revenue was up 41% to $486.7 million.
That was a higher gain than direct sales, which rose 18.4% to
$225.2 million, and private-label credit card revenue, which
edged up 2.8% to $85.8 million.
New stores might be smaller, but they are still big by most
Legacy stores are 130,000 to 200,000 square feet, and
new-generation ones are 80,000 to 100,000 square feet, Sigman
Outposts, which are for areas with populations under 250,000,
are about 40,000 square feet.
Cabela's has opened two Outpost stores since late last year
and expects to open around 10 over the next four years.
New-generation stores still have room for lots of the features
that have made them destinations, drawing customers from miles
away. Customers often stay for hours and, presumably, spend
Like the bigger formats, new-generation stores feature trophy
animal mounts, a mountain replica with wildlife displays, an
indoor archery range, gun library, cafe and fudge shop.
"They are not compromising any of the experiences that drive
excitement," Sigman said. "It's still a destination."
Another strong point is customer service, he adds. "Employees
are passionate and knowledgeable about the different categories,
whether fishing, boating or camping."
CEO Millner stated in the first-quarter earnings report that
new stores are exceeding expectations and are not cannibalizing
sales of nearby legacy stores.
Singling out a 100,000-square-foot store expected to open next
year in the Portland, Ore., area, the second in Oregon, he said,
"Oregon is full of people who live the Cabela's lifestyle and
enjoy outdoor recreation, which makes this a perfect match."
Cabela's bills itself as the go-to place for customers who
like to hunt, fish and take part in other outdoor activities.
Like most outfits that sell firearms, gun and ammunition sales
have continued their strong streak, helping drive same-store
sales up 24% in the second quarter. Excluding firearm-related
sales, same-store sales were still up 9%.
Management said soft goods, footwear, optics and archery sales
showed particularly strong gains.
But comparable store sales could slow in the second quarter,
analysts say. According to Wells Fargo, sporting goods sales in
general decelerated in all categories in May, likely impacted by
volatile weather and the coldest Memorial Day since 2005.
Wells Fargo analysts noted that growth was still up in the
high single digits or more, however.
Given the softer May trends, Wells Fargo estimates that
Cabela's same-store sales in the second quarter will slow to 14%
from 24% in the first quarter.
Cabela's earnings are still seen rising 26% for the year to
$3.43 a share, according to Thomson Reuters, though that is
slightly slower than the 28% gain logged in 2012.
Cabela's same-store sales results would still be a lot higher
thanDick's Sporting Goods (
). Wells Fargo expects Dick's to show a 4% gain vs. a 2% decline
in the first quarter.
Dick's depends less on outdoor products than Cabela's, Sigman
says. "For Cabela's that is their core business," he said.
"There is no direct publicly traded competitor to Cabela's
today," Sigman said. Rather, it competes with a host of regional
and mom-and-pop outfits.
Some of its bigger privately held rivals include Bass Pro
Shops, Gander Mountain and Sportsman's Warehouse.
In such a fragmented outdoor market, Cabela's has opportunity
to take market share as it expands across the country, Sigman
Management says it's using its significant cash flow to fund
expansion and has no plans to use external financing, at least