) delivered third-quarter 2012 earnings of 60 cents a share that
came in line with the Zacks Consensus Estimate. However, earnings
jumped 20% when compared with the prior-year quarter's adjusted
earnings of 50 cents.
Strong performance by the company's new next-generation stores,
increased merchandise margins and strong growth at the Cabela's
CLUB Visa program led to the growth in bottom-line.
Management remains optimistic and now expects 2012 earnings to be
at the higher end of the previous guidance range of $2.63 to
$2.68. For 2013, the company expects earnings to increase at
least at a low double-digit rate.
Sales & Margins
Total revenue, comprising retail, direct and financial services
revenues, increased 9.2% year over year to $741.2 million, but
fell short of the Zacks Consensus Estimate of $750 million.
Total merchandise revenue, including retail and direct revenue,
escalated 7.9% to $652.3 million. The company's branded products,
favorable vendor collaboration and operational efficiencies
facilitated it to register a 130 basis points expansion (best
third quarter merchandise margin in more than 8 years) in
merchandise gross margin to 37.2% during the quarter. However,
strengthened sales of lower margin products adversely affected
the merchandise gross margin by 60 basis points.
Cabela's, which faces stiff competition from discount stores such
Wal-Mart Stores Inc
), witnessed retail store revenue of $456 million, up 15.8% year
over year. Strong performance at the company's new
next-generation stores and strategic merchandising and inventory
planning service facilitated it to register a 3.9% increase in
comparable-store sales. The company noted a 5% increase in
average ticket. Further, increased merchandise margin and
operational efficiencies boosted retail operating margin, which
expanded 190 basis points to 18.7% during the quarter.
The quarter's downside was the decline in the Direct business.
Revenue for the segment came in at $196.8 million, down 6.7% year
over year. Lower demand for softgoods and footwear, and absence
of shipping income from CLUB customers negatively impacted the
segment. Consequently, Direct operating margin declined 220 basis
points to 15.4%.
Financial services revenue augmented 20.3% to $85.9 million,
reflecting higher interest and fee income as well as reduced
interest expense. Credit card charge-offs as percentage of
average credit card loans for the quarter improved 52 basis
points to 1.71% (the lowest level of charge-offs in more than 5
years) compared with 2.23% in the prior-year quarter. The
improvement in charge-offs was observed on the back of solid
account growth by 9%, lower funding costs and improved
delinquencies. Other revenue marked inched up 1.7% year over year
to $2.9 million.
Operating expenses as a percentage of sales expanded 110 basis
points to 35.6% compared with 34.5% in the prior-year quarter.
The increase reflected higher advertising and pre-opening
Operating income jumped 17.8% to $67.1 million compared with $57
million in the prior-year quarter, whereas operating margin
increased 70 basis points to 9.1%.
Other Financial Aspects
The company ended the quarter with cash and cash equivalents of
$265.7 million, long-term debt of $443.2 million and
shareholders' equity of $1,303.5 million.
For the nine-month ended September 29, 2012, the company
generated $57.6 million from cash flow from operations and
incurred capital expenditures of $144.2 million. For fiscal 2012,
management anticipates cash flow from operations to reach $300
million and capital expenditure to be in the range of $175
million to $200 million attributable to store expansion plans.
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 150 basis points rise
in return on invested capital while remaining on course to
increase it further in the coming quarters.
Cabela's next generation store format, multi-channel strategy and
seasonal product assortments enable it to focus on boosting
stores productivity and sales per square foot while lowering its
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 remains on track to open six domestic next generation
stores, one Canadian next generation store and 2 Outpost sores in
fiscal 2013. In fiscal 2014, the company plans to open eight
domestic next generation stores.
Further, Cabela's CLUB Visa program continues to register strong
growth, reflecting rise in average active accounts with
improvements in delinquencies and net charge-offs along with
lower funding cost.
Currently, we maintain a long-term Outperform recommendation on
the stock. Moreover, Cabela's holds a Zacks #2 Rank, which
translates into a short-term Strong Buy rating.
CABELAS INC (CAB): Free Stock Analysis Report
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