Cabela's Inc
. (
CAB
), one of the leading specialty retailers of hunting, fishing,
camping, and related outdoor merchandise, delivered solid
first-quarter 2012 results, backed by healthy performance of retail
stores, strong growth at financial services division, elevated
merchandise gross margin and lower expenses.
The quarterly earnings of 40 cents a share exceeded the Zacks
Consensus Estimate of 33 cents and jumped 60% from 25 cents earned
in the prior-year quarter.
Quarterly Performance
Total revenue, comprising retail, direct and financial services
revenues, increased 6.3% year over year to $623.5 million, ahead of
the Zacks Consensus Estimate of $621 million.
Total merchandise revenue, including retail and direct revenue,
increased 5.1% to $535.3 million. The company's favorable inventory
position prevented it from providing markdowns, which in turn,
facilitated it to register a 150 basis points expansion in
merchandise gross margin to 34.5% during the quarter. Further,
Cabela's enhanced merchandise offering also boosted its
results.
Cabela'switnessed retail store revenue of $345.3 million, up
14.4% year over year. Cabela'sstrategic merchandising and inventory
planning as well as excellent in-store customer service facilitated
the company to register a 4.2% increase in comparable store sales.
The company noted a 5% increase in average ticket. Further,
enhanced productivity boosted retail profitability, which expanded
120 basis points to 12.8% during the quarter.
However, Direct revenue was disappointing during the quarter as
revenues dropped 8.3% to $190.2 million. However, operating margin
increased 70 basis points to 18% during the quarter.
Other revenue declined 10.5% during the quarter to $4.5 million
compared with $5.1 million in the prior-year quarter.
Credit card charge-offs for the quarter contracted 74 basis
points to 2%. The decrease also marks the lowest level of
charge-offs in the last four years. Financial services revenue
increased 15.3% to $83.5 million, reflecting higher interest and
fee income as well as reduced interest expense.
Operating expenses, as a percentage of sales, decreased 30 basis
points to 36.3% during the quarter, whereas operating income jumped
50.8% to $46.6 million compared with $30.9 million in the
prior-year quarter.
Other Financial Aspects
The company ended the quarter with cash and cash equivalents of
$157.2 million, long-term debt of $331.9 million and shareholders'
equity of $1,235.5 million.
Our Take
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 100 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 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 opened two next
generation stores during the quarter, one each in Wichita, Kansas
and Tulalip, Washington. In a separate story, the company also
announced its plans to open two stores in Denver market in fiscal
2013.
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 #2 Rank, which
translates into a short-term 'Buy' 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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