In spite of a strong performance by the company's
next-generation stores and sustained growth at its CLUB Visa
) posted lower-than-anticipated results yesterday. First-quarter
2014 earnings of 36 cents per share missed the Zacks Consensus
Estimate by a penny and declined nearly 48.6% from the year-ago
quarter figure of 70 cents. Persistent decline in firearms and
ammunitions sales were the primary reasons behind the
However, quarterly earnings were within the company's guidance
range of 32 cents to 42 cents per share, which boosted investors'
confidence in the stock as evident from a rise of 3.4% in the
share price. Moreover, Cabela's impressive guidance for the
second and third quarters as well as full-year 2014 have also
generated positive investor sentiment as well.
For the second and third quarter of 2014, management expects
earnings in the range of 45-55 cents and 85-95 cents per share,
respectively, while for the full year 2014, it reaffirmed
earnings growth in the high single-digit/low double-digit rate as
against $3.32 recorded in 2013. Further, Cabela's expects its
revenues to grow in the low single-digit range for second quarter
and low double-digit range for third quarter.
Total revenue comprising retail, direct and financial services
revenues decreased 9.6% from the year-ago quarter to $725.8
million but fell short of the Zacks Consensus Estimate of $733.0
million. The year-over-year decline in top line was mainly due to
decreased sales of ammunition, firearms and other shooting
, including retail and direct revenues, declined 12.9% to $620.2
million in the quarter due to weak performance of firearms,
ammunition and other shooting-related categories. Merchandise
margins contracted 120 basis points (bps) to 34.4% due to margin
decline at firearms and ammunitions, which resulted from enhanced
supply and heavy promotions.
revenues decreased 9.4% to $440.9 million due to decline in
comparable-store sales (comps). Retail profitability (as a
percentage of segment revenues) contracted 550 bps to 11.9%.
Comps decreased 21.7% due to a decline of 39% and 32% in the
comps of firearms and ammunition, respectively. Looking ahead,
the company expects comps to decline in the range of 10%-13% in
the second quarter of 2014 due to waning arms and ammunition
revenues fell 20.3% year over year to $179.4 million. Also,
segment margin (as a percentage of segment revenues) contracted
140 bps to 18.5%.
revenues rose 14.9% to $98.6 million, driven by increase in
number of average active accounts. Credit card charge-offs as a
percentage of average credit card loans for the quarter fell to
1.8%. Moreover, delinquencies improved while active average
credit card accounts increased 7.9%.
rose substantially year over year to approximately $6.9
Total operating income declined 48.4% to $40.9 million while
operating margin contracted 430 bps to 5.6%.
In the reported quarter, Cabela's opened 1 store in Augusta,
GA while in the second quarter to date, it has opened one each
store at Greenville, SC and Anchorage, AK. For the remainder of
2014, the company has plans to open 11 additional stores.
In the remainder of second quarter, the company intends to
open five more stores at Christiana, DE; Woodbury, MN; Edmonton
in Alberta, Canada; Missoula, MT; and Lovett, TX. Of these,
Christiana, Woodbury and Edmonton locations are expected to open
in May while Missoula and Lovett locations will be opened in
For the third quarter, the company plans to open stores in
Acworth, GA; Barrie in Ontario, Canada; Cheektowaga, NY; Nanaimo,
British Columbia in Canada; Tualatin, OR; and Bowling Green,
The above-mentioned 14 new stores will represent 17% growth in
square footage area in 2014.
Other Financial Aspects
Cabela's ended the quarter with cash and cash equivalents of
$484.6 million, long-term debt (excluding current maturities) of
$540.6 million and shareholders' equity of $1,631.9 million.
During the quarter, the company's cash flow from operations was
negative $56 million as compared with $122 million at the
year-ago comparable quarter end.
For 2014, management expects to incur capital expenditures in
the range of $400-$450 million owing to its store expansion
plans. Further, cash flow from operations is expected to be
approximately $300-$350 million.
Other Stocks to Consider
Currently, Cabela's has a Zacks Rank #4 (Sell). However, other
better-ranked stocks worth considering in the retail sector
Barnes & Noble Inc.
American Apparel Inc.
Foot Locker Inc.
). While Barnes & Noble sports a Zacks Rank #1 (Strong Buy),
American Apparel and Foot Locker carry a Zacks Rank #2 (Buy).
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