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Cabela's (CAB) Lags Q4 Earnings & Revenues; Stock Down

Cabela's IncorporatedCAB continues its dismal run, with earnings missing the Zacks Consensus Estimate for the third consecutive quarter, as the company reported fourth-quarter 2016 results. Moreover, the company's revenues fell short of the estimate for the second straight quarter.

Following, the dismal results the company's shares declined 4.8% on Feb 16, 2017. In fact the company's shares have tumbled 23.9% in the past three months, underperforming the Zacks categorized Retail-Miscellaneous/Diversified industry which has witnessed a decline of 2.1%.

The company recorded earnings per share of $1.05, which came way below the Zacks Consensus Estimate of $1.22, and also declined 16.7% year over year. Including one-time items, the company's fourth-quarter earnings came in at 84 cents per share, plunging 26.3% year over year.

Moreover, the top line dropped 4.9% year over year to $1,338.3 million and also missed the Zacks Consensus Estimate of $1,449 million. The company's fourth-quarter results were primarily hurt by lower store traffic, dismal comparable store sales and also due to sharp decline in merchandise sales.

Consolidated comparable store sales (comps) dipped 6.5% in the quarter primarily due tough year-over-year comparison. The company witnessed robust sales in firearms and shooting-related categories in the first half of the quarter. However, later in the quarter, the company observed softness in both these categories. Moreover, U.S. comps were down 6.4% in the quarter under review.

Merchandise gross margin contracted 118 basis points (bps) to 32.2% in the quarter. The decline was mainly due to promotional activity, merchandise mix and proper inventory levels.

The company's total adjusted operating income for the quarter slumped 8.8% to $127.1 million, while operating margin fell 30 bps to 9.6%.

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Bass Pro Shops to Acquire Cabela's

Bass Pro Shops and Cabela's have entered into a deal, whereby the former will acquire the latter in an all-cash deal valued at $5.5 billion. The acquisition, which is expected to conclude in the first half of 2017, will result in a retail giant that will control over 20% of the U.S. hunting, camping, and fishing market. Cabela's was exploring strategic alternatives, including a potential sale, after it came under pressure from an activist fund, Elliot Management Corp. However, the Federal regulators have raised questions over the deal.

Segment Details

Total Merchandise sales , which include revenues from retail stores as well as internet and catalogs, went down 6.5% to $1,196 million in the fourth quarter. Retail store revenues fell 4.3% to $888.2 million, while Internet and catalog revenues decreased 12.4% to $307.8 million. Further, the segment's operating margin (as a percentage of segment revenues) contracted 120 bps to 5.8%.

Financial services revenues inched up 1.2% to $132.7 million, reflecting a 22.4% advance in interest, partially offset by an increase in the provisional losses for loans and interest expenses. The average number of active credit card accounts grew 4.2%, while average balance of credit card loans of $4.8 billion increased 13.3%. Additionally, the average balance per active credit card account rose 8.7%. Further, the segment's operating margin came in at 34% in comparison with 30.3% in the prior-year quarter.

Other Financial Aspects

Cabela's ended the quarter with cash and cash equivalents of $263.8 million, long-term debt (excluding current maturities) of roughly $671.5 million and shareholders' equity of $2,011.6 million.

Zacks Rank & Stocks to Consider

Cabela's currently carries a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the retail sector include Big 5 Sporting Goods Corp. BGFV , Barnes & Noble, Inc. BKS and Staples, Inc. SPLS .

Big 5 Sporting currently sports a Zacks Rank #1 (Strong Buy) and has a long-term earnings growth rate of 12%. You can see the complete list of today's Zacks #1 Rank stocks here .

Barnes & Noble, with a long-term earnings growth rate of 10%, has reported positive earnings surprise in the trailing four quarters, with an average beat of 4%. The stock currently carries a Zacks Rank #2 (Buy).

Staples which also carries a Zacks Rank #2 has witnessed nearly 7% gain in share price in the past six months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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