Cabela's Posts Mixed Q4: Earnings Miss, Revenues Beat - Analyst Blog

Cabela's Inc. ( CAB ) posted mixed results for fourth-quarter and full-year 2014, with better-than-expected top-line results and dismal bottom-line performance.

The company's adjusted earnings for the reported quarter plunged 15.9% year over year to $1.11 per share, simultaneously missing the Zacks Consensus Estimate of $1.35. The year-over-year decline was primarily led by greater advertising and promotion expenditure.

Cabela's Inc. - Earnings Surprise | FindTheBest

Including certain one-time items, earnings per share came in at $1.10, down 1.8% year over year.

On the positive side, total revenue for the quarter advanced 7.2% year over year to $1,274.6 million, surpassing the Zacks Consensus Estimate of $1,262 million. The impressive top-line results were driven by robust performance at Cabela's CLUB and the company's next-generation stores, increase in merchandise sales, along with the recovery of ammunition and firearm sales.

A Glance at 2014

Cabela's full-year 2014 adjusted earnings also slumped 13.3% to $2.88 per share, missing the Zacks Consensus Estimate of $3.13. Total revenue of $3,647.7 million climbed 1.3% year over year and beat the Zacks Consensus Estimate of $3,630 million. The year-over-year decline in bottom line and growth in top line could be attributable to the same factors as mentioned above for the fourth quarter.

Quarterly Details

Total merchandise sales escalated 7.3% to $1,159.7 million in the quarter, while merchandise gross margin contracted 150 basis points (bps) to 35.1% owing to hardcore discounting.

Cabela's retail store revenues surged 13.9% to $810.6 million while comparable-store sales (comps) declined 5.5%. Retail operating margin (as a percentage of segment revenues) contracted 150 bps to 19.4%.

Direct business revenues descended 5.4% year over year to $349.9 million. During the quarter, the company witnessed significant progress in its omnichannel business, including convenient checkouts and improvement in mobile traffic. Also, segment operating margin (as a percentage of segment revenues) contracted 340 bps to 10.7%.

Financial services revenues grew 9.9% to $113.3 million, driven by a 7.3% increase in number of average active accounts. Credit card charge-offs, as a percentage of average credit card loans for the quarter, were at a significant low of 1.74%. Further, segment operating margin (as a percentage of segment revenues) expanded 30 bps to 24.8%.

Other revenues slumped 83% year over year to approximately $0.8 million.

Adjusted operating income fell 9.6% to $129.5 million, with the operating margin contracting 180 bps to 10.2%.

Store Update

Given the robust performance of stores, the company plans to open 13 outlets in 2015, of which 2 will be opened in the first quarter, 5 in the second, 3 in the third and the remaining 3 in the final quarter.

Other Financial Aspects

Cabela's ended the year with cash and cash equivalents of $142.8 million, long-term debt (excluding current maturities) of $491.3 million and shareholders' equity of $1,817.5 million.

For 2015, management expects capital expenditures in the range of $425-$475 million owing to its store-expansion plans. Further, cash flow from operations is expected to be approximately $275-$325 million.

Looking Ahead

Though Cabela's earnings disappointed in the fourth quarter, management remains confident of its future performance, given the solid progress made at its next-generation stores and Cabela's CLUB.

For 2015, the company anticipates revenues to improve at a low double-digit rate, while it envisions earnings per share to grow at a high single-digit to low double-digit range. The Zacks Consensus Estimate for 2015 is currently pegged at $3.51 per share.

Stocks to Consider

Currently, Cabela's has a Zacks Rank #4 (Sell). However, better-ranked retail stocks include Build-A-Bear Workshop Inc. ( BBW ), Marinemax Inc. ( HZO ) and CST Brands, Inc. ( CST ), each with a Zacks Rank #1 (Strong Buy).

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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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