Cabela's Q3 Earnings Miss Ests - Analyst Blog

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In spite of rising comparable-store sales and strong performance by the company's next-generation stores and growth at its CLUB Visa program, Cabela's Incorporated ( CAB ) posted lower than anticipated results. The quarterly earnings of 70 cents a share missed the Zacks Consensus Estimate of 72 cents but rose 16.7% year over year.

Weakened firearms and ammunitions sales along with reduced Internet traffic were the primary reasons behind the miss.

Total revenue comprising retail, direct and financial services revenue increased 14.8% year over year to $850.8 million but fell short of the Zacks Consensus Estimate of $855 million.

Quarterly Highlights

Total merchandise revenue, including retail and direct revenues, rose14.8% to $749.1 million in the quarter, while merchandise margins expanded 10 basis points to 37.3% due to increased merchandise sales, removal of free shipping to consumers as well as lower markdowns and discounts. However, a decline in arms and an ammunition sales was a dampener.

Cabela's retail store revenues increased 20.8% to $550.9 million, driven by strong performance of the company's new next-generation stores and strategic merchandise and inventory planning. Comparable-store sales increased 3.9%. Retail profitability (as a percentage of segment revenues) expanded 10 basis points (bps) to 18.8%.

Direct business revenues inched up 0.9% year over year to $198.6 million. However, operating margin (as a percentage of segment revenue) contracted 70 basis points to 14.7%.

Financial services revenue augmented 14.5% to $98.4 million, reflecting increase in interest and fee income. Credit card charge-offs as a percentage of average credit card loans for the quarter remained almost flat at 1.72%. Moreover, delinquencies improved while active average credit card accounts increased 10.1%. Other revenues decreased 19.8% year over year to approximately $3. 0 million.

Total operating income rose 14.1% to $76.6 million, while operating margin contracted 10 bps to 9.0%.

Stores Update

In the reported quarter, Cabela's opened 4 next-generation stores in Ashwaubenon, Wis.; Thornton, Colo.; Lone Tree, Colo.; and Regina, Saskatchewan. Further, the company plans to open 3 stores in Nanaimo, British Columbia, Canada; Garner, N.C.; and Sun Prairie, Wis.

Other Financial Aspects

This Zacks Rank #2 (Buy) company ended the quarter with cash and cash equivalents of $409.7 million, long-term debt (excluding current maturities) of $524.1 million and shareholders' equity of $1,526.0 million. The company registered a 110 bps rise in return on invested capital while remaining focused on increasing it further in the coming quarters.

During the nine months, Cabela's generated $94 million in cash flow from operations. For 2013, management expects to incur capital expenditures in the range of $300-$325 million, owing to its store expansion plans. Further, cash flow from operations is expected to be approximately $300-$350 million.

Other Stocks to Consider

Apart from Cabela's, other stocks worth considering in the retail sector include KAR Auction Services, Inc. ( KAR ), Five Below, Inc. ( FIVE ) and Marinemax Inc. ( HZO ). All these have a Zacks Rank #2.

CABELAS INC (CAB): Free Stock Analysis Report

FIVE BELOW INC (FIVE): Free Stock Analysis Report

MARINEMAX INC (HZO): Free Stock Analysis Report

KAR AUCTION SVC (KAR): Free Stock Analysis Report

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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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