In a move to supplement its Financial Services Segment, Cabela’s Inc. (CAB) recently announced that its Credit Card Master Note Trust has concluded the sale of secured Notes worth $300 million.
The company distributed the issuance into three parts, including $155 million of Class A-1 Notes carrying a fixed rate of 2.39% per annum, and $100 million of Class A-2 Notes with a floating rate interest equal to one-month LIBOR along with 0.60% per annum.
Moreover, the company sold three subordinated classes of notes totaling $45 million. World’s Foremost Bank, a wholly-owned subsidiary of the company, procured each of the subordinated classes of notes.
The issued notes have a maturity of roughly five years, with legal maturity of eight years. As stated earlier, the move will boost its financial services segment and will escalate the growth of the credit card portfolio for the World’s Foremost Bank.
The company’s Financial Services Business segment plays an integral part in supporting the merchandising business by encouraging customer loyalty rewards program that will result in increase in revenue, profitability and customer retention at its Retail and Direct businesses, leading to overall growth in sales and earnings.
Cabela’s possesses a healthy balance sheet, feasible strategy and improving operating efficiencies. Moreover, Cabela’s multi-channel model facilitates consumers to purchase directly from retail stores or order products through catalog and Internet channels, and have them delivered to the retail store of their choice without incurring shipping costs. This multi-channel approach gives the company an advantage over its competitors.
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), and from specialty retailers, such as Gander Mountain, Bass Pro Shops, and Dick’s Sporting Goods. The competitors have large number of stores, greater market presence and brand recognition, and financial resources.
Further, the company’s expansion in the geographic regions could be a boomerang. This may cannibalize sales performance and lower traffic counts at individual stores. Consequently, the operating results of the Retail business could be adversely affected.
Currently, we maintain a long-term Neutral recommendation on the stock. Moreover, Cabela’s holds a Zacks #4 Rank that translates into a short-term Sell rating.
