Cabela’s Inc. (CAB), one of the leading specialty retailers of hunting, fishing, camping, and related outdoor merchandise, recently posted first-quarter 2011 results, in line with the Zacks’ expectation for the bottom line.
However, the quarterly earnings of 25 cents a share tumbled 13.8% from 29 cents delivered in the prior-year quarter. On a reported basis, including one-time items, quarterly earnings came in at 25 cents a share compared with 12 cents in the prior-year quarter.
Quarterly Performance
Total revenue, which comprises retail, direct and financial services revenue, increased 4.8% year over year to $586.7 million, reflecting rise in sales in each comparable stores. The reported revenue also came ahead of the Zacks Consensus Revenue Estimate of $576.0 million. However, operating income declined 9.0% to $30.9 million during the quarter.
Total merchandise revenue, which comprises retail and direct revenue, increased 3.1% to $509.1 million, with an 8.9% jump in comparable-store sales. However, merchandise gross margin fell 30 basis points to 33.0%, reflecting augmented carrying costs, partially offset by margin expansion from pre-season planning and vendor collaboration.
Cabela’s, which faces competition from Tractor Supply Company (TSCO), witnessed retail revenue of $301.8 million, up 11.3% year over year, whereas direct revenue fell 6.9% to $207.5 million. Other revenue dropped 9.6% to $5.1 million from $5.6 million in the prior-year quarter.
Credit card charge-offs for the quarter contracted to 2.74% from 4.96% in the prior-year quarter. Thus, financial services revenue jumped 20.7% to $72.4 million.
Given the improving trends, the company expects 2011 earnings per share to meet or exceed the expectation of the analysts.
Other Financial Aspects
The company ended the quarter with cash and cash equivalents of $168.3 million, long-term debt of $402.5 million and shareholders’ equity of $1,056.0 million.
Our View
Boasting a sturdy balance sheet, feasible strategy and operating efficiencies, Cabela’s offers its investors one of the strongest growth profiles. The company remains on course to surpass the high end of the targeted long-term return on invested capital of 12%–14%.
Next generation store format, multi-channel strategy and seasonal product assortments enable the company to focus on increasing stores productivity and sales per square foot, lowering its labor costs.
The company is also concentrating on alleviating its bad debt risk in the credit card business. Although, the improvement in the economy has led to a lowering of delinquencies and a decline in charge-offs, but we still remain cautious and maintain a long-term ‘Neutral’ rating. Moreover, the company holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation.
CABELAS INC (CAB): Free Stock Analysis Report
TRACTOR SUPPLY (TSCO): Free Stock Analysis Report
Zacks Investment Research
