Cabela’s Inc. releases second quarter 2015 results

Cabela’s Incorporated (NYSE:CAB) today reported financial results for second quarter fiscal 2015.

For the quarter, total revenue increased 9.9% to $836.3 million; Retail store revenue increased 13.9% to $570.1 million; Direct revenue decreased 7.0% to $136.8 million; and Financial Services revenue increased 14.2% to $124.9 million. During the period, consolidated comparable store sales decreased 0.9%. Net income was $40.1 million compared to $43.5 million in the year ago quarter, and earnings per diluted share were $0.56 compared to $0.61 in the year ago quarter.

“We remain on track to meet our full-year expectations and continue to see strong growth in several key merchandise categories, sequential improvement in comparable store sales, and excellent performance from Cabela’s CLUB,” said Tommy Millner, Cabela’s Chief Executive Officer. “While our second quarter results fell short of expectations, we are encouraged by several positive trends in our business, including our fifth consecutive quarter of sequential improvement in comparable store sales. U.S. comparable store sales increased 0.8% for the quarter and were led by positive comparable store sales in hunting equipment, camping, fishing, firearms, ammunition, powersports, and home/gifts. Consolidated comparable store sales decreased 0.9% largely due to currency declines affecting our Canadian business and some cannibalization impact from our Edmonton store.”

“Our new format stores continue to significantly outperform our legacy stores in sales and profit per square foot,” Millner said. “During the second quarter, we opened five new stores, and we plan to open four stores in the third quarter and two stores in the fourth quarter. We are confident that these new format stores will drive improvements in profitability and return on invested capital.”

A shift in ammunition sales from the Direct channel to the Retail channel combined with further pressure from new retail square footage contributed to the 7.0% decrease in Direct revenue for the quarter. Omni-channel improvements continue to drive enhancements to the customer experience and are expected to contribute to sequential improvement in Direct channel performance for the second half of 2015.

Strong performance in hardline categories such as powersports, firearms, and ammunition and weaker performance in soft goods and apparel categories combined with a more aggressive promotional cadence contributed to the 120 basis point decrease in merchandise gross margin for the quarter. With improving trends in certain apparel categories and the anniversary of a more promotional environment, the Company expects merchandise gross margins to be mostly in line with the prior year through the second half of 2015.

“While we have benefited from cost savings over the past year, we did deleverage expenses in the second quarter by 130 basis points,” Millner said. “Our deleverage was the result of new store costs, investments in labor, and higher incentive compensation cost. Recently, we completed a detailed review of our expense base and have identified meaningful savings in the balance of 2015 and full-year 2016.”

The Cabela’s CLUB Visa program had another excellent quarter. During the quarter, growth in the average number of active credit card accounts was 7.0%. Growth in the average balance per active credit card account was 5.5%, and growth in the average balance of credit card loans was 12.9% to $4.3 billion. For the quarter, net charge-offs remained at historically low levels of 1.80%. Increased Financial Services revenue was driven by increases in interest and fee income as well as interchange income.

“With several areas of our business trending positively as we enter the second half of the year, we are confident in our outlook for full-year 2015,” Millner said. “As a result, we reaffirm our expectations for a low-double-digit growth rate in revenue and a high-single to low-double-digit growth rate in diluted earnings per share for full-year 2015 as compared to full-year 2014 non-GAAP diluted earnings per share of $2.88.”