Cabela’s Incorporated (NYSE:CAB) reported financial results for the first quarter fiscal 2017.
For the quarter, on a GAAP basis, total revenue decreased 3.4 percent to $834.9 million, revenue from retail store sales decreased 3.9 percent to $542.0 million, internet and catalog sales decreased 12.6 percent to $136.1 million, and financial services revenue increased 6.5 percent to $150.0 million. For the quarter, U.S. comparable store sales decreased 9.1 percent and consolidated comparable store sales decreased 8.9 percent.
For the quarter, net income decreased 16.7 percent to $19.1 million compared to $22.9 million in the first quarter of 2016, and earnings per diluted share were $0.28 compared to $0.33 the previous year. Adjusted for certain items, the company reported first quarter net income of $27.6 million and earnings per diluted share of $0.40 as compared to net income of $29.5 million and earnings per diluted share of $0.43 last year. First quarter 2017 GAAP results included impairment and restructuring charges and other items totaling a $0.12 reduction in earnings per diluted share.
“While we were disappointed with our merchandise sales in the first quarter, we were very pleased with the excellent performance of our Cabela’s CLUB Visa program and our focus on expense management, which continued to provide meaningful contributions to profitability,” said Tommy Millner, Cabela’s chief executive officer. “Similar to broader retail industry trends, we continued to experience challenging traffic patterns in the first quarter. Our growth in average ticket was more than offset by continued decreases in transactions.”
For the quarter, consolidated comparable store sales decreased 8.9 percent and U.S. comparable store sales decreased 9.1 percent as compared to the first quarter of 2016. The decrease in comparable store sales was attributable to several specific events. Firearms and ammunition have faced several headwinds including the election and the tough comparisons from the San Bernardino tragedy a year ago. The home and gifts category was challenged by difficult comparisons related to a significant spike in demand for specific items in the previous year. While apparel categories comped negatively for the quarter, they have shown signs of improvement and were down less than the consolidated comp.
Merchandise gross margin decreased by 80 basis points in the quarter to 31.4 percent compared to 32.2 percent in the same quarter a year ago. This decrease was primarily attributable to the impacts of increased sales discounts and promotional activity as well as merchandise mix. Sales discounts and promotional activity were responsible for approximately 70 basis points of the decrease and the merchandise mix impact was approximately 10 basis points of the overall decrease for the quarter.
Expense management initiatives continued to generate meaningful contributions to profitability. For the quarter, GAAP basis SD&A expenses decreased by $1.3 million to $327.9 million as compared to $329.2 million in the first quarter of 2016. On a non-GAAP basis, SD&A expenses decreased $3.1 million to $318.6 million as compared to $321.7 million in the previous year. Expense reductions were primarily related to efficiencies in labor and a decrease in certain marketing expenses.
“We continue to be very pleased with the results of our expense and process improvement initiatives,” Millner said. “We are particularly encouraged by the sustainable impact of these initiatives from their implementation in 2015 through the first quarter. I commend our teams for executing these profitability enhancing improvements throughout the business.”
The Cabela’s CLUB Visa program had another positive quarter. For the quarter, growth in the average number of active credit card accounts was 2.4 percent and growth in average balance per active credit card account was 8.3 percent as compared to the same period a year ago. The average balance of credit card loans grew 11.0 percent to approximately $5.4 billion as compared to $4.9 billion in the year ago quarter. For the quarter, net charge-offs were 3.18 percent. First quarter financial services revenue increased 6.5 percent over the year ago quarter. This increase was primarily driven by increases in interest and fee income, which was largely offset by increases in the provision for loan losses as well as interest expense. During the quarter, the allowance for loan losses was reduced by $6.2 million as compared to a reduction of $1.2 million in the same quarter a year ago. For the quarter, the reduction in the allowance for loan losses was due to improvements in the roll rates for early stage delinquencies from the end of the fourth quarter of 2016 to the end of the first quarter of 2017.
As a reminder, Cabela’s will not host a conference call with analysts and investors or provide guidance in connection with the results and does not plan to do so for future quarters while the acquisition of the company by Bass Pro Shops is pending.