Cabela's Inc. Reports Record Second Quarter 2013 Results

Cabela's Inc. Reports Record Second Quarter 2013 Results

- Second Quarter Diluted EPS Increased 31.9% to $0.62 vs. $0.47 a Year Ago

- Second Quarter Comparable Store Sales Up 10.5%

- Direct Revenue Increased 13.7%

- Merchandise Gross Margin Increased 30 Basis Points to 37.7%

- After-Tax Return on Invested Capital Increased 160 Basis Points

SIDNEY, Neb.--(BUSINESS WIRE)-- Cabela's Incorporated (NYS: CAB) today reported strong financial results for second quarter fiscal 2013.

For the quarter, total revenue increased 20.7% to $756.8 million; Retail store revenue increased 25.8% to $483.9 million; Direct revenue increased 13.7% to $180.1 million; and Financial Services revenue increased 11.7% to $88.6 million. Comparable store sales increased 10.5%. For the quarter, net income increased 31.5% to $44.5 million compared to $33.9 million in the year ago quarter, and earnings per diluted share were $0.62 compared to $0.47 in the year ago quarter. Year to date cash flows from operations were $183 million compared to $70 million for the same period a year ago.

"This strong showing reflects excellent performance by our next-generation stores and our omni-channel marketing efforts," said Tommy Millner, Cabela's Chief Executive Officer. "Retail expansion continues as a highlight. Our next-generation stores provide the combination of exceptional customer experience and great use of retail space. These next-generation stores continue to yield sales and profit per square foot an extraordinary 40-plus percent better than our legacy stores. Additionally, our legacy stores continue to show improvement in revenue and profit per square foot themselves. We are excited as we continue to accelerate retail square footage expansion."

The 10.5% increase in comp store sales is the seventh consecutive quarter of comp store sales improvement. Excluding firearms, comp store sales increased 9.0% with comp store sales increasing in 32 of 33 stores and in 10 of 13 merchandise subcategories. Furthermore, next-generation stores generated comp store sales that were600 basis points higher than the legacy stores. In addition to firearms and shooting, hunting apparel, archery and optics were particularly strong.

"Direct revenue increased for the third consecutive quarter," Millner said. "We have made substantial progress in improving our Direct business with more improvement to come. During the quarter, we increased our marketing efforts behind special events such as Spring Great Outdoor Days and Father's Day. In the second half, our omni-channel initiatives will be focused on seamlessly providing the best possible customer experience across all sales channels."

Merchandise gross margin improved 30 basis points to 37.7% compared to the prior year quarter. Merchandise margin increased in 10 of 13 subcategories. Higher margins in most subcategories more than offset the mix effect of lower margin firearms and ammunition.

"It is important to note that our strong sales, improved merchandise margin and a favorable tax rate together allowed us to sharply increase our business building expenditures in the quarter," Millner said. "Our plan to do so was discussed in our first quarter earnings conference call. Specifically, we raised our national advertising, direct marketing spend, and store opening and store labor expense, all while still exceeding our profit objectives. Early success of our 'It's In Your Nature' campaign led us to significantly expand the scope of this national brand advertising."

The tax rate in the quarter was 30.5% compared to 35.9% in the year ago quarter. More effective tax planning in the second quarter of 2013, as well as a state income tax settlement in the second quarter a year ago, led to this reduction in the tax rate. The tax rate is expected to be 32.5-33.5% for the remainder of 2013 and should continue throughout 2014.

The Cabela's CLUB Visa program had another solid quarter. During the quarter, growth in average active credit card accounts accelerated to 10.7% due to increases in new customers, primarily in the Retail and Internet channels. For the quarter, net charge-offs as a percentage of average credit card loans increased to 1.87% compared to 1.86% in the prior year quarter. Increased financial services revenue was driven by increases in interest and fee income as well as interchange income.

"Return on invested capital improved by 160 basis points over the same quarter a year ago," Millner said. "With our strong operational improvements, we are confident in our ability to generate even further improvements in return on invested capital."

"We are certainly pleased with our strong second quarter results and investments we have made to further build the future health of our Company," Millner said. "Our retail stores are performing at very high levels, and our Direct business is showing continued improvement. As a result, we are comfortable with the current external earnings estimates for the third and fourth quarter of 2013."

Conference Call Information

A conference call to discuss second quarter fiscal 2013 operating results is scheduled for today (Thursday, July 25, 2013) at 9:00 a.m. Eastern Time. A webcast of the call will take place simultaneously and can be accessed by visiting the Investor Relations section of Cabela's website at www.cabelas.com. A replay of the call will be archived on www.cabelas.com.

About Cabela's Incorporated

Cabela's Incorporated, headquartered in Sidney, Nebraska, is a leading specialty retailer, and the world's largest direct marketer, of hunting, fishing, camping and related outdoor merchandise. Since the Company's founding in 1961, Cabela's® has grown to become one of the most well-known outdoor recreation brands in the world, and has long been recognized as the World's Foremost Outfitter®. Through Cabela's growing number of retail stores and its well-established direct business, it offers a wide and distinctive selection of high-quality outdoor products at competitive prices while providing superior customer service. Cabela's also issues the Cabela's CLUB® Visa credit card, which serves as its primary customer loyalty rewards program. Cabela's stock is traded on the New York Stock Exchange under the symbol "CAB".

Caution Concerning Forward-Looking Statements

Statements in this press release that are not historical or current fact are "forward-looking statements" that are based on the Company's beliefs, assumptions, and expectations of future events, taking into account the information currently available to the Company. Such forward-looking statements include, but are not limited to, the Company's statements regarding its tax rate being 32.5-33.5% for the remainder of 2013 and continuing throughout 2014, generating even further improvements in return on invested capital, and comfort with current external earnings estimates for the third and fourth quarter of 2013. Forward-looking statements involve risks and uncertainties that may cause the Company's actual results, performance, or financial condition to differ materially from the expectations of future results, performance, or financial condition that the Company expresses or implies in any forward-looking statements. These risks and uncertainties include, but are not limited to: the state of the economy and the level of discretionary consumer spending, including changes in consumer preferences and demographic trends; adverse changes in the capital and credit markets or the availability of capital and credit; the Company's ability to successfully execute its omni-channel strategy; increasing competition in the outdoor sporting goods industry and for credit card products and reward programs; the cost of the Company's products, including increases in fuel prices; the availability of the Company's products due to political or financial instability in countries where the goods the Company sells are manufactured; supply and delivery shortages or interruptions, and other interruptions or disruptions to the Company's systems, processes, or controls, caused by system changes or other factors; increased or adverse government regulations, including regulations relating to firearms and ammunition; the Company's ability to protect its brand, intellectual property, and reputation; the outcome of litigation, administrative, and/or regulatory matters (including a Commissioner's charge the Company received from the Chair of the U. S. Equal Employment Opportunity Commission in January 2011); the Company's ability to manage credit, liquidity, interest rate, operational, legal, and compliance risks; the Company's ability to increase credit card receivables while managing credit quality; the Company's ability to securitize its credit card receivables at acceptable rates or access the deposits market at acceptable rates; the impact of legislation, regulation, and supervisory regulatory actions in the financial services industry, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; and other risks, relevant factors, and uncertainties identified in the Company's filings with the SEC (including the information set forth in the "Risk Factors" section of the Company's Form 10-K for the fiscal year ended December 29, 2012), which filings are available at the Company's website at www.cabelas.com and the SEC's website at www.sec.gov. Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. The Company's forward-looking statements speak only as of the date they are made. Other than as required by law, the Company undertakes no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.