- Adjusted Third Quarter Diluted EPS of $0.71
- Total Revenue Increased 4.6% to $926.5 Million
- U.S. Comp Store Sales Decreased 3.3%, Consolidated Comp Store Sales Decreased 4.2%
- Cabela’s CLUB® Avg. Receivables Grew 13.9% and Charge-Offs Remained at Record Low Levels
- Restructuring Initiatives Expected to Reduce Operating Expenses as a Percentage of Total Revenue by 75 to 150 Basis Points Over the Next Three Years
SIDNEY, Neb., 2015-10-28 — /EPR Retail News/ — Cabela’s Incorporated (NYSE:CAB) today reported financial results for third quarter fiscal 2015.
For the quarter, total revenue increased 4.6% to $926.5 million; Retail store revenue increased 6.5% to $637.8 million; Direct revenue decreased 7.9% to $161.6 million; and Financial Services revenue increased 13.3% to $123.6 million. During the period, consolidated comparable store sales decreased 4.2%.
For the quarter, adjusted for certain items, net income decreased 13.8% to $50.3 million compared to $58.3 millionin the year ago quarter, and earnings per diluted share were $0.71 compared to $0.81 in the year ago quarter. The Company reported GAAP net income of $43.7 million and earnings per diluted share of $0.62 as compared to GAAP net income of $53.8 million and earnings per diluted share of $0.75 in the year ago quarter. Third quarter 2015 GAAP results included restructuring charges and other items of $0.09 in earnings per diluted share. See the supporting schedules to this earnings release labeled “Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures” for a reconciliation of the GAAP to non-GAAP financial measures.
“Continued strong performance in many of our key merchandise categories and exceptional performance at Cabela’s CLUB were not sufficient to offset the significant weakness in our fall apparel and footwear product lines,” said Tommy Millner, Cabela’s Chief Executive Officer. “During the quarter, we did take substantial and sustainable actions on our expense base, which will benefit 2016 and beyond.”
“Consolidated comparable store sales were down 4.2% for the quarter,” Millner said. “U.S. comparable store sales were down 3.3%. In both the United States and Canada, our customers have been slow to transition to fall apparel and footwear products. We were encouraged by positive comp performance in many of our core categories, including camping, powersports, home and gifts, firearms, and ammunition.”
“Our new format stores continue to significantly outperform our legacy stores in sales and profit per square foot, yet our U.S. stores opened in 2015 have underperformed our expectations,” Millner said. “Accordingly, we are evaluating our 2016 and 2017 store opening schedule. At this time, we plan to open seven stores in 2016 and no more than that in 2017. We have a number of initiatives underway to improve new store productivity and profitability, which gives us confidence in our long-term goal of 225 stores in North America.”
A shift in ammunition sales from the Direct channel to the Retail channel, continued softness in apparel and footwear categories, and further pressure from new retail square footage contributed to the 7.9% decrease in Direct channel revenue for the quarter.
Merchandise margins decreased 70 basis points in the quarter. Stronger hardline sales and weaker softline sales created a mix impact that accounted for approximately half of the decrease, while the other half was driven by a slightly higher markdown cadence across the assortment.
During the third quarter, the Company launched a major multi-year corporate restructuring project aimed at lowering its expense base to increase return on invested capital. The Company has already identified meaningful savings opportunities across the enterprise that are expected to result in a reduction of operating expenses as a percentage of total revenue by 75 to 150 basis points over the next three years.
In addition to its initiatives to reduce costs, the Company has begun a process to optimize its balance sheet. As part of this process, the Company plans to reduce working capital and sell unproductive assets. The proceeds from this balance sheet improvement will be used to help fund the Company’s previously announced $500 million share repurchase program.
The Cabela’s CLUB Visa program had another excellent quarter. During the quarter, growth in the average number of active credit card accounts was 6.6%. Growth in the average balance per active credit card account was 6.9%, and growth in the average balance of credit card loans was 13.9% to $4.6 billion. For the quarter, net charge-offs remained at historically low levels of 1.70%. Increased Financial Services revenue was driven by increases in interest and fee income as well as interchange income.
“With the revenue shortfall we experienced in the third quarter, we have reevaluated our fourth quarter and full-year expectations,” Millner said. “As a result, we expect a high-single-digit growth rate in revenue and approximately flat non-GAAP earnings per diluted share for full-year 2015 as compared to full-year 2014 non-GAAP diluted earnings per share of $2.88.”
Conference Call Information
A conference call to discuss third quarter fiscal 2015 operating results is scheduled for today (Thursday, October 22, 2015) at 11:00 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 taking substantial and sustainable actions on its expense base, which will benefit 2016 and beyond; opening seven stores in 2016 and no more than that in 2017; having a number of initiatives underway to improve new store productivity and profitability, which gives it confidence in its long-term goal of 225 stores in North America; its multi-year corporate restructuring project aimed at lowering its expense base to increase return on invested capital; reducing operating expenses as a percentage of total revenue by 75 to 150 basis points over the next three years; reducing working capital and selling unproductive assets; and a high-single-digit growth rate in revenue and approximately flat non-GAAP earnings per diluted share for full-year 2015 as compared to full-year 2014 non-GAAP diluted earnings per share of $2.88. 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, demand for firearms and ammunition, 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 Company’s ability to prevent cybersecurity breaches and mitigate cybersecurity risks; the outcome of litigation, administrative, and/or regulatory matters (including the ongoing Securities and Exchange Commission investigation, audits by tax authorities, and compliance examinations by the Federal Deposit Insurance Corporation); the Company’s ability to manage credit, liquidity, interest rate, operational, legal, regulatory capital, 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; 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 27, 2014, and Form 10-Q for the quarterly period ended June 27, 2015), 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.
Investor: Andrew Weingardt, 308-255-7428
Media: Nathan Borowski, 308-255-2861
SOURCE: Cabela’s Inc.