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Retail operating margin improves at Cabela's

20
Feb '12
Cabela's Incorporated reported record financial results for fourth quarter and fiscal year ended December 31, 2011. For the quarter, adjusted for divestitures, total revenue increased 5.4% to $983.7 million; Retail store revenue increased 9.8% to $525.6 million; Direct revenue decreased 1.9% to $378.9 million; and Financial Services revenue increased 34.5% to $77.7 million. For the quarter, comparable store sales increased 1.7%. On a reported basis, total revenue increased 5.3% and Direct revenue decreased 2.1%.

For the quarter, net income increased 25% to $75.0 million compared to $59.9 million in the year ago quarter, and earnings per diluted share were $1.06 compared to $0.86 in the year ago quarter, each excluding certain items.

"Over the past three years, we have focused on improving profitability and after-tax return on invested capital, enabling us to accelerate growth initiatives," said Tommy (Thomas) Millner, Cabela's Chief Executive Officer. "Our strong revenue and profit results in the fourth quarter led to record profitability in our Direct and Retail segments for the full year 2011 and reassure us as we invest to accelerate growth over the next few years."

"As a result of the significant improvements in retail profitability and after-tax return on capital, we are further accelerating our retail store expansion," Millner said. "In 2012, we now expect to open five next-generation stores in North America in addition to our first Outpost store, increasing retail square footage approximately 10%. Looking forward to 2013, we expect to increase retail square footage 11-13% with the opening of six next-generation stores in the U.S. and up to three additional Outpost stores."

Due to the success of the next-generation stores, and in particular the success of the smaller Springfield, Oregon, store, Cabela's has developed a new "Outpost" store format. These stores will be approximately 40,000 square feet and have an innovative "core-flex" merchandise strategy allowing us to effectively serve smaller markets with a large concentration of Cabela's customers. The first Outpost store is expected to open in the fall of 2012 and will be located in Union Gap, Washington.

"We are especially pleased that merchandise margins increased 40 basis points in the quarter and 50 basis points for the year as we continue to improve pre-season planning, in-season management and the performance of Cabela's branded merchandise," Millner said. "Additionally, despite the unusually warm weather, comparable store sales grew 1.7%, and increased collaboration with vendors allowed us to more tightly manage inventories, which declined 3% for the year."

"Mostly due to higher gross margin, Retail profitability for the quarter increased 80 basis points to 20.6%," Millner said. "This is the eleventh consecutive quarter of increases in Retail profitability."


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