Cabela's posts strong sales growth in Q2 FY'12

Cabela's Incorporated reported strong financial results for second quarter fiscal 2012.

For the quarter, total revenue increased 11.6% to $627.3 million; Retail store revenue increased 16.9% to $384.7 million; Direct revenue decreased 0.7% to $158.5 million; and Financial Services revenue increased 12.8% to $79.3 million. For the quarter, comparable store sales increased 4.7%. Net income increased to $33.9 million compared to $21.7 million and earnings per diluted share were $0.47 compared to $0.31, each compared to the year ago quarter.

"This strong performance is Company-wide and shows that our strategic initiatives have generated major improvements in our business," said Tommy Millner, Cabela's Chief Executive Officer. "Every key line of our income statement benefited. Retail and Direct channel revenue, merchandise margin, operating margin, expenses as a percentage of revenue, inventory turns, earnings per share and return on capital all improved."

"Retail revenue growth was particularly encouraging," Millner said. "Comparable store sales accelerated in the quarter and increased 4.7%. It's great that our smaller next-generation stores continue to generate higher revenue and profit per square foot than our legacy stores. Additionally, each of our three new stores opened this year exceeded our expectations in the quarter, which reinforces our decision to accelerate retail store expansion."

"Our Direct channel experienced its best revenue performance in eight quarters," Millner said. "Direct revenue improved significantly from the first quarter, declining just 0.7% due to stronger growth in Internet sales and reduced declines in call center sales."

Merchandise margin increased 70 basis points to 37.4%, the highest level in more than five years. Ongoing focus on Cabela's branded products, improved in-season and pre-season planning, and greater vendor collaboration contributed to the strong performance. These positives more than overcame strong sales of firearms, ammunition and powersports, which had a negative affect on merchandise margin.

"Operating expense management remains a key focus," Millner said. "Our disciplined approach to managing operating expenses led to our third consecutive quarter of operating expenses growing at a slower rate than revenue. We are confident in our ability to continue to tightly manage operating expenses as we accelerate growth."

The Company realized significant increases in Retail segment contribution margin. For the quarter, Retail segment operating margin increased 230 basis points to 18.5%, a new second quarter record. This represents the 13th consecutive quarterly increase in Retail segment contribution margin.