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Cabela's sees sales increase, net income drop in fourth-quarter

by Lisa Carter
Feb 14, 2013


TWEET: Cabela's sees 4Q sales increase, net income drop.

SUMMARY: Cabela’s operating profits rose sharply, helped by firearm sales and a strong holiday season.

HED: Gun sales help drive Cabela's earnings increase.

Cabela’s Inc., helped in part by a surge in firearm and ammunition sales, turned in fourth-quarter earnings that topped Wall Street forecasts Thursday.

In the quarter ended Dec. 29, the sporting-goods retailer’s net income fell to $68.0 million, or 95 cents per diluted share, from $69.8 million, or 99 cents per share, in the same quarter a year ago.

The Sidney, Nebraska-based company’s total revenue climbed 11 percent to $3.11 billion from $2.81 billion in the year-ago quarter. Excluding special items, the company said, adjusted income was $89.8 million, or $1.25 per share, compared to $75.0 million, or $1.06 per share, in the same quarter a year ago.
On that basis, Cabela’s earnings landed four cents above the $1.21 analysts surveyed by Yahoo Finance had been expecting.

Nonetheless, Cabela shares fell $2.65, or 5.2 percent, to close at $48.11 on Thursday.

Cabela’s sells a wide assortment of sporting clothes and equipment, and the latest quarter includes stronger sales of hunting gear, ice-fishing product and winter clothing. But Chief Executive Officer Tommy Millner said the rise firearm sales played a key role in strengthening total revenue and expanding Cabela’s customer base.

“We’re encouraged in the new customers we are seeing among firearms purchasers,” Millner said. “In the fourth quarter this year, 21 percent of firearms purchasers were new to Cabela’s. This is extremely powerful.”

Chief Financial Officer Ralph Castner said Cabela’s executives are expecting firearm sales to continue increasing in the first quarter.

“Our gun and ammo team took time building up inventory going into the fourth quarter,” Castner said. “We’re really seeing the benefit of that as we’re going into the first quarter…We’ve had to staff the gun counters immediately because of demand.”

“The [firearm] industry’s been very strong in the past couple months,” said Reed Anderson, an analyst with Northland Securities Inc. Cabela's is “the leader in that category, but it’s still only about 20 percent of their business.”

The company didn’t address the issue of whether the increase in firearms sales is a consumer reaction to proposed legislation based on recent mass shootings throughout the United States.

Millner said in addition to firearm sales, an improved holiday sales season also played a role in this quarter’s total revenue.

“We had a great Black Friday in both the direct and the retail channel,” Millner said. “We had a great cyber Monday in the direct channel…If anything has been a frustration, it’s been a lack of consistency in working to improve the direct business.”

Cabela’s strategy calls for the company to continue growing its chain of retail stores, specifically its “next-generation” stores that put customers in an outdoor atmosphere with wildlife displays.

Analysts surveyed by Yahoo Finance estimate the company’s first-quarter per-share earnings will rise about 10 percent, to 44 cents. Millner is optimistic about this quarter, particularly on the firearms sales and advertising fronts.

“I’m not prepared to declare victory on one quarter,” Millner said, “but I am pleased with the consistency going into the first quarter.”