Cabela's profits up, sales down in fourth quarter report

Cabela’s on Thursday reported an increase in revenue and decrease in sales for its fourth quarter of 2015, and reported that net income decreased over $2 million for fiscal year 2015.

The company also said that its process to “explore and evaluate a wide range of strategic alternatives to enhance value for the company’s shareholders” that was announced Dec. 2, 2015, is ongoing. No decision to sell all or part of the company was announced.

Cabela’s on Thursday reported financial results for its fourth quarter and fiscal year, which included a 10.5 percent total revenue increase in the quarter. In a press release, the company said retail store revenue increased 14.3 percent, direct revenue increased 0.5 percent and financial services revenue increased 15.7 percent. During the period, on a 14 week versus 14 week basis, U.S. comparable store sales decreased 3.5 percent and consolidated comparable store sales decreased 4.9 percent.

“During the second half of 2015, we deepened our focus on profitable growth, expense leverage and better balance sheet utilization,” said Tommy Millner, Cabela’s Chief Executive Officer, in a press release. “In the fourth quarter, we were excited to see the early results of these initiatives. Specifically, we outperformed external estimates for revenue, expenses and earnings per share.”

The press release said that for the quarter, adjusted for certain items, net income increased 9.5 percent to $86.8 million compared to $79.3 million in the year ago quarter, and earnings per diluted share were $1.26 compared to $1.11 in the year ago quarter.

For fiscal year 2015, the company said in a press release that net income was $204.7 million compared to 207.1 million last year.

“U.S. comparable store sales were down 3.5 percent,” Millner said in the press release. “Consolidated comparable store sales were down 4.9 percent for the quarter. In both the United States and Canada, weather impacted fall and winter 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.”

“We clearly faced a challenging environment in the fourth quarter,” Millner added. “However, we were able to drive better than anticipated merchandise revenue as the result of several initiatives, including expanded drop ship programs, retail inventory visibility online, and a focus on key merchandise categories. We are confident that a continued focus on key merchandise categories as well as new initiatives, such as optimization of store formats and digital and mobile leadership, will continue to drive merchandise revenue performance.”

For the quarter, adjusted for certain items, SD&A expenses as a percentage of sales decreased 130 basis points to 29.5 percent as compared to 30.8 percent in the same quarter a year ago, the press release said. This expense leverage was attributable to lower costs resulting from the company’s third quarter launch of new initiatives aimed at lowering its expense base to increase return on invested capital. These cost reduction initiatives are expected to provide a significant benefit to our 2016 results. Fourth quarter cost reductions were slightly offset by increased incentive compensation expense as compared to the fourth quarter a year ago, which had no incentive compensation expense.

In addition to its initiatives to reduce costs, the company said in a press release that it has seen meaningful progress in efforts to optimize its balance sheet. As part of this process, the company plans to reduce working capital and sell unproductive assets. Lower inventory levels will be a major source of the reduction in working capital. At year end 2015, days inventory on hand decreased by approximately four days as compared to the prior year.

The Cabela’s CLUB Visa program had another excellent quarter, the press release stated. During the quarter, growth in the average number of active credit card accounts was 6.6 percent. Growth in the average balance per active credit card account was 7.3 percent, and growth in the average balance of credit card loans was 14.4 percent to $4.8 billion. For the quarter, net charge-offs remained at historically low levels of 1.76 percent. Fourth quarter financial services revenue increased 15.7 percent, driven by increases in interest and fee income as well as interchange income.

“We have been very pleased with the results realized from both our revenue and expense initiatives implemented in 2015,” Millner said in a press release. “As a result, for full-year 2016, we expect a high-single-digit growth rate in revenue and a high-single-digit or low-double-digit growth rate in earnings per diluted share as compared to full-year 2015 adjusted earnings per diluted share of $2.88.”