Cabela's Inc. Reports First Quarter 2014 Results

  Cabela's Inc. Reports First Quarter 2014 Results

   - First Quarter Diluted EPS at $0.36 (Prior Guidance of $0.32 to $0.42)

  - Cabela’s Branded Softgoods Sales Penetration Grew 470 Basis Points From
                                54.0% to 58.7%

- Firearms and Ammunition Declines Lead to Comparable Store Sales Decrease of

 - New Stores at Nearly $500 Sales per Sq. Ft. on a Rolling Four Qtr. Basis,
                   Significantly Better than Legacy Stores

     - Merchandise Margin Down 120 Basis Points to 34.4% due to Firearms,
                     Ammunition and Shooting Margin Drop

Business Wire

SIDNEY, Neb. -- April 24, 2014

Cabela's Incorporated (NYSE:CAB) today reported financial results for first
quarter fiscal 2014.

For the quarter, total revenue decreased 9.6% to $725.8 million; Retail store
revenue decreased 9.4% to $440.9 million; Direct revenue decreased 20.3% to
$179.4 million; and Financial Services revenue increased 14.9% to $98.6
million. During the period, comparable store sales decreased 21.7%. Net income
was $25.7 million compared to $49.8 million in the year ago quarter, and
earnings per diluted share were $0.36 compared to $0.70 in the year ago

“In the first quarter, we anniversary the most difficult comparisons versus
the firearms and ammunition surge last year,” said Tommy Millner, Cabela’s
Chief Executive Officer. “As we cycle through the unprecedented comparisons
from 2013, we are encouraged by our strong fundamentals. Specifically, these
include: excellent new store performance, increased penetration of Cabela’s
branded softgoods and growth in our Cabela’s CLUB loyalty program. First
quarter profits were within our guidance as tight expense management and
strong profits from Cabela’s CLUB offset weaker revenue and lower merchandise

New stores continue to perform at high levels, and for the trailing twelve
months, the 14 new stores opened for the full period averaged sales per square
foot of $497. With continued strong new store performance, retail store
expansion remains on track with plans to open approximately one million square
feet per year for the next several years.

“Another important aspect of achieving our 2014 targets is tightly managing
growth in operating expenses,” Millner said. “As we expand into our national
footprint, expense control will be vitally important, and we are pleased to
see first quarter operating expenses less than our internal plan. In the first
quarter, we kept operating expense growth to just 4.7% as we grew retail
square footage 14%. The initiatives already in place will continue to yield
benefits for the remainder of 2014 as we expect mid to high single-digit
expense growth for each of the remaining quarters in 2014.”

Cabela’s branded product penetration in softgoods and footwear accelerated in
the quarter increasing 470 basis points from 54.0% to 58.7%. Cabela’s branded
products continue to be a core focus of the Company. Early reaction to XPG^TM
(Extreme Performance Gear) softgoods and footwear, Cabela’s Guidewear®, and
Wildlife and Land Management products has been very positive. These results
provide confidence in the prospects for future growth in Cabela’s branded

“Merchandise margin was down 120 basis points,” Millner said. “This drop was
primarily due to lower margins in firearms, ammunition and shooting, which are
returning to pre-surge levels. Margin rate in these categories declined versus
last year as a result of improved supply and testing of certain promotions
within specific categories of firearms and ammunition. We expect improvement
in merchandise margin in the second half of the year due to new product
performance in softgoods and more normalized firearm and ammunition

“Comparable store sales for the quarter decreased 21.7% as firearms and
ammunition declined 39% and 32%, respectively,” Millner said. “Through the
first six weeks of the quarter, comparable store sales were down 25% to 30%.
Comparable store sales improved each month through the quarter, and we expect
this trend to continue throughout the second quarter.”

Direct revenue declined 20.3% for the quarter as a result of the sharp decline
in ammunition and other shooting related categories compared to the
unprecedented levels from the same quarter a year ago. Direct sales of hunting
equipment, hunting apparel and footwear were encouraging. For the quarter,
conversion rates from both desktop and mobile devices increased.

The Cabela's CLUB Visa program had another solid quarter. During the quarter,
growth in average active credit card accounts was 7.9% due to new customer
acquisitions in our Retail and Internet channels. For the quarter, net
charge-offs remained at historically low levels of 1.80% compared to 1.86% in
the prior year quarter. Additionally, greater than 30-day delinquencies
continued to improve and were just 0.68% compared to 0.73% in the year ago
quarter. Increased Financial Services revenue was driven by increases in
interest and fee income as well as interchange income. Growth in average
balance per active credit card account was 4.0%, and growth in average credit
card loans was 12.3%.

"Expense initiatives already in place together with strong new store
performance, increases in Cabela’s branded products and growth in Cabela’s
CLUB will drive earnings growth for full year 2014," Millner said. "As a
result, we reaffirm our previous full year guidance and continue to expect
2014 earnings per diluted share to increase at a high single-digit to low
double-digit rate versus 2013 adjusted earnings per diluted share of $3.32.
Furthermore, we expect full year 2014 revenue to increase at a mid to high
single-digit rate. Due to carryover in the surge in firearms and ammunition
sales from a year ago, we expect second quarter 2014 revenue to grow at a low
single-digit rate and earnings per diluted share to be between $0.45 and
$0.55. For the third quarter, we expect revenue to increase at a low
double-digit rate and earnings per diluted share to be between $0.85 and

                         Conference Call Information

A conference call to discuss first quarter fiscal 2014 operating results is
scheduled for today (Thursday, April 24, 2014) 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 A replay of the call will be archived on

                         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
opening approximately one million square feet of retail space per year for the
next several years; mid to high single-digit expense growth for each of the
remaining quarters in 2014; merchandise margin improvement in the second half
of the year; comparable store sales continuing to improve throughout the
second quarter; 2014 earnings per diluted share increasing at a high
single-digit to low double-digit rate versus 2013 adjusted earnings per
diluted share of $3.32; full year 2014 revenue increasing at a mid to high
single-digit rate; second quarter 2014 revenue growing at a low single-digit
rate and earnings per diluted share being between $0.45 and $0.55; and third
quarter revenue increasing at a low double-digit rate and earnings per diluted
share being between $0.85 and $0.95. 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 a
Commissioner's charge the Company received from the Chair of the U. S. Equal
Employment Opportunity Commission in January 2011, 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, including the Dodd-Frank Wall Street Reform and Consumer Protection
Act; 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 28, 2013), which filings are available at the Company's website at and the SEC's website at 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

(Dollars in Thousands Except Earnings Per Share)
                                        Three Months Ended
                                           March 29,        March 30,
                                           2014               2013
Merchandise sales                          $ 620,197          $ 711,713
Financial Services revenue                   98,578             85,772
Other revenue                               7,048            5,012      
Total revenue                               725,823          802,497    
Cost of revenue:
Merchandise costs (exclusive of              406,643            458,627
depreciation and amortization)
Cost of other revenue                       1,322            68         
Total cost of revenue (exclusive of         407,965          458,695    
depreciation and amortization)
Selling, distribution, and                  277,005          264,687    
administrative expenses
Operating income                             40,853             79,115
Interest expense, net                        (3,685     )       (5,356     )
Other non-operating income, net             2,102            1,539      
Income before provision for income           39,270             75,298
Provision for income taxes                  13,521           25,451     
Net income                                 $ 25,749          $ 49,847     
Earnings per basic share                   $ 0.36            $ 0.71       
Earnings per diluted share                 $ 0.36            $ 0.70       
Basic weighted average shares               70,766,568       70,157,744 
Diluted weighted average shares             71,758,033       71,372,824 

(Dollars in Thousands Except Par Values)
                           March 29,         December 28,      March 30,
                           2014              2013              2013
Cash and cash              $ 484,586         $ 199,072         $ 363,747
Restricted cash of the       24,609            23,191            19,401
Accounts receivable,         27,959            42,868            26,826
Credit card loans
(includes restricted
credit card loans of
the Trust of
$3,726,122,                  3,698,529         3,938,630         3,334,619
$3,956,230, and
$3,375,103), net of
allowance for loan
losses of $51,010,
$53,110,and $64,700
Inventories                  742,021           644,883           613,065
Prepaid expenses and         92,650            90,438            147,782
other current assets
Income taxes
receivable and              58,229          47,430          46,954    
deferred income taxes
Total current assets         5,128,583         4,986,512         4,552,394
Property and                 1,366,298         1,287,545         1,074,169
equipment, net
Economic development         80,056            78,504            84,463
Other assets                43,689          44,303          49,211    
Total assets               $ 6,618,626      $ 6,396,864      $ 5,760,237 
Accounts payable,
including unpresented      $ 250,181         $ 261,200         $ 388,286
checks of $26,824,
$22,717, and $41,442
Gift instrument,
credit card rewards          277,185           291,444           248,902
and loyalty rewards
Accrued expenses             123,723           204,073           126,899
Time deposits                212,141           297,645           355,722
Current maturities of
secured variable             —                 50,000            —
funding obligations of
the Trust
Current maturities of
secured long-term            255,000           —                 —
obligations of the
Current maturities of        8,422             8,418             8,406
long-term debt
Deferred income taxes,      757             —               —         
Total current                1,127,409         1,112,780         1,128,215
Long-term time               728,000           771,717           613,645
Secured long-term
obligations of the           2,452,250         2,452,250         2,154,750
Trust, less current
Long-term debt, less         540,587           322,647           319,923
current maturities
Deferred income taxes        7,346             3,118             14,669
Other long-term              131,090           128,018           100,395
Preferred stock, $0.01
par value; Authorized        —                 —                 —
Issued – none
Common stock, $0.01
par value:
Class A Voting,
Authorized –
Issued – 71,009,175,
70,630,866, and
Outstanding –
71,009,175,                  710               706               705
70,630,866, and
Additional paid-in           348,162           346,535           338,465
Retained earnings            1,286,566         1,260,817         1,086,274
Accumulated other            (3,494    )       (1,724    )       5,982
comprehensive income
Treasury stock, at
cost – 51,495 shares        —               —               (2,786    )
at March 30, 2013
Total stockholders’         1,631,944       1,606,334       1,428,640 
Total liabilities and      $ 6,618,626      $ 6,396,864      $ 5,760,237 
stockholders’ equity

(Dollars in Thousands)
                                                 Three Months Ended
                                                 March 29,       March 30,
                                                 2014            2013
Retail                                           $ 440,949       $ 486,749
Direct                                             179,416         225,158
Financial Services                                 98,578          85,772
Other                                             6,880         4,818   
Total revenue                                    $ 725,823      $ 802,497 
Operating Income (Loss):
Retail                                           $ 52,298        $ 84,678
Direct                                             33,130          44,897
Financial Services                                 33,102          24,101
Other                                             (77,677 )      (74,561 )
Total operating income                           $ 40,853       $ 79,115  
As a Percentage of Total Revenue:
Retail revenue                                     60.8    %       60.6    %
Direct revenue                                     24.7            28.1
Financial Services revenue                         13.6            10.7
Other revenue                                     0.9           0.6     
Total revenue                                     100.0   %      100.0   %
As a Percentage of Segment Revenue:
Retail operating income                            11.9    %       17.4    %
Direct operating income                            18.5            19.9
Financial Services operating income                33.6            28.1
Total operating income as a percentage of          5.6             9.9
total revenue

(Dollars in Thousands)
Financial Services revenue consists of activity from the Company's credit
card operations and is comprised of interest and fee income, interchange
income, other non-interest income, interest expense, provision for loan
losses, and customer rewards costs. The following table details the
components and amounts of Financial Services revenue for the periods
presented below.

                                                 Three Months Ended
                                                 March 29,     March 30,
                                                 2014            2013
Interest and fee income                          $ 94,219        $ 81,249
Interest expense                                   (15,886 )       (13,851 )
Provision for loan losses                         (12,714 )      (12,775 )
Net interest income, net of provision             65,619        54,623  
for loan losses
Non-interest income:
Interchange income                                 82,427          77,630
Other non-interest income                         755           1,283   
Total non-interest income                          83,182          78,913
Less: Customer rewards costs                      (50,223 )      (47,764 )
Financial Services revenue                       $ 98,578       $ 85,772  

The following table sets forth the components of Financial Services revenue as
a percentage of average total credit card loans, including any accrued
interest and fees, for the periods presented below.

                               Three Months Ended
                                   March 29,   March 30,
                                   2014          2013
Interest and fee income            10.0   %      9.7    %
Interest expense                   (1.7   )      (1.7   )
Provision for loan losses          (1.4   )      (1.5   )
Interchange income                 8.8           9.3
Other non-interest income          0.1           0.2
Customer rewards costs             (5.3   )      (5.7   )
Financial Services revenue         10.5   %      10.3   %

Key statistics reflecting the performance of the Financial Services business
are shown in the following charts for the periods presented below.

                  Three Months Ended
                  March 29,       March 30,         Increase         %
                  2014              2013              (Decrease)       Change
                  (Dollars in Thousands Except Average Balance per Account)
balance of        $ 3,757,216       $ 3,346,588       $ 410,628        12.3 %
credit card
loans (1)
number of
active            1,762,782         1,633,551         129,231          7.9
credit card
balance per
active            $ 2,131           $ 2,049           $ 82             4.0
credit card
account (1)
on credit         $ 16,919          $ 15,585          $ 1,334          8.6
card loans
as a
percentage     1.80        %   1.86        %   (0.06     )%       
of average
credit card
loans (1)
(1) Includes accrued interest and fees

To supplement our consolidated statements of income presented in accordance
with generally accepted accounting principles ("GAAP"), we have disclosed
non-GAAP adjusted financial measures of operating results that exclude
certain items. Total revenue; selling, distribution, and administrative
expenses; impairment and restructuring charges; operating income; interest
expense, net; provision for income taxes; net income; and earnings per
diluted share are presented below both as GAAP reported and non-GAAP
financial measures excluding (i) adjustments to interchange income for the
Visa settlement, (ii) certain employee related expenses, (iii) impairment
losses primarily related to two retail stores, (iv) adjustments to interest
expense on certain unrecognized tax benefits, and (v) adjustments to the
provision for income taxes related to changes in our assessments of
uncertain tax positions. In light of the nature and magnitude, we believe
these items should be presented separately to enhance a reader's overall
understanding of the Company's ongoing operations. These non-GAAP adjusted
financial measures should be considered in conjunction with the GAAP
financial measures.
We believe these non-GAAP adjusted financial measures provide useful
supplemental information to investors regarding the underlying business
trends and performance of our ongoing operations and are useful for
period-over-period comparisons of such operations. In addition, we evaluate
results using non-GAAP adjusted operating income, adjusted net income, and
adjusted earnings per diluted share. These non-GAAP adjusted financial
measures should not be considered in isolation or as a substitute for
operating income, net income, earnings per diluted share, or any other
measure calculated in accordance with GAAP. The following table reconciles
these financial measures to the related GAAP adjusted financial measures for
the fiscal year ended December 28, 2013.

                        Reconciliation of GAAP Reported to Non-GAAP Adjusted
                        Financial Measures (1)
                        Fiscal Year Ended December 28, 2013
                        GAAP Basis          Non-GAAP        Non-GAAP
                        As Reported          Adjustments      Amounts
                        (Dollars in Thousands Except Earnings Per Share)
Total revenue (2)       $   3,599,577        $  (3,167  )     $  3,596,410
distribution, and       $   1,201,519        $  (735    )     $  1,200,784
expenses (3)
Impairment and
restructuring           $   5,868            $  (5,868  )     $  —
charges (4)
Operating income        $   361,361          $  3,436         $  364,797
Interest expense,       $   (17,833    )     $  3,648         $  (14,185   )
net (5)
Income before
provision for           $   343,528          $  7,084         $  350,612
income taxes
Provision for           $   119,138          $  (6,783  )     $  112,355
income taxes (6)
Net income              $   224,390          $  13,867        $  238,257
Earnings per            $   3.13             $  0.19          $  3.32
diluted share

        The presentation includes non-GAAP financial measures. These non-GAAP
        financial measures are not prepared under any comprehensive set of
(1)   accounting rules or principles, and do not reflect all of the amounts
        associated with the Company's results of operations as determined in
        accordance with GAAP.
(2)     Reflects adjustments to the liability for the Visa settlement.
(3)     Reflects certain employee related expenses primarily related to
        severance benefits.
        Reflects impairment losses of $4,931 related to a retail store site
(4)     and $937 related to the closure and relocation of a retail store in
        May 2013.
(5)     Reflects interest adjustments related to certain unrecognized tax
        Reflects the estimated income tax provision on the non-GAAP adjusted
(6)     income before provision for income taxes and tax adjustments related
        to changes in assessments of uncertain tax positions.


Cabela's Incorporated
Investor Contact:
Chris Gay, 308-255-2905
Media Contact:
Joe Arterburn, 308-255-1204
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