Cabela's Massive Superstores Are Cannibalizing Each Other
It turns out there is such a thing as too much taxidermy.
Cabela’s, a retail mecca for all things outdoorsy, admitted this morning that it vastly overestimated the market for massive shopping centers stuffed with stuffed critters.
In the recent quarter, Cabela’s revenue increased a respectable 4.6 percent, to $927 million. But the company was operating 10 more giant shops than it was in the year-earlier period. As a result, sales at comparable stores slumped 4.2 percent and profit plummeted 19 percent.
In a note to investors this morning, Goldman Sachs analysts said cannibalization among the company’s stores “looks severe.” In other words, the new sites are luring customers from other Cabela’s shops, rather than from competitors. Now that there’s a Cabela’s in Missoula, Mont., grizzly hunters don’t have to schlep up to Kalispell to get their gear.
To be sure, Cabela’s is a bit of a niche retailer, but the result presents a cautionary tale for the few companies bold enough to double down on bricks-and-mortar in a Web-savvy world. As some sellers shift more of their business online, others are moving in the opposite direction—building superstores, shopping planets that have their own gravity. If the building is compelling enough, it becomes a destination of its own.
Apple’s Manhattan nerve center falls into this camp (based on how many tourists near the Bloomberg office ask for directions to it). A few blocks away, H&M recently built its biggest flagship in the world near two of its other stores. Under Armour, meanwhile, is gearing up its big retail game plan with its own “brand houses.”
Once inside these places, the thesis is consumerism by cornucopia. There are simply so many products and so much stuff to see, it takes a while to process. The longer one stays, the more you're liable to spend--at least, that's the idea.
Few commit to this strategy as fully as Cabela's, which boasts of a "tourist-type experience." Its 250,000-square-foot barn in Hamburg, Pa., has a museum that would make Teddy Roosevelt proud, a shooting gallery, and a kennel where shoppers can leave their dogs for the day. Of course, that kind of presence requires a lot of expensive inventory 1 Cabela’s inventory in the past 12 months climbed 14 percent. and, in the case of Cabela’s, taxidermy (the Pennsylvania store has many mounted musk-oxen).
Not surprisingly, Cabela’s said this morning that it will slow its expansion schedule. At the moment, it is calling for seven new stores next year and no more than that in 2017. And it’s leaning toward smaller stores. Still, the company plans eventually to have 225 brick-and-mortar shops in North America. They have 74 now. “We’re still confident," Chief Executive Officer Thomas Millner said. "But the pause to have a model that is far more predictable is really important."
In the meantime, the company is buying back stock, which was on sale at a 15 percent discount this morning.