Thanks to strength in its financial services business, Cabela’s Inc. posted total revenue that rose 4.5 percent while net income — on an adjusted basis — gained 7.3 percent. Same-store and online sales both declined while apparel gross margins were eroded by markdowns.
Regarding its “strategic alternatives,” which were revealed last fall and could include all or parts of its business, the retailer said “[t]hat process has continued and is ongoing.” The company also noted that it was opening two new stores, and that earnings per share in the quarter were impacted by various charges as well as a previously disclosed legal issue.
Total revenue for the quarter rose to $864.7 million from $827.1 million in the same period last year while net income fell 14.5 percent to $22.9 million, or 33 cents per share, from $27.7 million, or 37 cents. Operating income was flat at $44.5 million. On an adjusted basis, net income rose to $29.5 million, or 43 cents, from $27.5 million, or 38 cents, in the prior year.
The company said first-quarter results “included impairment and restructuring charges and other items totaling” 6 cents per share as well as 4 cents of “earnings per diluted share related to the preliminary settlement of a legal matter.”
The company’s Internet and catalog sales fell 10.2 percent to $155.7 million while its financial services revenue rose 14.6 percent to $140.8 million. “During the period, adjusted for the shift in weeks, U.S. comparable-store sales decreased 3.8 percent and consolidated comparable store sales decreased 4.3 percent,” the company said.
The company’s said merchandise gross margins fell by 96 basis points to 32.2 percent of sales, which compares to 33.2 percent in the prior year. “This decrease was primarily due to merchandise mix with the increased sales of lower margin firearms and power sports combined with lower sales in higher margin soft goods and apparel categories with the remainder of the decrease being attributable to markdowns and pricing,” the retailer said.
Tommy Millner, chief executive officer, said the “revenue trends we experienced in the fourth quarter of 2015 continued into the first quarter of 2016.”
Millner said on an adjusted basis, results were strong. “We have a number of initiatives to increase organic growth for the remainder of the year,” the ceo added. “These include expanded drop-ship programs, retail inventory visibility on cabelas.com, merchandise realignment in selected stores, in-store customer service improvements and numerous other initiatives.”
Millner noted that in the second half of 2015, “we launched a major multiyear corporate restructuring project aimed at lowering the company’s operating expense base to increase our return on invested capital. This led to an action plan of improving expense leverage over time.”
That resulted in “significant leverage of expenses” that was seen in the fourth quarter of 2015 he said, adding that is continuing into this year. “We believe we are in the early stage of many of these initiatives and expect ongoing benefit in the balance of 2016 and beyond,” Millner added.
In a separate statement, the company said it was opening two stores; one in McDonough, Ga., and the other in Lee’s Summit, Mo.
The McDonough store will be built this year and open in fall. The unit will be 70,000 square feet. Millner said, “Georgia is a great place for the outdoors and has been a great place for Cabela’s recent retail expansion.” The store will be the fourth Cabela’s in that state.
The Lee’s Summit store is also set for a fall 2017 opening, and will be the same footprint.