Cabela’s Inc. Announces Fourth Quarter 2015 Results

SIDNEY, Neb.--(BUSINESS WIRE)--Cabela’s Incorporated (NYSE:CAB) today reported financial results for fourth quarter and fiscal year ended January 2, 2016. As previously disclosed, the Company’s fourth fiscal quarter and fiscal year ended January 2, 2016, included 14 weeks and 53 weeks, respectively, while its fourth fiscal quarter and fiscal year ended December 27, 2014, included 13 weeks and 52 weeks, respectively.

For the quarter, total revenue increased 10.5% to $1.4 billion; Retail store revenue increased 14.3% to $926.5 million; Direct revenue increased 0.5% to $351.5 million; and Financial Services revenue increased 15.7% to $131.1 million. During the period, on a 14 week versus 14 week basis, U.S. comparable store sales decreased 3.5% and consolidated comparable store sales decreased 4.9%.

For the quarter, adjusted for certain items, net income increased 9.5% 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. The Company reported GAAP net income of $78.8 million and earnings per diluted share of $1.14 as compared to GAAP net income of $78.6 million and earnings per diluted share of $1.10 in the year ago quarter. Fourth quarter 2015 GAAP results included impairment and restructuring charges and other items of $0.12 in earnings per diluted share. See the supporting schedules to this earnings release labeled “Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures” for a reconciliation of the GAAP to non-GAAP financial measures.

For fiscal 2015, net income was $204.7 million compared to $207.1 million last year, and earnings per diluted share were $2.88 compared to $2.88 a year ago, each adjusted for certain items. The Company reported GAAP net income of $189.3 million and earnings per diluted share of $2.67 as compared to GAAP net income of $201.7 million and earnings per diluted share of $2.81 a year ago. Fiscal 2015 GAAP results included impairment and restructuring charges and other items of $0.21 in earnings per diluted share. See the supporting schedules to this earnings release labeled “Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures” for a reconciliation of the GAAP to non-GAAP financial measures.

“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 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.”

“U.S. comparable store sales were down 3.5%,” Millner said. “Consolidated comparable store sales were down 4.9% 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 said. “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% as compared to 30.8% in the same quarter a year ago. 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 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. During the quarter, growth in the average number of active credit card accounts was 6.6%. Growth in the average balance per active credit card account was 7.3%, and growth in the average balance of credit card loans was 14.4% to $4.8 billion. For the quarter, net charge-offs remained at historically low levels of 1.76%. Fourth quarter financial services revenue increased 15.7%, 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. “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.”

On December 2, 2015, the Company issued a press release announcing that its Board of Directors was initiating a process to explore and evaluate a wide range of strategic alternatives to enhance value for the Company’s shareholders. That process has continued and is ongoing.

Conference Call Information

A conference call to discuss fourth quarter fiscal 2015 operating results is scheduled for today (Thursday, February 18, 2016) 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 www.cabelas.com. A replay of the call will be archived on www.cabelas.com.

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 a continued focus on key merchandise categories as well as new initiatives, such as optimization of store formats and digital and mobile leadership, continuing to drive merchandise revenue performance; cost reduction initiatives providing a significant benefit to 2016 results; plans to reduce working capital and sell unproductive assets; and a high-single-digit growth rate in revenue and a high-single-digit or low-double-digit growth rate in earnings per diluted share for full-year 2016 as compared to full-year 2015 adjusted earnings per diluted share of $2.88. 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 Company’s exploration and evaluation of strategic alternatives may not result in the successful identification or completion of a strategic alternative that yields additional value for stockholders, and the exploration and evaluation process may have an adverse impact on the Company’s business; 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 the ongoing Securities and Exchange Commission investigation, 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; 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 27, 2014, and Form 10-Q for the quarterly period ended September 26, 2015), which filings are available at the Company’s website at www.cabelas.com and the SEC’s website at www.sec.gov. 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 otherwise.

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