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Cabela's Q2 Earnings Beat

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Significant rise in comparable-store sales, strong performance by the company’s next-generation stores and growth at its CLUB Visa program facilitated Cabela’s Incorporated to come up with stronger-than-anticipated results. The quarterly earnings of 62 cents a share surpassed the Zacks Consensus Estimate of 60 cents and jumped 31.9% year over year.

Total revenue comprising retail, direct and financial services revenue, increased 20.7% year over year to $756.8 million and comfortably surpassed the Zacks Consensus Estimate of $734 million.

Quarter Details

Total merchandise revenue, including retail and direct revenue, escalated 22.3% to $663.7 million during the quarter, while merchandise margins expanded 30 basis points to 37.7%, reflecting increased sales of higher margin products like soft goods in footwear and lower markdowns.

Cabela’s retail store revenue increased 25.8% to $483.9 million, reflecting strong performance of the company’s new next-generation stores and strategic merchandise and inventory planning. Comparable-store sales increased 10.5% during the quarter. The company marked a 0.6% increase in average ticket, while retail transactions rose 9.9%. Retail profitability (as a percentage of segment revenue) remained strong, expanding 30 basis points to 18.8% on account of higher merchandise margin.  

Direct business revenue escalated 13.7% year over year to $180.1 million, reflecting higher traffic at its .com business. However, operating margin (as a percentage of segment revenue) contracted 130 basis points to 17.1%.

Financial services revenue augmented 11.7% to $88.6 million, reflecting increase in interest and fee income. Credit card charge-offs as a percentage of average credit card loans for the quarter remained flat at 1.87%. During the quarter, delinquencies improved while active average credit card accounts increased 10.7%. Other revenue decreased 14.7% year over year to $4.5 million.

Total operating income jumped 15.7% to $66.9 million compared with $57.8 million in the prior-year quarter, whereas operating margin contracted 40 basis points to 8.8%.

Stores Update

During the quarter, the company opened 1 next-generation store in Louisville, Ky. and relocated the Winnipeg store. The company plans to open 3 new stores in U.S. and 1 new store in Canada in 2014.

Other Financial Aspects

This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $345.5 million, long-term debt of $379.9 million and shareholders’ equity of $1,470.8 million. The company registered a 160 basis points rise in return on invested capital while remaining on course to increase it further in the coming quarters.

During the quarter, Cabela’s generated $60 million in cash flow from operations and incurred capital expenditures of $70 million. For 2013, management anticipates to incur capital expenditures in the range of $300 million – $325 million, attributable to its store expansion plans.

Other Stocks to Consider

Until any further upgrade in Cabela’s Zacks Rank, other stocks worth considering in the non-food retail, wholesale sector include Big 5 Sporting Goods Corp. (BGFV - Free Report) , Five Below, Inc. (FIVE - Free Report) and Build-A-Bear Workshop Inc. (BBW - Free Report) all of which carry a Zacks Rank #2 (Buy).

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