Cabela's Reports In Line - Analyst Blog
May 02 2011 - 4:00AM
Zacks
Cabela’s Inc.
(CAB), one of the leading specialty retailers of hunting, fishing,
camping, and related outdoor merchandise, recently posted
first-quarter 2011 results, in line with the Zacks’ expectation for
the bottom line.
However, the quarterly earnings of
25 cents a share tumbled 13.8% from 29 cents delivered in the
prior-year quarter. On a reported basis, including one-time items,
quarterly earnings came in at 25 cents a share compared with 12
cents in the prior-year quarter.
Quarterly
Performance
Total revenue, which comprises
retail, direct and financial services revenue, increased 4.8% year
over year to $586.7 million, reflecting rise in sales in each
comparable stores. The reported revenue also came ahead of the
Zacks Consensus Revenue Estimate of $576.0 million. However,
operating income declined 9.0% to $30.9 million during the
quarter.
Total merchandise revenue, which
comprises retail and direct revenue, increased 3.1% to $509.1
million, with an 8.9% jump in comparable-store sales. However,
merchandise gross margin fell 30 basis points to 33.0%, reflecting
augmented carrying costs, partially offset by margin expansion from
pre-season planning and vendor collaboration.
Cabela’s, which faces competition
from Tractor Supply Company (TSCO), witnessed
retail revenue of $301.8 million, up 11.3% year over year, whereas
direct revenue fell 6.9% to $207.5 million. Other revenue dropped
9.6% to $5.1 million from $5.6 million in the prior-year
quarter.
Credit card charge-offs for the
quarter contracted to 2.74% from 4.96% in the prior-year quarter.
Thus, financial services revenue jumped 20.7% to $72.4 million.
Given the improving trends, the
company expects 2011 earnings per share to meet or exceed the
expectation of the analysts.
Other Financial
Aspects
The company ended the quarter with
cash and cash equivalents of $168.3 million, long-term debt of
$402.5 million and shareholders’ equity of $1,056.0 million.
Our View
Boasting a sturdy balance sheet,
feasible strategy and operating efficiencies, Cabela’s offers its
investors one of the strongest growth profiles. The company remains
on course to surpass the high end of the targeted long-term return
on invested capital of 12%–14%.
Next generation store format,
multi-channel strategy and seasonal product assortments enable the
company to focus on increasing stores productivity and sales per
square foot, lowering its labor costs.
The company is also concentrating
on alleviating its bad debt risk in the credit card business.
Although, the improvement in the economy has led to a lowering of
delinquencies and a decline in charge-offs, but we still remain
cautious and maintain a long-term ‘Neutral’ rating. Moreover, the
company holds a Zacks #3 Rank, which translates into a short-term
‘Hold’ recommendation.
CABELAS INC (CAB): Free Stock Analysis Report
TRACTOR SUPPLY (TSCO): Free Stock Analysis Report
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