Cabela’s Incorporated reported total revenue increased 14.0 percent to $827.1 million in the first quarter ended March 28 due primarily to the opening of new stores and associated growth at its credit card business.
Cabela's Retail store revenue grew 18.9 percent to $524.4 million, while Direct revenue decreased 3.3 percent to $173.5 million. Financial Services revenue increased 24.7 percent to $122.9 million. Consolidated comparable store sales decreased 1.3 percent compared with the first quarter ended March 29, 2014.
For the quarter, adjusted for certain items, net income increased 6.9 percent to $27.5 million compared to $25.7 million in the year ago quarter, and earnings per diluted share were $0.38 compared to $0.36 in the year ago quarter. The company reported GAAP net income of $26.8 million and earnings per diluted share of $0.37 as compared to GAAP net income of $25.7 million and earnings per diluted share of $0.36 in the year ago quarter. First quarter 2015 GAAP results include incremental expenses related to the relocation of a distribution center in Winnipeg, Manitoba, Canada, of $0.01 per diluted share.
“We have started the year well and are pleased that the extreme volatility in firearms and ammunition over the past two years seems to have normalized,” said Tommy Millner, Cabela’s Chief Executive Officer. “We experienced strong growth in merchandise sales, sequential improvement in comparable store sales, and excellent performance from Cabela’s Club and our new format stores. We were particularly pleased with the continued improvement in comparable store sales as hunting equipment, optics, camping, fishing, shooting, and powersports all comped positively in the quarter.”
“Our new format stores continue to significantly outperform our legacy stores in sales and profit per square foot,” Millner said. “As our business grows, we are excited as we accelerate the pace of our new store openings. During the first quarter, we opened two new stores and plan to open a total of five stores in the second quarter, four stores in the third quarter, and two stores in the fourth quarter.”
Comps up in six of 13 subcategories
U.S. comparable store sales decreased 0.4 percent. Consolidated comparable store sales decreased 1.3 percent largely due to currency declines in Canada. U.S. comparable store sales increased in six of 13 merchandise subcategories and benefited from a 2.2 percent increase in average ticket.
Direct revenue decreased 3.3 percent in the quarter, representing the fourth quarter of sequential improvement. Particularly strong performance in women’s and children’s apparel, optics, home and gifts, as well as powersports all contributed to the sequential improvement in Direct revenue. During the quarter, improvements to the company's omni-channel model, including simplified checkout and growth in mobile traffic, further enhanced customers’ shopping experience.
Merchandise gross margin decreased 60 basis points excluding the previously announced adjustment in the presentation of reimbursement between segments. The total decrease of 120 basis points in merchandise gross margin was attributable to the previously announced adjustment, merchandise mix headwind, and a slightly more promotional approach early in the quarter. As a reminder, the change in presentation of reimbursement was initiated in the second quarter of 2014 and negatively impacted merchandise gross margin by 60 basis points for the first quarter of 2015. The change has no impact on consolidated operating income or earnings per diluted share.
“Adjusted operating income increased by 12.0 percent to $45.7 million for the quarter,” Millner said. “As we continue to focus on tightly managing expenses, we have identified new cost savings opportunities that are expected to further reduce costs.”
On a GAAP basis, operating income increased by 9.0 percent to $44.5 million for the quarter.
The first quarter effective tax rate was 37.0 percent compared to 34.4 percent in the same quarter a year ago. The increase in the effective tax rate was primarily due to changes in unrecognized tax benefits and deferred tax items, and an increase to the company's state effective tax rate. Cabela's expect the full-year 2015 effective tax rate to be between 35.5 percent and 36.5 percent.
Number of active credit card accounts rises 7.0 percent
The Cabela’s Club Visa program continued to build a base of customers who shop more frequently and have higher average spend. During the quarter, growth in the average number of active credit card accounts was 7.0 percent due to new customer acquisitions in the company's Retail and Internet channels. Growth in the average balance per active credit card account was 5.0 percent, and growth in the average balance of credit card loans was 12.3 percent to $4.2 billion. For the quarter, net charge-offs remained at historically low levels of 1.53 percent compared to 1.80 percent in the prior year quarter. Increased Financial Services revenue was driven by increases in interest and fee income as well as interchange income.
Cabela's board of directors has approved a share repurchase program designed primarily to offset shareholder dilution resulting from the granting of equity-based compensation awards. As part of this program, the company intends to repurchase up to two million shares of its common stock in open market transactions through February 2016.
“As the volatility in firearms and ammunition over the past two years subsides, we are confident in our outlook for full-year 2015,” Millner said. “As a result, we reaffirm our expectations for a low-double-digit growth rate in revenue and a high-single to low-double-digit growth rate in diluted earnings per share for full-year 2015 as compared to full-year 2014 non-GAAP diluted earnings per share of $2.88.”
