Cabela's Reports Record Results, Cuts Marketing

Business is brisk at Cabela's -- so brisk, in fact, that the company has ditched its earlier downbeat forecasts, and now expects sales to continue to gain at a mid-single-digit rate. "And there's the opportunity to exceed these results, should the growth we've seen in October continue," Tommy Millner, CEO of the Sidney, Neb.-based retailer, told investors via conference call.

Comparable-store sales for its fiscal third quarter increased 3.5% -- its fourth consecutive quarterly increase -- and average ticket sales also gained. While growth in firearms and ammunition moderated, that spending appeared to shift to other categories, including soft goods.

Revenue at its stores gained 6.1% to $348 million, while direct revenue decreased 6.2% -- more than analysts expected -- to $226.2 million. Total revenue for the quarter gained 2% to $624.3 million, compared to $611.8 million for the third quarter a year ago. Net income for the quarter jumped 93% to $18.8 million compared to $9.7 million in the year-ago quarter.

The company says it is particularly pleased with improvements made in profitability in its retail division, as well as greater efficiencies in its marketing, including spending cuts of 15% in its direct division. Marketing costs accounted for just 13.6% of direct revenue this quarter, he says, compared with 15% a year ago. In the months ahead, he says, "we'll be less aggressive in cutting catalog pages, but we will switch more toward Internet marketing." During the third quarter, traffic to its Web site gained 14%.

The company says it does not anticipate further cuts to the marketing budget. "We're done seeing reductions in both direct and retail -- we've right-sized those expenditures," he says.

Based on its sales gains, as well as the "fantastic" performances of the 80,000-square-foot store it opened in Billings, Mont. this year, the company says it will open its next store in Grand Junction, Colo. At 75,000 square feet -- considerably less than the typical store size -- and will serve as a model for its "next generation" stores, including a Gun Library, more conservation-themed wildlife displays and trophy animal mounts. Construction is expected to start next month.

While the fourth quarter is an important one for all retailers, it is even more so for Cabela's, since so much hunting happens in the fall months. The jury is still out on how the recession will affect the year's hunting. While many sportsman have cut back on pricier trips, layoffs and reduced work weeks also create more leisure time for enthusiasts, and some areas, such as Oregon and Arkansas, are reporting increases in hunting.

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