Cabela’s curtails rate of expansion
Cabela’s smaller stores are not as productive as the company would like so the outdoor retailer is tapping the brakes on growth while it focuses on productivity.
In conjunction with the release of disappointing third quarter results and a reduced full year profit forecast, Cabela’s said it was evaluating it store expansion schedule and currently expects to open seven stores next year and no more than that in 2017.
During an investor presentation in March, when the company operated 64 stores in the U.S. and Canada, Cabela’s said it was on track to open 13 stores this year and had announced or identified 11 stores for 2016 and six for 2017.
Cabela’s was long known for its flagship stores which measure more than 150,000-sq.-ft. and drew shoppers from a larger trading area. More recently, the company has opened stores that are half that size that are less expensive to build and can be used to penetrate smaller markets.
“Our new format stores continue to significantly outperform our legacy stores in sales and profit per square foot, yet our U.S. stores opened in 2015 have underperformed our expectations,” said Cabela’s CEO Tommy Millner. “We have a number of initiatives underway to improve new store productivity and profitability, which gives us confidence in our long-term goal of 225 stores in North America.”
The reduced pace of expansion was announced with the release of third quarter results which saw same store sales decline 4.2% while total revenue increase 4.6% to $926.5 million. Cabela breaks its revenue into three streams: retail store revenue increased 6.5% to $637.8 million; direct revenue decreased 7.9% to $161.6 million; and Financial Services revenue increased 13.3% to $123.6 million.
Despite the topline growth, profits fell 13.8 to $50.3 million and earnings per share declined to 71 cents from 81 cents on an adjusted basis.
“Continued strong performance in many of our key merchandise categories and exceptional performance at Cabela’s CLUB were not sufficient to offset the significant weakness in our fall apparel and footwear product lines,” Millner said. “During the quarter, we did take substantial and sustainable actions on our expense base, which will benefit 2016 and beyond.”
Millner said customer in the U.S. and Canada have been slow to transition to fall apparel and footwear products while core categories such as camping, powersports, home and gifts, firearms, and ammunition have generated positive comps.