Cabela’s sports growth initiative to expand market share

NEW YORK —New retail stores will be a primary driver of growth in Cabela’s future, according to a company presentation at the Piper Jaffray Consumer Conference in Manhattan earlier this month. Cabela’s 19 retail stores raked in $820 million in revenues last year, not to mention millions of shoppers across the country (35 million to be exact). While the company opened four stores last year, it will open eight this year. Piper Jaffray reports estimate that up to 50 total units are possible in the near future, given continued healthy growth of the company.

“For the past four decades, Cabela’s has grown to become the largest direct marketer in our sector,” said Dennis Higby, the company’s ceo, during the presentation. “However, research indicates that most consumers prefer to shop in a traditional retail store. This is clearly an opportunity for Cabela’s to expand market share, given our dominant brand awareness.”

Cabela’s has been able to leverage its status as the outdoor industry’s foremost direct marketer when deciding where to open its retail outlets, Higby said.

“We’re able to leverage our huge direct customer database not only in terms of brand recognition, but we’ve also used this data to actively select markets and forecast store performance,” Higby said.

Cabela’s stores are “destination” environments for shoppers, some of which travel as much as 250 miles just to visit the shops, Higby said. They include, on average, 150,000 square feet or more and a recreation of an outdoor environment. This recreation includes animal displays, colorful dioramas, huge aquariums stocked with native fish and a centerpiece indoor mountain displaying animals interacting in their native habitats.

“A visit to a Cabela’s is a retail and outdoor experience rolled into one,” Higby said. “The overall ambiance and decorum, combined with the selection of merchandise, sets Cabela’s stores apart from any other sporting goods stores… Many of our customers’ store visits last three-and-a-half to four hours.”

The opening of these retail outlets has helped the company’s overall growth strategy. Total revenue in 2006 was up to nearly $2.1 billion, increasing approximately 15%, thanks in part to new store growth. Retail revenues for the year rose 32.3%, with same-store sales increasing 1.3%. The compound annual growth rate of the company’s retail sales has been 26% over the last six years, according to Higby.

These retail outlets have helped, not hindered, the company’s online and catalog businesses in the areas where they have opened, strengthening the company’s overall multi-channel platform, Higby said.

“When a new store opens, our experience has been that in the first 12 to 18 months of our operation there is minimal short-term impact on our catalog or online sales in that region,” Higby said. “Our direct business typically returns to its pre-store level within 12 months. Opening up retail facilities expands our market share significantly in that region.”

Because of the customer information Cabela’s has through its catalog business, it also has been able to open stores in markets that have the need for an outdoor retailer, but have not yet been penetrated by the company’s competitors, such as Bass Pro Shops and Gander Mountain.

“There are some markets that are very unpenetrated—to give an example, just outside Seattle, in Lacey, Wash.,” Higby said. “This fall, we’re going to open one of the first and only destination stores on the West Coast. There’s nothing like that out there… We feel the same way about our store that will open this year in East Hartford, Conn.”

Overall, Higby expressed confidence in the company’s plans to open eight stores this year, and moving forward he expects that the company’s retail outlets will continue to contribute to the company’s profitability and bottom line.

“We have experienced profitability every year since we were founded in 1961,” Higby said. “Our retail stores have helped contribute to that, and that’s why we continue to open them.”