Outdoor sporting goods retailer Q1 profit plunges

Still awaiting approval on its acquisition by Bass Pro Shops, Cabela’s reported disappointing sales for its first quarter.



Total revenue in the quarter decreased 3.4% to $834.9 million, less than expected. Revenue from retail store sales decreased 3.9% to $542 million.



Online and catalog sales fell 12.6% to $136.1 million. Same-store sales fell 8.9%. U.S. comparable store sales decreased 9.1%.



Net income fell 16.7% to $191 million in the quarter, with earnings of 28 cents per diluted share compared to 33 cents in the year ago period.



“Similar to broader retail industry trends, we continued to experience challenging traffic patterns in the first quarter,” said Tommy Millner, CEO, Cabela’s. “Our growth in average ticket was more than offset by continued decreases in transactions.”



Bass Pro Shops is expected to acquire the retail arm of Cabela’s for $5 billion, or $61.50 per share. The deal has hit some snags and is still under review by the FTC, mostly related to Cabela’s selling off its World Foremost Bank unit, which operates the retailer’s credit card. But under a recent agreement, Synovus Financial Corp. would acquire World’s Foremost and then sell credit card portfolio to Capital One.

Håkon Helgesen, analyst at GlobalData Retail, commented that Bass Pro’s acquisition of Cabela’s would be a good one for Cabela's investors, “mostly because it allows them to exit at a time when the company is on a firm downward slide.”



“It increasingly looks like Bass Pro will, if the deal goes ahead, inherit a business that needs some work to perk up performance,” Helgesen said. “We also have concerns about the extent to which Bass Pro will gain new customers from the acquisition. While the geographical overlap of stores is minimal, there is much more sharing of customers within the direct business. This does not completely kill the rationale for the takeover, but it does suggest that Bass Pro will need to work hard to find cost savings if it is to make the financials stack up.



The analyst added that Cabela’s has fallen behind in an increasingly competitive outdoor goods segment, one in which traditional players like Dick's Sporting Goods have stepped up their game, while players like REI have gained ground over recent years.



“This is increasingly putting the squeeze on Cabela's which remains very reliant on the rather cyclical niche of hunting and shooting,” Helgesen said.