The colorful Robertson clan of A&E's Duck Dynasty built an empire on their family duck call business. But it may have been their call to "redneckify" your life along with the catchphrase "happy, happy, happy" that made them the highest-rated show on reality TV.
The show is popular, with more than 7 million Facebook fans and drawing a record 11.8 million viewers for the season four premiere. The program's Christmas special drew 8.9 million viewers earlier this month.
Duck Dynasty has mostly been in the news lately as patriarch Phil Roberston was indefinitely suspended from the show for anti-gay remarks. Right now the impact to the show's popularity (and longevity) is unclear.
But even before Phil Robertson's comments in a GQ interview sparked outrage (from those opposed and those in support), PETA (People for the Ethical Treatment of Animals) had Duck Dynasty on its radar, claiming it popularizes hunting.
If PETA's claim is right, does the show really move the needle for hunting-related stocks like Cabela's (NYSE: CAB ) , Tractor Supply Company (NASDAQ: TSCO ) and Dick's Sporting Goods (NYSE: DKS ) ? And should investors be worried about the recent controversy having an effect on the short- and long-term prospects for related stocks?
Armchair hunters and weekend duck callers
The U.S. Sportsmen's Alliance says that the number of hunting license purchases has stayed stable for two decades and that Americans' acceptance of hunting is over 79%.
It seems most Americans are content to watch Duck Dynasty while they sit in their armchairs sporting camo. And numbers at Cabela's -- the outdoors outfitter most exposed to the Robertson lifestyle of hunting, fishing, and camo -- support this, with same-store firearm sales declining 2.5% last quarter.
Cabela's stock has pulled back significantly from its all-time high this summer mainly due to lowered guidance until the back half of 2014. CEO Thomas Millner said on the third-quarter call in October:
We did experience a change in consumer sentiment. This change seemed to go beyond the expected slowdown in firearms and ammunition. We began to see this impact in August, and it has persisted through October.
However, excluding firearms, comparable same-store sales rose 5.3%. Retail profitability also rose by 10 basis points to 18.8%. The bullish thesis on Cabela's and its ilk has been fear of gun control leading to rising firearms sales. But the retailer is much more than just a gun dealer, it is a destination experience, as I detailed here.
Getting gentleman farmers into hunting
Tractor Supply Company, a retailer of farm and ranch equipment, caters to an affluent exurban/rural lifestyle with products ranging from lawn and garden equipment to livestock care and now, hunting.
The chain is a one-stop shop for gentleman farmer/ranchers and offers something that's priceless to them: knowhow. In-store and online newbies to the farm/ranch can learn about skills and products they need and now, how to set up a deer blind or choose a gun safe.
Tractor Supply's third-quarter results were even better than Cabela's, with gross margin expansion of 90 basis points to 34.4% and comparable-store sales growth of 7.5%. The company also guided higher for full-year sales.
Although hunting sales were not specifically addressed on the call, the one-stop convenience of Tractor Supply for its core customers should bode well for the new division.
How not to shoot yourself in the foot
Although athletic apparel is Dick's Sporting Goods' bread and butter (with 540 DICK'S and 81 Golf Galaxy stores in 45 states), the company recently opened two Field & Stream hunting and fishing stores.
Like Cabela's, these are "destinations" and 20,000 attended the grand opening in Kentucky. Also like Cabela's, Dick's offers hunting/fishing enthusiasts special services like scope mounting, archery lanes, arrow cutting, and fishing line spooling.
CEO Edward Stack said on the third-quarter call that slowing guns and ammo would be a headwind going forward. But he added as a smaller percentage of sales than at competitors, it shouldn't hurt much.
Dick's is planning for 70 more stores in the next year, growing its footprint by almost 10%. As the largest U.S. sporting goods retailer, it has a finger on the pulse of the outdoorsy and clearly believes hunting and fishing are a worthwhile enterprise going forward. Besides, it has its strong athletic apparel sales as a buttress should it be wrong.
The "happy, happy, happy" trade
Duck Dynasty may be just a vicarious armchair sensation that moves the needle imperceptibly for these three retailers. However, it is significant that Tractor Supply opened a new hunting category and Dick's is opening stand-alone Field & Stream stores.
With hunting licenses still stable, an investor could hedge his or her bets against shorter-term firearms headwinds by buying either Tractor Supply or Dick's, which both have strong sales outside the category.
As for Cabela's, with 18% growth in square footage, major omnichannel improvements, and 10% growth in its loyalty program, now may be the time to reload on weakness.