Cabela's Takes Aim on Growth

When you bill yourself as the World's Foremost Outfitter, your earnings results better live up to the title. Fortunately for Motley Fool Hidden Gems recommendation Cabela's (NYSE: CAB  ) , its fourth-quarter and full-year results came pretty close.

What was once simply a direct-mail retailer is now transforming itself into a destination-store retailer as well. Part retail store, part theme park, Cabela's destination stores are a unique experience, and the company ended the year with 18 stores opened. Stores feature replica mountains, huge freshwater aquariums, shooting galleries, indoor archery ranges, and more. It's Disneyland for outdoor enthusiasts.

These stores saw revenues rise 15% for the quarter and 32% for the year. With $820 million in revenues, the retail segment is quickly catching up to the direct segment, whose sales grew 4% for the year to almost $1.1 billion in revenue. Direct sales, though, still account for more than half of all revenues.

A year ago, Cabela's was experiencing declines in same-store sales, an important retail metric. That's turned around now, and the company has reported three straight quarters of rising comps, ending the year with 1.3% growth overall. That points to a still-competitive landscape. Primarily, Cabela's competes against privately held Bass Pro Shops and Orvis, Gander Mountain (Nasdaq: GMTN  ) , and more general sporting goods companies like Dick's Sporting Goods (NYSE: DKS  ) and Hibbett Sports (Nasdaq: HIBB  ) . Let's not forget about Wal-Mart (NYSE: WMT  ) and Target (NYSE: TGT  ) as well.

Oddly enough, Cabela's is also a bank. Perhaps it's fitting that the World's Foremost Outfitter also runs the World's Foremost Bank. That might be a bit of hyperbole, since it's still a small component of operations, providing just $137 million out of almost $2.1 billion in 2006. The WFB primarily handles the company's branded credit cards, but it also has certificates of deposits, securitizations, and interest-only strips, and it just got into issuing bonds. Financial revenues increased 30% over 2005's results.

Cabela's says it has fairly strict standards when issuing credit cards to customers, and its delinquency rates compare favorably with industry standards. But it can miss out on a lot of business that way, so Cabela's has inked an agreement with Washington Mutual (NYSE: WM  ) to market a Cabela's credit card to individuals who wouldn't otherwise qualify for one of the company's own. As these cards drive more business for Cabela's, and also result in interest income from the balances carried on the cards (as well as the revenues realized from securitizing the debt), this should continue to be an important revenue stream in coming years.

While outdoor fans remain Cabela's primary target, it's seeking to reach out to more mainstream customers as well. Not every article of clothing comes in different shades of camouflage! That kind of brand extension will allow Cabela's to stay ahead of the herd and truly be the foremost outfitter in the world.

For more on outdoor sporting goods retailers, check out:

Cabela's was recommended to Hidden Gems subscribers by top Fool analyst Bill Mann. A 30-day trial subscription lets you scope out all of the service's market-beating recommendations.

Wal-Mart is an Inside Value selection, and Washington Mutual is an Income Investor recommendation.

Fool contributor Rich Duprey owns shares of Wal-Mart but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.

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Related Tickers

10/24/2016 4:02 PM
CAB $62.52 Up +0.15 +0.24%
Cabela's CAPS Rating: ****
DKS $57.81 Up +1.03 +1.81%
Dick's Sporting Go… CAPS Rating: ***
GMTN $5.09 Down +0.00 +0.00%
HIBB $41.15 Up +0.40 +0.98%
Hibbett Sports CAPS Rating: *****
TGT $68.26 Up +0.03 +0.04%
Target CAPS Rating: ***
WAMUQ.DL $0.00 Down +0.00 +0.00%
Washington Mutual,… CAPS Rating: No stars
WMT $69.19 Up +0.85 +1.24%
Wal-Mart Stores CAPS Rating: ***