As expected, outdoors outfitter Cabela's (NYSE: CAB) reported a mountain of revenue growth in the first quarter -- up 16% to $535.5 million -- because of the larger number of stores. As impressive as that might sound, Cabela's had 37% more stores open this quarter than it did last year. So how were its same-store sales? They decreased 8.4%.
More notable was the retailer's 40% growth in profits to $0.15 per share, which easily beat analyst forecasts of $0.05 per share. Equally impressive was the fact that margins were not hurt by discounting, as I had feared they might be. Instead, consolidated operating income grew 70%, which included a 55% increase in the retail segment. Essentially, Cabela's sold more clothes at higher price points. Bull's-eye!
It's a challenge these days to manage costs and inventory and still earn a profit on your business. The growth in stores will end for Cabela's for the foreseeable future -- with only two openings planned for this year and next -- so we probably won't see such fantastic revenue spurts, unless the economy turns. Other retailers are facing similar problems.
Hibbett Sports (Nasdaq: HIBB), with stores in the Southeast, is finding growth a challenge and forecast earnings to come in at much less than analyst expectations recently. Dick's Sporting Goods (NYSE: DKS), which has been supporting growth by making acquisitions, is also expected to report lower-than-anticipated results. Big 5 Sporting Goods (Nasdaq: BGFV) is also in bad shape, and there's not much use in taking a gander at Gander Mountain (Nasdaq: GMTN).
Yet it's also clear that Cabela's, a Motley Fool Hidden Gems recommendation, did a much better job in the quarter than anyone had anticipated. Shares may also do better, too, in the immediate future, because the company had a relatively high short interest ratio: Days to cover stood at around 33 days, meaning that with the good results the retailer turned in, shorts may move to cover their positions but have a hard time doing so. That could drive share prices higher still.
That could mean the stock falls harder later on, and that all is not well with Cabela's stores as they go up against some weak performance numbers from last year. The company also recently agreed to refund $173,000 to one city after the store located there failed to meet job targets for the third year in a row. That's a pittance compared with Cabela's overall revenue, but comps have fallen in four of the past five quarters, and the declines accelerated from last quarter to this one. Cabela's might find that it will face more clawback provisions if the economy doesn't improve.
None of that withstanding, Cabela's still climbed a mountain of doubt and turned in generally good numbers. It still has a ways to go, though.
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