With all of the hype surrounding Google's
The quarter was not completely rosy, however. Same-store sales declined 3%. Management blamed the decline on a marketing promotion that did not get to the stores on time. Declining same-store sales should arouse suspicion the way a buck senses danger nearby. However, I am not completely alarmed, for two reasons. First, same-store sales are up 1.3% for the year. Not great, but positive nonetheless. And second, the release showed that customers are flocking to its customer loyalty credit card, co-branded by Visa. About 95,000 more people signed up over last year's third quarter and they increased their balance from $1,384 to $1,467. More people spending more money is a good thing for a retailer.
Another thing I noticed was the amount of cash going out of the company. Inventories increased from $262 million to $364 million. A 40% jump always gets my attention. However, I would ascribe the increase to getting ready for the holiday shopping season. Also, Cabela's turns over its inventory at a rate of 2.1 times per year, so it's not like the stuff is just sitting around gathering dust. Capital expenditures were also up, but I attribute those to preparing to open the stores in Texas and Utah, which are scheduled to open in 2005 and will bring the number of retail outlets to 12. Remember that Cabela's came public to finance the expansion of its retail sales channel, so it needs to spend money on stores and inventory.
I love a good retailer, especially when I see it selling Teva sandals and shoes by Deckers Outdoor
All in all, I think Cabela's had a pretty good quarter considering its transformation. I would note that the company has a plan to grow and is proceeding carefully. It's early in the expansion process, and Cabela's has its sights fixed on the goals of customer satisfaction and shareholder value. Given the history of other great retailers, early in the growth cycle can be a good time to buy.
Fool contributor David Meier enjoys the mountains near his home in the Upstate of South Carolina. He does not own shares in any company mentioned.