Sporting goods retailer Cabela's (NYSE:CAB) will report Q4 2006 financial results on Thursday, Feb. 22. What's in the cards?

What analysts say:

  • Buy, sell, or waffle? Of the 11 analysts covering Cabela's, eight don't see it as big game and rate it a hold, while two say buy, and one says sell.
  • Revenues. Sales are expected to gallop away at a 15% clip, to $777 million.
  • Earnings. Profits, meanwhile, are expected to surge nearly 20%, to $0.76 per share.

What management says:
Cabela's is primarily a sporting-goods retailer, specializing in a theme park-like atmosphere at its stores. But the "World's Foremost Outfitter" also has a financial services company with its own bank -- called, appropriately enough, the World's Foremost Bank. It issues CDs, securitizes debt, and issues credit cards. Last quarter, Cabela's posted 26% revenue growth in its retail operations, with equally impressive 29% growth from its financial services segment. It also has an online catalog division, which accounts for 47% of revenues and saw 5% growth last quarter.

What management does:
Cabela's has been growing in store count and sales alike. Each new store opening costs between $30 million and $50 million, which squeezes margins via some store opening costs that must be expensed. In 2005, the company opened four new stores, adding 59% more square feet to its total retail square footage. Counting those four new stores, Cabela's will be adding an additional 29% to its square footage this year. The new stores seem to be a little smaller, though, since the four stores in 2005 added more than 778,000 square feet, while this year's four new stores will add just more than 603,000 square feet.

Margin

06/05

09/05

12/05

03/06

06/06

Gross

40.4%

40.9%

41.0%

41.3%

41.3%

Operating

6.2%

6.4%

6.5%

6.7%

6.5%

Net

4.0%

4.0%

4.0%

4.0%

3.8%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
There's usually a lot of hoopla surrounding the opening of a new Cabela's destination store, and one is supposed to be opening soon about 15 minutes from where I live. I know from a number of hunter friends that not having to cross the state line to go to Cabela's is a big attraction, not to mention the theme-park atmosphere the store inherently brings.

The Motley Fool Hidden Gems selection has actually dropped 2% from its recommended buy-in price over concerns about same-store sales. Once these large-format stores get past opening-day enthusiasm, they tend to have weak comps. Since the company wants to expand to as many as 40 or 50 such stores, fears of a drag on performance are rising.

Yet Cabela's is an online and catalog company first and a destination retailer second. With its small footprint right now, the ability to attract new customers who can just as easily buy online remains constrained. But the economies of scale that can be achieved by growing, plus the ability to attract more mainstream consumers -- not just hunters and fishermen -- can be realized once it gets beyond a certain point. So expect to see gross profits raise their head like an eight-point buck, while net turns like a white-tail doe.

Competitors:

  • Dick's Sporting Goods (NYSE:DKS)
  • Big 5 Sporting Goods (NASDAQ:BGFV)
  • Hibbett Sports (NASDAQ:HIBB)
  • Gander Mountain (NASDAQ:GMTN)
  • K2 (NYSE:KTO)
  • Sport Chalet (NASDAQ:SPCH)

Related Foolishness:

Cabela's is a Motley Fool Hidden Gems recommendation. The company has earned a four-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the new stock rating service by joining today. It's free!

Fool contributor Rich Duprey owns shares of K2, but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a blaze orange disclosure policy.