Despite the challenging economic landscape and a decrease in firearms sales, Cabela’s comparable store sales for the third quarter ended Sept. 28 increased 3.9% — the company’s eighth consecutive quarter of comp store sales increases. Excluding firearms, comparable store sales increased 5.3%.
For the quarter, total revenue increased 14.8% to $850.8 million. Retail store revenue increased 20.8% to $550.9 million. Direct revenue increased 0.9% to $198.6 million. Net income increased 16.6% to $49.9 million compared to $42.8 million in the year-ago quarter, and earnings per diluted share increased 16.7% to $0.70 compared to $0.60 in the year-ago quarter.
"In today's difficult marketplace, the strong performance of our next-generation stores continues to be a competitive advantage," said Tommy Millner, Cabela's CEO. "Growing our retail footprint through our next-generation store format provides an exciting vision into the future of our company. In the third quarter, 14 of our 18 next-generation stores were open for the full period and outperformed our legacy store base by approximately 50% in sales per square foot and approximately 60% in profit per square foot. Based on this, we plan to expand retail square footage at a low to mid-teens rate throughout the next several years with our next-generation and outpost store formats."
The eight next-generation stores in the comp base at the end of the quarter generated comp store sales of 6.7%. Ammunition sales, while still above prior year levels, slowed during the quarter. The company saw strong performance in men’s apparel, hunting apparel and general outdoors.
"Although direct revenue increased for the fourth consecutive quarter, the results fell short of our expectations," Millner said. "These results were caused by a deceleration in ammunition sales and Internet traffic, lower average ticket and a more cautious consumer. Since we expect these trends to continue, our direct business in the fourth quarter is anticipated to decline at a mid-single digit rate. During the quarter, we continued to enhance our omnichannel efforts through greater use of digital marketing and the limited roll out of omnichannel fulfillment. In the fourth quarter, we will continue to expand our omnichannel fulfillment capabilities and will implement a number of improvements to our mobile platform."
Starting in August, Cabela’s experienced a significant deceleration in the sales of firearms and ammunition as well as a challenging consumer environment across all business channels. To compensate, the company increased marketing and advertising spending by several million dollars. It also took an aggressive approach to managing other costs to levels consistent with how its business performed.
In the fourth quarter of last year, comp store sales soared 12%, which, at the time, was its largest increase ever as a public company. The company anticipates comp store sales to decline at a mid-single digit rate in the fourth quarter this year.
The Cabela's CLUB Visa program had another solid quarter. During the quarter, growth in average active credit card accounts accelerated to 10.1% due to increases in new customers, primarily in the retail and Internet channels.
The company also announced plans to enter three new markets: Nanaimo, British Columbia, Canada; Garner, N.C.; and Sun Prairie, Wis.