For the quarter, retail store revenue increased 6.1% to $348.0 million led by a 3.5% increase in comparable store sales; direct revenue decreased 6.2% to $226.2 million as the Company lowered direct marketing costs 15.1% resulting in increased revenue per catalog page; and financial services revenue increased 15.0% to $48.2 million. Total revenue for the third quarter of 2009 increased 2.0% to $624.3 million compared to $611.8 million for the third quarter of 2008.

Consolidated operating income increased 53.1% in the quarter to $31.9 million as compared to $20.8 million in the year ago quarter. For the quarter, consolidated operating margins increased 170 basis points over the prior year quarter. Net income for the quarter increased 93% to $18.8 million compared to $9.7 million in the year ago quarter. Earnings per share for the quarter increased 87% to $0.28 compared to $0.15 in the year ago quarter.

"We are delighted that several of our strategic initiatives showed early signs of improvement during the third quarter," said Tommy Millner, Cabela's Chief Executive Officer. "These initiatives are improving the profitability of our retail stores, increasing returns on capital through better balance sheet management, improving inventory levels, and increasing profitability at World's Foremost Bank while preserving the brand loyalty of our cardholders."

During the third quarter, the Company reported the following results on these strategic initiatives:

• Retail profitability increased 240 basis points from 9.2% to 11.6% as the Company gained efficiencies in the utilization of its advertising and labor resources.
• Borrowings on the Company's revolving credit facility were $29 million at quarter end as compared to $199 million at the same time last year due to better management of inventory and working capital.
• Inventory levels were $572 million at quarter end as compared to $649 million at the same time last year while the Company increased in stock percentage in its retail business.
• Return on invested capital improved 90 basis points.
• Financial services revenue increased 15.0% and the average number of active accounts increased 8.7%. Charge-offs were 5.02% as compared to 5.24% in the second quarter of 2009. Charge-offs improved sequentially for the first time since the second quarter of 2007.

"Although there is much work ahead of us, we are very pleased with the results so far," Millner said. "We have seen solid improvement in retail profitability, balance sheet management, return on invested capital and profitability/customer loyalty at World's Foremost Bank. And, it is important to note, we have significant opportunities to continue to improve operating efficiencies in these areas for the next several years."

"Another vitally important strategic initiative is expanding merchandise gross margins, which have been impacted by product mix and our efforts to liquidate unproductive inventory," Millner said. "During the third quarter, we began to see growth rates in firearm and ammunition sales moderate, and we have begun to see sales trends in all four of our other categories improve."

"Changes in accounting rules will require Cabela's to provide an additional $200 million of capital to World's Foremost Bank in the first quarter of 2010," Millner said. "During 2009, we have generated excess cash internally to meet this capital need. We expect to have sufficient cash available at the end of the year to meet World's Foremost Bank's capital needs for 2010. We are pleased that we will not be required to raise any capital through the equity or long term debt markets to meet this capital need."

"Our credit facility limits further capital contributions to our financial services subsidiary," Millner said. "Therefore, in order to inject additional capital into World's Foremost Bank, we intend to amend our credit facility. We expect to amend our facility in the fourth quarter of 2009 without materially impacting future borrowing costs."

Cash flows from operations improved significantly for the year-to-date period. For the nine months ending September 26, 2009, cash flows from operations improved $57 million to a positive $24 million as compared to a negative $33 million in the same period a year ago. Capital expenditures during the quarter were $8 million. The Company continues to expect capital expenditures for the year to be $40 million to $50 million.

"As we look ahead into the fourth quarter, we are encouraged by the strength we are seeing in sales in the first four weeks of the quarter," Millner said. "For the full year 2009, we continue to expect direct revenue to decline at a low to mid-single-digit percentage rate. Due to favorable trends that we have seen in our business, we now expect full year 2009 total revenue growth and comparable store sales to increase at a mid-single-digit percentage rate as compared to our prior guidance of a low single-digit percentage rate. Additionally, we now expect net charge-offs at World's Foremost Bank to be between 5.1% and 5.3% for the full year as compared to our previous guidance of 5.1% to 5.5%. As a result, we now expect full year earnings per diluted share to increase at a mid-single-digit percentage rate with an opportunity to exceed these results should the strength we have seen in October continue for the remainder of the year. This compares to our previous forecast of full year earnings per diluted share to be roughly equal with 2008 levels."

Conference Call Information

A conference call to discuss third quarter fiscal 2009 operating results is scheduled for today (Tuesday, October 27) at 11:00 a.m. Eastern Time. A webcast of the call will take place simultaneously and can be accessed by visiting the Investor Relations section of Cabela's website at www.cabelas.com. A replay of the call will be archived on www.cabelas.com.

About Cabela's Incorporated

Cabela's Incorporated, headquartered in Sidney, Nebraska, is the world's largest direct marketer, and a leading specialty retailer, of hunting, fishing, camping and related outdoor merchandise. Since the Company's founding in 1961, Cabela's(R) has grown to become one of the most well-known outdoor recreation brands in the world, and has long been recognized as the World's Foremost Outfitter(R). Through Cabela's growing number of retail stores and its well-established direct business, it offers a wide and distinctive selection of high-quality outdoor products at competitive prices while providing superior customer service. Cabela's also issues the Cabela's CLUB(R) Visa credit card, which serves as its primary customer loyalty rewards program. Cabela's stock is traded on the New York Stock Exchange under the symbol "CAB".

Caution Concerning Forward-Looking Statements

Statements in this press release that are not historical or current fact are "forward-looking statements" that are based on the Company's beliefs, assumptions and expectations of future events, taking into account the information currently available to the Company. Such forward-looking statements include, but are not limited to, the Company's statements regarding having sufficient cash available at the end of the year to meet World Foremost Bank's capital needs for 2010; amending the Company's credit facility in the fourth quarter of 2009 to allow for additional capital contributions to World's Foremost Bank without materially impacting future borrowing costs; capital expenditures being $40-50 million for 2009; total revenue growth and comparable store sales increasing at a mid-single digit percentage rate for 2009, direct revenue declining at a low to mid-single digit percentage rate for 2009, net charge-offs at World's Foremost Bank being between 5.1% and 5.3% for 2009; and earnings per diluted share for 2009 increasing at a mid-single digit percentage rate with an opportunity to exceed these results should the strength the Company has seen in October 2009 continue for the remainder of 2009. Forward-looking statements involve risks and uncertainties that may cause the Company's actual results, performance or financial condition to differ materially from the expectations of future results, performance or financial condition that the Company expresses or implies in any forward-looking statements. These risks and uncertainties include, but are not limited to: the level of discretionary consumer spending; the strength of the economy, including increases in unemployment levels and bankruptcy filings; changes in the capital and credit markets or the availability of capital and credit; the Company's ability to comply with the financial covenants in its credit arrangements; counterparty risk on the Company's unsecured revolving credit facility; changes in consumer preferences and demographic trends; the Company's ability to successfully execute its multi-channel strategy; the ability to negotiate favorable purchase, lease and/or economic development arrangements for new retail store locations; expansion into new markets; market saturation due to new retail store openings; the rate of growth of general and administrative expenses associated with building a strengthened corporate infrastructure to support the Company's growth initiatives; increasing competition in the outdoor segment of the sporting goods industry; the cost of the Company's products; trade restrictions; political or financial instability in countries where the goods the Company sells are manufactured; adverse fluctuations in foreign currencies; increases in postage rates or paper and printing costs; supply and delivery shortages or interruptions caused by system changes or other factors; adverse or unseasonal weather conditions; fluctuations in operating results; the cost of fuel increasing; road construction around the Company's retail stores; labor shortages or increased labor costs; increased government regulation, including regulations relating to firearms and ammunition; inadequate protection of the Company's intellectual property; the Company's ability to protect its brand and reputation; changes in accounting rules applicable to securitization transactions, including related increases in required regulatory capital; the Company's ability to manage credit and liquidity risks; any downgrade of the ratings on the outstanding notes issued by the Company's financial services business' securitization trust; the ability of the Company's financial services business to securitize credit card receivables at acceptable rates or access the deposits market; decreased interchange fees received by the Company's financial services business as a result of credit card industry regulation and/or litigation; the impact of legislation, regulation and supervisory regulatory actions in the financial services industry including the Credit Card Accountability Responsibility and Disclosure Act of 2009 and the proposed financial regulatory reform; other factors that the Company may not have currently identified or quantified; and other risks, relevant factors and uncertainties identified in the Company's filings with the SEC (including the information set forth in the "Risk Factors" section of the Company's Form 10-K for the fiscal year ended December 27, 2008, and in Part II, Item 1A, of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 27, 2009), which filings are available at the Company's website at www.cabelas.com and the SEC's website at www.sec.gov. Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. The Company's forward-looking statements speak only as of the date they are made. Other than as required by law, the Company undertakes no obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE: Cabela's Incorporated

Cabela's Incorporated
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