In a move to enhance long-term financing flexibility, Cabela’s Inc. (CAB), one of the leading specialty retailers of hunting, fishing, camping and related outdoor merchandise, recently entered into a new credit agreement with a group of financial institutions led by U.S. Bank.
The newly announced $415 million credit facility is for a period of five years and overrides the previous $350 million facility signed in 2007. Moreover, the company added that the new facility can be extended to $500 million.
The move, which was aimed toward making the company more financially flexible, will facilitate the company to focus on future growth prospects. The company intends to augment its retail square footage growth plans and accelerate retail expansion in the U.S. and Canada. Meanwhile, the company will focus on the growth of its direct channel business while increasing its market share.
Earlier, Cabela’s posted better-than-expected third-quarter 2011 results on the heels of healthy performance at its retail stores, strong growth at financial services division and elevated merchandise gross margin. The company delivered earnings of 50 cents a share, up 61.3% from 31 cents delivered in the prior-year quarter. The quarterly earnings also surpassed the Zacks Consensus Estimate of 44 cents a share.
Total revenue, comprising retail, direct and financial services revenue, increased 5.5% year over year to $678.6 million, but fell marginally short of the Zacks Consensus Revenue Estimate of $679 million. However, adjusted for divestitures, total revenue increased 6.2%.
Cabela’s next generation store format, multi-channel strategy and seasonal product assortments enable it to focus on increasing stores productivity and sales per square foot, lowering its labor costs.
Moreover, Cabela's CLUB Visa program continues to register strong growth, reflecting increase in average active accounts with enhancements in delinquencies and net charge-offs along with lower funding cost.
However, the outdoor recreation and casual apparel and footwear markets are highly fragmented and competitive. Cabela’s faces stiff competition from discount stores, such as Wal-Mart Stores Inc. (WMT) and Target Corporation (TGT).
Currently, we maintain a long-term Outperform rating on Cabela's. Moreover, the company holds a Zacks #2 Rank, which translates into a short-term Buy recommendation.
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