Cabela's is basically a dry goods retailer listed on the New York Stock Exchange as CAB, currently priced @ $14.92, which is 12 times forward (2010) earnings of $1.26; the 2009 earnings were $1.24 per share. This company is making money even in a down retail market.
Since summer of 2007, wife Nancy and I have put 52,000 miles on our Road Trek from Illinois to Maine, Florida, New Orleans, Michigan's UP, Montana, California, twice to Alaska, and almost everywhere in between. We always stop at the Cabela's and Bass Pros and Gander Mountains along the way, and I ask questions...
About this time last year, after what the drive-by media was widely reporting (make that speculating) about the 2008 "disaster" of Xmas non-shopping, I discovered by interviewing check-out persons at Bass Pro and Cabela's that they had a good Xmas-2008 rush with extra registers open, etc...and talking to the guys in the Gun Library (flashing my Parker credentials) I was surprised that sales of sporting goods, not just camp clothing, was strong. So I checked out CAB--then about $6.00 per share--but didn't buy any shares as CAB pays no dividends...
Woulda, coulda, shoulda, because it is now up 150%--$6.00 to $14.92--and has been as high as $17.73 this year!
Point being that it is pretty hard for some gun crank to observe the Gun Library at one selected store on one day (or over a period of time)or surf the Internet postings to draw conclusions about the business prospects of a NYSE listed company. There is a bigger picture: Ask yourself what a full-size mount of an elephant charging costs, or the lions, or the aquariums or the upkeep on the fish, or the animal mountain in the bigger stores. The hole-in-the-wall Gun Library is a "loss leader" to entertain retail buyers of camo clothing, ammo, duck decoys, deer stands, fishing stuff, common guns, woman's clothing, shoes and socks and boots, and assorted bling. The real issue in re: Cabela's success or failure this year has to do with these factors:
Management fright that the 2009 Xmas sales rush was going to be less on a same store basis than 2008...which led to...
Anticipating that an increasing percentage of customers who had just started to feel the recession in fall of 2008, yet still went shopping on their reserves for Xmas 2008, had during 2009 seen their unemployment expire and then be extended. With 10% unemployment built into the economy and a static CPI (no SSI increase, no automatic bumps for other pensions coupled to the CPI, or union contracts so linked) it was foreseeable that Xmas 2009 shopping would be down. Thus management bought less inventory for the Xmas 2009 rush, which, in turn, gave shoppers less incentive to buy, and the shelves are now relatively empty for post-Xmas sales. You can't sell what you don't have.
I predict that same store gross sales for 2009 will be down from 2008, while the investment pundits predict forward earnings--the bottom line--to be up a paltry two cents, which results from savings generated by reduced staff (more unemployment)and reduced interest costs occasioned by less inventory financed. None of this has anything to do with the price or quality of guns in the Gun Library.
Did you know that Cabela's owns its own captive bank so it can get funds at almost zero-% interest from the Fed, and issue MMCDs insured by the FDIC for virtually nothing-% interest and turn around and issue their own credit card with a high rate of interest so customers can charge stuff they really don't need and can't pay for when the buying impulse arises. In other words, a large portion of sales rung up do not involve the customer paying anything at point of sale. If there is a problem lurking behind the scene at Cabela's it is in the quality of their charge card receivables, not the quality of the guns in the Gun Library. But consider this:
A year ago you could have decided not to buy a $6,000 gun from the Cabela's Gun Library, but bought Cabela's stock instead. You could sell your CAB stock for a long term capital gain (15% tax rate) at today's market price on the NYSE for about $15,000. As Paul Harvey would say, if he were still alive, "That's the rest of the story." EDM
