|Shares Out. (in M):||70||P/E||23.0x||16.0x|
|Market Cap (in $M):||3,490K||P/FCF||9.0x||11.0x|
|Net Debt (in $M):||453,000||EBIT||1,198||1,131|
|Entry||02/14/2013 09:27 AM|
Thanks for the write up.
First, I have to say that CAB is one of those companies that has a very unique customer base. I have visited several of the older big foot print stores in various parts of the country - always on a saturday afternoon - and in all but one instance when i pulled into the parking lot there were people tailgating.
I don't know of any other retailers that sell products that are so important to a life style that their customers arrange to meet friends in the parking lot and grill sausages before / after their shopping experience. This is largely tied to in store educational programs that strengthen brand loyalty.
Second, i think it is worth mentioning that the default rate on their credit cards is amongst the lowest of any retail branded cards - again, a sign that CAB customers consider CAB products a part of their life style.
Third, i think it is worth mentioning the tailwind that CAB gets from the energy boom in the interior of the country. Disposable cash levels for those working in the often remote areas like north dakota are growing every day, and these are not people that will spend their disposable cash on broadway shows and the like. These are people that spend their money on big boy toys like fishing and hunting gear that CAB sells.
Fourth, CAB has been concentrating on shifting their mix toward CAB branded gear which improves margins. In my experience the CAB branded gear is high quality, and the customer service is top notch. Information taken from message boards focused on the sporting community supports the notion that cabelas puts out a respected product.
Fifth, maybe it is nothing, but maybe it is everything... board member John Gottschalk is the former CEO and Chairman of the Omaha World Herald. I have often wondered if there is anyone based in Omaha who might be interested in a company that is the clear leader in a niche market.
All that being said, I do have concerns regarding gun sales. It is important to recognize that the recent spike in gun sales and news associated with the Newtown shooting and potential bans etc is only the latest chapter in changing trend in gun sales. Sales started to spike as early as 2006 / 2007 when the Obama / McCain election was starting to warm up, and they have continued since then to the parabolic level they are at now. While they may be low margin, they are significant. For example, last quarter com sales increased 3.9% total, but only 1.6% with firearms stripped out.
Beyond that, its not clear to me what affect gun sales have to non gun sales. Cabela's hopes to be the "easiest, fastest place to shop for firearms." They are also often cheaper than mom and pop stores due to economies of scale etc. It makes sense that for a big ticket item like a gun the consumer would go to CAB where they can save a meaningful amount of money. Since they are already there for the gun, they buy whatever else they need.
However, one of my concerns is that contrary to your view regarding how it should be easy to gain market share from mom and pop stores, that it may be rather difficult outside of the recent spike in gun sales. A big part of hunting and fishing is local knowledge. Where are the fish biting? Where are the birds flying? How is the acorn crop for deer season this year? Information like this keeps sportsman going to their mom and pop store rather than cabelas.
Do you have any thoughts on this?
Another concern i have is managements commitment to the obscene amount of printed catalogues they mail out. If you are not a subscriber, I would estimate that I get somewhere north of 1,000 printed glossy pages a year from them, including an annual guide that is bigger than a text book, and is hard bound as well. This seems like an easy way to cut SG&A, but as of the last time i spoke with management (more than a year ago) they were committed to keeping the printed catalogues going.
One thing that i would like to hear your thoughts on is the eventual sale of the credit card biz. In the past they have expressed reluctance as they like to have control so they can keep consumers close - as was the case during the financial crisis - rather than risk having an outside CC company kill off their customers. I think it would unlock real value if they spun it off however.
|Entry||02/14/2013 11:25 AM|
You make several good points.
I don't think they should have trouble competing with mom and pops as the CAB employees are locals.
I think the company is comfortable with the ROI of the catalogs.
Don't know if they would spin out the credit card business, but it might make sense.
|Entry||02/14/2013 11:27 AM|
Probably anticipated by the market but CAB reported a very strong quarter with very good revenue growth and same store sales.
|Subject||RE: RE: thoughts|
|Entry||02/14/2013 12:05 PM|
right... the CAB employees are local to where the store is, and the stores are based near population centers in areas that are as a whole not very densely populated.
alot of the customer base drives from "out in the country" into the store for special events like a duck calling class, or once a year before hunting/fishing season etc to stock up on what they need for the season..... they arrange to meet friends that they may not see often, and that is why they tailgate in the parking lot etc.
but my feeling is that alot of these customers do not live by the store, so the local knowledge that store employees have is not local to where the customers live. As a result customers likely make their last minute or maintenance type trips to their mom and pop shop.
to be clear, i think this is a great business, but i'm not convinced that the stock is at a great price with P/E above long term averages and the "E" at risk of slipping materially as the gun control issue (and sales that are add ons to gun purchases) is uncertain.
That being said, uncertainty is of course what makes stocks cheap... but i think to buy here you have to have complete faith in the growth strategy.
Curious btw how many stores you think they can get to in north america? CAB is definitely the leader, but DKS, TSA, and WMT have been catering more to the last minute / maintenance type trips for sportsmen, and Bass Pro and Gander Mountain are a significant presence on the full service side, although they admittedly have more of a warehouse feel than the Cabella's "experience" stores
|Subject||RE: RE: RE: thoughts|
|Entry||02/14/2013 05:09 PM|
Hard to say but I think they can add 8-10 per year indefinetely
|Subject||CAB pre-announces a very strong quarter|
|Entry||03/12/2013 11:45 AM|
CAB said this morning that business accelerated in the prevous quarter and they expect to earn $0.10-0.15 above the concensus.
Management is executing beautifully and the stock is printing $60.
|Subject||another low rated idea with stellar performance|
|Entry||03/19/2013 01:04 PM|
No strong opinion on CAB, but I do think the lower the rating, offer the stronger the performance on VIC!!!
|Subject||RE: another low rated idea with stellar|
|Entry||03/19/2013 02:44 PM|
I didn't expect it to start moving so quickly, but thank you.
|Entry||04/26/2013 11:50 AM|
CAB posted a great quarter with strong same store sales growth and direct sales growth.
|Subject||RE: Author Exit Recommendation|
|Entry||05/21/2013 09:37 AM|
Congratulations, very nice return.
|Subject||RE: RE: Author Exit Recommendation|
|Entry||05/21/2013 11:12 AM|
Thanks, appreciate it.