Cabela's 2006 Annual Report Download - page 16

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Our continued retail expansion will result in a higher number of destination retail stores, which could
adversely affect the desirability of our destination retail stores, harm the operating results of our retail
business and reduce the revenue of our direct business.
As the number of our destination retail stores increases, our stores will become more highly concentrated in
the geographic regions we serve. As a result, the number of customers and related revenue at individual stores may
decline and the average amount of sales per square foot at our stores may be reduced. In addition, as we open more
destination retail stores and as our competitors open stores with similar formats, our destination retail store format
may become less unique and may be less attractive to customers as tourist and entertainment shopping locations. If
either of these events occurs, the operating results of our retail business could be adversely affected. The growth in
the number of our destination retail stores may also draw customers away from our direct business. If we are unable
to properly manage the relationship between our direct business and our retail business, the revenue of our direct
business could be adversely affected.
Our failure to successfully manage our direct business could have a material adverse effect on our
operating results and cash flows.
During fiscal 2006, our direct business accounted for 57.0% of the total revenue in our direct and retail
businesses. Our direct business is subject to a number of risks and uncertainties, some of which are beyond our
control, including the following:
• our inability to properly adjust the fixed costs of a catalog mailing to reflect subsequent sales of the
products marketed in the catalog;
• lower and less predictable response rates for catalogs sent to prospective customers;
• increases in U.S. Postal Service rates, paper costs and printing costs resulting in higher catalog production
costs and lower profits for our direct business;
• failures to properly design, print and mail our catalogs in a timely manner;
• failures to introduce new catalog titles;
• failures to timely fill customer orders;
• changes in consumer preferences, willingness to purchase goods through catalogs or the Internet, weak
economic conditions and economic uncertainty, and unseasonable weather in key geographic markets;
• increases in software filters that may inhibit our ability to market our products through e-mail messages
to our customers and increases in consumer privacy concerns relating to the Internet;
• changes in applicable federal and state regulation, such as the Federal Trade Commission Act, the
Children’s Online Privacy Act, the Fair Credit Reporting Act and the Gramm-Leach-Bliley Act;
• breaches of Internet security; and
• failures in our Internet infrastructure or the failure of systems of third parties, such as telephone or
electric power service, resulting in website downtime, customer care center closures or other problems.
Any one or more of these factors could result in lower-than-expected revenue for our direct business. These
factors could also result in increased costs, increased merchandise returns, slower turning inventories, inventory
write-downs and working capital constraints. Because our direct business accounts for a significant portion of our
total revenue, any performance shortcomings experienced by our direct business would likely have a material adverse
effect on our operating results and cash flows.