Cabela's 2006 Annual Report Download - page 33

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of financial condition, results of operations, liquidity and capital resources
should be read in conjunction with our audited consolidated financial statements and notes thereto appearing
elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties,
including information with respect to our plans, intentions and strategies for our businesses. See “Special Note
Regarding Forward-Looking Statements.” For additional information regarding some of the risks and uncertainties
that affect our business and the industries in which we operate, please see “Risk Factors.” Our actual results may
differ materially from those estimated or projected in any of these forward-looking statements.
Overview
We are the world’s largest direct marketer, and a leading specialty retailer, of hunting, fishing, camping and
related outdoor merchandise. We serve people who enjoy the outdoor lifestyle through our well-established direct
business and our growing number of destination retail stores. Additionally, we benefit from our credit card operation
that strategically supports our merchandising business by reinforcing our brand and increasing customer loyalty. To
best reflect our operations, we organize the reporting of our business into the following segments:
• Direct, which consists of our catalogs and website;
• Retail, which consists of our destination retail stores;
• Financial Services, which consists of our credit card business managed and administered by our wholly-
owned bank subsidiary, World’s Foremost Bank; and
• Other, which consists of aggregated non-merchandising outfitter services, our real estate land sales and
corporate and other expenses.
In the following discussion, where we refer to our “merchandising business” we mean our Direct and Retail
segment operations, collectively. Where we make reference to our “bank,” we are referring to the operations of our
Financial Services segment.
We had significant increases in revenue, net income and earnings per share in fiscal 2006 compared to fiscal
2005. Total revenue increased $263.9 million, or 14.7%, to $2.06 billion; net income increased 18.2% to $85.8 million;
and diluted earnings per share increased 17.3% to $1.29 per diluted share. Revenue from our three main business
segments increased in fiscal 2006 compared to fiscal 2005. Direct revenue increased 4.2% to $1.09 billion; Retail
revenue increased 32.3% to $820.3 million, with a comparable store sales increase of 1.3%; and Financial Services
revenue increased $31.6 million, or 29.9%, to $137.4 million.
Accomplishments in Fiscal 2006
During fiscal 2006, we focused our efforts on expanding our merchandising business, increasing exposure
to our loyalty programs, increasing comparable store sales, improving our operating margin and enhancing our
systems. Our accomplishments as a result of these efforts were as follows:
• Our total revenue exceeded $2.0 billion – as we continued to leverage our multi-channel model to drive
sales in all three of our primary segments.
• Retail revenue increased by $200.2 million, or 32.3%, as we opened four new destination retail stores –
increasing our retail square footage by 29% and our geographical diversification across the United
States.
• Our Direct business continued on a strong steady growth pattern as revenue increased $44.3 million, or
4.2%, to nearly $1.1 billion. The number of active customers, which we define as those customers who
have purchased merchandise from us in the last twelve months, increased by 4.6%.
• Our bank continued to build brand loyalty with our Cabela’s CLUB Visa card. Total managed credit
card loans exceeded $1.6 billion at the end of fiscal 2006 and average active accounts totaled 853,187 for
2006.