Cabela's 2006 Annual Report Download - page 35

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concentration of customers that represent potential new markets for our destination retail stores. We believe that
there are many additional markets throughout North America that could potentially support one of our destination
retail stores. Additionally, we believe that smaller-format destination retail stores could provide further opportunities
for future expansion. Our stores require large capital investments. We are actively seeking ways to improve their
operating efficiencies, layout and customer friendly design to increase our average customer transaction and improve
our return on investment, including leasing retail store space.
Expand our Direct business. We plan to expand our Direct business through several initiatives surrounding
existing and new customers. We will seek to increase the amount each customer spends on our merchandise through
enhanced customer targeting, continued introduction of new catalog titles and the development and marketing of
new products. We have taken advantage of web-based technologies such as targeted promotional e-mails, on-line
shopping engines and Internet affiliate programs to increase sales. We also are improving our customer relationship
management system, which we expect will allow us to better manage our customer relationships and more effectively
tailor our marketing programs. We will use our expanding retail business to capitalize on additional customer
purchase history and information.
Expand our customer loyalty programs. We intend to increase the penetration of our loyalty programs,
including programs for our Cabela’s CLUB Visa credit card, our third party debit card and our Cabela’s CLUB
Rewards loyalty card to attract a more diverse group of customers. Based upon historical results, we believe these
programs will reinforce our customer loyalty and retention and thereby increase revenue and net income.
Improve our operating efficiencies. As we continue to grow our business through opening new destination
retail stores and building our direct business, we are focused on improving our operating efficiencies by optimizing
and investing in our management information systems and distribution and logistics capabilities. We also are
analyzing our catalog costs and inventory turns and concentrating on our sales training.
Expand the reach of our brand and target market through complementary opportunities. We focus on
increasing consumer awareness of our company and maintaining and enhancing our outdoor lifestyle image by using
consistent branding in all of our distribution channels. We also will continue to effectively broaden the application
of our brand through: opportunistic acquisitions of complementary businesses; internal development of relevant
businesses and product categories; and continued involvement and sponsorship of sporting and hunting events.
In addition, we will continue to leverage our brand recognition through conservation, corporate relationships and
alliances.
Trends and Opportunities
Improving Comparable Store Sales. Our comparable store sales improved 1.3% in fiscal 2006 over fiscal 2005.
We continue to focus initiatives on improving comparable store sales. We experienced declines at some stores in
our comparable store base due to gasoline prices as discussed below and due to our own cannibalization of market
share.
Catalog production and circulation costs. Costs of providing our catalogs continue to increase as postage and
printing prices increase. Catalog costs increased by 0.2% as a percentage of Direct revenue in fiscal 2006 over 2005.
We are mitigating these cost increases by entering into long-term contracts for paper and printing and enhancing our
in-house production capabilities. We continue to refine our customer contacts strategy through advanced analytic
concepts to maximize total sales across all channels while minimizing processing and distribution costs.
Growth of our credit card business. We anticipate that Financial Services revenue will increase as our
portfolio of managed loans matures, and we will seek to further increase Financial Services revenue by attracting
new cardholders through low cost targeted marketing at our destination retail stores. We will continue to control
costs in our Financial Services segment by managing default rates, delinquencies and charge-offs by continuing our
underwriting and account management standards and practices. We anticipate that we will continue to sell our credit
card loans in the securitization markets and manage those customer accounts at the bank.
Effect of Retail expansion on Direct business. When we open a destination retail store in a new market, our
Direct revenue in that market generally experiences a decline during the first 12 months after the new store opening
despite a substantial increase in our Retail revenue in that market due to the presence of our destination retail store.
The new retail store serves as a marketing tool in that geographic area. As a result, approximately 12 months after the