Cabela's 2009 Annual Report Download - page 43

34
Direct Business – We worked on the following key growth objectives to expand this business channel:
• natural growth by offering industry-leading selection, service, value, and quality;
• acquisition, retention, and reactivation of customers through our multi-channel platform;
• category expansion to capitalize on the general outdoor enthusiast;
• develop and execute strategies to broaden our exposure to different growing networks, e-commerce
platforms, and international e-commerce growth;
• an enhanced focus on the Canadian market by building on our Canada acquisition; and
• targeted marketing designed to increase sales of certain on-line market sectors.
Our Direct revenue decreased $37 million in 2009 compared to 2008 primarily due to customers buying more
ammunition, firearms, and related products from our retail locations, and customers buying smaller quantities of
higher margin soft goods. The impact of the 53rd week in 2009 was to increase Direct revenue by $17 million;
therefore, adjusted for 52 weeks, Direct revenue decreased $54 million in 2009 compared to 2008. Part of the
decrease in Direct revenue in 2009 compared to 2008 related to a net decrease in revenue of $5 million from our
taxidermy business and our wildlife/Americana art prints and art-related products business that were sold in 2009.
Our planned reduction in catalog pages circulated, and to a lesser extent to a decrease in catalog circulation, resulted
in a decrease of $16 million in catalog-related costs comparing 2009 to 2008. As a percentage of Direct revenue,
catalog-related costs decreased 90 basis points to 13.8% for 2009 compared to 14.7% for 2008. The number of active
Direct customers increased by approximately 2% compared to 2008.
Our Internet website continued to receive awards and high praise for excellence and customer satisfaction,
including the following awards and recognition:
• Our website was the most visited sporting goods industry eCommerce website according to Hitwise,
Incorporated, an online measurement company. Internet visits increased by 19.5% in 2009 over 2008.
• Our website continues to be ranked in the top group among online retailers for reliability and responsiveness
- an indication of download page speed and completing transactions for customers (measured by industry
publications).
Financial Services Business – In 2009, our Financial Services business completed a $500 million term
securitization under the Term Asset-Backed Securities Loan Facility Program (“TALF”) established by the Federal
Reserve Bank of New York, renewed and increased a $215 million variable funding facility to $260 million, and
renewed and increased a $376 million variable funding facility to $412 million. In addition, we increased our
Financial Services revenue by attracting new cardholders through low cost marketing efforts with our Retail and
Direct businesses. We added new credit cardholders as the number of average active accounts increased 9.1% to
over 1.2 million compared to 2008. During 2009, our Financial Services business executed two change of terms to
lessen the effects of the provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the
“CARD Act”) and increasing credit card charge-offs. These changes in terms resulted in operating income for our
Financial Services segment increasing $3 million, or 7.4%, over 2008 to $50 million in 2009.
Current Business Environment
Worldwide Credit Markets and Macroeconomic Environment – During 2009, the economic downturn
continued with high unemployment rates, reductions in consumer spending, a depressed housing market, lack
of consumer credit, and a reduction in consumer confidence. This macroeconomic environment lead to higher
delinquencies and charge-offs in our Financial Services business. Since April 2009, the credit markets have become
more active and our wholly owned bank subsidiary, World’s Foremost Bank (“WFB”), successfully completed a
TALF program securitization as well as renewed two variable funding facilities. WFB also completed an additional
securitization transaction for $300 million on February 12, 2010, under the TALF program. Although we believe there
have been significant improvements in the credit markets since April 2009, we remain cautious and will continue
to closely monitor our debt covenant compliance provisions and our access to the credit markets. Our Financial
Services business continues to monitor developments in the securitization and certificates of deposit markets to
ensure adequate access to liquidity.