Cabela's 2010 Annual Report Download - page 3

Download and view the complete annual report

Please find page 3 of the 2010 Cabela's annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 128

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128

Dear Cabela’s Shareholders:
Fifty years ago, Dick Cabela, in Chicago with his father
to purchase furniture for the family store in Chappell,
Nebraska, came across a small display of hand-tied fi shing
fl ies. He bought the lot, 20 gross, and in so doing set in
motion events that would lead us to where we are today.
We are very pleased with our record performance in 2010,
which gives us great confi dence leading into our Golden
Anniversary year.
During 2010, we not only improved on our successful
2009, but we also saw an acceleration of momentum in
all of our key fi nancial metrics: return on invested capital,
merchandise gross margin, Retail segment operating
margin, total revenue growth, retail expansion, and
performance of our Cabela’s CLUB Visa loyalty program.
This acceleration of momentum gives us confi dence in our
ability to achieve our goal of becoming the best
multi-channel outdoor retail company in the world by the
end of 2012.
I am pleased to report, on a like-calendar basis, total
revenue increased 3.2 percent to an all-time record of $2.7
billion, and comparable store sales increased 1.6 percent
led by a 7.3 percent increase in our all important fourth
quarter. Merchandise gross margin increased 50 basis
points, marking the fi rst annual increase in merchandise
gross margin in fi ve years. During the year, we opened one
new store in Grand Junction, Colorado, and announced
three new stores for 2011 (Allen, Texas; Springfi eld,
Oregon; and Edmonton, Canada). Our confi dence to
increase store growth arises, in part, from a 290 basis
point increase in Retail segment contribution margin. Our
Cabela’s CLUB Visa loyalty program witnessed a 32.8
percent revenue increase, also a new record.
We also saw improvement in the aggregate number of
multi-channel customers and their spend. As a multi-
channel retailer, this represents a vital measure of our
long-term success. In 2010, the number of multi-channel
customers increased 4 percent while their spend increased
6 percent. And fi nally, our most important metric, return
on invested capital, increased 210 basis points to 13.1
percent, the highest level in fi ve years.
Fiscal 2010 Results
In 2010, net income, excluding impairment charges and
certain other items, increased 32 percent to a record
$121 million, or $1.76 per diluted share, compared to $92
million, or $1.36 per diluted share, in 2009. Improvements
in earnings were a result of higher gross margin, improved
performance at our Cabela’s CLUB Visa program, and a
continued focus on tightly managing expenses.
For the year, consolidated operating margin, also excluding
impairment charges and certain other items, increased
improved performance in our Cabela’s CLUB Visa program
and higher merchandise gross margin.
In our Retail segment, on a like-calendar basis, revenue
increased 4.3 percent due to a 1.6 percent increase in
comparable store sales and revenue contribution from
new stores. For the year, Retail segment operating margin
increased 290 basis points to 14.6 percent. Improving
operating margin has been a key focus
over the past two years, and we are very pleased with the
improvement we have realized.
We also realized improvements in our Direct business -
Internet and call center. For the year, on a like-calendar
basis and adjusting for divestitures, Direct business
revenue decreased just 1.6 percent as we saw double-digit
gains in our Internet business and planned declines in call
center revenues. These results were an improvement over
2009 levels and are encouraging in light of greater than
expected challenges with two systems implementations -
the new Cabelas.com website and a new customer
relationship management system at our call centers. While
the customer issues are largely behind us, at times in our
busy fourth quarter, our customers experienced longer
than average wait times and slow response times while
placing orders. For the year, operating margin in our Direct
segment increased 40 basis points to 15.6 percent from
15.2 percent last year.
Our Cabela’s CLUB Visa program had a solid year. Financial
Services revenue increased 32.8 percent in 2010 due to
lower provision for loan losses, reduced interest expense,
Letter To Shareholders
50 basis points to 7.5 percent from 6.0 percent last year.
The increase in consolidated operating margin was due to
1
s
Retail segment