Cabela's 2011 Annual Report Download - page 4

Our only disappointment in 2011 was our inability to
grow the Direct channel more rapidly. Adjusted for
divestitures, Direct revenues were down 3.0%, which is
a slight improvement from 2010, but not at a satisfactory
level. We did see signs of improvement in the crucial
holiday season. Cabelas.com posted strong results on
top of a very strong prior year, which gives us confi dence
in our ability to grow this segment over the long term.
New leadership and a new organizational structure and
focus are already making a difference, and we look
forward to accelerating improvements in 2012.
Fiscal 2011 Results
In 2011, net income, excluding impairment charges
and certain other items, increased 24.3% to a record
$151 million, or $2.12 per diluted share, compared
to $121 million, or $1.76 per diluted share, in 2010.
Improvements in earnings were a result of increases
in comparable store sales, strong performance from
our new stores, higher merchandise gross margin, and
$12.2 million pre-tax in 2011. These charges were mostly
the
writedown of certain economic development bonds
land to fair value.
For the year, consolidated operating margin, also
excluding impairment charges and certain other items,
increased 120 basis points to 8.7% from 7.5% last year.
The increase in consolidated operating margin was due
to improved performance in our Cabela’s CLUB Visa
program and higher merchandise gross margin.
In our Retail segment, revenue increased 9.7% due to a
2.8% increase in comparable store sales and revenue
contribution from new stores. For the year, our Retail
segment operating margin increased 240 basis points to
17.0%. Improving Retail segment operating margin has
been a key focus over the past three years, and we are
very pleased with the improvements we have realized.
As I mentioned earlier, our Cabela’s CLUB Visa program
had another solid year. Financial Services revenue
increased 28.1% in 2011 due to lower provision for
loan losses, reduced interest expense, and higher
interchange income. For the year, average active
accounts increased 7.5% and the average account
balance increased 3.3%.
Our balance sheet also saw signifi cant improvements
in 2011, as we ended the year with just $345 million
of debt and generated $366 million of cash fl ows
from operations. The strength of our balance sheet
and cash fl ows has allowed us to self-fund our retail
store expansion and solidify our strong position with
vendor partners.
Three years ago, we launched a new strategy for
Cabela’s, which we refer to as Vision 2012. 2011
was a turning point in the implementation of Vision
2012. Following two years of hard work on
fundamentals throughout the enterprise, we began
to see real improvements. This is critically important
because returning the Company to a growth mode
was incumbent on improvements occurring from
fundamental core processes. During the year, our
enthusiasm to accelerate growth increased and was
based on watching the efforts of 2009 and 2010 yield
solid results. However, simply seeing improvements
in results was not enough. We knew our development
of people, culture, and continuous improvement was
essential for success. The progress we made in these
areas is worthy of a deeper look.
Human Capital/Culture
As I noted, successfully exporting our culture in a
climate of signifi cantly increasing retail store count
was a key source of concern. Ensuring we could both
grow and sustain the culture that drives our results
was a focus of our Company over the last three years.
In 2011, we increased training at the Outfi tter level to
nearly 500,000 hours or approximately two weeks per
Outfi tter. Additionally, we began a Manager in Training
program for new hires. This program places a general
store manager candidate in one of our existing stores
for six months to a year of training and evaluation
before that individual is handed the keys to a new
store. For current employee candidates, we created an
internal leadership development process to ultimately
prepare individuals for store general management.
Lastly, we have sharpened our new store opening teams
so skills and our unique culture are shared during the
pre and post new store opening process. These three
improved performance at our Cabela’s CLUB Visa program.
We incurred impairment and restructuring charges totaling
non-cash asset impairment charges related to
and