Cabela's 2013 Annual Report Download - page 24

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• general economic and business conditions affecting consumer confidence and spending and the overall
strength of our business.
We may not be able to sustain the growth in the number of our retail stores, the revenue growth historically
achieved by our retail stores, or to maintain consistent levels of profitability in our Retail business, particularly
as we expand into markets now served by other large-format sporting goods retailers and mass merchandisers. In
particular, new retail stores typically generate lower operating margins because pre-opening costs are expensed as
incurred in the periods prior to opening and because fixed costs, as a percentage of revenue, are higher. In addition,
the substantial management time and resources which our retail store expansion strategy requires may result in
disruption to our existing business operations which may decrease our profitability.
Retail store expansion could adversely affect the operating results of our Retail business and reduce the
revenue of our Direct business.
As the number of our retail stores increases, our stores will become more highly concentrated in the
geographic regions we serve. As a result, the number of customers and related revenue at individual stores may
decline and the average amount of sales per square foot at our stores may be reduced. In addition, as we open
more retail stores and as our competitors open stores with similar formats, our retail store format may become less
unique and may be less attractive to customers as tourist and entertainment shopping locations. If either of these
events occurs, the operating results of our Retail business could be materially adversely affected. The growth in
the number of our retail stores may also draw customers away from our Direct business, which could materially
adversely affect our Direct business revenue.
Our failure to successfully manage our Direct business could have a material adverse effect on our
operating results and cash flows.
During 2013, our Direct business accounted for 30.4% of the total revenue in our Retail and Direct
businesses. Our Direct business is subject to a number of risks and uncertainties, some of which are beyond our
control, including:
• failures to timely fill customer orders;
• changes in consumer preferences, willingness to purchase goods through catalogs or our website, weak
economic conditions and economic uncertainty, and unseasonal weather in key geographic markets;
• increases in software filters that may inhibit our ability to market our products through e-mail messages
to our customers and increases in consumer privacy concerns relating to the Internet;
• supply and delivery shortages or interruptions, including reduced service levels from the United States
Postal Service;
• changes in applicable federal and state regulation;
• breaches of our website security;
• failures in our website infrastructure or the failure of systems of third parties, such as telephone or
electric power service, resulting in website downtime, customer care center closures, or other problems;
• failures to properly design, print, and mail our catalogs in a timely manner;
• failures to introduce new product specific catalog titles;
• lower and less predictable response rates for catalogs sent to prospective customers;
• our inability to properly adjust the fixed costs of a catalog mailing to reflect subsequent sales of the
products marketed in the catalog; and
• increases in United States Postal Service rates, paper costs, and printing costs resulting in higher catalog
production costs and lower profits for our Direct business.
Any one or more of these factors could result in lower-than-expected revenue for our Direct business. These
factors could also result in increased costs, increased merchandise returns, slower turning inventories, inventory
write-downs, and working capital constraints. Any significant performance shortcomings experienced by our
Direct business could have a material adverse effect on our operating results and cash flows.