Cabela's 2013 Annual Report Download - page 3

Letter To Shareholders
Dear Cabela’s Shareholders:
The year 2013 provided substantial growth and record
results for Cabela’s, a testament to the passion and
dedication of our Outfitters and the Core Values passed
down through the legacy of our founders. These Core
Values make up the foundation upon which the future of
our company will be built.
We must begin this report on a sad note. Our co-founder,
Dick Cabela, passed away in Sidney Feb. 17 surrounded
by his family at the home he loved. Dick was an
extraordinary businessman, leader, and family man who
pursued a dream, taking, as he said, “baby steps” and
assuring, first and foremost, customers and employees
were treated fairly. In the process, he raised two families
– his and Mary’s sons and daughters and the Cabela’s
family of Outfitters who continue to grow his legacy. Our
heritage, created by Dick, Mary, and Jim Cabela, is the
foundation of our success and the path to take us to
even greater heights in the future.
Adjusted total revenue grew to $3.6 billion in 2013, a
15% increase from 2012. Return on invested capital
grew 20 basis points to 16.1%, and earnings per
diluted share increased 22.1% to $3.32, after certain
non-GAAP adjustments. These strong improvements
were made possible as a result of the exceptional
performance of our new retail stores, which exceeded
$500 in sales per square foot for 2013. For the year,
comparable store sales increased 3.9%, representing
the fifth consecutive year of growth. Our Direct business
showed significant improvement during the year with
revenue growth of 4.6%, representing the first year
of revenue growth in six years. We also grew both
merchandise and adjusted operating margins in 2013 to
36.8% and 10.1%, respectively. Our ability to continually
grow these metrics as we aggressively expand our
retail store footprint continues to provide substantial
shareholder value.
Our record performance in 2013 is a result of our
Outfitters’ commitment to living our culture and
providing our customers with legendary customer
service. The culture upon which Dick, Mary, and Jim
Cabela built our company continues to influence the
success of our business each and every day. This
culture of cherishing and delighting our customers,
enjoying the outdoors, respecting each other, celebrating
success, acting with integrity and honesty, and
continually improving has been and will continue to be
the backbone of our company.
Return on Invested Capital
As previously mentioned, return on invested capital
continues to be a meaningful performance metric for
our company. We have improved return on invested
capital by 660 basis points over the past five years,
from 9.5% to 16.1%. The year 2013 represents the fifth
consecutive year of increased return on invested capital.
There are many drivers of the increase in return on
capital, most notably, the improved performance in our
retail segment and strong results in our CLUB program.
Improvements in our legacy store base and strong new
store performance led to a 70 basis point increase in
adjusted retail profitability. New format stores performed
between 40% to 50% better than our legacy store base
in both sales and profit per square foot. As we continue
to expand our retail footprint at a rate of approximately
one million square feet per year, these new stores will
continue to drive strong returns.
Additionally, we were able to grow merchandise gross
margin by 50 basis points, which made a significant
contribution to increased return on invested capital.
Although we took the opportunity to make significant
investments in our company during 2013, we were able
to grow operating income by improving gross margin
and leveraging expenses for the year.