Cabela's 2013 Annual Report Download - page 41

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31
• Grow Profitably and Sustainably. Through sustaining and adapting our culture, we will continuously
seek ways to improve profitability and increase revenue in all business segments.
• Enhance Technology Capability. We will implement a strategic technology road map, streamline our
systems, and accelerate customer-facing technologies.
• Simplify Our Business. As we focus on our priorities, we will align our goals to foster collaboration and
streamline cross-functional processes.
• Improve Marketing Effectiveness. We will optimize all marketing channels and expand our digital and
e-commerce capabilities while continuing to strengthen the Cabela’s brand.
Improvements in these areas have led to an increase in our return on invested capital, an important measure
of how effectively we have deployed capital in our operations in generating cash flows. Increases in our return on
invested capital, on an after-tax basis, indicate improvements in our use of capital, thereby creating value in our
Company.
We offer our customers integrated opportunities to access and use our retail store, website, and catalog
channels. Our in-store pick-up program allows customers to order products through our catalogs, website, and store
kiosks and have them delivered to the retail store of their choice without incurring shipping costs, thereby helping
to increase foot traffic in our stores. Conversely, our expanding retail stores introduce customers to our website
and catalog channels. We are capitalizing on our omni-channel model by building on the strengths of each channel,
primarily through improvements in our merchandise planning system. This system, along with our replenishment
system, allows us to identify the correct product mix in each of our retail stores, maintain the proper inventory
levels to satisfy customer demand in both our Retail and Direct business channels, and improve our distribution
efficiencies. In 2013, we continued to enhance our omni-channel efforts through greater use of digital marketing,
the limited roll out of omni-channel fulfillment, and the improvements to our mobile platform.
We continue to work with vendors to negotiate the best prices on products and to manage inventory levels,
as well as to ensure vendors deliver all products and services as expected. Our efforts continue in detailed
pre-season planning, in-season monitoring of sales, and management of inventory to focus product assortments
on our core customer base. As a result, our merchandise gross margin as a percentage of merchandise revenue
increased 50 basis points to 36.8% in 2013 compared to 36.3% in 2012. These increases were primarily attributable
to improved in-season and pre-season merchandise inventory planning, improvements in vendor collaboration,
an ongoing focus on private label products, and improvements in price optimization to ensure we are optimizing
markdowns. The increases in our merchandise gross profit as a percentage of merchandise sales were partially
offset by an adverse product mix shift due to increased sales of firearms and ammunition, which carry a lower
margin.
We have improved our retail store merchandising processes, information technology systems, and distribution
and logistics capabilities. We have also improved our visual merchandising within the stores and coordinated
merchandise at our stores by adding more regional product assortments. Our outfitters also benefited through the
launch of our new retail product information application which is available via hand held devices. This provides
quick and convenient access to product information, allowing outfitters to be more efficient and engaging with
customers. In addition, to enhance customer service at our retail stores, we have continued our management
training and mentoring programs for our retail store managers.
Comparing Retail segment results for 2013 to 2012:
• operating income increased $83 million, or 24.1%,
• operating income as a percentage of Retail segment revenue increased 50 basis points to 19.2%, and
• comparable store sales increased 3.9%.
Our Retail business segment currently consists of 50 stores, including the seven next-generation stores
and the three Outpost stores that we opened in 2013. The new store formats are more productive and generate
higher returns which will help to increase our return on invested capital. Our total retail store square footage at