Cabela's 2014 Annual Report Download - page 42

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32
Our merchandise gross profit decreased $37 million, or 3.1%, to $1.1 billion in 2014 compared to 2013
primarily due to a decrease in sales of firearms and ammunition. Our merchandise gross profit as a percentage
of merchandise sales decreased 110 basis points to 35.7% in 2014 from 36.8% in 2013 primarily due to increased
sales discounts and markdowns, which had an impact of approximately 70 basis points, and to an adjustment in
the presentation of reimbursement between segments for certain promotional costs totaling $15 million for 2014,
which had an impact of approximately 50 basis points. The effect of this reimbursement adjustment resulted in an
increase in Financial Services revenue and an increase in merchandise cost of sales by the same amount.
Retail segment results for 2014 compared to 2013 were as follows:
x revenue increased $117 million, or 5.3%;
x operating income decreased $11 million, or 2.5%;
x operating income as a percentage of Retail segment revenue decreased 140 basis points to 17.8%; and
x comparable store sales decreased 12.3%.
Our Retail business segment currently consists of 64 stores, including the 14 new format stores that we
opened in 2014. Our new format stores are more productive and generate higher sales per square foot and higher
returns compared to our legacy stores, which will help to increase our return on invested capital. It is expected
that the planned openings of future stores will continue to generate a higher profit per square foot compared to
the legacy store base. With this strong new store performance, retail store expansion remains on track with plans
to increase retail square footage approximately one million square feet annually over the next several years. Our
total retail store square footage at the end of 2014 was 6.9 million square feet, an increase of 17% compared to the
end of 2013.
For 2015, we have announced plans to open 13 stores with over one million square feet of retail space.
This equates to approximately 15% square footage growth over 2014. These new format retail stores are
located as follows:
x Berlin, Massachusetts; Fort Mill, South Carolina; Sun Prairie, Wisconsin; Garner, North Carolina;
Fort Oglethorpe, Georgia; Ammon, Idaho; Moncton, New Brunswick, Canada; Noblesville, Indiana;
West Chester, Ohio; Oklahoma City, Oklahoma; Huntsville, Alabama; Bristol, Virginia; and Calgary,
Alberta, Canada.
Beyond 2015, as we continue our pace of new store openings, we expect to see more stores in smaller
markets. The following communities have been announced as new store locations beyond 2015:
x Short Pump, Virginia; Lexington, Kentucky; Woodbury, New York; League City, Texas; Ottawa,
Ontario, Canada; Farmington, Utah; and Gainesville, Virginia.
We are building a 600,000 square foot distribution center in Tooele, Utah, to support our growth. We
expect to have this distribution center operational by July 2015. In August 2013, we leased a 325,000 square foot
distribution center in Tooele, Utah, that we anticipate will be in use through the opening of the new distribution
center currently under construction.
We continue to improve our customers’ digital shopping experiences on Cabelas.com and via mobile devices
as we strive to provide a best-in-class level of service to our customers. Our marketing focus continues to be on
developing a seamless omni-channel experience for our customers regardless of their transaction channel. Our
digital transformation continues with efforts around enhancing our website to support the Direct business. The
amount of traffic coming through mobile devices is growing significantly. As a result, we continue to utilize best-
in-class technology to improve our customers’ digital shopping experiences and build on the advances we have
made to capitalize on the variety of ways customers are shopping at Cabela’s today, including a new simplified
checkout that was implemented across all device platforms in the fourth quarter of 2014. We have seen successes
in our social marketing initiatives and now have over 3.4 million fans on Facebook. Our omni-channel marketing
efforts and retail expansion have resulted in an increase in the number of new customers, as well as in customer
engagement with a consistent experience across all channels.