Allison Ham 1

Cabela’s World’s Foremost Outfitter Company Analysis Allison Ham

Financial Assessment Project, PRT 595 December 8, 2015

Allison Ham 2

Table of Contents Executive Summary…………………………………………………………………………3 Company Profile……………………………………………………………………………..4 Economic Issues…………………………………………………………………………….5 Revenue and Expenditure Summary……………………………………………………...6 Assets and Liabilities Summary…………………………………………………………....8 Financial Analysis and Ratios……………………………………………………………...9 Future Trends……………………………………………………………………………….11 Appendix…………………………………………………………………………………….13

Balance Sheet…..…………………………13 Income Statement ………………………..14 Cash Flow Sheet…………………………..15

Key Financial Ratios………………………16

References…………………………………17

Allison Ham 3

Executive summary

Cabela’s ending revenue for the 2014 fiscal year was $3,647,650. This is profit

increase of $48 million, or 1.3% over 2013. Cabela has the company essentially split into

two different profit making sections, or as they call it, business; retail and direct. Cabela’s

retail business is through retail store locations. In 2014 Cabela operated 64 retail stores

resulting in $2.4billion, which was 73.4% of total revenue. This includes the opening of 14

new retail locations in 2014 throughout the United States and Canada. Cabela’s direct

business section, which includes their two websites and catalogs, generated $852 million

which was 26.6% of the total revenue. Although there was a higher revenue in 2014 it is

important to note that the sales of total merchandise decreased by $5million when

compared to 2013. Additionally, again while 2014 saw a continued increase in revenue the

overall quarterly averages for the Cabela’s stocks where lower for 2014 when compared to

2013. Per the New York Stock Exchange, Cabela’s stocks, on average for the year, sold

$2.42 lower for 2014 than 2013 (2013 averaged: $69.83, 2014 averaged: $66.83)

Cabela has a number of strengths as a company. Cabela’s philosophy is to ensure

customer satisfaction, 100 percent. Their effort to achieve this goal was recognized when

Cabela was ranked as the highest in overall customer satisfaction according to JD Power

and Associates. Their customer satisfaction is due to helpful and friendly staff, exclusive

branding and fairly competitive merchandise prices, many incorporated sales/promotions as

well as clean and organized stores. Another strength includes Cabela’s capability to allow

their customers to make through multiple ways including in the store, online, through their

catalog and via mobile application. Cabela also offers their own credit card to purchase

items with competitive interest rates. In 2013 a new format store was introduced and it

performed 40-50% better than legacy stores in both sales and profit.

There are a few weakness of Cabela’s as well. While Cabela points out many risk

factors they could face on their annual financial report there was not a strategic plan

addressing these risk factors. Other weaknesses include having less physical locations than

most of their competitors. For example, Bass Pro, LLC has 85 stores in the US and Canada,

compared to Cabela’s 64. However, Cabela is currently expanding and has continued plans

to expand in the near future. A third weakness for Cabela is the higher prices on their

products due to branding. Currently Cabela has more than 200 brands trademarked. Cabela

justifies this by stating that they “feel compelled to offer quality brand to our customers” thus

the branding in order to compete with other premium brands in the marketplace.

Allison Ham 4

Cabela’s Company Profile Mission Statement

“As the World's Foremost Outfitter, we are dedicated to providing safe products of exceptional quality to our customers.” Objectives

“The Company's primary objective is to maximize stockholder value while adhering to the laws of the jurisdictions wherein it operates and at all times observing high ethical standards.”

-Focus on the Customer-Combine outdoor expertise, product knowledge and understanding of core customers to drive customer loyalty. Improve customer experiences-every customer, every interaction, every day. -Improve Merchandise Performance-Continue to increase margins through optimization of current capabilities and product assortments as well as improving speed to market for new and innovative Cabela’s branded product. -Retail Profitability-Continue to increase retail profitability with improved customer experience drive by great outfitter training and development combined with a sharp focus on continuous improvement. -Retail Store Expansion-Capitalize on competitive opportunity to increase market share through acceleration of square footage growth using both “Next-Generation” stores and “Outpost” store formats. -Direct Channel Growth-Grow Direct business by expanding internet commerce and content along with capitalizing on growth opportunities in digital, mobile and social marketing.

History of Cabela’s The World’s Foremost Outfitters

Cabela’s was founded in 1961 and managed at the kitchen table of the owners, Dick & Mary Cabela. Their company quickly grew to what is now worth $2.6 billion and serves 50 states, 125 countries and has with over 225,000 SKUs.

Timeline

1961-Cabela founded by Dick and Mary Cabela who ran the company from the kitchen table by placing advertisements for fishing flies in national outdoor magazines. 1963-First catalog mailed to customers 1969-Sales topped $1 million 1970’s-Cabela settles headquarters in Sidney, Nebraska 1979-Cabela ends the year with $13 million in revenue; grows as a catalog business 1991-Cabela’s opens their first catalog showroom 1994-The Visa Club/Reward program is created 1998-Cabela launches its website, cabelas.com 2004-Cabela goes public on NYSE 2014-Cabela Co-Founder Dick Cabela passes away

Allison Ham 5

Economic issues

While overall the economy was on the rise in 2014 after the recent recession, Russ

Koesterich, CFA demonstrates in his article “Low Consumer Spending is Affecting Retailers’

top lines” that most American’s are choosing to save their money rather than spending it

(2014). The growth in retail sales was barely rising 0.2% a month (Koesterich, 2014).

However, consumer spending continues to be on a steady rise which will continue to

stimulate the economy and promote growth.

The re-election of President Barack Obama appeared to have a direct correlation

with a decrease in the purchase of firearms and ammunition for Cabela during 2014

according the Shelly Banjo in her article in the Wall Street Journal, “Cabela’s Hit by Slowing

Gun Sales” (2014). This was a change from when President Obama was elected in 2012,

alongside recent mass shootings, in which purchases of firearms increased so dramatically

that retailers had difficulty keeping up with the demand. Cabela reported a decrease of 50%

in sales, when compared to 2013, of firearms and ammunition during the first few months of

the year (Banjo, 2014). Firearms and ammunition are a part of the Hunting division of sales

for Cabela. In 2014 this division made up 47.1% of revenue for Cabela’s, with General

Outdoors bringing in 29.6% and Clothing and Footwear bringing in 23.3% (Cabela’s 2014

Annual Report). While there was a decrease in firearms and ammunition purchases overall

for the year the hunting division still brought in the most revenue. This trickled down to other

parts of Cabela’s retail divisions, resulting in a drop of 5% for store transactions (Banjo,

2014).

According to NOAA’s National Climatic Data Center the 2013-2014 winter was the

coldest period for 48 states as a whole since 1895 (weather.com). Many other retailers,

such as Wal-Mart, saw a decrease in sales and customers in their store due to bad weather

(Banjo, 2014). However, Cabela reported an increase in purchases of clothing and footwear

during these cold months of the year and appeared to fair well.

Allison Ham 6

Revenue and Expenditure summary Provided are two charts to demonstrate Cabela’s revenue and expenditures for

the year of 2014. Chart A is a pie chart that easily shows that Cabela’s revenue is

greater than their expenditures by $1,587,361. Chart B is a bar graph that provides the

financial information of Cabela’s revenue and expenditures on a quarterly basis for 2014.

Chart B demonstrates the trend that Cabela experienced in which revenues remained

well above their quarterly expenditures. As expenses increased so did Cabela’s

revenue. The average revenue for the 2014 fiscal year was $911,757 while the average

expense was $83,849. Cabela was able to remain in the black throughout the 2014 year.

There is a significant increase in revenue during the fourth quarter. This is more than

likely due to the holiday shopping that occurs in the world of retail during the months of

November and December.

Chart A

2014 Revenue & Expenditure

Revenue ($3,647,650)

Expenditure ($2,060,289)

Allison Ham 7

Chart B

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

Revenue $725,823 $761,201 $886,002 $1,274,000

Expenses $40,853 $71,991 $93,915 $128,636

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

Do

llar

Am

ou

nt

Allison Ham 8

Assets and Liabilities summary

The following graph demonstrates Cabela’s assets and liabilities over a three

year period (2012, 2013, and 2014). For all three years Cabela’s assets just outweigh

their liabilities by an average of $1,599,941 annually. This can be perceived as a positive

for the company in their efforts to avoid overwhelming debt. While both of Cabela’s

assets and liabilities continue to grow with each year, the growth of their liabilities is at a

lower rate than their assets. Cabela has been able to follow the upward trend of the

economic regrowth in retail services. Liability growth can be contributed to the opening

of an average of twelve stores a year. This trend will continue as Cabela has current

plans to continue to open specified stores throughout the United States and Canada

over the next three years with a continued average of twelve store openings a year.

2012 2013 2014

Assets $5,748,163 $6,396,864 $7,675,317

Liabilities $4,372,184 $4,790,530 $5,857,807

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000

Am

ou

nt

Assets & Liabilities

Allison Ham 9

Financial Analysis Current Ratio Current ratios are the important measure of liquidly because short term liabilities are due within the next year and current assets can easily be converted into cash in the short term. The high ratio that Cabela reflects in the ratio formulas below show that they would be more easily able to pay current liabilities without selling off their long term assets. Current Ratio=Current Assets/Current Liabilities 2012 = $4,589,028 / $1,429,350 = 3.21 321% 2013 = $4,986,512 / $1,112,780 = 4.48 448% 2014 = $5,937,672 / $2,121,040 = 2.80 280%

Total Debt Ratio Cabela, overall, has remained consistent with their debt ratio over a three year period. Cabela’s has steadily gained both assets and liabilities at an equal ratio in all three years. It appears that they are not paying off any debt per say, but rather are adding more liability each year. This can be contributed to the opening of an average of twelve stores each year. Cabela’s trend in increased liabilities will most likely continue due to their plans to open additional stores in the following years.

Debt Ratio=Total Liabilities/Total Assets 2012 = $4,372,184 /$5,748,163 = 0.7606 =76% 2013 = $4,790,530 / $6,396,864 = 0.7488 = 75% 2014 = $5,857,807 / $7,675,317 = 0.7632 = 76%

Allison Ham 10

Receivables Turnover Cabela’s receivables turnover rations reflect that they on average take about five days to collect on credit sales. Their last year, 2014, has been their highest yet in collecting on credit sales. Accounts Receivable Turnover= Net Sales/Accounts Receivable 2012= $3,112,682 /$46,081 = 67 times 365 days/67 times = 5 days 2013= $3,599,577/ $42,868 =84 times 365 days/84 times=4 days

2014 = $3,647,650/ $62,358 = 58 times 365 days/58 times= 6 days

Profit Margin Cabela’s profit margin has maintained at 6% over the past three years. While some industries may view this as a low profit margin it is higher than the average general retail industry which is set around 2.67% according to Stern New York University. Cabela’s high expenditures are relative to their revenue. The big change in net income can most likely be contributed to the opening of new stores each year. Profit Margin = Net Income / Net Sales (revenue) 2012= $173,513 / $3,112,682 = 0.055 = 6% 2013 = $224,390 / $3,599,577 = 0.062 = 6%

2014 = $201,715 / $3,647,650 = 0.055 = 6%

Allison Ham 11

Future Trends

Although Cabela did see some losses in 2014 in one of their most money making

divisions, Hunting, and they incurred more liabilities from the opening of 12 stores they

continue bring in a stable profit margin. Cabela has a strong governing management in

place along with an established model that has proven to be profitable since they were

established in 1961. Their 100% customer satisfaction philosophy continues to bring back

customer time and time again. Customers appear to be more loyal to Cabela due to their

branding and quality products. Although some of their prices may be a little higher than their

competitors, again loyalty and quality products play a big part in their customers’ willingness

to pay a higher amount. Cabela has attempted to help offset some of these costs through

frequent sales. Another rewards system has been implemented through Cabela’s credit card

services. This service has been operating for a few years and appears to be going well for

Cabela. Although they had a small set back in 2013 due to fraudulent charges they were

able to quickly address the security breach and move forward. A word of caution should be

heeded for Cabela to ensure that they are continually updating their security measures to

ensure the security of their customers credit/credit card. With continued updated technology

and hackers in the world there are regular breaches to larger chain retailers such as Target.

To many breaches or to great of a breach will not only affect Cabela’s revenue for credit

income but could also affect them even longer term with loss of customers.

When compared to other large retail stores, such as Bass Pro Shop, Cabela’s can be

perceived as behind in the number of operating retail stores. However, in my opinion,

Cabela has a good business plan in place to expand the number of stores that they have at

a slow and steady pace of opening about 13 stores annually across the United States and

Canada. This steady pace will help to promote continued growth with the company while

helping to maintain liabilities at a manageable level. Additionally, with their change in their

store format in 2013 demonstrates Cabela’s ability to make changes as needed to continue

to make their stores enticing to their customers.

As the economy is working its way out of a recession and Americans are starting to

fuel the economy once again through their purchases Cabela, and other retail stores, will be

able to capitalize the growing economy. Cabela has forecasted a continued growth over the

next few years if the economy continues to grow at its current or better rate. I would agree

with their assessment. Cabela has been around for 54 years and has proven themselves

year after year with sticking to their original mission and keeping their customers and

Allison Ham 12

employees happy. Cabela has demonstrated their ability to change with the trends of the

market and their returning customers making them a sound company to remain profitable

and viable for many years to come.

Allison Ham 13

Appendix Balance Sheet

Allison Ham 14

Income Statement

Allison Ham 15

Cash Flow Sheet

Allison Ham 16

Financial Ratios Sheet

Allison Ham 17

References Branjo, Shelly. 2014. Cabela’s Hit by Slowing Gun Sales. Wall Street Journal. Retrieved from: http://www.wsj.com/articles/SB10001424052702304703804579381322480816640 Cabela’s 2014 Annual Report. Retrieved from: file:///C:/Users/scyoung/Downloads/Annual%20Report%20Bookmarked%20(3).pdf Cabela’s Home Website. Retrieved from: http://phx.corporate-ir.net/phoenix.zhtml?c=177739&p=irol-irhome Koesterich, Russ. 2014. Low Consumer Spending is Affecting Retailers’ Top Lines. Market Realist. Retrieved from: http://marketrealist.com/2014/12/low-consumer-spending-affecting-top-line-retailers/ http://www.jdpower.com/press-releases/2013-sporting-goods-retailer-satisfaction-report http://www.weather.com/news/news/winter-ncdc-state-climate-report-2013-2014-20140313 http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html