Cabela’s 4Q15 Earnings Call Notes

Thomas L. Millner – Chief Executive Officer & Director

Exploring strategic alternatives

“I would like to begin by reminding everyone that we issued a press release in December announcing that our board had initiated a process to explore strategic alternatives.”

Apparel hurt by weather

“Throughout the quarter, we saw softness in our apparel categories, as our fall and winter assortments were met with unseasonably warm weather across most of our major markets. ”

Sales cadence has been better since December

“Well, the cadence during the quarter, the first two months of the quarter were tough, obviously weather driven, and we saw a real nice improvement in December. And those December trends have continued into the first quarter. We’ve seen acceleration in comp performance and gross profit dollar performance. Rate is better and we continue to see really favorable improvement in operating expenses.”

Ralph W. Castner – Executive Vice President & Chief Financial Officer

Saw a shift in trend in delinquencies in credit card portfolio

“For the quarter, average credit card loans increased by 14.4% to approximately $4.8 billion. And at the end of the year, total loans exceeded $5 billion for the first time in history. Net charge-offs as a percentage of average credit card loans increased 2 basis points from the year-ago quarter and were 1.76% for the quarter.

During the quarter, we saw a shift in the trends in delinquencies. Greater than 30-day delinquencies were 0.82% as compared to 0.68% a year ago, greater than 60-day delinquencies were 0.51% as compared to 0.41% a year ago, and greater than 90-day delinquencies were 0.26% as compared to 0.22% a year ago.”

We think we’ve reached the trough of charge offs

” we’re certainly not alarmed by it, but we think we’ve reached the trough of charge-offs and we expect them to go up. I don’t know, as I’ve told other people forever, the historic range of charge-offs at our bank has been somewhere between 2% and 2.25% and we think over a number of years we’re going to return to that range.”

Only 3% of card spend is in their stores

“remember, on our card, only about 3% of the spend is in our stores. So there’s almost no correlation (59:55) comp store sales and average balance on the card.”

Outstanding balances keep going up and up and up

“Now another phenomenon that we’re seeing and watching very closely is revolving rate keeps going up. Now that also increases as an account matures, but we’ve been surprised, I guess, as to that how that continues to go up and up and up. We’re watching it closely to make sure that it’s not an early indicator of bad debts or delinquencies or some other problems we’re seeing in the portfolio. But the trends in that business from a receivable standpoint are extraordinarily strong and we expect them to continue for the foreseeable future.”