Cabela's Casts Into Deeper Waters

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It's been a trophy year for hunting and fishing outfitter Cabela's.

On June 24, the Sydney, NE, company issued its initial public offering and raised a higher-than-expected $115.2 million. On Aug. 20, its 10th retail store opened in Wheeling, WV, with former NFL players on hand to draw attention to the event. The company this year also announced the publication of five new catalogs and posted first-half sales of $593.1 million, up 16 percent from 2003.

The new catalogs are Women's Spring Clothing Catalog; Home & Cabin -- Spring Edition; Home & Cabin -- Fall Edition; Children's Clothing and Footwear Catalog and a Special Limited Spring Edition, which was hardbound and had 1,480 pages.

"I would describe the new catalog titles as trying to get a greater percent wallet share of our existing customers," chief financial officer Ralph Castner said.

The average Cabela's customer is a man ages 25-65. About 44 percent have an annual household income of $50,000 to $100,000.

The Children's Clothing and Footwear Catalog, which mailed the week of Aug. 16, marks the first book dedicated to children's merchandise. This category previously had been included in Cabela's general catalogs.

But as Cabela's evolves into a multichannel merchant, direct sales contribute less of a percentage of the company's revenue. Direct sales constituted 62.7 percent of revenue for the six months ended July 3, but were 68.7 percent of the total for the year-ago period, according to Cabela's Form 10-Q SEC filing Aug. 13.

"Retail and financial services will continue to grow at a much greater rate than direct," Castner said. "This will result in direct being a smaller percent of the consolidated business over time."

The public offering will have little effect on daily operations, he said. Taking Cabela's public "provided us with greater access to capital," but it won't change the company's plans.

"We're moving more and more toward being a multichannel operation, and we're not going to change that direction at all," he said.

Though Cabela's will continue opening stores, with two planned next year in Texas and one in Utah, it won't ignore direct marketing. Cabela's typically opens destination retail stores that have 35,000 to 250,000 square feet. With museum-quality taxidermy, virtual shooting arcades and ponds stocked with local fish, they are often tourist destinations.

"We believe our catalogs are the best advertising that the retail business has," Castner said. Cabela's mailed nearly 104 million catalogs across 60 titles in 2003, and Castner said the large circulation provides an advantage when the company opens new stores.

"People know who Cabela's is even before we get there," he said.

The company usually blankets the area near a new store with catalogs. Once the outlet opens, catalog sales drop as much as 10 percent within 150 miles of the new location, but return to historical growth rates after 18 months, Castner said.

Direct revenue totaled $372 million for the six months ended July 3, compared with $352 million for the year-ago period, according to the SEC filing. Cabela's surveyed its customers, and 95 percent of those who responded expressed a desire to continue receiving the catalog.

Along with its stores, catalog and Web operations, Cabela's has a Visa card division and produces a TV show on the Outdoor Life Network as well as a newsstand magazine published six times annually.


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