NEW YORK, N.Y. – Cabela’s says strong sales of guns and ammunition helped drive its profit up 73 per cent in the first quarter, surpassing expectations and briefly driving its shares to all-time highs on Thursday.
The retailer operates stores that sell gear for hunting, fishing and outdoor sports.
Consumer demand for firearms has surged in recent months on worries about the possibilities of increased regulation or bans of certain kinds of weapons in the wake of the December slayings of 20 first-graders and six adult staffers at the Sandy Hook Elementary School in Newtown, Conn.
The shooting stirred up debate over gun control. A bill to expand background checks for gun purchases was introduced in the Senate, which also fueled demand, even though the bill was voted down last week. In fact, guns and ammunitions have been tough to keep on store shelves.
Millner said Cabela’s has been able to keep up with demand better than others because it began diversifying its supplier base four years ago. But he added that supply is still tight, particularly in some categories such as 22-calibre ammunition. Demand shows no sign of slowing, he added.
“I think the honest answer is, I don’t know when it’s going to loosen up,” Millner said.
Sidney, Neb.-based Cabela’s Inc. said net income rose to $49.8 million, or 70 cents per share, in the January-March quarter, up from $28.8 million, or 40 cents per share, in the year-ago quarter. Analysts expected 59 cents per share, according to FactSet.
Revenue jumped 29 per cent to $802.5 million from $623.5 million last year. Analysts expected revenue of $770.5 million.
The results beat Cabela’s expectations as well. In March it said it expected earnings between 57 cents to 62 cents per share.
“First quarter results exceeded our expectations on every line of the income statement,” said CEO Tommy Millner. He said revenue in the second half of March was much stronger than expected. Particularly strong were sales of guns, and bullets, along with shoes and clothing, he said.
Excluding guns and bullets, revenue in stores open at least one year rose 9 per cent. During a call with analysts, Millner said that due to strong demand and tight supply of ammunition, the company is not going to report revenue in stores open at least one year that includes guns and ammunition until the demand “normalizes.”
Millner added Cabela’s stores continue to see strong new customer growth due to the high demand for guns.
“These new customers create a great opportunity for us to convert these individuals into long-term shoppers with our proven marketing and retention strategies,” he said.
Millner said he is “comfortable” with analyst estimates for the year. Analysts expect net income of $2.72 per share on revenue of $3.12 billion.
Shares rose $8.22, or 14.6 per cent, to $64.44 in afternoon trading, after earlier reaching an all-time high of $66.24. The stock had been up 35 per cent since the beginning of the year.