Sales growth in guns and ammunition contributed to a strong third quarter for Sidney, Neb.-based Cabela's Inc., and firearms sales could climb further if President Obama is re-elected, CEO Tommy Millner said Thursday.
“If the president is re-elected, I would expect some surge beyond current levels, which are really good,” he said. “If Gov. Romney is elected, I still think we're going to see gun growth next year. It probably won't be at the same pace.”
Millner on Thursday said economic uncertainty had stimulated gun sales, something he said would continue in 2013 regardless of the outcome of the presidential election. In September, company officials told the Wall Street Journal that gun sales are up because buyers fear the Obama administration would push policies to make buying a gun more difficult.
However, Obama's campaign told the Journal that his record “makes clear that he supports and respects the Second Amendment and the tradition of gun ownership in this country.” Obama and Romney both have said the real need is for the government to enforce gun laws already on the books, according to a recent Associated Press analysis of growing gun sales.
Millner also noted an increase in the number of people who hunt, especially women and youth. “The shooting sports are actually growing and vibrant,” reversing a 25-year decline, he said.
Firearms made up a significant portion of same-store sales growth in the third quarter. Cabela's said sales at locations open at least a year rose 3.9 percent. Excluding firearms, comparable store sales rose only 1.6 percent.
To respond to anticipated demand, Cabela's is more aggressively stocking firearms-related inventory going into the fourth quarter. In addition, Millner said, “We're doing a lot of stuff in our stores to make sure we are the easiest, fastest place to shop for your firearms purchases.”
Millner said firearms have lower margins than other product categories and accelerating gun sales means shoppers have less to spend on other merchandise. “Unfortunately they have a limit to how much of their money we can relieve them of.”
The company's net income rose 28 percent in the third quarter, Cabela's reported Thursday, as the outdoor sporting goods retailer's new, smaller store formats outperformed its more cavernous stores.
Total revenue was short of Wall Street expectations, however, and the company said direct sales fell as a result of weaker demand for clothing and footwear.
Cabela's also noted that its free shipping offer hurt results. The company said it responded to the decline in September by boosting advertising and is seeing improved results for the current quarter. Cabela's said the increased advertising will continue through the holiday season.
The company also said that it plans to accelerate expansion as a result of the strong performance of its new stores, and all new locations will follow the smaller “next generation” format.
Millner said the company now expects to open eight of the new smaller stores in 2014. Three had previously been announced.
The new format, which ranges from about 80,000 square feet to 125,000 square feet, is designed to fit more easily in areas where other retailers are located, such as strip malls. By comparison, the legacy stores are as large as about 250,000 square feet.
For the three months ended Sept. 29, the company earned $42.8 million, or 60 cents per share. That's compared with $33.3 million, or 47 cents per share, in the year-ago period.
This report includes material from The Associated Press.