Savvy Trades and Investments

[abh3vt]

More evidence out today that SPWH competitors like Cabelas (CAB) had a really tough quarter. CAB reported and had the following comments:

https://finance.yahoo.com/news/cabelas-inc-announces-fourth-quarter-113000687.html

“We were clearly disappointed with the fourth quarter results,” said Tommy Millner, Cabela’s Chief Executive Officer. “Consistent with other retailers, we experienced challenging traffic patterns in the quarter. Our increase in average ticket was not enough to make up for a decrease in transactions. Similar to industry trends, we experienced strength in firearms and shooting-related categories primarily early in the quarter. Later in the quarter, firearms and shooting-related categories became challenging as we faced the headwind of lapping the impact that the San Bernardino tragedy had on these categories a year ago. We saw improved trends in apparel and other softgoods categories in the latter part of the quarter. We continue to be pleased with the performance and growth of our Cabela’s CLUB Visa program.”

For the quarter, consolidated comparable store sales decreased 6.5% and U.S. comparable store sales decreased 6.4% as compared to the same quarter a year ago. Comparable store sales strength in firearms and shooting-related categories through the first half of the quarter was more than offset by softness in these categories due to challenging comparisons from the year ago period.

Merchandise gross margin decreased by 118 basis points in the quarter to 32.2% compared to 33.3% in the same quarter a year ago. This decrease was primarily attributable to the impacts of merchandise mix, promotional activity, and efforts to right size inventory levels. The negative impact of merchandise mix was attributable to the first two months of the quarter with increased firearms and shooting-related category penetration and decreased penetration in apparel categories. This negative impact was slightly offset in the month of December with lower penetration of firearms and shooting-related categories and higher penetration of apparel categories. The overall merchandise mix impact was approximately 70 basis points of the overall decrease for the quarter. Promotional activity was responsible for approximately 30 basis points of the decrease and efforts to right size inventory levels were responsible for approximately 20 basis points of the overall decrease.

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Clearly the market is pricing in a big Q4 miss from SPWH. Short interest is around 15% of fds count. If they come in around 0.22 or so (meaning FY16 fd eps of 0.65) and can provide a bit of evidence of growth in FY17, then its cheap at current prices....but this could be a tough period ahead for SPWH as they get a lot of their revenue from hunting/gun sales. I could very easily see a flat forecast ahead because of some tough comps. On the flip side, they are a much smaller retailer than Cabelas and don't really compete in the same territories...so perhaps they have a better chance to grow their top line. Analyst estimates have been dropping slowly for next year, so it might be hard for it to get a decent multiple.