What little winter we had is over and the sun is returning to the skies. When spring arrives, consumers rejoice and head outdoors again. They begin preparing for camping trips, fishing, boating and all sorts of outside activities. Consumers go into shopping overdrive as they begin to gather up all the accessories they will need on their trips. Cabelas sales reps are waiting with open arms. The low gasoline prices will allow for more outdoor trips and more money to spend in Cabelas.
NEW DIRECTIONAL CALL PLAYS
CAB - Cabellas - Company Description
Cabelas is a specialty retailer and direct marketer of hunting, fishing, campiny and related outdoor merchandise. They operate more than 77 retail stores and a large e-commerce website along with direct mail catalogs. They also have a very profitable financial services segment offering a Cabelas Club Visa credit card.
The company has expanded profitability by moving most of its merchandise to its private label brand. Instead of being North Face, Coleman, Redwing, etc, everything is manufactured and sold using the Cabelas label.
Cabelas reported Q4 adjusted earnings of $1.26 that beat estimates for $1.22 per share. Revenue of $1.41 billion also beat estimates for $1.36 billion. Full year revenue was $4 billion and earnings of $2.67.
Merchandise sales rose +10.1% and retail store revenues rose +14.3%. same store sales comps rose only 4.9% because of the unusually warm weather that depressed the sale of cold weather clothing. Financial services revenue rose +15.7% with a 21.3% increase in interest collected. The number of active Visa accounts rose +14.4%.
The company guided for revenues to rise at a high single digit rate with earnings per share to grow in low double digits.
Cabelas shares from a low of $39 in the February dip to close at $48.40 today. I know that is a 25% jump in three weeks but I believe there is more to come. Shares are facing resistance at $48.75 but a breakout there could return to the March 2015 highs around $58. I recommend we position ourselves for the potential breakout.
Earnings are May 21st.
With a CAB trade at $49.05
Buy April $50 call, currently $1.95, initial stop loss $45.25
NEW DIRECTIONAL PUT PLAYS
No New Bearish Plays