Anthony Salamone/The Morning Call – Cabela’s, the outdoor sporting goods chain known for its elaborate in-store wildlife displays, may be on the hunt for a buyer amid pressure from investors to boost profit.
But don’t panic, hunting and camping fans: It doesn’t mean the retailer’s destination-style megastore outside Hamburg, Berks County, will be closing any time soon, company and retail officials said.
The company, which already has been linked to a merger with rival Bass Pro Shops, has been under pressure since late October when the investment firm Elliott Management started pushing for money-generating maneuvers from Cabela’s, possibly the sale of its credit card unit or the entire company. Elliott owns a 6 percent stake in the company.
CEO Tommy Millner said in a statement Wednesday that Cabela’s is exploring potential strategic options to drive more value for shareholders, but there is no assurance the process will result in a sale.
Millner, who has led Cabela’s since 2009, said the company’s board maintains faith in its current strategy but will consider other options.
Cabela’s, which was co-founded by brothers Richard and Jim Cabela in 1961, grew primarily as a catalog business before expanding as a mega-retailer.
Making the move to online retailing was a natural, given the company’s catalog operations, but it has come at a price, said Neil Stern, a retail strategist at McMillanDoolittle LLP in Chicago.
“Even with the growth online,” Stern said, “if that’s taking traffic from the stores, you still have a problem.”
Consumers are seeing consolidation in the retail landscape as companies try to get bigger and establish efficiencies to ward off online competitors, and the trend is manifesting itself in major deals such as Walgreens’ acquisition of Rite Aid, Stern said.
“I think it’s happening in retail category after retail category,” Stern said.
The entire retail sporting goods sector has been under pressure for some time.
Shares of Dick’s Sporting Goods Inc., Hibbett Sports Inc. and Big 5 Sporting Goods Corp. are all down between 20 and 35 percent over the past year. In that regard, Cabela’s has fared better. Cabela’s shares are down 11 percent this year. But they’ve risen more than 18 percent in the last month on speculation of a buyout.
Stern said while Cabela’s revenue has been solid, its profitability has dipped recently, disappointing Wall Street. Its net income dropped by 14 percent during the third quarter to $50.3 million.
Cabela’s also has struggled amid soft demand for its gear, especially in footwear and apparel categories. In September, the company laid off 70 people, or about 4 percent of its corporate workforce, and said it planned to sell off unproductive assets.
Still, retail analyst Jeff Green said Cabela’s is not forced to put the company up for sale.
“It’s not a merge-or-die situation,” said Green, owner of Jeff Green Partners in Phoenix. “Strategic alternatives always mean it’s a way of letting the market know they could be interested [in exploring options].”
Privately held Bass Pro Shops, which is being courted to open a store near the Sands Casino Resort Bethlehem, is already reportedly mulling a bid to buy Cabela’s. Bass Pro is working with JPMorgan Chase to explore a bid, people familiar with the matter told Bloomberg last month. Private equity firms including KKR & Co., Hellman & Friedman and TPG Capital also may be interested in bidding for the company, the people said.
While there are differences between the retailers, both Bass Pro and Cabela’s operate large stores that offer a wide variety of clothing and other gear for hiking, fishing, hunting and other outdoor pastimes as well as attractions such as massive fish tanks, restaurants and shooting galleries.
Ron Reese, a spokesman for Las Vegas Sands Corp., which owns the Bethlehem Sands, did not respond to a request for comment. Alicia Miller Karner, Bethlehem’s community and economic development director, said she had no updates.
Las Vegas Sands is hoping to lure Bass Pro Shops to the former Bethlehem Steel No. 2 Machine Shop. In June, it launched a master planning process aimed at coming up with a unified vision for the 126 acres of former industrial land it controls on the city’s South Side.
Cabela’s opened its first Pennsylvania and East Coast store in September 2003 along Interstate 78 and Route 61 in Tilden Township, near Hamburg. It has nearly 400 employees, spokesman Nathan Borowski said.
He said the company has 80 stores in North America and plans to open seven more in 2016.
Cabela’s shares closed up 2 percent to $47.89 Wednesday.