Foolish Forecast: Calling a Cab for Cabela's

Sporting goods outfitter and retailer Cabela's (NYSE: CAB) will report first-quarter financial results today after the market's close. Should we hail the cab again and take another ride with Cabela's?

What analysts say:

Buy, sell, or waffle? Of the 11 analysts covering the Motley Fool Hidden Gems recommendation, nine rate it a hold and the other two are split on whether to buy or sell.Revenues. Sales are expected to grow at a healthy 16% clip, rising to $534.6 million, but that will be on a store base that's 37% greater than last year.Earnings. The more difficult retail environment will show up instead in the profit estimates, which call for earnings to drop 55% to just $0.05 per share.

What management says:
Cabela's is known for its carnival-like stores, with mini-mountains and stuffed animal museums. Those big footprint stores -- as big as 247,000 square feet, but generally in the 150,000-square-foot range -- have become expensive showcases these days. Plans are for most new stores to be smaller in size, about 80,000 to 125,000 square feet. With a smaller base, expect to see lower sales growth going forward too.

Yet Cabela's isn't alone in the lower-growth forecast. Both Dick's Sporting Goods (NYSE: DKS) and Big 5 Sporting Goods (Nasdaq: BGFV) are expected to post lower-than-usual results. Dick's has been using the power of acquisitions to beat expectations lately.

What management does:
The changed economy has brought Cabela's store expansion to a halt. They opened eight new stores in the fourth quarter of 2007, but the specialty retailer plans to open only two stores for all of 2008. Yet while the broadening footprint will be smaller and slower, Cabela's should realize a few benefits from this. Both pre-opening expenses and capital expenditures will be significantly below last year's results.

On the other hand, inventory was up 25.5% in the fourth quarter: Did the sporting goods retailer have to offer discounts to get those items down to a more manageable level? Or did the "micro-seasons" management alluded to -- hunting for elk, for example -- help to thin the ranks?

Margin	12/06	03/07	06/07	09/07	12/07
Gross	41.6%	41.5%	41.8%	41.9%	41.3%
Operating	7.0%	6.7%	6.8%	6.5%	6.4%
Net	4.2%	4.0%	4.0%	3.8%	3.7%

One Fool says:
Cabela's is simply another victim of the weak retail environment. As the Fed has cut interest rates and continued its easy money policies, food and fuel prices have maintained their upward trajectory. That has led consumers to cut back on their discretionary spending leading to Cabela's, Dick's, and other retailers waiting for better times. That's left big box discounters like Wal-Mart (NYSE: WMT) benefiting as consumers try to get the biggest bang for the buck.

Cabela's has tried to counter that by locating its stores in more urban areas to cut the distance a customer has to drive to get to a store. Instead it's found that in doing so it has opened itself to the travails of what every urban commuter is familiar with: traffic. In the current economic situation, an investor would be better off sticking with mass transit instead of hitching a ride with Cabela's.