Cabela's weighs deal amid slumping sales
Hunting and fishing store chain Cabela's said Wednesday that it would weigh "strategic alternatives" — a process that often includes a potential sale or breakup — following slumping sales.
The move comes more than a month after hedge fund Elliott Management disclosed that it had acquired 11% of Cabela's, declared the retailer undervalued and called for the company to consider such a potential sale or reorganization.
Cabela's gave no details of what changes it might consider, saying only that it would weigh "a wide range" of options. Reuters reported in November that rival Bass Pro Shop has considered a bid for Cabela's.
Sales at Cabela's stores open at least a year — a figure often used to gauge a retailer's health — fell 4% in the third quarter. The company blamed the poor showing on its large-format "legacy stores" and a tepid performance for apparel and footwear.
Cabela's has been charting an aggressive shift from the large-format destination stores that often draw tourists and generate local development to smaller stores that are more nimble and require less capital investment.
The company, which had 64 stores at the end of 2014, had mapped out plans to eventually operate 225 stores in North America. But it recently said that it is reevaluating its plans for new-store openings beyond 2016 and has been shedding costs to help fund a $500 million share buyback program.
The arrival of activist investors from Elliott Management casts the retailer's future as an independent company in an uncertain light.
Elliott said in an Securities and Exchange Commission filing in October that it believed Cabela's shares were "significantly undervalued by the public market and represent an attractive investment opportunity" and that it would "engage in a constructive dialogue" to identify the best route.
Cabela's remains profitable despite recent struggles. Net income fell 14% in the third quarter to $50.3 million.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.