SIDNEY, Neb. -- Cabela's Inc. said Thursday that its net income rose 28 percent in the third quarter, which was in line with Wall Street expectations, as the outdoor sporting goods retailer's new, smaller store formats outperformed its more cavernous stores.
Total revenue was short of Wall Street expectations, however, and the company said direct sales fell as a result of weaker demand for clothing and footwear. Its shares sank 12 percent to $48.56.
Cabela's also noted that its free shipping offer also hurt results for the segment. In September, the Sidney, Neb.-based company said it responded to the decline by boosting advertising and is seeing improved results for the current quarter. Cabela's said the increased advertising will continue through the holiday season.
The company also noted that it plans to accelerate expansion as a result of the strong performance of its new stores. It also noted that all new locations going forward will follow the smaller, "next generation" format.
CEO Tommy Millner said the company now expects to open eight of the new smaller stores in 2014. Three of those had been previously announced; four were approved at or before the board of directors meeting in October and one is expected to be approved shortly.
The new format, which ranges from about 80,000 square feet to 125,000 square feet, is designed to fit more easily in areas where other retailers are located, such as strip malls. By comparison, the legacy stores are as large as about 250,000 square feet.
Cabela's said sales at locations open at least a year and profit at "next generation" stores during the quarter were stronger than at its older stores.
Overall, sales at stores open at least a year rose 3.9 percent. The metric is a key indicator of health because it strips out the impact of newly opened and closed locations.
For the three months ended Sept. 29, the company earned $42.8 million, or 60 cents per share. That's compared with $33.3 million, or 47 cents per share, in the year-ago period.
Total revenue rose 9 percent to $741.17 million, but was shy of the $741.18 million analysts expected, according to Factset.