Cabela's 2005 Annual Report Download - page 28

• our ability to hire and train skilled store operating personnel, especially management personnel;
• the availability of construction materials and labor and the absence of significant construction delays or
cost overruns;
• our ability to provide a satisfactory mix of merchandise that is responsive to the needs of our customers
living in the areas where new destination retail stores are built;
• our ability to supply new destination retail stores with inventory in a timely manner;
• our competitors building or leasing stores near our destination retail stores or in locations we have
identified as targets for a new destination retail store;
• general economic and business conditions affecting consumer confidence and spending and the overall
strength of our business; and
• the availability of financing on favorable terms.
We may not be able to sustain the growth in the number of our destination retail stores, the revenue growth
historically achieved by our destination retail stores or to maintain consistent levels of profitability in our retail
business, particularly as we expand into markets now served by other large-format sporting goods retailers and
mass merchandisers. In particular, new destination retail stores typically generate lower operating margins
because pre-opening costs are fully expensed in the year of opening and because fixed costs, as a percentage of
revenue, are higher. In addition, the substantial management time and resources which our destination retail store
expansion strategy requires may result in disruption to our existing business operations which may harm our
profitability.
Our continued retail expansion will result in a higher number of destination retail stores, which could
adversely affect the desirability of our destination retail stores, harm the operating results of our retail
business and reduce the revenue of our direct business.
As the number of our destination retail stores increases, our stores will become more highly concentrated in
the geographic regions we serve. As a result, the number of customers and related revenue at individual stores
may decline and the average amount of sales per square foot at our stores may be reduced. In addition, as we
open more destination retail stores and as our competitors open stores with similar formats, our destination retail
store format may become less unique and may be less attractive to customers as tourist and entertainment
shopping locations. If either of these events occurs, the operating results of our retail business could be adversely
affected. The growth in the number of our destination retail stores may also draw customers away from our direct
business. If we are unable to properly manage the relationship between our direct business and our retail
business, the revenue of our direct business could be adversely affected.
Our failure to successfully manage our direct business could have a material adverse effect on our
operating results and cash flows.
During fiscal 2005, our direct business accounted for 62.6% of the total revenue in our direct and retail
businesses. Our direct business is subject to a number of risks and uncertainties, some of which are beyond our
control, including the following:
• our inability to properly adjust the fixed costs of a catalog mailing to reflect subsequent sales of the
products marketed in the catalog;
• lower and less predictable response rates for catalogs sent to prospective customers;
• increases in U.S. Postal Service rates, paper costs and printing costs resulting in higher catalog
production costs and lower profits for our direct business;
• failures to properly design, print and mail our catalogs in a timely manner;
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