Cabela's 2014 Annual Report Download - page 48

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38
Direct Revenue – Direct revenue decreased $122 million, or 12.5%, in 2014 compared to 2013. The decrease
in Direct revenue was primarily due to a decrease in the hunting equipment product category, mostly due to a
substantial decrease in sales of ammunition and other shooting related products compared to 2013, and expected
cannibalization from our new retail stores.
Internet sales decreased in 2014 compared to 2013. The number of visitors to our website decreased 8%
in 2014 after experiencing record growth of nearly 26% in 2013 due to the surge in sales of ammunition. Our
website traffic was also negatively effected by the expected cannibalization from our new retail store growth.
Our hunting equipment and general outdoors categories were the largest dollar volume contributors to our Direct
revenue for 2014. The number of active Direct customers, which we define as those customers who have purchased
merchandise from us in the last twelve months, remained relatively even compared to 2013.
We continue to focus on smaller, more specialized catalogs. We have reduced the number of pages mailed and
decreased total circulation, leading to continued reductions in catalog related costs. Increases in website and mobile
platform related expenses due to our expanded use of digital marketing channels and enhancements to our website
mostly offset the reductions in catalog related costs.
Financial Services Revenue – The following table sets forth the components of our Financial Services
revenue for the years ended:
2014 2013
Increase
(Decrease) % Change
(Dollars in Thousands)
Interest and fee income $ 400,948 $ 343,353 $ 57,595 16.8%
Interest expense (64,167) (63,831) 336 0.5
Provision for loan losses (61,922) (43,223) 18,699 43.3
Net interest income, net of provision for loan losses 274,859 236,299 38,560 16.3
Non-interest income:
Interchange income 366,633 344,979 21,654 6.3
Other non-interest income 3,338 7,530 (4,192) (55.7)
Total non-interest income 369,971 352,509 17,462 5.0
Less: Customer rewards costs (214,445) (212,998) 1,447 0.7
Financial Services revenue $ 430,385 $ 375,810 $ 54,575 14.5
Financial Services revenue increased $55 million, or 14.5%, in 2014 compared to 2013. The increase in
interest and fee income of $58 million was due to increases in credit card loans and the mix of credit card loans
carrying interest, partially offset by lower London Interbank Offered Rate (“LIBOR”) rates. The provision for
loan losses increased $19 million primarily due to growth in the average outstanding balance of credit card loans
in 2014 compared to 2013. In addition, the provision for loan losses in 2013 was lower, in part, due to declining
balances in our restructured loan portfolio, improvements in historical charge-off trends, and other performance
data in this portfolio. The increase in interchange income of $22 million was primarily due to the adjustment
in the presentation of reimbursements between segments for certain promotional costs totaling $15 million for
2014. The impact of this reimbursement adjustment resulted in an increase in Financial Services revenue and an
increase in merchandise cost of sales by the same amount. This presentation will be ongoing and had no impact
on consolidated operating income or earnings per diluted share. Also contributing to the increase in interchange
income was an increase in credit card purchases, partially offset by a decrease in the interchange rate. The decrease
in other non-interest income was a result of the discontinuance of an identity theft program in 2013.