Is Buying Cabela’s a Bad Move for Bass Pro Shops?

Last month, as ICAST was getting underway, Cabela’s shareholders voted to officially approve the publicly-held company’s sale to rival Bass Pro Shops. The vote was the latest in an ongoing saga that seems destined to merge two of the outdoor world’s marquee brands. The final hurdle, now, is a green light from the Federal Reserve on the sale of Cabela’s credit card operations to Synovus Financial. And while that deal is expected to be approved, Bass Pro Shops still has until October 3 to walk away from the deal unscathed. Now, at least one expert is saying Springfield should.

“Bass Pro Shops may have won the chance to acquire its rival,” writes The Motley Fool’s Rich Duprey, “but it may rue the day when Cabela’s shareholders said yes.”

Duprey backs his sentiment with some key statistics:

  • Q2 sales at Cabela’s fell 3% while same-store sales of ammunition and firearms fell 9%
  • Cabela’s internet and catalog sales fell 13% from the previous year.
  • Cabela’s has posted just one quarter of composite sales growth in four years.

The brand, in Duprey’s mind, is in a tailspin.

“While Cabela’s and Bass Pro don’t necessarily overlap where they do business,” he writes.”With the former stronger in the northwest and the latter more prevalent in the southeast, there is a substantial overlap in their customer base (Bass Pro says about 45% of its customers also shop Cabela’s).”

Duprey notes that, as a private company, Bass Pro Shops does not release public reports of its own. However, Moody’s assigned a lower credit rating to a Bass Pro-acquired loan in November, due to risks associated with the Cabela’s acquisition.

“…big mergers sometimes don’t work out as intended, as the vaunted synergies often touted fail to materialize. Certainly, there are economies of scale and efficiencies Bass Pro will realize from the merger, but they may be outweighed by Cabela’s operations pulling it down.”

The Bigger They Come…

It’s no secret that megalithic, brick-and-mortar retailers have been struggling to adapt to eCommerce. And while Gander Mountain serves as the most prominent big box demise in our world, outdoor recreation as a whole has been suffering, as the failure of big boxers like Sports Authority and Sports Chalet shows. Even iconic brands that formed the foundation of a generation of American shopping—Walmart, Target, Kroger, and Costco—are feeling pressure from Amazon’s acquisition of Whole Foods.

“Implications ripple far beyond the food segment,” Moody’s retail analyst Charlie O’ Shea told investors. “Where dominant players like Walmart, Kroger, Costco, and Target now have to look over their shoulders at the Amazon train coming down the tracks, but also the potential for multi-channel, which Amazon up until now has largely eschewed.”

Market analysts have long predicted Amazon’s move into the brick-and-mortar space—a direct challenge to the status quo—however, for Bass Pro Shops, which already operates close to 100 retail stores, one has to wonder at the acquisition of at least 50 more concrete locations in a world where traditional retailers are already falling like dominos.

Both Bass Pro Shops and Cabela’s have notoriously clumsy eCommerce sites that have left the door open for internet startups like Tackle Warehouse and Tackle Direct, as well as well-run independent stores with a knack for web design. But how this changing landscape ripples to smaller, independent dealers is up for debate. Most independent shops I’ve talked to have for years been more concerned with online startups than Bass Pro Shops. Many, in fact, choose to openly cooperate with their local big box stores, who often refer customers to the smaller shops when a true, expert opinion is needed.

Independent retailers often benefit from a more stable sales staff, more intimate location, and more flexible business model than their larger rivals. And as the big plan to get bigger, nimble independents and startups could find more room to breathe under the combined Bass Pro/Cabela’s canopy while the giant tries to find its footing—all with the shadow of Amazon looming over its shoulder.