Cabela's Incorporated Management Discusses Q3 2013 Results - Earnings Call Transcript

Oct.24.13 | About: Cabela's Incorporated (CAB)

Cabela's Incorporated (NYSE:CAB)

Q3 2013 Earnings Call

October 24, 2013 11:00 am ET

Executives

Chris Gay - Director of Treasury & Investor Relations and Treasurer

Thomas L. Millner - Chief Executive Officer, President and Director

Ralph W. Castner - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Reed Alan Anderson - Northland Capital Markets, Research Division

Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division

Matthew R. Nemer - Wells Fargo Securities, LLC, Research Division

Joe Edelstein - Stephens Inc., Research Division

Sean P. Naughton - Piper Jaffray Companies, Research Division

Mark R. Miller - William Blair & Company L.L.C., Research Division

Seth Sigman - Crédit Suisse AG, Research Division

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

Charles Edward Cerankosky - Northcoast Research

Lee J. Giordano - Imperial Capital, LLC, Research Division

Mark E. Smith - Feltl and Company, Inc., Research Division

Anthony C. Lebiedzinski - Sidoti & Company, LLC

Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Cabela's Incorporated Third Quarter Fiscal 2013 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference is being recorded. And I will now turn the conference over to Chris Gay, Director, Treasury and Investor Relations. Please go ahead, sir.

Chris Gay

Thank you. Good morning. I welcome everyone listening today both on the conference call and by webcast. A replay of today's call will be archived on our website at www.cabelas.com.

With me on today's call are Tommy Millner, Cabela's Chief Executive Officer; and Ralph Castner, Cabela's Executive Vice President and Chief Financial Officer.

This conference call will include forward-looking statements. These statements are made on the basis of our views and assumptions as of this time and are not guarantees of future performance. Actual events or results may differ materially from these statements.

For information about certain factors that could cause such differences, investors should consult our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission and available on our website, including the information set forth under the captions Risk Factors and Special Note Regarding Forward-Looking Statements.

Additionally, this conference call may include certain non-GAAP financial measures. Please refer to our website to find reconciliations of these non-GAAP financial measures to GAAP.

Now I will turn the call over to Tommy Millner, Cabela's Chief Executive Officer.

Thomas L. Millner

Thanks, Chris, and good morning, everyone. Our record third quarter financial results provide further evidence of superior next-generation store performance and a dominant omni-channel model that continues to exceed our expectations.

For the quarter, we realized strong growth in comp store sales, increases in Direct revenue, higher merchandise margin, solid account growth in our Cabela's CLUB and exceptional performance from our next-generation stores.

While pleased with many aspects of our business in the quarter, we did experience a change in consumer sentiment. This change seemed to go beyond the expected slowdown in firearms and ammunition. We began to see this impact in August, and it has persisted through October. Our reaction has been to slightly increase advertising and marketing spend while tightly managing other expenses to reflect a more conservative outlook.

Obviously, as witnessed by our guidance, we remain confident in our promotional plans for the holiday season, our strong new store performance and continued growth in our Cabela's CLUB program.

For the quarter, 14 of our 18 next-generation stores were opened for the full period and outperformed our legacy store base by approximately 50% in sales per square foot and approximately 60% in profit per square foot.

During the quarter, we opened next-generation stores in Ashwaubenon, Wisconsin; Thornton, Colorado; Lone Tree, Colorado; and Regina, Saskatchewan, all of which are performing extremely well. Each new store we opened continues to perform significantly better than our legacy stores, reinforcing our retail growth strategy.

Additionally, as next-generation stores enter the comp base, they continue to outperform. For the quarter, comp store sales for the 8 next-generation stores in the comp base were 6.7%, which is 280 basis points above the consolidated comp. During the quarter, we had 3 next-generation stores enter the comp base, and during the fourth quarter, we will have 2 more enter the comp base. As next-generation stores continue to perform exceptionally well, we are very excited for the cadence of store openings that we've announced.

For the quarter, consolidated comp store sales increased 3.9%. The increase in comp store sales was broad-based as sales increased in 9 of 13 merchandise subcategories. For the quarter, firearms comped down 2.5%, while we saw solid performance from ammunition, men's apparel, hunting apparel and fishing. Excluding firearms, comp store sales increased 5.3%.

Today, we announced plans to open 2 domestic next-generation stores in 2015, one in Sun Prairie, Wisconsin, northeast of Madison; and the other in Garner, North Carolina, just south of Raleigh. We also announced plans for another Canadian store in Nanaimo, British Columbia, which will open in late 2014. This brings the total to 14 announced stores for 2014 and 3 announced stores for 2015.

These new stores represent approximately 18% retail square footage growth in 2014. We highly anticipate that our 2014 new store lineup will provide exceptional performance as a number of these stores represent our entry into great markets.

For the quarter, merchandise gross margin increased to 37.3% from 37.2% in the year ago quarter. Merchandise mix declines from ammunition sales were more than offset by margin improvement due to the elimination of free shipping to CLUB members, increased penetration of Cabela's brand merchandise and fewer sales discounts and markdowns. We have significantly improved merchandise margin over the last 4 years. Accordingly, we expect modest improvement in merchandise margin as we move through 2014.

Now let me turn to retail profitability, which is a key initiative in our retail growth strategy. For the quarter, retail profitability increased 10 basis points to 18.8%. This is the 18th consecutive quarter of retail profit contribution improvement. Improvements in retail profitability were due entirely to higher merchandise margin.

For the quarter, Direct revenue increased 0.9%, which fell shy of our expectations. Direct revenue was impacted by a significant deceleration in ammunition sales and a more cautious consumer. As we expect ammunition to continue to moderate, our Direct business is expected to be down at a mid single-digit rate for the fourth quarter.

During the quarter, we went live with our omni-channel fulfillment program in a limited number of stores and merchandise categories. The benefits we've seen from our ability to fulfill customer direct orders with inventory from our retail channel are very encouraging. As a result, we plan to expand omni-channel fulfillment across 20 retail stores by mid-2014.

Additionally, during the fourth quarter, we will implement a number of improvements to our mobile platform, allowing our direct customers to have the best experience on their mobile devices.

During the quarter, we saw a moderation in the sales of firearms and ammunition, as well as a challenging consumer environment across all business channels. On our second quarter earnings call in July, we noted that our business was running as planned. As we got into August, we began to see a more challenging consumer environment, combined with a slowdown in firearm sales and deceleration in ammunition sales. Accordingly, we slightly increased promotional spending while taking a more aggressive approach to managing other expenses. We believe we have made the necessary adjustments to manage costs down to levels consistent with how our business is performing, and we'll continue to manage these costs through the end of the year. We expect fourth quarter comparable store sales to be down mid single digits and then more than that in the first quarter of 2014, where we're up against a plus-24% comp from a year ago. As we enter the back half of 2014, we expect comp store sales to return to more normalized levels.

Now let's take a look at our Cabela's CLUB, which had another exceptional quarter. We continued to see strong growth in average active accounts and favorable delinquency and charge-off trends. For the quarter, average active accounts increased 10.1%, and charge-offs remained at extremely low levels and were just 1.72% in the quarter.

Now turning to guidance. We continue to be very pleased with the strong performance of our next-generation stores, omni-channel transformation and growth in our Cabela's CLUB loyalty program. Our retail stores are performing at very high levels, and we've adjusted expenses to be more in line with current business trends. As a result, we are comfortable with the current external earnings estimates for the fourth quarter of 2013. While our 2014 budget is not yet finalized, we expect 2014 to be the sixth consecutive year of double-digit earnings per share growth.

Now I'll turn the call over to Ralph Castner to review in more detail, among other things, performance of our Cabela's CLUB.

Ralph W. Castner

Thanks, Tommy. For the quarter, non-GAAP earnings per share increased 15% to $0.69 compared to $0.60 in the prior year. Retail revenue increased 20.8% over the same quarter a year ago, led by the exceptional performance of our next-generation stores. The strong performance of these new stores reinforces our confidence as we continue our retail expansion.

We opened 4 new stores during the third quarter and have been very pleased with their performance. In the fourth quarter, we plan on opening 2 Outpost stores, one in Waco, Texas and the other in Kalispell, Montana. With regard to comps -- with regard to comp stores, we'll have 2 next-generation stores entering the comp base in the fourth quarter of this year.

Looking forward to 2014, we expect to open 1 Outpost store in the first quarter. In the second quarter, we plan to open 4 domestic next-generation stores, 2 Outpost stores and 1 next-generation store in Canada. In the third quarter, we expect to open 4 domestic next-generation stores and 2 next-generation stores in Canada. These stores represent approximately 1 million new square feet of retail space or 18% square footage growth in 2014.

As a result of our store growth, preopening expenses increased $3.7 million in the quarter to $7.8 million compared to $4.1 million in the third quarter a year ago. With these additional stores opening in 2014 compared to 2013, we expect to realize additional preopening expenses in 2014.

Direct revenue increased 0.9% to $199 million compared to $197 million in the same quarter a year ago. While we're pleased with the fourth consecutive quarter of growth in our Direct business, these results fell shy of our expectations as ammunition growth slowed faster than we anticipated, leading to a deceleration in Internet traffic and lower average ticket.

Our limited rollout of omni-channel fulfillment is progressing nicely, and we look forward to rolling this out to additional stores and more product categories in the remainder of the year.

For the quarter, Financial Services revenue increased 12.6% to $96.8 million. The increase in Financial Services revenue was primarily due to a 10.1% increase in average active accounts. The account growth helped drive higher interest and fee income, as well as interchange income.

For the quarter, average credit card loans increased by 13.5%. Net charge-offs, as a percentage of average credit card loans, remained constant with the prior year quarter, rising a single basis point to 1.72%.

Additionally, we continued to see improvements in delinquencies, greater than 30-day delinquencies, which is 0.71% as compared to 0.81% a year ago. Greater than 60-day delinquencies were 0.42% as compared to 0.49% a year ago. And greater than 90-day delinquencies were 0.21% as compared to 0.26% a year ago.

For the quarter, we reduced our allowance for loan losses by $5.1 million compared to a $1.3 million reduction in the year ago quarter. The reduction was mostly a result of our evaluation of the performance of restructured or fixed pay credit card loans. Beginning in 2008, with the significant increases in delinquencies and charge-offs, we placed more emphasis on utilizing fixed pay plans as part of our collection strategy.

Based upon very limited usage of the fixed pay plans prior to 2008, the performance of these loans was uncertain. With fixed pay plans now approaching the 5-year statutory maturity and additional history on loans restructured subsequent to 2008, we're able to perform additional analysis to determine actual expected performance of the restructured loan portfolio. Due to the continued improvements in charge-off rates on loans restructured after 2008, which we expect to continue, we have reduced the allowance for loan losses accordingly.

For the quarter, Financial Services interest expense increased 23.7% to $17.1 million as compared to $13.8 million in the same quarter a year ago. As previously discussed, the increase in interest expense is mostly due to our efforts to lengthen our maturities and lock in historically low fixed rates.

Additionally, during the quarter, we completed a 5-year term securitization to fund growth. The transaction included a $100 million of notes that accrue interest at a fixed rate of 2.17% and $197.5 million of notes which accrue interest at a floating rate equal to 1 month LIBOR, plus 65 basis points.

In the fourth quarter of 2012, we recorded a liability of $12.5 million as a result of the preliminary court approval of the Visa antitrust settlement. Since that time, a group of plaintiffs has opted out of the proposed settlement, and we received our initial interchange reduction notification from Visa. With this new information, we reevaluated the impact of the 10-basis-point reduction of default interchange income and determined that the estimated liability for the proposed settlement would be reduced by $1.7 million in the quarter. Accordingly, we recognized the $1.7 million as interchange revenue for the quarter.

As discussed during the second quarter earnings call, more effective tax planning has led to a tax rate reduction, which is expected to continue to some extent. As a result, the effective tax rate in the quarter was 31.3% compared to 32.3% in the year ago quarter and is below the guidance we gave in our second quarter call. We expect the effective tax rate for the fourth quarter to be between 31.5% and 32.5%. For 2014, we expect the effective tax rate to be between 31.5% and 33.5%.

Now let's turn to inventory. Inventory increased by 13% or $93.9 million year-over-year to $816 million. Over the same period, we've grown retail square footage by 13.4%, with 9 new stores opening since Q3 2012. Inventory turns improved to 3x in the third quarter as compared to 2.8x in the same quarter a year ago. We're very comfortable with the quality of our inventory.

For the 9-month period, cash flow from operations was $94 million compared to $58 million in the same period a year ago. Virtually all the cash we have is held in our Financial Services subsidiary. At quarter-end, we had $200 million outstanding in our line of credit. With our accelerating store growth plans, we expect full year 2013 capital expenditures to be between $300 million and $325 million. Cash flow from operations is expected to be between $300 million and $350 million for 2013. We expect to complete a small financing transaction in 2014 to fund future growth.

Now let me turn the call back over to Tommy for some closing comments.

Thomas L. Millner

Thanks, Ralph. We're pleased with our record financial results for the third quarter and, in particular, the strong performance of our next-generation stores and growth in the Cabela's CLUB program. We're very excited about our future growth opportunities in making sure we cherish and delight every customer every day.

With that, operator, let's open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] We'll take the first question from Reed Anderson with Northland Securities.

Reed Alan Anderson - Northland Capital Markets, Research Division

A couple of things. First of all, I guess, let's talk about comps first. So, Tommy, when you look at -- despite the firearms, you still have the majority of your categories were comping positive. So I'm curious, as you look into that next quarter, or the quarter we're in now, in particular, with that down mid single-digit comp, is your expectation that it'll largely reflect what's going on in firearms? Or do you think you'll see further weakness in some of the stuff that maybe has slipped a little since late August[ph]?

Ralph W. Castner

I'm sorry, Reed, this is Ralph. I'll take the first part of that question and let Tommy jump in. I mean, what we're seeing so far in the fourth quarter, I mean, our comps, at least through the first 3.5 weeks of October, are down just slightly. But what we're anticipating -- this goes to your point. What we're anticipating is, as you move forward through this quarter and anniversary the election and then the Newtown tragedy that happened in December, obviously, guns accelerated as we move through the quarter. So we expect the quarter to be largely impacted by guns, and we're actually anticipating to get it worse than what we've experienced through the first 3.5 weeks. I'm sorry, Tommy.

Thomas L. Millner

No. Exactly.

Reed Alan Anderson - Northland Capital Markets, Research Division

Good. That makes a lot of sense. And then I guess just kind of related to the whole comp discussion, I mean, Tommy, put your vendor hat on from years ago, but when I look at, for example, your deer camp promo just showed up in my email -- or my mailbox the other day, but it looks like the firearm vendors, in particular, are very cognizant of what's going on and very accommodating with what needs to happen in terms of keeping customer activity going. Would you agree with that? And, I guess, do we see that extending here for the next couple of quarters? Just thoughts on that regard.

Thomas L. Millner

Yes, I think so, Reed. If you'll recall, starting, really, in January and February, because of availability of product, we pretty much had to pull firearms from most of our retail ads and circulars. Ammunition, we canceled a major shooting book in the first quarter because we simply couldn't get product. As the year has progressed, product availability is better, but it's still not great. We've seen an improvement in modern sporting rifles and in other firearms so much that we can begin to start our regular cadence of including those products, which are good traffic drivers in our retail circulars. But I don't -- because of the inventory constraints, there might be some slight settling of margin in those categories over the next year or 2. But look, the vendors, they've got to keep their factories running, too, and they've been very accommodating.

Reed Alan Anderson - Northland Capital Markets, Research Division

Okay. And then just 1 follow-up related to that is, on the ammo side then, given that's obviously more like a commodity sort of razor blade business, would you foresee that you might see some price moderation in that category as -- into the next couple of quarters at the retail level?

Thomas L. Millner

Well, maybe. But, again, the challenge is -- we've not seen any relief in rimfire ammunition. In terms of supply, it's still very, very tight. Even for reasons I can't explain, a number of hunting calibers, traditional hunting calibers, if you shop retail stores, you don't find any. It's tight. However, 223 is much more available, and maybe it's just our -- the broadening of our supply base that we started years ago that's helping us. But it's not like there's a crazy amount of supply that would lead to a glut, that would lead to a collapse of pricing at all.

Reed Alan Anderson - Northland Capital Markets, Research Division

That makes sense. And then I just have one more question. When you talk about the Direct ease and the fourth quarter being also down kind of mid singles, what are you contemplating in that in terms of like catalog, [indiscernible] or promotion, email? I mean, how does that -- are you reflecting a decline in that as well or just you're changing sort of the mix? Just curious.

Thomas L. Millner

No, it's more mix related from ammunition just beginning to come back to more normal levels.

Reed Alan Anderson - Northland Capital Markets, Research Division

Makes sense. Good. I'll let somebody else jump in...

Thomas L. Millner

And, Reed, it's kind of interesting that 2 years ago, if we had had a Direct business up 0.9%, we would have been celebrating. So it's important for everyone to understand that 0.9% increase in the quarter's pretty good, but it just didn't -- we thought it was going to be a little bit better. The same thing in retail comps, we just saw this subtle change in the consumer. I mean, we should be thrilled with the comps we posted. We just thought they were going to be better. We thought the consumer was going to be a little stronger during the quarter.

Ralph W. Castner

Reed, just to kind of add on to that. What I -- as I think about our business, it is largely behaving as we thought it would as we entered this time and period when we were coming up against really big comps. Firearm has slowed. Ammunition, although is decelerated from huge levels we saw in the first and second quarter, is still up year-over-year, and we expect to continue to see strength in that. As I said earlier, we have seen comps down just very slightly in the first 3 weeks of the quarter. We are planning for them to get worse as we anniversary the election here in 2 weeks and then the Newtown tragedy later in December. But I think most of that, we feel pretty good about. If there's 1 area maybe we're a little concerned about, to Tommy's points, the Direct business has slowed maybe more than what we originally thought. And then we did notice in August and September in the rest of our business, we did see real slowdowns as we got into a bunch of noise in the economy about Syria and government shutdowns. It did hurt the rest of our business. But we feel pretty good about where we are as we anniversary. This time, it's really tough comps.

Operator

We'll take the next question from Jim Duffy with Stifel.

Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division

Ralph, a question on the Finance business. A couple of interesting dynamics there. It looked like the average balances ticked up some, at least, relative to what the growth rate has been. Do you think that's a sustainable trend? And then...

Ralph W. Castner

They did accelerate. I'm just looking at the earnings release. They did accelerate slightly in the quarter. They're up -- in the quarter, they're up 3%. Year-to-date, they're up 2.5%. Just as -- that's largely driven by the age of the account. And we may see higher levels than the 2.5%, but to think it's going to move meaningfully from that seems optimistic.

Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division

And so the younger the account, the more likely it is to grow? Is that...

Ralph W. Castner

Well, yes. The younger the account, the lower the -- it's a little bit like a traditional retail store. The lower the average balance, and the more likely it is to grow. So as you build -- putting on a bunch of new accounts, you're driving down average balance, which we've -- new accounts are going to make up a smaller piece of the total as we move forward, which could put some upward pressure on that. I'm kind of jumping ahead in your question, but I -- what I -- as we look at that data, I think -- well, at least, what I expect to happen is not to see big increases in either growth rates in average account -- or, I'm sorry, number accounts or average account balance. But I think those growth rates are sustainable for a way longer period of time than I had at least originally assumed.

Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division

Let me ask a more detailed question with respect to that. So how do you think about cardholder growth with respect to footage growth? I would expect with accelerated footage, you'd see a pickup in the number of cardholders. Or is that not how you think about it?

Ralph W. Castner

Well, it is. I actually did -- earlier this year -- I'm sure I drove our CLUB guys crazy, but I did a way more detailed study myself on that. And what I learned is that old -- and I can share with you the details, but, I mean, what I did was I treated every store as if it was its own credit card portfolio. Now, by the way, this is comparing end of 2012 to 2011, which might have been influenced as we came out of the recession. What I was shocked to find out is our slowest growing store was growing their portfolio at 6%, which struck me as a lot. So the point is, we're seeing really good growth out of a lot of our old stores, and then the new stores are adding on top of that. But there are really so few new stores relative to the base. You've got to count on those old stores to continue to grow. So that's a long way to answer the question of what we -- what I would expect to see is kind of that 10% to 12% account growth, but as we open up more and more new stores, that can last for 5 to 10 years. So we're really optimistic about the future of account growth, assuming that we continue square footage growth. But what's happening is the stores we open in '14 are going to be drivers of account growth for '15, '16, '17 and '18.

Thomas L. Millner

On a large base of cardholders.

Ralph W. Castner

Right. So we feel -- I mean, we think the growth rates we're seeing there are sustainable and may accelerate a little, but you won't see 15% and 16% account growth out of that business, probably ever.

Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division

Okay. Shifting gears a little bit. Follow up on one of Reed's line of questioning. How much of a benefit was price in firearms and ammunition over the past year? And is some of the softness that you're seeing on the Direct side because competitors are getting more price competitive with ammunition?

Thomas L. Millner

I don't think so, Jim. We don't have any sense of that.

Ralph W. Castner

I mean, you cut out the middle of your question, but I think the question was, how much did price affect the comp? And is some of the slowdown in...

Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division

No. Actually, Ralph, the question was, how much of a benefit was price to the firearms and ammunition category over the past year? I know you guys have been taking some price increases in those categories.

Ralph W. Castner

Yes. I would tell you, in the last year, not much. Over a longer period of time, we clearly have seen some price inflation, but not in the last, I don't know, several quarters.

Thomas L. Millner

No.

Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then last question. Attach sales for firearms, scope, safes, holsters, that type of thing, do you have data that shows when those sales occur? Do they occur at the time of purchase? Or is there a lag as to when you might see that attach sale as an add-on?

Thomas L. Millner

Well, Jim, we've gotten really good in the last year of not escorting the customer out of the store with their firearm before they're finished shopping. We have concierge programs in our stores. Just about 1 year, 1.5 years ago, when you would buy your firearm, we would literally walk you out to your car. And we kind of realized that's sort of stupid because maybe you'd like to buy a scope and a sling. And so we have processes now that allow the customer to continue to shop if they want to and attach the scope, and that's really helped attachment at the time of sale. And we also had a program earlier this year to prescreen for a card when you purchased a firearm. So we've gotten much better at that, which has led to more attachment earlier.

Operator

The next question comes from Matt Nemer with Wells Fargo.

Matthew R. Nemer - Wells Fargo Securities, LLC, Research Division

My first question is, as you've seen the deceleration in the firearms and the ammo business to a certain extent, what's happening to the attachments in terms of categories like optics and safes? You mentioned that hunting apparel was one of your best categories. That seems to disprove the theory that guns drove this halo over a lot of categories, but just curious what you're seeing.

Thomas L. Millner

Yes. We haven't seen a significant change from prior periods. What's different is, we obviously have seen a slight deceleration of new customers, but in the quarter, it was almost -- we almost -- 10% new customers. So it just wasn't dramatically -- like it was dramatically higher than that earlier in the year. Matt, we had reactivation in the quarter of almost 9.5%. So good trends but no real changes in attachment.

Ralph W. Castner

I think here's the way I would think about it, Matt. The closer the attach product is to the gun, the more it's impacted. So as I look at what affected retail comps in the quarter, 2 of the quarters -- 2 of the categories that are down were firearms and optics, which probably makes sense. But what was up was ammunition, men's apparel, fishing and hunting apparel, which are categories, I think, we would all agree are less correlated necessarily to gun sales. So to your point, some of what we've talked about, to see our customers money move back and forth between various product categories, to some extent, that's happening.

Thomas L. Millner

And, Matt, what's really critical to sustaining that trend of other categories being relevant as guns settle goes to a product I'll use as an example. We launched Zonz camo, which is a whole new concept in camouflage clothing. It has literally taken the market by storm. So we didn't need the traffic from guns to sell this product because it's great on its own merits. And that's the really important stuff. Our development of OutfitHer, women's camouflage clothing, I saw data yesterday from a study that Southwick associates has done. Women are now 11% of hunters. And in my career in the industry, I mean, it used to be 0 or so close to 0 that you wouldn't even bother measuring. Now it's 11%. So for us to have really relevant camo clothing for women, that category is doing great. So it's all about innovation in other categories of our business to attract the consumer.

Matthew R. Nemer - Wells Fargo Securities, LLC, Research Division

That's a good segue in my -- into my second question, which is, the simple math would tell you that firearms profit dollars should be down in the tens of millions in the fourth quarter and in the first quarter. But based on your commentary around guidance, your comfort with estimates, it suggests that there are a number of offsets. So what are the kind of discrete offsets either in terms of product launches like Zonz or cost offsets that sort of allow you to still hit the numbers?

Ralph W. Castner

Well, there clearly are some product offsets, and you mentioned a couple of them. Zonz camo is a big one that would have been used. And OutfitHer is another one. But I would tell you, the biggest thing is just more tightly managing SG&A. And I'll give you an example of that. Earlier in the quarter, earlier in the year, we had an opportunity to test a bunch of new marketing programs, which we talked about. Some of the national marketing is one of them. So as we move into the fourth quarter, we're really focusing on, a, has the marketing worked and focused on that? And then also, just try to be -- one of the interesting -- we were talking with some of our retail peeps the other day. 23% of the labor in a store is behind the gun counter. So, obviously, that's an opportunity to manage that down as we move forward, along with our distribution costs. And then there's just a bunch of fine tuning what's going on at the corporate headquarters. So it's really everything. It starts with product, which you mentioned, and then goes through the SG&A line, just trying to manage that more tightly. So as I said earlier, I think things are behaving very similar to what we thought it would. It's up to us to make sure that we can manage the SG&A line as we go through these next 2, 3, 4 quarters.

Matthew R. Nemer - Wells Fargo Securities, LLC, Research Division

On SG&A management, how much of that comes from sort of labor cost management versus marketing or advertising?

Ralph W. Castner

Oh, I'm not sure we can quantify it. Those are, obviously, the 2 biggest levers you pull. I mean, I guess, I'd throw out half and half. The marketing is a lot tougher to do because you're just worried about the impact of cutting the wrong things. So that requires a lot more judgment. Our retail operations guys are doing a great job as we've seen the comp metric change as we get in the back half of the year. They're doing a great job managing the store labor to those expectations.

Thomas L. Millner

I think, Matt, also to your point, as we look at the next 2 months that are ahead of us from a promotional cadence, while we're going to deal with 1 less week between Black Friday and Christmas, our promotional cadence and aggressiveness will be consistent with last year. Where we may spend a little less money is national brand stuff, but retail circulars and search engine optimization and all of those tools, we're going to be aggressive and consistent with where we've been -- where we were last year.

Operator

The next question comes from Joe Edelstein with Stephens Inc.

Joe Edelstein - Stephens Inc., Research Division

Curious on the CLUB operations and from the analysis that you did and being able to go back and take a lower provision for the loan loss. And as I sort of now look at the total allowance and the balance and where that sits relative to the total outstanding receivables, it looks like it's about 1.5% of that receivable's balance. My question is, do you think that you're now able to kind of hold that allowance balance roughly in line with that level going forward? And, really, what does that imply for your provision rates as we think about modeling that segment?

Ralph W. Castner

Well, I think the short answer to your question is yes. I mean -- and we can -- I can give you more details about why we think that's right. But as we look forward to 2014 and planning our business, how we're thinking about it is -- using your ratio of 1.5%, is keeping allowance fairly constant as a percent of receivables or 1.5%. And then we'll actually have to increase it in 2014 just as the portfolio grows. So that's one of the additional expenses that we're trying to manage as we go through 2014. But, yes, I think your presumption is mostly right.

Thomas L. Millner

And maybe some color on the fixed pay.

Ralph W. Castner

Yes, well, on the fixed pay, what happened on the fixed pay thing is back in 2008, 2009, we had -- in order to help our customers meet some of their obligations, we put a lot of people on a product where we would reduce the interest rate in exchange for them making a commitment to pay us. As you can imagine, these were people that had previously been delinquent. So as you can imagine, the losses in that portfolio were pretty high. We expect them to be high, and they were high. Those loans had a 5-year maturity on them. And we've been nervous earlier to bring the reserve down, mainly because we were concerned that all the worst loans would be left at the end. And what we found was that although the losses were multiples of the rest of the portfolio, they weren't as high as we expected. And as we got to the end of the first tranche of those, we changed our assumptions not only on that tranche but other people that got put on fixed pay in 2009, 2010 also.

Joe Edelstein - Stephens Inc., Research Division

Yes, that is very helpful. I appreciate that additional color there. Maybe just a follow-up to that is, what percentage of accounts are you effectively re-aging today? I understand it was higher with the recession, but what would that look like today?

Ralph W. Castner

Well, I'm not -- I guess, the only stat I could give you is what we call restructured loans are at about just over 1% of the portfolio, and that's down from 1.5% a year ago. So we're seeing those -- I'm not sure I can tell you how many new ones we're putting in. It's much smaller than it used to be, and we're seeing a lot of those pay off. We're seeing, obviously, some of the old ones either pay off or charge off.

Joe Edelstein - Stephens Inc., Research Division

But at this point, there has not been any material change to underwriting standards or anything else that we should potentially change?

Ralph W. Castner

No.

Operator

The next question comes from Sean Naughton with Piper Jaffray.

Sean P. Naughton - Piper Jaffray Companies, Research Division

Just a follow-up on that labor, the fixed pay plans. But it looked like it was a little bit of a benefit in Q3. Is that something that could continue to be reviewed moving forward? Or is that likely a bucket that we should consider empty at this point?

Ralph W. Castner

Well, I -- well, obviously, we'll continue to review it. I would be surprised if -- I'd be very surprised if there was anything as meaningful as what we saw in the third quarter.

Sean P. Naughton - Piper Jaffray Companies, Research Division

Okay. That's helpful. And then, I guess, on the Direct business, can you just maybe remind us there how much of an impact there is when you open up a new store? And, I guess, as a corollary to that, if you exclude the ammo portion, are there specific aspects of the catalog or the online business that are coming under particular pressure?

Thomas L. Millner

Well, I'll answer the second question first. The change that we saw in consumer sentiment, as I said earlier, seemed to be across the board in categories and also across the country in terms of geography. There was no one place that was meaningfully better or worse. So it was -- the slowdown seemed to be agnostic to category or geography. The cannibalizing effect of a new store is between $2 million and $3 million per store. So it's a meaningful number and just something we have to deal with. As we've said earlier, Sean, the one interesting thing is we've announced Raleigh, North Carolina and Greenville, South Carolina, where we have no physical presence at all. And I'm really interested to see if our Direct business actually improves there because we have a physical presence or if we see the same cannibalizing effect, and that's something that we're going to internally monitor very carefully. One could make an argument that with a physical presence, we're more top-of-mind. And if you don't have time to go to the store, you might think about Cabela's first instead of somebody who's been in the Southeast for a long time.

Sean P. Naughton - Piper Jaffray Companies, Research Division

Got it. And then maybe a quick administrative question. Just on the traffic versus ticket in the comp, how did those perform in Q3?

Thomas L. Millner

In retail, transactions were up 5 3. You know we don't count traffic, we only count transactions. And average ticket was down 1.3%, to no surprise, from big-ticket guns slowing.

Sean P. Naughton - Piper Jaffray Companies, Research Division

Got it. And then maybe just real quick. On the Q4, it sounds like the comp is down just a little bit. Did you see any impact from potentially some national parks maybe not being around, people not taking vacations, being able to get into parks or hunting areas? Any sort of impact on your business, you think, from that?

Thomas L. Millner

No, not that aspect of it. There was a lot of talk about national parks being closed, but it's pretty hard to hunt in Yellowstone. The only part of the country that was constricted to fishing was Biscayne Bay down in Florida that we're aware of, and that wouldn't have had any effect on us. The public lands people were able to hunt, it was probably just more the noise of the uncertainty and watching what was going on in Washington that may have distracted the consumer. But I think we're -- as we look at the balance of the fourth quarter, the likelihood of more of that noise is probably lessened, thank goodness.

Operator

We'll move next to Mark Miller with William Blair.

Mark R. Miller - William Blair & Company L.L.C., Research Division

A couple of questions on the next-gen Outpost stores. Tommy, I think in your prepared remarks, you said you're generating in a range of 50% higher sales per square foot. So can you reconcile that with what's in your deck of 450? Because I think that -- it seems like the math will [ph] put that over 500. I mean, how is it tracking on each of these new stores? And then the comps, I think you said, are outperforming by 280 basis points. I think you said 600 before, so I'm not sure if there's a change there or what might be causing that from the prior quarter.

Ralph W. Castner

In both -- the answer to your question is really both the same. When we comment on that, we're looking at it -- it's going to be volatile because we're looking at it on a quarterly basis. For example, I mean, the 450 that you quoted was the same number, but it was for the -- all the stores that were opened for the full year of 2012 -- I think for 2012. So as you move forward through 2013, you're adding more and more stores into the base and also looking at shorter periods of time that can cause more volatility. So, I guess, what I'm saying by all that is, when we look at the same number for the full year of 2013, by that, I'm talking about the 450, you would expect it to be higher. And it's really the same thing with the comps. We're looking at a fairly small number of stores over a very short period of time that seasonally could behave differently than the base. But I think we still continue to think it's important to disclose those numbers to give investors some perspective about how our new stores are performing relative to the old ones. Now I'll tell you, as you move into the fourth quarter, I would expect some volatility because you're going to -- and probably upward, because you're going to be introducing the 3 stores we opened in the third quarter, which are the 2 Denver stores and our Green Bay stores, which are all performing really well. So I hope that addresses your question, Mark.

Mark R. Miller - William Blair & Company L.L.C., Research Division

Yes. Ralph, if I can just follow on to that. So if I'm understanding, then does this infer that some of the more of the recent openings, I guess, you just said that, that those are actually tracking even better from a sales per square foot standpoint than some of your first next-gen stores, more than just the comp increase you're seeing in the base business this year?

Ralph W. Castner

Yes. No, I think that's true. We feel really pleased with some of the new stores that are opening, and those are helpful. And I'm not sure I'd read a whole lot into up 40% moving up 50% from 1 quarter to the next. But the overall theme is, as we go now to having 18 stores that were opened for the full quarter out of a total of 48 stores, we're seeing great performance out of those 18 stores, consistent with what we saw with the first 2 or 3. Now, look, it's not going to stay at 50% better probably forever as the 18 stores goes to 28 or 38, but we feel really good about the performance of our next-gen stores.

Thomas L. Millner

And, Mark, one thing that gets us pretty excited, as you look into 2014, we are going into some very lucrative markets, Greenville, South Carolina. We should have been in Anchorage, Alaska 10 years ago. We know we have huge concentrations of customers there. Our store in Christiana, Delaware is going to be adjacent to one of the most productive malls in the United States and Canada. And our store is going to sit literally on Interstate 95, with hundreds of thousands of cars passing it every day. We solidify our position in the Twin Cities, with a third store in Woodberry. We think Atlanta, Georgia is waiting for us. Portland, Oregon is a market -- gosh, our success in Springfield has just been terrific, and we know customers in Oregon have been waiting for us, like Anchorage, for a decade. So we get really excited when we see the markets that lay before us as 2014 unfolds.

Mark R. Miller - William Blair & Company L.L.C., Research Division

Fantastic. This is a great segue to the next question. Square footage is going to be up 18%, but in your press release, you're indicating low- to mid-teens rate the next several years. So what would happen here that would cause you to drop down to the low-teens? Because that would make the follow-on years beyond '14 to be low double digits. I mean, it seems -- I mean, and, I guess, what are the constraints to -- I know the base gets bigger, but what are you waiting to see? Or what are the things that govern that rate of growth beyond '14?

Thomas L. Millner

It's really keeping our culture together, because part of the magic of our stores is having knowledgeable people, that before we hand them the keys to the Ferrari, we've looked at them, they've worked for us, we know everything about how they manage and lead. And we think that number's -- 13 or 14 stores a year, we can keep a pipeline of people that we trust to manage these stores. We have the financial capacity to build a lot more stores than that, but we think we could lose our magic if we did. So just at 13 or 14 stores a year, it's just a function of the math. You build 14 stores on a base of 60, and the percentage rate changes. But we think this is the most profitable way to build real value for our shareholders.

Mark R. Miller - William Blair & Company L.L.C., Research Division

Okay. Final question on the promo spend. I think you said earlier on that you were going to be increasing promotion, but I thought, in answer to another question, you said that cadence circulars would be the same. So can I infer from that, that maybe it's going to be in-store activity, maybe a little more aggressive markdowns, et cetera?

Thomas L. Millner

Yes. We're going to be -- our promotional cadence of books and circulars and TV and radio is going to be the same. We'll monitor as we get into the quarter and into the holiday season. Could be a little more aggressive, but we'll just see how it unfolds.

Operator

We'll move next to Seth Sigman with Crédit Suisse.

Seth Sigman - Crédit Suisse AG, Research Division

A couple of quick follow-up questions. Maybe, first, just about the guidance more focused on next year. When you think about the double-digit earnings growth, it sounds like you're planning for sales to be down in the first half, up in the second, margins up modestly. Is the rest just coming from SG&A? I mean, just kind of walk us through how you get to double-digit earnings growth next year, given the headwind in the first part.

Ralph W. Castner

Well -- and I'll talk to the full year and not to the individual quarters. But as we think about next year, we're thinking about comp store sales being flat to maybe down slightly. The Direct business, flat to up slightly, with most of the revenue growth coming from new stores. So as we think about next year -- now, one of the good fortunes we have with how productive some of these new stores are, that will help manage SG&A. And then to my comments earlier about what we're doing in the fourth quarter really apply to the full year, which is just trying to tightly manage SG&A so that we can get earnings growth to be at or slightly above where we see revenue growth being. So that's kind of how we're looking at it for the year. We will have to do, which you should model in, we're probably going to have to do a financing transaction in the back half, sometime around midyear, which will put upward pressure on interest expense. So -- but we think we can get there. We will have to manage SG&A very tightly to do so.

Seth Sigman - Crédit Suisse AG, Research Division

Right. And just a follow-up on SG&A. I mean, it sounds like there were some strategic investments in marketing over the last few quarters maybe taking advantage of the really strong sales. I mean, is that an area that you'll be able to pull back on potentially as the sales moderate?

Thomas L. Millner

Yes. Yes. Absolutely.

Ralph W. Castner

That, with all areas of SG&A, will have to be things. And, by the way, the other thing I'll remind you of is, we also took big bets on interest rates at our CLUB earlier in the year by going to fixed -- going to long-term fixed rate obligations as we saw improvements. I would -- we have not finalized it yet, but I would think, as we move into 2014, you'll see more of a shift towards variable rate deals, at least as a percentage. And out of the fixed rate deals is another opportunity. So...

Thomas L. Millner

And as Ralph noted in his prepared comments, interest expense in the quarter was up from $13.8 million to $17.1 million in the quarter.

Ralph W. Castner

So, anyway -- so there's opportunities to do that. Having said that, we'll have to work hard to do it.

Seth Sigman - Crédit Suisse AG, Research Division

Got it. Okay. And just shifting gears, maybe talk a little bit about the competitive landscape. The Denver stores opened. It seems like that market has maybe more competitors than some other markets. Can you maybe just talk about some of the early learnings there, how those stores are performing and any implications for other markets that you may enter that have more competitors?

Thomas L. Millner

Well, I'll back up and tell you that I viewed opening 2 stores in Denver, personally, as probably the biggest risk that I had blessed in my 5 years with the company. We had never done that before. We had had so many stops and starts in the Denver market with Wheat Ridge. And Colorado has clearly shifted a little more progressive over time, and I was really concerned about whether our core customer was there. And I couldn't have been more wrong. So we've been really pleased. I'm glad we opened 2 stores. It is a competitive market, and we're just really pleased with where we are. Same thing in Ashwaubenon, which is Green Bay. That store is just doing really, really well. And it's funny. The only days that it doesn't do well is when those Green Bay Packers are playing football at Lambeau Field, which is 0.125 mile away from the stadium -- from our store, but, obviously, taking share from somebody in that market and been really pleased.

Operator

We'll go next to Jim Chartier with Monness, Crespi & Hardt.

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

Just wanted to continue asking on the SG&A a couple of more specific questions. You mentioned that firearms, labor was about 23% of total labor. What was it a year ago before the surge in firearms started?

Ralph W. Castner

I'm sorry, I don't have that number.

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

Okay. And then can you give us a sense of incentive compensation, if that's an area that can come down after 2 years of kind of mid to high single-digit comp sales growth?

Ralph W. Castner

Yes, let me -- let's talk about that because that's something I didn't mention. There's no question that incentive compensation. Well, I guess, there is a question. But we're planning on incentive compensation being down year-over-year. And actually, as we move into the third and fourth quarter of this year, that -- because -- that's been one of the challenges with SG&A. And the reason we accrue it evenly over 4 quarters and with the strong performance in the first half of the year, we're expecting a fair amount of incentive compensation pay this year, which is amortized equally over 4 quarters. So one of the SG&A challenges we had both in the third and fourth quarter is incentive comp is up in quarters where revenue has been more challenged. So that will be a challenge in the fourth quarter. However, to your point, when you move into 2014, that should be down year-over-year and one of the opportunities we have for SG&A.

Thomas L. Millner

Jim, one comment about labor at the gun counter. As you can only imagine, after the election and then after Newtown and everything that happened with regulatory threat in the first quarter, we were dealing with such a volume of customers in that part of our store that we had to invest significant amounts of money just to provide a reasonable level of service. I mean, we had days where people are lined up inside the -- inside our stores waiting to purchase firearms. So we didn't really have a choice but to scale up in -- at the gun counters just to meet an overwhelming number of people and as that comes down to reality, which it is, not to anyone's surprise, that scenario where we just don't need the same level of staffing because we don't have people standing 5 deep and 30 feet long at the gun counter.

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

Okay, that's helpful. And then last year, you guys invested in marketing late in the fourth quarter to capitalize on the traffic and trends. Was that brand advertising or was it more transaction-related?

Ralph W. Castner

It was more transaction-related, and it was things that we normally think of as benefiting our Direct business, paid search, catalogs and some of those sorts of things. And it's an -- it's obviously an area we'll manage in the fourth quarter of this year.

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

Okay. And then on the Direct business and the omni-channel shipping, I thought the initial plan was to have omni-channel capabilities in all stores in the fourth quarter this year. Was that incorrect or you're seeing some delays there?

Thomas L. Millner

Yes, no, that was incorrect. Our plan had always been to start with a handful of stores, make sure we got it right. And I'm pleased to tell you, we did get it right. It rolled out -- glitch seems to be a popular word these days. It was a glitch-free implementation, which allowed us then to increase the pipe to more merchandise categories. And the ultimate rollout that we need is 20 stores. We don't have to be in 50 stores. 20 stores covers the geography we need and the inventory availability. So full rollout will be 20 stores. And while there are clearly revenue implications to this, Jim, I think there are bigger implications for our company. Great companies like Amazon and Walmart.com and others have conditioned all of us that when you go online and buy something, it's available for sale. So in this case, we've been able to take 2,000 items just in a short period of time that would have been noted as back-orderable down from cabelas.com, and now they're in-stock items because we're utilizing our whole inventories. So I think the implications of cabelas.com being a predictable place where they -- where we actually have the merchandise, like best-in-class Internet providers do, is maybe even more important than the short-term revenue benefits.

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

Great. And then just one last question. On ammo, when do you expect that trend will actually become a headwind for you guys?

Thomas L. Millner

That's a really good question. And a lot will just depend on availability of product. In rimfire ammunition, which is a pretty good category, I think we're a long way off from that being a headwind. So we'll just see, and we'll keep you posted.

Operator

We'll go next...

[Technical Difficulty]

Operator

I'm not sure what that was, but we'll go next to Chuck Cerankosky from Northcoast Research.

Charles Edward Cerankosky - Northcoast Research

That wasn't me, obviously.

Thomas L. Millner

We do not have a boy's playwear business, just for the record.

Charles Edward Cerankosky - Northcoast Research

Yes, that was too weird.

Thomas L. Millner

Although maybe the whole store is a boy's playground, I guess.

Charles Edward Cerankosky - Northcoast Research

That's what my wife thinks.

Thomas L. Millner

Good.

Charles Edward Cerankosky - Northcoast Research

Hey question for you on the archery category, just for fun. How did that do in the quarter?

Thomas L. Millner

Archery, this year, got off to a really big start early in the year and was quite strong. Then it sort of softened midyear. And I think we have really high hopes for the balance of the year. We've just launched a new bow called the Instigator. I would encourage you to go to Facebook and see it. And Hunger Games 2 is released soon in early November. And if the initial release of Hunger Games is any indication, it'll have a really favorable impact on archery.

Charles Edward Cerankosky - Northcoast Research

Okay. So I would take that it was -- the category comp negative in the third quarter?

Thomas L. Millner

Yes. It was challenging in the quarter slightly after a really good run early in the year.

Charles Edward Cerankosky - Northcoast Research

Getting back to how you opened the call, Tommy, about seeing this consumer sentiment change, how are you measuring that?

Thomas L. Millner

Well, we had pretty solid expectations as -- remember, we talked to you guys on July 24. And July was moving along right to our expectations. And as we got into August, we just saw weakness by geography and category to pretty good expectations we had for August and September. So we just kind of saw weakness across the board, which we saw little traffic declines in the stores. And that's kind of how we got there.

Charles Edward Cerankosky - Northcoast Research

Have you followed up? Or does it involve any analyses of the point-of-sale data, especially with your Visa CLUB members, shifting in what they're buying and how they're buying a number of trips?

Ralph W. Castner

No. I think what we saw in the consumer sentiment was just anecdotally in the timing of when we saw shifts in our business relative to what was in the news. I mean, clearly, it started when we saw all the talk about Syria and went through the debt ceiling discussions that we had later in the quarter.

Charles Edward Cerankosky - Northcoast Research

So very broad sentiment, and you can't tie it to anything other than that?

Thomas L. Millner

Yes, and it was slight, too. I don't want to overplay. But -- and maybe our expectations were too lofty for August and September, but it was a slight change that we just kind of felt. Obviously, we talked to other retailers, and anecdotally, we kind of heard similar things, that there was a change in August that persisted.

Charles Edward Cerankosky - Northcoast Research

I saw the announcement of the land management tractor line. How -- is that going to be financed at all in connection with the bank?

Ralph W. Castner

It will be financed but not by us. We've got a third-party to do the financing on that.

Thomas L. Millner

We're 6 weeks in, so we really don't have enough data to opine on how successful or not we've been. I'd say we're pleased so far. What we're really pleased about is the quality of the product that we're buying -- that we put our name on. And we view that as the most important thing we could do. If we had a great product, we had a chance of penetrating this market. And we'll obviously see -- I think, probably by the second or third quarter of next year, we'll have a really good sense of whether this is -- can be a meaningful market for us, but obviously, we thought that it was.

Charles Edward Cerankosky - Northcoast Research

Are those products imported?

Thomas L. Millner

Yes, they are.

Operator

We'll take the next question from Lee Giordano with Imperial Capital.

Lee J. Giordano - Imperial Capital, LLC, Research Division

Can you just update us on the performance of the Outpost stores and what you've learned so far about that store format and, potentially, what kind of adjustments you might make as you roll that format out next year and into 2015?

Ralph W. Castner

Yes, Lee, I -- I'm sure you guys are tired of the answer it's too early to tell, but we do only have 2 open. We're opening 2 more stores, 1 next week in Waco, Texas, and another 1 next month in Kalispell. We expect to get more -- quite frankly, the Kalispell store is probably not opening at the right time of the year. That, we won't know much about until the spring. I think the Waco store, we're really interested in looking at that to try to get more data. What we've noticed in the 2 that are open is, on one of the stores, I would tell you, we're slightly exceeding our expectations and the other one is slightly below our expectations. Interestingly enough, we planned them this way and they're performing this way on a per square foot basis. They're actually doing a little worse than our next-generation stores, but better than our legacy stores. So I think it's sort of in line with what our expectations are. We see accelerating the rollout of those slightly, but until we've got 5 or 10 of them, I'm not sure we're going to be changing a lot about what we do. We continue to have teams meet on improving the performance. And as we have more of the stores, we'll be able to dedicate more resources that'll be shared across all stores. And we're looking forward to continuing to build that concept.

Operator

We'll go next to Mark Smith with Feltl and Company.

Mark E. Smith - Feltl and Company, Inc., Research Division

I just want to follow up real quick, Ralph, on that question on the Outpost. If sales per square foot are slightly below next-gen, I know it's still early, but would you look at profitability per square foot still being above, given kind of the product mix that you sell in those stores?

Ralph W. Castner

Yes, but I think we still got in -- from a profit perspective, one of the stores is doing a little better, and the other one's doing a little worse or -- and maybe more worse than the sales are relative to our expectations. I think we've just got a lot more work to do to figure that out. And as we have more stores and dedicate more and more corporate people to those teams, I think we're going to be able to improve the performance of those stores and see great results from our stores in the future. So...

Mark E. Smith - Feltl and Company, Inc., Research Division

Okay. And then second, I just wanted to get an update on a few things in Canada, in general, kind of how pleased you are with those stores as you relocated Winnipeg, what you kind of learned from that and how that store is doing. And then if you can give any update on where you stand on a credit card solution in Canada.

Ralph W. Castner

Well, first, I'll talk about the stores. I mean, we continue to be really pleased with what we're seeing in Canada. We announced a third store for 2014 today in Nanaimo, which, as you may now, Mark, is on Victoria Island. That'll be one of our Western stores that we're looking forward to. I would tell you -- and that will be it for 2014. As you look forward to 2015, we've got at least 1 store that we're very close to being able to announce and would expect to have either 1 or 2 more in addition to that. As far as having a card solution in Canada, I would tell you, that continues to go -- it continues to be a personal frustration for me and continues to go much slower than what we'd expect. And I don't see, at the earliest, we'd have something in 2015.

Mark E. Smith - Feltl and Company, Inc., Research Division

Anything on the relocation [indiscernible].

Ralph W. Castner

Yes. The...

Mark E. Smith - Feltl and Company, Inc., Research Division

Are there any other stores that maybe in the future you could say, "Hey, this really worked. We can do this again?"

Thomas L. Millner

Well, you've been to the -- you were at the old store and you've seen the new store. So the old store is small, no parking, difficult to get in and out of the store. So to say that we're pleased with the performance of the relocated store would be the understatement of the century. The store is just doing really, really well. I mean, it's bright and open and airy and reflects what our retail theme looks like. In Canada, I don't think we see at this point a need for -- I mean, they're all new stores, so it's kind of hard to imagine relo [relocation] in one of them. But gosh, we just continue to be thrilled with Canada and excited by the opportunity to grow our Canadian footprint at a measured, thoughtful pace to build value for shareholders.

Ralph W. Castner

I think the learning I'm most looking forward to is when we open our store in July of 2014 in Barrie, which is a northern suburb of Toronto, I'll be interested to see how we perform in the more Metropolitan areas of Canada. I mean, obviously -- I mean, just by where we're not, the places we need to be is in Calgary, we need to be in British Columbia, we need to be in Ontario and we need to be in the maritime provinces. And as we continue to expand particularly with Nanaimo, although that's really not in the Greater Vancouver area, but as we open up at Nanaimo and in Barrie, to see how we perform in those more Metropolitan areas will be interesting.

Operator

We have one final question that comes from Anthony Lebiedzinski with Sidoti & Company.

Anthony C. Lebiedzinski - Sidoti & Company, LLC

My first question is regarding the Direct business. Can you just talk about the magnitude of the average ticket decline that you saw in the quarter?

Ralph W. Castner

Yes. Well, let me take that. It was average ticket -- average order size was down less than 1%, and orders were up slightly more than 1%.

Anthony C. Lebiedzinski - Sidoti & Company, LLC

Okay, that's helpful. And earlier in the call, you mentioned that fourth quarter to date, the same-store sales were down slightly. Can you just give us a perspective as to how comps were in the year ago period, the first 3.5 weeks of the fourth quarter of 2012?

Ralph W. Castner

I don't have the number for the 3.5-week period, although I do know, a year ago, they accelerated during the quarter as we came up against the election and then the Newtown tragedy, which is why -- and, particularly, in guns, which is why we gave the guidance we did, that we expected it to deteriorate somewhat as we move throughout this quarter.

Thomas L. Millner

Yes. Last year, the deeper we got into October and the closer we got to the election, things started to accelerate, and then after the election, they accelerated further. And then we know what happened in mid-December.

Anthony C. Lebiedzinski - Sidoti & Company, LLC

Okay, that's helpful. And also, can you give us an expected timeline for how the omni-channel fulfillment will progress over the next few years? At what point should we expect that to be in all the stores?

Thomas L. Millner

Well, you may not have been on the call when we talked about this earlier. We never envisioned all stores because it's not necessary. We see it capping at about 20 stores. And in the right geographical dispersion, that will get us close to most of our customers and access to enough inventory to satisfy omni-channel. Obviously, we need to add more as we get to midyear next year when we would have 20 stores. We will. But we think that 20 stores more than satisfies the need we have for omni fulfillment. And at 20 stores, we'll be able to better manage the package not going from Hamburg, Pennsylvania to Billings, Montana, that we will have dispersion so we can get stuff more geographically located to the consumer, which helps on cost also. But I can't tell you enough how seamless this was done, and it's a real compliment to our marketing teams, our IT teams, our retail operations and DC teams. They've pulled this off flawlessly.

Anthony C. Lebiedzinski - Sidoti & Company, LLC

Okay. And my last question is, can you give us a sense as to the expected impact from Obamacare and as far as any changes to your staffing levels between full-time and part-time labor?

Ralph W. Castner

What we've done, we've made a few adjustments there previously, but we don't see anything in the future significantly driven by that from a staffing level.

Operator

And we have no further questions at this time. I'd like to turn the conference back to our speakers for any additional or closing remarks.

Thomas L. Millner

I want to thank everybody for joining us today, and we'll look forward to talking to you all again soon.

Operator

That does conclude today's presentation. Thank you for your participation.

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