How the Obama Gun Boom Pushed the Fortune of Two Brothers to $1.2 Billion

Forbes
A man wearing a t-shirt quoting Gen. George S. Patton attends the National Rifle Association's annual convention Friday, May 3, 2013 in Houston. (AP Photo/Steve Ueckert)
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A man wearing a t-shirt quoting Gen. George S. Patton attends the National Rifle Association's annual convention Friday, May 3, 2013 in Houston. (AP Photo/Steve Ueckert)

In March the National Rifle Association coordinated a demonstration against new gun legislation in Connecticut, the state where 26 children and staff were gunned down at an elementary school in December. Before boarding buses headed for the state capital, gun owners met up at a parking lot in nearby East Hartford--a parking lot owned by sporting goods store Cabela's

The location was no accident--they were guests of the owners. With 40 stores and a strong Internet and mail catalog business, Cabela's sells everything from fishing rods to wool slippers. But guns are the real moneymaker, and while fears of future gun restrictions have spurred sales for the entire industry, no company has benefited quite like Cabela's.

Shares have increased by 95% in the last year and are up more than 70% already in 2013. That makes Cabela's stock the best-performing in the firearms industry and one of the top-performing stocks in the U.S. in the last year. The company's two biggest shareholders, founders Richard and James Cabela, have seen the value of their combined 25% stake jump to $1.2 billion from $750 million at the start of 2013.

About one-third of Cabela's $3.1 billion in sales last year came from firearms, ammunition and accessories, and a substantial amount of its all-important sales growth came from its gun business. Cabela's first-quarter 2013 same-store sales growth was 24%, but it was only 9% excluding firearms and ammunition. The company set a new record for first-quarter revenue, which increased 28.7% to $802.5 million.

It has been an incredible run for the company founded in 1961 by Richard Cabela and his wife, Mary, at their kitchen table in Chappell, Nebr. Within two years younger brother James Cabela joined the catalog business, and the duo eventually moved their headquarters to Sidney, Nebr. and developed stores that have become like shopping amusement parks for sportsmen, known for elaborate taxidermy displays of animals from deer to lions. In addition to its stores and direct-sales channels, Cabela's offers a cobranded Visa credit card and even owns an FDIC-insured bank.

Richard Cabela, 76, is currently chairman of the company; he will become chairman emeritus in June. James Cabela, 73, will go from being vice chairman to chairman of the board. Cabela's and its founders declined to comment for this article.

Both the company and its founders have long been strong supporters of the NRA. The company had a prominent presence at this month's annual NRA meeting in Houston, where many people were given a cloth Cabela's bag upon entering the show and Cabela's cosponsored events and seminars like the NRA Foundation Banquet. In 2012 the NRA honored Cabela's after the company became one of the few to cross the $1 million mark in NRA donations. According to the Violence Policy Center gun-control group, only five other corporations had given the NRA more than $1 million as of 2011.

Cabela's has also offered customers $25 gift cards for signing up for or renewing NRA memberships, and it participates in the NRA Add-a-Buck program, giving customers the opportunity to add one dollar to their orders to benefit the NRA Youth Hunter Education Challenge. "Cabela's longtime support of the NRA indicates the high regard we hold for the organization and the work it does to protect our important freedoms," CEO Thomas Millner said last year.

In a video interview on Cabela's website conducted by NRA Executive Vice President Wayne LaPierre, Richard Cabela explained his support for the NRA while sitting in his home's 15,000-square-foot trophy room, which features large African animals, including an elephant, giraffe and rhinoceros. "These guys protect your right to own a gun, that's what it's all about," Cabela said of the NRA, adding: "Some of those countries have no freedom, and a lot of that comes right down to their right to bear arms--I'll tell you that's where it sticks."

And while Cabela's support for the NRA follows the personal beliefs of the founders, it also helps the company's financials. In its Securities & Exchange Commission filings, Cabela's says new laws or increased regulations regarding sales and ownership of firearms and ammunition could "cause the demand for and sales of our products to decrease and could materially adversely impact our revenue and profitability." Complying with any new firearms regulation, the company notes, might also cause its operating expenses to increase.

But the impact of the gun debate on Cabela's is complex. As a federally licensed firearms dealer, the company already conducts presale background checks on purchasers of its guns. The company does, however, sell controversial firearms like the Smith & Wesson M&P15, one of the weapons used by the man who killed 12 people in an Aurora, Colo. movie theater last year. It was restricted under a law that expired in 2004 and has been the focus of proposed regulations.

Still, the extension of mandatory background checks to gun shows and private gun sales, as was proposed by recent federal legislation that was defeated in the Senate, would probably strengthen Cabela's marketplace position by making it a dominant player on a more even playing field. In addition, as the company's recent financial performance shows, demand for its inventory of firearms, ammunition and gun accessories gets stronger as long as gun control continues to be a legislative focus.

That's certainly been the case in Connecticut. Despite the protests, lawmakers there eventually passed new, stricter gun legislation. In the days before Governor Dannel Malloy signed the bill, Cabela's Connecticut sales of firearms and ammunition skyrocketed, Millner said on an investor call in April. And while sales have plateaued a bit lately, "it's still a pretty good level," he said.


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