Record-Setting NICS Data Decelerates, But Still A Positive For Cabela's And Sportsman's Warehouse

Despite a slowdown in growth, NICS data continued to be at record levels in September. DA Davidson’s Andrew Burns said that Cabelas Inc CAB had opened a store during this period, while Sportsman's Warehouse Holdings Inc SPWH had opened two.

Figures released by the FBI indicated 7.9 percent year-over-year growth in adjusted firearms background checks to 1,155,355 in September. While this marks a slowdown from the 17.5 percent increase recorded in August and the 28.0 percent increase in July, NICS data continues to be at a record high.

Adjusted NICS background checks rose 17.4 percent year-over-year in Q3, representing an acceleration from the 14.6 percent growth recorded in Q2.

Related Link: NICS Firearm Background Checks Up 11% Year-Over-Year In September

Comparing With National Growth

For September, the adjusted NICS data rose 6.6 percent year-over-year for Cabelas and 14.4 percent for Sportsman's Warehouse. For Q3, adjusted NICS data rose 13.0 percent when weighted by Cabelas’ store base. Burns added, “For retail 3Q16 QTD (Aug-Sep), adjusted NICS data is up 15.0% when weighted by SPWH's store base.”

NICS Data To Remain Elevated

“Although growth has continued to decelerate from the surge-like performance of June and July, high-single digit y/ y growth in September suggests that industry fundamentals are intact. As we enter the higher volume hunting season, we see potential for further deceleration but still believe the NICS data will remain positive and at or near record levels,” the analyst wrote.

These are positive trends in the firearms category and support positive same-store sales for Cabelas and Sportsman's Warehouse.

Store Openings

In September, Cabelas opened one store in Ottawa [Canada] and Sportsman's Warehouse opened two stores, one in Avondale, Arizona and the other in Fairfield, California.

“Overall, we believe new competitive entrants to existing CAB and SPWH markets remain a manageable headwind,” Burns commented.

The analyst maintained a Neutral rating on Cabelas, with a price target of $65.50, and a Buy rating on Sportsman's Warehouse, with a price target of $15. He added that the latter’s growth prospects justified “a premium high-growth retailer valuation.”