Subsidy-Hungry Cabela’s: Is Its Business Model Teetering?

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It’s an axiom in the economic development profession that if a company really depends on subsidies to decide where to go, it’s probably not much of a company. State commerce officials distinguish between consultants and companies they deem credible and, well, others.

That’s why I ridiculed the business plan of Cabela’s in The Great American Jobs Scam. As the #1 outdoor sporting goods retailer changed from just a catalogue operation to a national mega-store chain as well (and went public to raise the money), it signaled in its IPO prospectus that it was going to rely heavily on subsidies. Indeed, 20 facilities and more than $500 million later, Cabela’s officials have said publicly they don’t open stores without subsidies.

But will Cabela’s (and Bass Pro) shopping “pilgrims” really travel 400 miles (thus justifying “high impact retail” subsidies) once the two chains saturate every major market? (Not to mention $3.50 gasoline.)

Recent news from Cabela’s suggests otherwise: a trade journal recently noted that it will open only 2 stores this year, not the 7 it had announced. “On hold are stores announced for Billings, Mont.; Greenwood, Ind.; Wheat Ridge, Colo.; and East Rutherford, N.J.” reports Waverly News.

And in Hammond, Indiana and Hoffman Estates, Illinois (both near Chicago), the Northwest Indiana Times reports that Cabela’s is laying off 40 workers at each store. “During Cabela’s fourth-quarter conference call with analysts a week ago, company officials said three of the eight stores the outdoor outfitter opened in 2007, which included the Hammond and Hoffman Estates locations, were underperforming. They had declined to name the locations,” the Times reported.

David Cay Johnston, who will speak at our May 7-8 conference, also lambasts Cabela’s in his new book Free Lunch.

3 Responses to “Subsidy-Hungry Cabela’s: Is Its Business Model Teetering?”

  1. Brian J. Kelsey Says:

    Thanks for posting this, Greg. Do most “regional” retail outlet centers employ a similar strategy?

  2. Melissa Says:

    Great site. I will bookmark for my sons to view as well!!!e

  3. The Subsidy Game as Corporate Strategy « Says:

    […] over $1.2 billion in state and local subsidies, often to the detriment of other local retailers. Cabela’s and Bass-Pro Shops both utilize this strategy. Gander Mountain cried foul. Semiconductor companies […]

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