Dive Brief:

• Cabela's net income fell 35% in the third quarter to $28.2 million from $43.7 million in the year ago period after the outdoor retailer (recently acquired by rival Bass Pro Shops for $5.5 billion) discounted many items to boost sales, the company said Wednesday.

• Same-store sales fell 2.3% as weak demand for apparel undermined strong sales of firearms and shooting-related categories and camping, powersports and optics. E-commerce and catalog sales rose 3.6% on strong demand in the fishing, camping, optics, powersports and shooting-related categories, the company said.

• Cabela's revenues rose 8% in Q3 to $996.5 million, missing analyst projections of $1.01 billion.

Dive Insight:

Cabela’s released its quarterly report a day early and isn’t holding its usual conference call with analysts or issuing guidance in light of its pending acquisition by rival Bass Pro Shops, the retailer said in a press release. But the report shows why activist investor Elliott Management for months angled for a sale of some or all of Cabela's operations after declaring an 11% stake in the company last year.

“During the third quarter, we successfully drove sales growth in several of our key merchandise categories through an aggressive promotional and markdown cadence; however, these promotional activities also resulted in a decrease in merchandise gross margins and were the primary contributor to the profitability shortfall,” Cabela’s CEO Tommy Millner said in a statement.

Cabela’s has been struggling for a while, and recently scaled back expansion plans after discovering that its new superstores were taking sales from smaller existing ones. After months of rumors that Bass Pro Shops was gunning for its rival, the sale was announced earlier this month.

Cabela's and Bass Pro Shops have a lot in common. Both have worked for years to lure and entertain customers with huge, destination-like stores that include attractions like shooting galleries and taxidermy displays. But their complementary strengths and dominance in the outdoor segment could invite a challenge from antitrust regulators, experts recently told Retail Dive.

In related news, Moody’s Investor Service confirmed its downgrade of Bass Pro Group's ratings, and assigned a B1 rating to the company's proposed $3.87 billion Senior Secured Credit Facilities. Moody's nevertheless said Bass Pro Shops' ratings outlook is positive in light of the Cabela's deal.

"The acquisition combines two premier specialty brands in the outdoor sporting goods industry," Moody's analyst Mike Zuccaro wrote Wednesday in an email to Retail Dive. "While the proposed financing structure will result in a pro forma leverage that remains around Bass Pro's current levels, we expect significant de-leveraging to occur over time through revenue and profit growth, margin expansion through synergy realization, and debt reduction.”