**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form 10-Q**


(Mark
      One)





x
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





For
                the quarterly period ended September 29,
                2007





OR





o
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





Commission
      File Number: **1-32227**





**CABELA’S
      INCORPORATED**


(Exact
      name of registrant as specified in its charter)


**Delaware**
            
            **20-0486586**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                Number)**One
                Cabela Drive, Sidney, Nebraska**
            
            **69160**(Address
                of principal executive offices)
            
            (Zip
                Code)





**(308)
      254-5505**


(Registrant’s
      telephone number, including area code)





**Not
      applicable**


(Former
      name, former address and former fiscal year, if changed since last
      report)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the
      registrant was required to file such reports), and (2) has been subject to
      the filing requirements for at least the past 90 days. Yes x No o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the
      Exchange Act.  (Check One):





Large
                accelerated filer  x
            Accelerated
                filer o
            Non-accelerated
                filer o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  Yes o No x





Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date.





Common
      stock, $0.01 par value: 65,850,190 shares as of October 26,
      2007.








**CABELA’S
      INCORPORATED**


**FORM
      10-Q**


**QUARTERLY
      PERIOD ENDED SEPTEMBER 29, 2007**


**TABLE
      OF CONTENTS**








PART
                I – FINANCIAL INFORMATION
            PageItem
                1.
            Financial
                Statements
            3Condensed
                Consolidated Balance Sheets
            3Condensed
                Consolidated Statements of Income
            4Condensed
                Consolidated Statements of Cash Flows
            5Notes
                to Condensed Consolidated Financial Statements
            6Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            18Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            37Item
                4.
            Controls
                and Procedures
            38Item
                4T.
            Controls
                and Procedures
            38PART
                II – OTHER INFORMATIONItem
                1.
            Legal
                Proceedings
            39Item
                1A.
            Risk
                Factors
            39Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            39Item
                3.
            Defaults
                Upon Senior Securities
            39Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            39Item
                5.
            Other
                Information
            39Item
                6.
            Exhibits
            39SIGNATURES
            40INDEX
                TO EXHIBITS
            41





-
          2
          -
 TABLE
          OF CONTENTS


**PART
      I – FINANCIAL INFORMATION**





**Item
      1.                                Financial
      Statements**





**CABELA'S
                INCORPORATED AND
                SUBSIDIARIES**
              **CONDENSED
                CONSOLIDATED BALANCE SHEETS**
              **(Dollars
                in Thousands Except Par Value)**
              **(Unaudited)****ASSETS**
            
            **September 29,**
              **2007**
            
            
            **December
                30,**
              **2006**
            
            
            **September
                30,**
              **2006**CURRENT
                ASSETS:Cash
                and cash
                equivalents
            
            $
            103,114
            
            
            $
            172,903
            
            
            $
            73,315Accounts
                receivable, net of
                allowance for doubtful accounts of $2,084, $1,932 and
                $1,838
            
            
            30,657
            
            
            
            37,812
            
            
            
            26,766Credit
                card loans held for
                sale (Note 3)
            
            
            158,939
            
            
            
            136,072
            
            
            
            91,400Credit
                card loans receivable,
                net of allowances of $1,036, $699 and $592 (Note 3)
            
            
            13,360
            
            
            
            16,611
            
            
            
            14,882Inventories
            
            
            669,544
            
            
            
            484,414
            
            
            
            504,399Prepaid
                expenses and deferred
                catalog costs
            
            
            63,858
            
            
            
            42,502
            
            
            
            63,011Income
                taxes
                receivable
            
            
            11,113
            
            
            
            --
            
            
            
            5,419Other
                current
                assets
            
            
            67,729
            
            
            
            63,907
            
            
            
            78,060Total
                current
                assets
            
            
            1,118,314
            
            
            
            954,221
            
            
            
            857,252PROPERTY
                AND EQUIPMENT, NET
            
            
            862,554
            
            
            
            600,065
            
            
            
            584,957OTHER
                ASSETS:Land
                held for sale or
                development
            
            
            34,186
            
            
            
            20,947
            
            
            
            8,903Retained
                interests in
                securitized loans
            
            
            46,378
            
            
            
            39,033
            
            
            
            40,033Marketable
                securities
            
            
            80,687
            
            
            
            117,360
            
            
            
            111,199Other
                assets
            
            
            22,655
            
            
            
            19,604
            
            
            
            17,192Total
                other
                assets
            
            
            183,906
            
            
            
            196,944
            
            
            
            177,327Total
                assets
            
            $
            2,164,774
            
            
            $
            1,751,230
            
            
            $
            1,619,536**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**CURRENT
                LIABILITIES:Accounts
                payable
            
            $
            311,195
            
            
            $
            239,285
            
            
            $
            225,994Unpresented
                checks net of bank
                balance
            
            
            40,458
            
            
            
            --
            
            
            
            11,735Accrued
                expenses and other
                liabilities
            
            
            59,400
            
            
            
            72,124
            
            
            
            57,876Gift
                certificates and credit
                card reward points
            
            
            141,030
            
            
            
            144,210
            
            
            
            113,399Accrued
                employee compensation
                and benefits
            
            
            52,013
            
            
            
            61,275
            
            
            
            41,961Time
                deposits
            
            
            25,044
            
            
            
            33,401
            
            
            
            40,799Short-term
                borrowings at
                financial services segment (Note 4)
            
            
            50,000
            
            
            
            6,491
            
            
            
            --Current
              maturities of long-term debt (Note
              5)
            
            
            26,760
            
            
            
            26,803
            
            
            
            27,356Income
                taxes
                payable
            
            
            --
            
            
            
            17,267
            
            
            
            --Deferred
                income
                taxes
            
            
            21,774
            
            
            
            17,978
            
            
            
            11,960Total
                current
                liabilities
            
            
            727,674
            
            
            
            618,834
            
            
            
            531,080LONG-TERM
                LIABILITIES:Long-term
                debt, less current
                maturities (Note 5)
            
            
            523,306
            
            
            
            284,579
            
            
            
            298,416Time
                deposits
            
            
            72,594
            
            
            
            68,795
            
            
            
            65,595Deferred
                compensation
            
            
            5,262
            
            
            
            5,174
            
            
            
            5,047Deferred
                grant income and
                tenant allowances
            
            
            24,083
            
            
            
            9,550
            
            
            
            12,813Deferred
                income
                taxes
            
            
            32,004
            
            
            
            30,440
            
            
            
            27,769Other
                long-term
                liabilities
            
            
            9,458
            
            
            
            --
            
            
            
            --Total
                long-term
                liabilities
            
            
            666,707
            
            
            
            398,538
            
            
            
            409,640COMMITMENTS
                AND CONTINGENCIES (Note 9)STOCKHOLDERS’
                EQUITY (Note 7):Preferred
                stock, $0.01 par
                value; 10,000,000 shares authorized, no shares issued or
                outstanding
            
            
            --
            
            
            
            --
            
            
            
            --Common
                stock, $0.01 par
                value:Class
                A Voting, 245,000,000
                shares authorized;  65,843,844, 59,556,431 and 57,226,463shares
                issued and outstanding
            
            
            658
            
            
            
            596
            
            
            
            573Class
                B Non-voting, 245,000,000
                shares authorized:  none, 5,807,305 and 8,073,205
                shares issued and outstanding
            
            
            --
            
            
            
            58
            
            
            
            80Additional
                paid-in
                capital
            
            
            255,350
            
            
            
            247,741
            
            
            
            245,943Retained
                earnings
            
            
            515,031
            
            
            
            485,148
            
            
            
            431,796Accumulated
                other
                comprehensive income (loss), net
            
            
            (646
            )
            
            
            315
            
            
            
            424Total
                stockholders’
                equity
            
            
            770,393
            
            
            
            733,858
            
            
            
            678,816Total
                liabilities and
                stockholders’ equity
            
            $
            2,164,774
            
            
            $
            1,751,230
            
            
            $
            1,619,536See
                notes to unaudited condensed consolidated financial
                statements.





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          3
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          OF CONTENTS





**CABELA'S
                INCORPORATED AND
                SUBSIDIARIES**
              **CONDENSED
                CONSOLIDATED STATEMENTS OF INCOME**
              **(Dollars
                in Thousands Except Earnings Per Share)**
              **(Unaudited)****Three
                months ended**
            
            
            **Nine
                months ended****September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**
            
            
            **September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**REVENUE:Merchandise
                sales
            
            $
            499,182
            
            
            $
            450,821
            
            
            $
            1,325,245
            
            
            $
            1,171,493Financial
                services
                revenue
            
            
            44,749
            
            
            
            37,392
            
            
            
            121,497
            
            
            
            98,946Other
                revenue
            
            
            2,878
            
            
            
            2,240
            
            
            
            13,357
            
            
            
            12,082Total
                revenue
            
            
            546,809
            
            
            
            490,453
            
            
            
            1,460,099
            
            
            
            1,282,521COST
                OF REVENUE:Cost
                of merchandise
                sales
            
            
            322,547
            
            
            
            290,747
            
            
            
            859,042
            
            
            
            759,079Cost
                of other
                revenue
            
            
            37
            
            
            
            (582
            )
            
            
            1,671
            
            
            
            2,894Total
                cost of revenue
                (exclusive of depreciation and amortization)
            
            
            322,584
            
            
            
            290,165
            
            
            
            860,713
            
            
            
            761,973SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES
            
            
            199,879
            
            
            
            173,437
            
            
            
            542,397
            
            
            
            464,949OPERATING
                INCOME
            
            
            24,346
            
            
            
            26,851
            
            
            
            56,989
            
            
            
            55,599OTHER
                INCOME (EXPENSE):Interest
                income
            
            
            42
            
            
            
            287
            
            
            
            1,705
            
            
            
            1,624Interest
                expense
            
            
            (4,220
            )
            
            
            (4,794
            )
            
            
            (13,690
            )
            
            
            (12,929
            )Other
                income,
                net
            
            
            1,004
            
            
            
            2,000
            
            
            
            5,353
            
            
            
            7,600Total
                other income
                (expense)
            
            
            (3,174
            )
            
            
            (2,507
            )
            
            
            (6,632
            )
            
            
            (3,705
            )INCOME
                BEFORE PROVISION FOR INCOME TAXES
            
            
            21,172
            
            
            
            24,344
            
            
            
            50,357
            
            
            
            51,894PROVISION
                FOR INCOME TAXES
            
            
            7,940
            
            
            
            9,350
            
            
            
            18,719
            
            
            
            19,461NET
                INCOME
            
            $
            13,232
            
            
            $
            14,994
            
            
            $
            31,638
            
            
            $
            32,433EARNINGS
                PER COMMON  SHARE (NOTE 6):Basic
            
            $
            0.20
            
            
            $
            0.23
            
            
            $
            0.48
            
            
            $
            0.50Diluted
            
            $
            0.20
            
            
            $
            0.23
            
            
            $
            0.47
            
            
            $
            0.49WEIGHTED
                AVERAGE SHARES OUTSTANDING (NOTE 6):Basic
            
            
            65,825,895
            
            
            
            65,271,870
            
            
            
            65,701,443
            
            
            
            65,180,992Diluted
            
            
            67,031,102
            
            
            
            66,484,306
            
            
            
            67,317,482
            
            
            
            66,492,421See
                notes to unaudited condensed consolidated financial
                statements.





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          4
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          OF CONTENTS





**CABELA’S
                INCORPORATED AND
                SUBSIDIARIES**
              **CONDENSED
                CONSOLIDATED STATEMENTS OF CASH FLOWS**
              **(In
                Thousands)**
              **(Unaudited)****Nine
                months ended****September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income
            
            $
            31,638
            
            
            $
            32,433Adjustments
                to reconcile net
                income to net cash flows from operating activities:Depreciation
            
            
            41,074
            
            
            
            31,549Amortization
            
            
            530
            
            
            
            669Stock
                based
                compensation
            
            
            3,468
            
            
            
            2,627Deferred
                income
                taxes
            
            
            5,937
            
            
            
            15,275Other,
                net
            
            
            803
            
            
            
            2,194Change
                in operating assets and
                liabilities:Accounts
                receivable
            
            
            6,973
            
            
            
            (2,516
            )Origination
                of credit card
                loans held for sale, net of collections
            
            
            (22,867
            )
            
            
            (13,710
            )Retained
                interests in
                securitized loans
            
            
            (5,845
            )
            
            
            (8,818
            )Inventories
            
            
            (180,696
            )
            
            
            (107,764
            )Prepaid
                expenses and deferred
                catalog costs
            
            
            (21,259
            )
            
            
            (20,129
            )Other
                current
                assets
            
            
            (3,601
            )
            
            
            (26,182
            )Land
                held for sale or
                development
            
            
            (10,614
            )
            
            
            2,729Accounts
                payable
            
            
            28,776
            
            
            
            42,422Accrued
                expenses and other
                liabilities
            
            
            (12,320
            )
            
            
            1,371Gift
                certificates and credit
                card reward points
            
            
            (3,439
            )
            
            
            (7,721
            )Accrued
                compensation and
                benefits
            
            
            (9,800
            )
            
            
            (18,363
            )Income
                taxes
                payable/receivable
            
            
            (28,349
            )
            
            
            (36,854
            )Deferred
                compensation
            
            
            88
            
            
            
            (2,122
            )Deferred
                grant income and
                tenant allowances
            
            
            14,064
            
            
            
            2,093Other
                long-term liabilities
                for unrecognized tax benefits and related interest
            
            
            7,702
            
            
            
            --Net
                cash used in operating
                activities
            
            
            (157,737
            )
            
            
            (110,817
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Capital
                expenditures
            
            
            (259,501
            )
            
            
            (134,189
            )Purchases
                of marketable
                securities
            
            
            (10,052
            )
            
            
            (16,827
            )Maturities
                of marketable
                securities
            
            
            1,105
            
            
            
            928Proceeds
                from retirement of
                marketable securities
            
            
            43,970
            
            
            
            53,000Purchases
                of short-term
                investments
            
            
            --
            
            
            
            (131,225
            )Proceeds
                from sales or
                maturities of short-term investments
            
            
            --
            
            
            
            131,225Change
                in credit card loans
                receivable, net
            
            
            1,955
            
            
            
            (3,323
            )Change
                in cash reserves for
                retained interests
            
            
            (1,500
            )
            
            
            3,250Acquisition
                of net assets, net
                of cash received
            
            
            (9,281
            )
            
            
            --Proceeds
                from disposition of
                property and equipment
            
            
            3,905
            
            
            
            --Other,
                net
            
            
            867
            
            
            
            933Net
                cash used in investing
                activities
            
            
            (228,532
            )
            
            
            (96,228
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Change
                in unpresented checks
                net of bank balance
            
            
            40,458
            
            
            
            (9,917
            )Change
                in time deposits,
                net
            
            
            (4,558
            )
            
            
            (3,094
            )Change
                in federal funds
                purchased, net
            
            
            (6,491
            )
            
            
            --Borrowings
                on lines of credit,
                inventory financing and short-term borrowings
            
            
            440,321
            
            
            
            213,679Repayments
                on lines of credit,
                inventory financing and short-term borrowings
            
            
            (191,678
            )
            
            
            (197,178
            )Proceeds
                from issuance of
                long-term debt
            
            
            60,800
            
            
            
            215,000Payments
                on long-term
                debt
            
            
            (26,684
            )
            
            
            (28,092
            )Proceeds
                from exercise of
                employee stock options and stock purchase plan
            
            
            3,499
            
            
            
            3,148Excess
                tax benefits from
                exercise of stock options
            
            
            998
            
            
            
            340Payment
                of debt issuance
                costs
            
            
            (185
            )
            
            
            (449
            )Net
                cash flows provided by
                financing activities
            
            
            316,480
            
            
            
            193,437NET
                DECREASE IN CASH AND CASH EQUIVALENTS
            
            
            (69,789
            )
            
            
            (13,608
            )CASH
                AND CASH EQUIVALENTS, beginning of fiscal year
            
            
            172,903
            
            
            
            86,923CASH
                AND CASH EQUIVALENTS, end of period
            
            $
            103,114
            
            
            $
            73,315See
                notes to unaudited condensed consolidated financial
                statements.


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          OF CONTENTS


**CABELA’S
      INCORPORATED AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Dollar
        Amounts in Thousands Except Share and Per Share Amounts)**
 **(Unaudited)**





**1.  MANAGEMENT
      REPRESENTATIONS**





The
      condensed consolidated financial statements included herein are unaudited and
      have been prepared by Cabela’s Incorporated and its wholly-owned subsidiaries
      (the “Company”) pursuant to the rules and regulations of the United States
      Securities and Exchange Commission (“SEC”).  Certain information and
      footnote disclosures normally included in financial statements prepared in
      accordance with accounting principles generally accepted in the United States
      of
      America have been condensed or omitted pursuant to such rules and
      regulations.  The condensed consolidated balance sheet of the Company
      as of December 30, 2006, was derived from the Company’s audited consolidated
      balance sheet as of that date.  All other consolidated financial
      statements contained herein are unaudited and reflect all adjustments which
      are,
      in the opinion of management, necessary to summarize fairly the financial
      position of the Company and the results of the Company’s operations and cash
      flows for the periods presented.  All of these adjustments are of a
      normal recurring nature.  All material intercompany balances and
      transactions have been eliminated in consolidation.  Because of the
      seasonal nature of the Company’s operations, results of operations of any single
      reporting period should not be considered as indicative of results for a full
      year.  These condensed consolidated financial statements should be
      read in conjunction with the Company’s audited consolidated financial statements
      for the fiscal year ended December 30, 2006.





***Reclassifications:***





Effective
      June 30, 2007, the Company classified the accrued interest receivable associated
      with its economic development bonds from accounts receivable to other current
      assets in the condensed consolidated balance sheets.  Balances
      totaling $5,864 and $4,512 at December 30, 2006, and September 30, 2006,
      respectively, were reclassified to conform to the current
      presentation.  The corresponding line items in the condensed
      consolidated statements of cash flows were also reclassified and there was
      no
      change in the total of net cash used in operating activities for the nine months
      ended September 30, 2006.  Total current assets of the Company were
      not affected by this reclassification and there was no impact on cash flows
      or
      covenant provisions from this reclassification.





***Acquisition:***





On
      September 27, 2007, the Company purchased the net assets of an outdoors
      specialty retailer located in Winnipeg, Canada.  The net assets
      acquired in this acquisition, which are not material, are included in the
      Company’s condensed consolidated balance sheet at September 29,
      2007.  The Company is in the process of valuing the net assets
      acquired.  The Company expects to complete such valuation by the end
      of fiscal 2007.  In connection with this acquisition, the Company
      entered into a revolving credit agreement dated September 19,
      2007.  As of September 29, 2007, the amount outstanding under this
      revolving credit agreement was $9,333.








**2.**
            **CHANGE
                IN ACCOUNTING PRINCIPLES**





***Inventories:***





Prior
      to
      fiscal 2007, cost was determined using the last-in, first-out (“LIFO”) method
      for all inventories except for a limited amount of inventory totaling $18,200
      owned by Van Dyke Supply Company, Inc. and Wild Wings, LLC, wholly-owned
      subsidiaries of the Company, which used the first-in, first-out (“FIFO”)
      method.  Effective December 31, 2006, the beginning of the Company’s
      2007 fiscal year, management elected to change the Company’s method of valuing
      inventories from the LIFO method to the FIFO method.  Due to
      merchandise unit cost increases for new and higher-priced product lines offered
      by the Company, and because of  the market volatility for certain
      materials in the manufacture of other product lines (primarily firearms and
      ammunition), management believes that this change is preferable as the FIFO
      method better represents our inventory balances at current
      cost.  Further, the adoption of the FIFO method enhances the
      comparability of the Company’s consolidated financial statements by changing to
      the predominant method utilized in the Company’s industry and conforms all of
      its inventories to the same accounting method.  The effect of the
      change did not have a material impact to the Company’s condensed consolidated
      financial statements for the three and nine months ended September 29, 2007,
      and
      September 30, 2006, and for fiscal years 2006, 2005 and 2004 was not material
      to
      the Company’s consolidated financial statements.  Because the effect
      of the change on all periods is not material, no adjustments have been made
      to
      the Company’s consolidated financial statements to reflect a retrospective
      application.


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At
      December 30, 2006, $18,697 was included in the current portion of deferred
      income taxes payable in the Company’s condensed consolidated balance sheet
      related to the book-tax difference resulting from the LIFO method used for
      income tax purposes.  Although the use of the LIFO method under income
      tax regulations requires conformity of methods for financial reporting purposes,
      it does allow selection of alternative methods of calculation.  The
      Company’s LIFO calculation for income tax purposes utilizes a simplified LIFO
      approach which results in a book-tax difference. The change to the FIFO method
      in the first quarter of fiscal 2007 increased the current portion of income
      taxes payable by $4,674 and reduced the current deferred income tax liability
      by
      $4,674.  The Company will incur a cash outlay of $18,697 over the next
      four years based on the Company’s election in its 2007 federal income tax return
      to change its method of accounting for inventory from LIFO to FIFO for income
      tax purposes.





***Uncertainty
      in Income Taxes:***





The
      Company adopted the provisions of Financial Interpretation No. 48 (“FIN 48”),
*Accounting for Uncertainty in Income Taxes—an Interpretation of FASB
      Statement No. 109*, on December 31, 2006.  FIN 48 prescribes a
      recognition threshold and measurement attribute for the financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return.  The recognition threshold requires that the Company
      determine whether it is more likely than not that a tax position will be
      sustained upon examination, and then the position is measured at the largest
      amount of the benefit that is greater than 50 percent likely of being realized
      upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed
      on
      the Company’s tax returns that do not meet these recognition and measurement
      standards.





As
      a
      result of the adoption of FIN 48, the Company recorded total liabilities for
      unrecognized tax benefits of $8,569.  Of this amount, $966 after-tax
      was recorded as a one-time decrease to the Company’s beginning retained earnings
      for the cumulative effect of adopting FIN 48.  The remaining amount
      was previously accrued under Financial Accounting Standards No. 5,
*Accounting for Contingencies* or Financial Accounting Standards No. 109,
*Accounting for**Income Taxes*.  In addition, the
      Company recorded $1,196 before-tax, or $789 after-tax, of accrued interest
      on
      its estimated unrecognized tax benefits as a one-time decrease to the Company’s
      beginning retained earnings for the cumulative effect of adopting FIN
      48.





The
      Company’s policy is to accrue interest expense, and penalties as appropriate, on
      its estimated unrecognized tax benefits as a charge to interest expense in
      the
      condensed consolidated statements of income.  The Company recognized
      $269 and $684 in interest expense during the three and nine months ended
      September 29, 2007, respectively. No penalties were accrued.





The
      liability for unrecognized tax benefits totaling $7,579 at September 29, 2007,
      is classified as other long-term liabilities in the condensed consolidated
      balance sheet.  In addition, a liability for estimated interest on
      unrecognized tax benefits totaling $1,879 at September 29, 2007, is also
      included in other long-term liabilities in the Company’s condensed consolidated
      balance sheet.





The
      total
      amount of unrecognized tax benefits that, if recognized, would affect the
      effective tax rate is $1,326.  As of September 29, 2007, the reversal
      of $6,680 of uncertain tax positions is reasonably possible during the next
      12
      months.  Reversal of any such uncertain tax positions would not affect
      the Company’s effective tax rate.  The Company files income tax
      returns in the United States and various states.  The tax years 2003
      through 2006 remain open to examination by major taxing jurisdictions to which
      the Company is subject.





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**3.                      SALE
      OF CREDIT CARD LOANS**





The
      Company’s wholly-owned bank subsidiary, World’s Foremost Bank (“WFB”), sells a
      substantial portion of its credit card loans.  WFB has established a
      trust for the purpose of routinely securitizing and selling credit card loans.
      WFB retains certain interests in the loans, including a transferor’s interest,
      interest-only strips, servicing rights, and in some cases cash reserve accounts
      and Class B securities.





Credit
      card loans held for sale and credit card loans receivable consisted of the
      following at the periods ended:





**September
                29,**
              **2007**
            
            
            **December
                30,**
              **2006**
            
            
            **September
                30,**
              **2006**Composition
                of credit card loans held for sale and credit card loans
                receivable:Loans
                serviced
            
            $
            1,782,100
            
            
            $
            1,674,064
            
            
            $
            1,412,058Loans
                securitized and sold to
                outside investors
            
            
            (1,600,000
            )
            
            
            (1,514,000
            )
            
            
            (1,298,000
            )Securitized
                loans with
                securities owned by WFB which are classified as retained
                interests
            
            
            (6,900
            )
            
            
            (4,922
            )
            
            
            (5,704
            )175,200
            
            
            
            155,142
            
            
            
            108,354Less
                adjustments to market
                value and allowance for loan losses
            
            
            (2,901
            )
            
            
            (2,459
            )
            
            
            (2,072
            )Total
                (including transferor’s interest of $155,161, $122,824 and
                $85,498)
            
            $
            172,299
            
            
            $
            152,683
            
            
            $
            106,282Transferor’s
                interest restricted for repayment of secured borrowing
            
            $
            66,667
            
            
            $
            --
            
            
            $
            --Delinquent
                loans in the managed credit card loan portfolio
              at
                the respective periods
                ended:30-89
                days
            
            
            12,314
            
            
            
            9,589
            
            
            
            9,23890
                days or more and still
                accruing
            
            
            5,459
            
            
            
            3,095
            
            
            
            2,752





**Three
                months ended**
            
            
            **Nine
                months ended****September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**
            
            
            **September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**Total
                net charge-offs on the managed credit card loans portfolio
            
            $
            8,869
            
            
            $
            6,412
            
            
            $
            22,847
            
            
            $
            17,956Annual
                average credit card loans:Managed
                credit card loans
            
            
            1,730,886
            
            
            
            1,394,377
            
            
            
            1,633,446
            
            
            
            1,315,000Securitized
                credit card loans including seller's interest
            
            
            1,699,428
            
            
            
            1,362,236
            
            
            
            1,600,328
            
            
            
            1,284,002Total
                net charge-offs as a percentage of annual average managed credit
                card
                loans
            
            
            2.05
            %
            
            
            1.84
            %
            
            
            1.86
            %
            
            
            1.82
            %





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**4.  SHORT-TERM
      BORROWINGS AT FINANCIAL SERVICES SEGMENT**




WFB
        entered into a credit agreement on June 21, 2007, for a $50,000 variable
        funding
        facility.  This facility is secured by a participation interest in the
        transferor’s interest of the Cabela’s Master Credit Card Trust.  The
        facility limit was increased to $75,000 on October 9, 2007.  The
        facility carries a liquidity fee of 0.15% on the outstanding commitment and
        a
        program fee of 0.10% on the principal amount outstanding. The interest rate
        on
        the facility is based upon the interest rate for commercial paper issued
        by the
        lender and was 5.68% at September 29, 2007. The weighted average interest
        rate
        was 5.52% on this credit agreement since June 21, 2007. The credit agreement
        expires on June 20, 2008.
 
 WFB
        has
        an unsecured federal funds purchase agreement with a financial
        institution.  The maximum amount that can be borrowed is
        $25,000.  WFB also has an unsecured federal funds purchase agreement
        with another financial institution.  The maximum amount that can be
        borrowed is $60,000.  The weighted average interest rate on the
        average balances outstanding was 5.53% during the nine months ended September
        29, 2007.




5.  LONG-TERM
      DEBT




Long-term
      debt consisted of the following at the periods ended:





**September
                29,**
              **2007**
            
            
            **December
                30,**
              **2006**
            
            
            **September
                30,**
              **2006**Unsecured
                senior notes;  principal payable in annual installments of
                $25,000 through
              September
                5, 2009;  interest payable semi-annually at
                4.95%
            
            $
            50,000
            
            
            $
            75,000
            
            
            $
            75,000Unsecured
                revolving credit facility expiring June 30, 2012
            
            
            195,000
            
            
            
            --
            
            
            
            13,389Unsecured
                notes payable;  balloon principal payable in full February 27,
                2016;
              interest
                payable semi-annually at 5.99%
            
            
            215,000
            
            
            
            215,000
            
            
            
            215,000Senior
                unsecured notes payable due June 17, 2017;  interest payable
                semi-annually at 6.08%
            
            
            60,000
            
            
            
            --
            
            
            
            --Unsecured
                revolving credit facility for Canadian operations expiring June 30,
                2010
            
            
            9,333
            
            
            
            --
            
            
            
            --Capital
                lease obligations
            
            
            13,813
            
            
            
            13,948
            
            
            
            14,007Other
            
            
            6,920
            
            
            
            7,434
            
            
            
            8,376Total
            
            
            550,066
            
            
            
            311,382
            
            
            
            325,772Less
                current maturities of long-term debt
            
            
            (26,760
            )
            
            
            (26,803
            )
            
            
            (27,356
            )Long-term
                debt, less current maturities
            
            $
            523,306
            
            
            $
            284,579
            
            
            $
            298,416





The
      Company has a credit agreement that provides for a $325,000 unsecured revolving
      credit facility.  Effective August 15, 2007, the Company entered into
      an agreement to amend this credit facility.  This amendment changed
      the expiration date of the revolving commitment to June 30, 2012, from June
      30,
      2010; increased the limit of letters of credit to $200,000 from $150,000; and
      amended certain covenants.  The credit facility may be increased to
      $450,000 upon request of the Company and the consent of the banks that are
      party
      to the credit agreement. The credit agreement permits the issuance of up to
      $200,000 in letters of credit and standby letters of credit, the nominal amount
      of which are applied against the overall credit limit available under the credit
      facility. At September 29, 2007, the principal amount outstanding under this
      credit agreement totaled $195,000.  The weighted average interest rate
      for borrowings on the line of credit was 6.24% during the nine months ended
      September 29, 2007.  Letters of credit and standby letters of credit
      totaling $99,165 were outstanding at September 29, 2007.  In addition,
      at September 29, 2007, the Company had an obligation under its open account
      document instructions program to pay $4,531 to participating
      vendors.





On
      June
      15, 2007, the Company issued $60,000 of 6.08% senior unsecured notes pursuant
      to
      a supplement to the Company’s February 2006 debt issuance of $215,000. The notes
      mature on June 15, 2017, with interest on the notes payable
      semi-annually.  These notes contain the same default provisions and
      covenants as those pertaining to the February 2006 debt issuance, including
      limitations on indebtedness and financial covenants relating to net worth and
      fixed charges.





On
      September 19, 2007, the Company entered into an unsecured revolving credit
      agreement for $14,933 ($15,000 Canadian) in conjunction with the acquisition
      of
      the net assets of an outdoors specialty retailer located in Winnipeg,
      Canada.  This credit agreement expires on June 30, 2010. As of
      September 29, 2007, the amount outstanding under this revolving credit agreement
      was $9,333.  Interest is variable, computed at rates as defined in the
      agreement plus a margin and payable monthly.  At September 29, 2007,
      the interest rate was 5.88%.





At
      September 29, 2007, the Company was in compliance with all financial covenants
      under its credit agreements and unsecured notes.


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The
      Company is also party to inventory financing agreements that allow certain
      boat
      and all-terrain vehicle merchandise vendors to give the Company extended payment
      terms.  The vendors are responsible for all interest payments for the
      financing period and the financing company holds a security interest in the
      specific inventory held by the Company.  The Company’s revolving
      credit facility limits this security interest to $50,000.  The Company
      records this merchandise in inventory with an offsetting liability in accounts
      payable in the consolidated balance sheets.  The loans and payments
      are reflected in the financing lines of credit in the Company’s consolidated
      cash flow statements.  The extended payment terms to the vendor do not
      exceed one year.  The outstanding liability was $4,139 at September
      29, 2007.








**6.                      EARNINGS
      PER SHARE (“EPS”)**





Basic
      EPS
      is computed by dividing net income by the weighted average number of shares
      of
      common stock outstanding during the period.  Diluted EPS is computed
      by dividing net income by the sum of the weighted average number of shares
      outstanding plus all additional common shares that would have been outstanding
      if potentially dilutive common share equivalents had been issued.  For
      the fiscal 2006 periods, options exercised prior to vesting have not been
      considered in the basic EPS calculation, but are considered in the computation
      of diluted EPS.





The
      following table reconciles the number of shares utilized in the EPS calculations
      for the periods presented.





**Three
                months ended**
            
            
            **Nine
                months ended****September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**
            
            
            **September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**Weighted
                average number of shares:Common
                shares - basic
            
            
            65,825,895
            
            
            
            65,271,870
            
            
            
            65,701,443
            
            
            
            65,180,992Effect
                of incremental dilutive securities:Stock
                options and employee stock purchase plan shares
            
            
            1,205,207
            
            
            
            1,212,436
            
            
            
            1,616,039
            
            
            
            1,311,429Common
                shares - diluted
            
            
            67,031,102
            
            
            
            66,484,306
            
            
            
            67,317,482
            
            
            
            66,492,421Options
                outstanding considered anti-dilutive
            
            
            11,500
            
            
            
            1,276,736
            
            
            
            4,000
            
            
            
            2,166,736





**7.                      STOCKHOLDERS’
      EQUITY AND DIVIDEND RESTRICTIONS**





The
      most
      significant restrictions on the payment of dividends to stockholders are the
      covenants in the Company’s credit agreement and unsecured senior notes purchase
      agreements.  As of September 29, 2007, the Company had unrestricted
      retained earnings totaling $99,471 available for dividends to stockholders.
      However, the Company has never declared or paid any cash dividends on its common
      stock and does not anticipate paying any cash dividends in the foreseeable
      future.  Nebraska banking laws also govern the amount of dividends
      that WFB can pay to the Company.








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**8.                      COMPREHENSIVE
      INCOME**





The
      components of comprehensive income and related tax effects were as follows
      for
      the periods presented.





**Three
                  months ended**
              
              
              **Nine
                  months ended****September
                  29,**
                **2007**
              
              
              **September
                  30,**
                **2006**
              
              
              **September
                  29,**
                **2007**
              
              
              **September
                  30,**
                **2006**Net
                  income
              
              $
              13,232
              
              
              $
              14,994
              
              
              $
              31,638
              
              
              $
              32,433Changes
                  in net unrealized holding gains (losses) on marketable securities,
                  net of
                  tax of $64, $770, $(619) and $409
              
              
              107
              
              
              
              1,284
              
              
              
              (1,031
              )
              
              
              650Less
                  adjustment for net (gains) losses on marketable securities included
                  in net
                  income, net of tax of $--, $(110), $-- and $(102)
              
              
              --
              
              
              
              (184
              )
              
              
              --
              
              
              
              (169
              )107
              
              
              
              1,100
              
              
              
              (1,031
              )
              
              
              481Changes
                  in net unrealized holding gains (losses) on derivatives designated
                  as cash
                  flow hedges, net of tax of $61, $(27), $86 and $(16)
              
              
              101
              
              
              
              (45
              )
              
              
              143
              
              
              
              (25
              )Less
                  adjustment for reclassification of derivatives included in net
                  income, net
                  of tax of $(25), $--, $(44) and $(3)
              
              
              (42
              )
              
              
              1
              
              
              
              (73
              )
              
              
              (6
              )59
              
              
              
              (44
              )
              
              
              70
              
              
              
              (31
              )Comprehensive
                  income
              
              $
              13,398
              
              
              $
              16,050
              
              
              $
              30,677
              
              
              $
              32,883


**9.                     
      COMMITMENTS AND CONTINGENCIES**





The
      Company leases various buildings, computer equipment, signs and storage space
      under operating leases, which expire on various dates through April 2033. Rent
      expense on these leases as well as other month to month rentals was $3,522
      and
      $9,017 for the three and nine months ended September 29, 2007, respectively,
      and
      $1,073 and $3,487 for the three and nine months ended September 30, 2006,
      respectively.





The
      following is a schedule of future minimum rental payments under operating leases
      as of September 29, 2007:





For
                the three months ending December 29, 2007
            
            $
            2,563For
                fiscal year:2008
            
            
            5,7922009
            
            
            5,4192010
            
            
            4,9302011
            
            
            4,5862012
            
            
            4,167Thereafter
            
            
            78,336$
            105,793





Certain
      leases include tenant allowances that will be amortized over the life of the
      lease. During the nine months ended September 29, 2007, the Company received
      $17,000 in tenant allowances.  The Company does not expect to receive
      additional tenant allowances in fiscal 2007 but does expect to receive
      approximately $36,700 in fiscal 2008.





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The
      Company has entered into real estate purchase, construction and/or economic
      development agreements for various future retail store site locations. At
      September 29, 2007, the Company had cash commitments totaling $107,000 for
      the
      remainder of fiscal 2007 and $162,000 for fiscal 2008 for estimated capital
      expenditures and the purchase of future economic development bonds in connection
      with the construction and development of new retail stores.





Under
      various grant programs, state or local governments provide funding for certain
      costs associated with developing and opening a new retail store. The Company
      generally receives grant funding in exchange for commitments, such as assurance
      of agreed employment and wage levels at the retail store or that the retail
      store will remain open, made by the Company to the state or local government
      providing the funding. As of September 29, 2007, the total amount of grant
      funding subject to a specific contractual remedy was $13,086.





WFB
      enters into financial instruments with off-balance sheet risk in the normal
      course of business through the origination of unsecured credit card loans.
      These
      financial instruments consisted of commitments to extend credit totaling
      $10,913,605 and $9,528,456 at September 29, 2007, and December 30, 2006,
      respectively, and are in addition to existing balances a cardholder would have
      had with WFB at such dates.  These instruments involve, to varying
      degrees, elements of credit risk in excess of the amount recognized in the
      consolidated balance sheets.  The principal amounts of these
      instruments reflect the maximum exposure WFB has in the instruments. WFB has
      not
      experienced, and does not anticipate, all of its cardholders exercising their
      entire available line of credit at any given point in time. WFB has the right
      to
      reduce or cancel these available lines of credit at any time.





***Litigation***– The Company is engaged in various legal actions arising in the
      ordinary course of business. The subject matter of these proceedings primarily
      includes commercial disputes, employment issues and product liability
      lawsuits.  After taking into consideration legal counsels’ evaluation
      of such actions, management is of the opinion that the ultimate outcome will
      not
      have a material adverse effect on the Company’s financial position, results of
      operations or liquidity.





***Self-Insurance***– The Company is self-insured for health claims up to $300 per
      individual. The Company’s liability for health claims submitted and for claims
      incurred but not yet reported totaled $3,449, $3,934 and $4,225 at September
      29,
      2007, December 30, 2006, and September 30, 2006, respectively.





The
      Company is also self-insured for workers’ compensation claims up to $500 per
      individual. The Company’s liability for workers’ compensation claims submitted
      and for claims incurred but not yet reported totaled $3,992, $3,843 and $2,895
      at September 29, 2007, December 30, 2006, and September 30, 2006,
      respectively.





**10.                     SEGMENT
      REPORTING**





The
      Company has four reportable segments: Direct, Retail, Financial Services and
      Corporate Overhead and Other.  The Direct segment sells products
      through direct-mail catalogs and its e-commerce websites (Cabelas.com and
      complementary websites); the Retail segment sells products through retail stores
      of various sizes and formats; and the Financial Services segment issues
      co-branded credit cards.  Corporate Overhead and Other is the
      Company’s fourth segment primarily made up of land sales, employee discounts,
      corporate overhead and shared services.  The Company’s executive
      management, being its chief operating decision makers, assesses the performance
      of each operating segment based on an operating income measure.  This
      operating income measure is defined as net revenue less costs of merchandise
      and
      related acquisition expenses as well as certain directly identifiable and
      allocable operating costs as described below.  For the Direct segment,
      operating costs primarily consist of catalog development, production and
      circulation costs; e-commerce advertising costs and order processing
      costs.  Operating costs for the Retail segment primarily consist of
      labor and related benefits, advertising, depreciation and occupancy costs of
      retail stores.  For the Financial Services segment, these costs
      primarily consist of advertising and promotion, marketing fees, third-party
      services for processing credit card transactions, salaries and other general
      and
      administrative costs.  Expenses for the Corporate Overhead and Other
      segment include unallocated shared-service costs, general and administrative
      expenses, operations of various ancillary subsidiaries such as real estate
      development, travel and lodging (which are not aggregated with the other
      segments) and eliminations.  Unallocated shared-service costs include
      costs for services shared by two or more business segments (principally our
      Direct and Retail segments) and include receiving, distribution and storage
      costs of inventory, merchandising and quality assurance costs, as well as
      bonuses and corporate headquarters occupancy costs.  General and
      administrative expenses include costs associated with general corporate
      management and shared departmental services such as management information
      systems, finance, human resources and legal.





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Segment
      assets are those directly used in or clearly allocable to an operating segment’s
      operations.  For the Direct segment, these assets primarily include
      prepaid catalog costs, fixed assets and goodwill.  For the Retail
      segment, assets primarily include inventory in the retail stores, land,
      buildings, fixtures and leasehold improvements.  For the Financial
      Services segment, assets primarily include cash, credit card loans, buildings
      and fixtures.  Assets for the Corporate Overhead and Other segment
      include corporate headquarters, merchandise distribution inventory, shared
      technology infrastructure as well as corporate cash and cash equivalents,
      economic development bonds, prepaid expenses and other
      assets.  Depreciation, amortization and capital expenditures of each
      segment are allocated to each respective segment.  Unallocated assets
      include corporate cash and cash equivalents, merchandise distribution inventory
      for the Retail or Direct segments, the net book value of corporate facilities
      and related information systems, deferred income taxes and other corporate
      long-lived assets. Intercompany revenue between segments has been eliminated
      in
      consolidation.





Results
      by business segment are presented in the following table for the three and
      nine
      months ended September 29, 2007, and September 30, 2006,
      respectively:








**Three
                months ended September 29, 2007**
            
            **Direct**
            
            
            **Retail**
            
            
            **Financial**
              **Services**
            
            
            **Corporate**
              **Overhead**
              **and
                Other**
            
            
            **Total**Revenue
                from external
            
            $
            241,132
            
            
            $
            256,836
            
            
            $
            44,902
            
            
            $
            3,939
            
            
            $
            546,809Revenue
                (loss) from internal
            
            
            768
            
            
            
            446
            
            
            
            (153
            )
            
            
            (1,061
            )
            
            
            -Total
                revenue
            
            
            241,900
            
            
            
            257,282
            
            
            
            44,749
            
            
            
            2,878
            
            
            
            546,809Operating
                income (loss)
            
            
            40,897
            
            
            
            26,940
            
            
            
            9,569
            
            
            
            (53,060
            )
            
            
            24,346As
                a % of
                revenue
            
            
            16.9
            %
            
            
            10.5
            %
            
            
            21.4
            %
            
            N/A
            
            
            
            4.5
            %Depreciation
                and amortization
            
            $
            1,135
            
            
            $
            6,868
            
            
            $
            287
            
            
            $
            6,270
            
            
            $
            14,560Assets
            
            
            468,957
            
            
            
            980,290
            
            
            
            375,762
            
            
            
            339,765
            
            
            
            2,164,774





**Three
                months ended September 30, 2006**
            
            **Direct**
            
            
            **Retail**
            
            
            **Financial**
              **Services**
            
            
            **Corporate**
              **Overhead**
              **and
                Other**
            
            
            **Total**Revenue
                from external
            
            $
            231,665
            
            
            $
            218,378
            
            
            $
            37,545
            
            
            $
            2,865
            
            
            $
            490,453Revenue
                (loss) from internal
            
            
            507
            
            
            
            271
            
            
            
            (153
            )
            
            
            (625
            )
            
            
            -Total
                revenue
            
            
            232,172
            
            
            
            218,649
            
            
            
            37,392
            
            
            
            2,240
            
            
            
            490,453Operating
                income (loss)
            
            
            35,727
            
            
            
            29,630
            
            
            
            7,689
            
            
            
            (46,195
            )
            
            
            26,851As
                a % of
                revenue
            
            
            15.4
            %
            
            
            13.6
            %
            
            
            20.6
            %
            
            N/A
            
            
            
            5.4
            %Depreciation
                and amortization
            
            $
            1,086
            
            
            $
            4,659
            
            
            $
            239
            
            
            $
            5,600
            
            
            $
            11,584Assets
            
            
            356,168
            
            
            
            619,360
            
            
            
            303,488
            
            
            
            340,520
            
            
            
            1,619,536





**Nine
                months ended September 29, 2007**
            
            **Direct**
            
            
            **Retail**
            
            
            **Financial**
              **Services**
            
            
            **Corporate**
              **Overhead**
              **and
                Other**
            
            
            **Total**Revenue
                from external
            
            $
            682,161
            
            
            $
            640,112
            
            
            $
            121,952
            
            
            $
            15,874
            
            
            $
            1,460,099Revenue
                (loss) from internal
            
            
            1,485
            
            
            
            1,487
            
            
            
            (455
            )
            
            
            (2,517
            )
            
            
            -Total
                revenue
            
            
            683,646
            
            
            
            641,599
            
            
            
            121,497
            
            
            
            13,357
            
            
            
            1,460,099Operating
                income (loss)
            
            
            107,356
            
            
            
            66,403
            
            
            
            26,961
            
            
            
            (143,731
            )
            
            
            56,989As
                a % of
                revenue
            
            
            15.7
            %
            
            
            10.4
            %
            
            
            22.2
            %
            
            N/A
            
            
            
            3.9
            %Depreciation
                and amortization
            
            $
            3,262
            
            
            $
            19,646
            
            
            $
            819
            
            
            $
            17,877
            
            
            $
            41,604Assets
            
            
            468,957
            
            
            
            980,290
            
            
            
            375,762
            
            
            
            339,765
            
            
            
            2,164,774






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**Nine
                months ended September 30, 2006**
            
            **Direct**
            
            
            **Retail**
            
            
            **Financial**
              **Services**
            
            
            **Corporate**
              **Overhead**
              **and
                Other**
            
            
            **Total**Revenue
                from external
            
            $
            654,768
            
            
            $
            514,272
            
            
            $
            99,401
            
            
            $
            14,080
            
            
            $
            1,282,521Revenue
                (loss) from internal
            
            
            1,284
            
            
            
            1,169
            
            
            
            (455
            )
            
            
            (1,998
            )
            
            
            -Total
                revenue
            
            
            656,052
            
            
            
            515,441
            
            
            
            98,946
            
            
            
            12,082
            
            
            
            1,282,521Operating
                income (loss)
            
            
            97,420
            
            
            
            58,870
            
            
            
            21,815
            
            
            
            (122,506
            )
            
            
            55,599As
                a % of
                revenue
            
            
            14.8
            %
            
            
            11.4
            %
            
            
            22.0
            %
            
            N/A
            
            
            
            4.3
            %Depreciation
                and amortization
            
            $
            3,320
            
            
            $
            13,076
            
            
            $
            680
            
            
            $
            15,142
            
            
            $
            32,218Assets
            
            
            356,168
            
            
            
            619,360
            
            
            
            303,488
            
            
            
            340,520
            
            
            
            1,619,536





The
      components and amounts of net revenue for the Financial Services segment were
      as
      follows for the periods presented:





**Three
                months ended**
            
            
            **Nine
                months ended****September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**
            
            
            **September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**Interest
                and fee income, net of provision for loan losses
            
            $
            9,139
            
            
            $
            6,372
            
            
            $
            20,233
            
            
            $
            17,360Interest
                expense
            
            
            (1,807
            )
            
            
            (1,299
            )
            
            
            (4,252
            )
            
            
            (3,600
            )Net
                interest income, net of provision for loan losses
            
            
            7,332
            
            
            
            5,073
            
            
            
            15,981
            
            
            
            13,760Non-interest
                income:Securitization
                income
            
            
            50,679
            
            
            
            44,294
            
            
            
            144,315
            
            
            
            120,074Other
                non-interest
                income
            
            
            13,592
            
            
            
            10,505
            
            
            
            36,072
            
            
            
            28,586Total
                non-interest
                income
            
            
            64,271
            
            
            
            54,799
            
            
            
            180,387
            
            
            
            148,660Less:
                Customer rewards costs
            
            
            (26,854
            )
            
            
            (22,480
            )
            
            
            (74,871
            )
            
            
            (63,474
            )Financial
                Services revenue
            
            $
            44,749
            
            
            $
            37,392
            
            
            $
            121,497
            
            
            $
            98,946





The
      Company’s products are principally marketed to individuals within the United
      States.  Net sales realized from other geographic markets, primarily
      Canada, have collectively been less than 2.0% of consolidated net merchandise
      sales in each reported period.  No single customer accounts for ten
      percent or more of consolidated net sales.  No single product or
      service accounts for a significant percentage of the Company’s consolidated
      revenue.








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**11.                      SUPPLEMENTAL
      CASH FLOW INFORMATION AND OTHER INFORMATION**





The
      following table sets forth non-cash financing and investing activities and
      other
      cash flow information for the periods presented.





**September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**Non-cash
                financing and investing activities:Unpaid
                purchases of property and equipment included in
                accounts payable(1)
            
            $
            67,639
            
            
            $
            26,653Capital
                lease obligations
            
            
            202
            
            
            
            5,649Recording
                liabilities for unrecognized tax benefits and related interest expense
                as
                a reduction of beginning retained earnings on initial adoption of
                FIN
                48
            
            
            1,755
            
            
            
            --Transfer
                of land held for sale or development from property and equipment
                (construction in progress)
            
            
            2,625
            
            
            
            --





**Nine
                months ended****September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**Other
                cash flow information:Interest
                paid
            
            $
            22,166
            
            
            $
            16,888Capitalized
                interest
            
            
            (3,060
            )
            
            
            (338
            )Interest
                paid, net of capitalized interest
            
            $
            19,106
            
            
            $
            16,550Income
                taxes,
                net
            
            $
            36,646
            
            
            $
            40,561





(1)
            Amounts
                reported as unpaid purchases are recorded as cash outflows from investing
                activities for purchases of property and equipment in the consolidated
                statements of cash flows in the period they are
                paid.





During
      the second quarter of fiscal 2007, the assets of the Company’s hotel operation
      in Sidney, Nebraska, were sold resulting in a pre-tax gain of $1,236 (or
      approximately $772 after-tax, or $0.01 per diluted share).  The gain
      on sale is classified in the Other Income section of the Company’s condensed
      consolidated statements of income.




**12.                      STOCK
      OPTION PLANS**





In
      March
      2004, the Company adopted the Cabela’s Incorporated 2004 Stock Plan (the “2004
      Plan”). The 2004 Plan provides for the grant of non-qualified stock options,
      incentive stock options, stock appreciation rights, restricted stock, restricted
      stock units and other stock-based awards to employees, directors and
      consultants. On May 15, 2007, the Company’s shareholders approved certain
      amendments to the 2004 Plan, including an amendment to increase the number
      of
      shares authorized for issuance by 3,500,000 shares.  As of September
      29, 2007, a maximum of 6,252,500 shares of the Company’s common stock, subject
      to adjustment in the event of a stock split, consolidation or stock dividend,
      were subject to awards under the 2004 Plan. During the three months ended
      September 29, 2007, the Company granted 27,500 options to employees at an
      exercise price of $23.36 per share.  In addition, on May 15, 2007, the
      Company granted 1,035,500 options to employees at an exercise price of $22.37
      per share.  These options granted in 2007 vest over three years and
      have an eight-year term.  On May 16, 2007, the Company granted 10,000
      options to its non-employee directors at an exercise price of $22.32 per
      share.  These options vest on the first anniversary of the grant date
      and have a ten-year term.  As of September 29, 2007, there were
      3,601,194 shares subject to options and 2,466,434 shares authorized and
      available for grant under the 2004 Plan.





The
      Company has an Employee Stock Purchase Plan (the “ESPP”) under which shares of
      common stock are available to be purchased by the Company’s
      employees.  The maximum number of shares of common stock available for
      issuance under the ESPP is 1,835,000, subject to adjustment in the event of
      a
      stock split, consolidation or stock dividend.  During the three and
      nine months ended September 29, 2007, 32,819 shares and 99,619 shares,
      respectively, were issued under the ESPP.  As of September 29, 2007,
      1,479,263 shares were authorized and available for issuance.  Since
      inception of the ESPP, there have been 124,680 shares issued under market
      purchases rather than as new issuances.  The Company intends to
      utilize market purchases whenever possible.


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The
      Company’s 1997 Stock Option Plan (the “1997 Plan”) provided for the granting of
      incentive stock options and nonqualified stock options to purchase shares of
      the
      Company’s common stock to officers, directors and key employees.  As
      of September 29, 2007, there were 1,749,940 shares subject to options under
      the
      1997 Plan and no shares available for grant.





As
      of
September 29, 2007, the
      Company’s total unrecognized deferred share-based compensation balance for
      unvested shares, net of expected forfeitures, was approximately $8,377 net
      of
      tax, which is expected to be amortized over a weighted average period of 3.75
      years.





The
      Company’s consolidated net income for the three and nine months ended September
      29, 2007, includes share-based compensation expense of $1,354 ($846 after-tax,
      or $0.01 per diluted share) and $3,468 ($2,168 after-tax, or $0.03 per diluted
      share), respectively, compared to $993 ($621 after-tax, or $0.01 per diluted
      share) and $2,627 ($1,642 after-tax, or $0.02 per diluted share) for the
      comparable fiscal 2006 periods.  This share-based compensation expense
      is recorded as a component of selling, general and administrative expenses
      in
      the condensed consolidated statements of income.





There
      were 461,758 options exercised during the nine months ended September 29, 2007.
      The aggregate intrinsic value of awards exercised was $7,817 during the nine
      months ended September 29, 2007, compared to $3,373 during the nine months
      ended
      September 30, 2006.  At September 29, 2007, based on the Company’s
      closing stock price of $23.65 per share, a total of 2,454,979 awards were
      in-the-money and exercisable.




**13.**
            **RECENTLY
                ISSUED ACCOUNTING
                PRONOUNCEMENTS**





Financial
      Accounting Statement (“FAS”) No. 155, *Accounting for Certain Hybrid
      Financial Instruments – an**amendment to FASB Statements No. 133 and
      140* (“FAS 155”) is effective the beginning of fiscal 2007 for the
      Company.  FAS 155 addresses issues which had arisen related to FAS
      No.133, *Accounting for Derivative Instruments and Hedging
      Activities*.  FAS 155 allows, among other provisions, a company to
      elect fair value measurement of instruments in cases in which a derivative
      would
      otherwise have to be bifurcated.  The provisions of this statement had
      no effect on the Company’s financial position or results of
      operations.





FAS
      No.
      156, *Accounting for Servicing of Financial Assets – an amendment of
      FASB**Statement No. 140* (“FAS 156”) is effective the beginning of
      fiscal 2007 for the Company.  FAS 156 requires that an entity
      separately recognize a servicing asset or servicing liability when it undertakes
      an obligation to service a financial asset under a servicing contract in certain
      situations.  Such servicing assets or servicing liabilities are
      required to be initially measured at fair value, if practicable.  FAS
      156 also allows an entity to choose one of two methods when subsequently
      measuring its servicing assets and servicing liabilities: (i) the amortization
      method or (ii) the fair value measurement method.  The provisions of
      this statement had no effect on the Company’s financial position or results of
      operations.





Emerging
      Issues Task Force (“EITF”) Issue No. 06-3, *How Taxes Collected
      From**Customers and Remitted to Governmental Authorities Should Be
      Presented in the Income Statement (That Is, Gross versus Net Presentation)*
      is effective for financial statement presentations beginning in fiscal 2007
      for
      the Company.  EITF 06-3 specifies that entities should present taxes
      imposed concurrently on a specific revenue-producing transaction between a
      seller and a customer in the income statement on either a gross or a net basis
      based on their accounting policy. Disclosure is required if such taxes are
      significant and presented on a gross basis. The Company presents such taxes
      on a
      net basis.  The adoption of this statement did not have a material
      effect on the Company’s financial position or results of
      operations.




In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued FAS No.
      157, *Fair Value Measurements* (“FAS 157”).  This statement
      enhances existing guidance for measuring and disclosing the fair value of assets
      and liabilities for more consistency and comparability.  FAS 157
      provides a single definition of fair value, together with a framework for
      measuring it, and requires expanded disclosures to provide information about
      the
      extent to which fair value is used to measure assets and liabilities, the
      methods and assumptions used to measure fair value, and the effect of fair
      value
      measures on earnings.  FAS 157 is effective for financial statements
      issued in fiscal years beginning after November 15, 2007, or beginning in fiscal
      2008 for the Company.  Management is evaluating the impact of this
      statement to the Company but does not believe that the adoption of the
      provisions of this statement will have a material effect on the Company’s
      financial position or results of operations.





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In
      February 2007, the FASB issued FAS No. 159, *The Fair Value Option for
      Financial Assets and Financial Liabilities – Including an Amendment of FASB
      Statement No.*115 (“FAS 159”).  This statement permits entities
      to choose to measure many financial instruments and certain other items at
      fair
      value. The objective of FAS 159 is to improve financial reporting by providing
      entities with the opportunity to mitigate volatility in reported earnings caused
      by measuring related assets and liabilities differently without having to apply
      complex hedge accounting provisions. Most of the provisions of this statement
      apply only to entities that elect the fair value option. However, the amendment
      to FASB Statement No. 115, *Accounting for Certain Investments in Debt and
      Equity Securities,* applies to all entities with available-for-sale and
      trading securities.  FAS 159 permits entities to make an irrevocable
      election to carry almost any financial instrument at fair value.  Upon
      adoption of FAS 159, when an entity elects to apply the fair value option to
      specific items, the entity reports the difference between the carrying value
      and
      the fair value of the items as a cumulative-effect adjustment to the opening
      balance of retained earnings.  A business entity will report
      unrealized gains and losses on items for which the fair value option has been
      elected in earnings at each subsequent reporting date. FAS 159 is effective
      as
      of the beginning of an entity’s first fiscal year that begins after November 15,
      2007, or beginning in fiscal 2008 for the Company.  Management is
      evaluating the impact of this statement to the Company but does not believe
      that
      the adoption of the provisions of this statement will have a material effect
      on
      the Company’s financial position, liquidity or results of
      operations.




**14.**
            **SUBSEQUENT
                EVENT**





On
      October 22, 2007, the Company entered into a short-term borrowing arrangement
      of
      $50,000 with a financial institution. This promissory note is unsecured and
      is
      due December 21, 2007.  The Company expects to repay amounts borrowed
      pursuant to the promissory note by either issuing senior notes to replace the
      promissory note or with cash derived from operations.  Advances under
      the promissory were used for general business purposes.





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**Item
      2.                                Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations**





This
      report contains “forward-looking statements” that are based on our beliefs,
      assumptions and expectations of future events, taking into account the
      information currently available to us.  All statements other than
      statements of current or historical fact contained in this report are
      forward-looking statements within the meaning of the Private Securities
      Litigation Reform Act.  The words “believe,” “may,” “should,”
“anticipate,” “estimate,” “expect,” “intend,” “objective,” “seek,” “plan,” and
      similar statements are intended to identify forward-looking
      statements.  Forward-looking statements involve risks and
      uncertainties that may cause our actual results, performance or financial
      condition to differ materially from the expectations of future results,
      performance or financial condition we express or imply in any forward-looking
      statements.  These risks and uncertainties include, but are not
      limited to:  the ability to negotiate favorable purchase, lease and/or
      economic development arrangements for new retail store locations; expansion
      into
      new markets; market saturation due to new retail store openings; the
      acceleration of new retail store openings; the rate of growth of general and
      administrative expenses associated with building a strengthened corporate
      infrastructure to support our growth initiatives; increasing competition in
      the
      outdoor segment of the sporting goods industry; the cost of our products; supply
      and delivery shortages or interruptions caused by system changes or other
      factors; adverse weather conditions, unseasonal weather conditions which impact
      the demand for our products; fluctuations in operating results; adverse economic
      conditions causing a decline in discretionary consumer spending; the cost of
      fuel increasing; delays in road construction and/or traffic planning around
      our
      new retail stores; road construction around our existing retail stores; labor
      shortages or increased labor costs; changes in consumer preferences and
      demographic trends; increased government regulation; inadequate protection
      of
      our intellectual property; decreased interchange fees received by our financial
      services business as a result of credit card industry litigation; other factors
      that we may not have currently identified or quantified; and other risks,
      relevant factors and uncertainties identified in our filings with the SEC
      (including the information set forth in the “Risk Factors” section of our Annual
      Report on Form 10-K for the fiscal year ended December 30, 2006 (our “2006 Form
      10-K”), and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the
      fiscal quarter ended March 31, 2007), which filings are available at the SEC’s
      website at www.sec.gov.  Given the risks and uncertainties
      surrounding forward-looking statements, you should not place undue reliance
      on
      these statements.  Our forward-looking statements speak only as of the
      date of this report.  Other than as required by law, we undertake no
      obligation to update or revise forward-looking statements, whether as a result
      of new information, future events or otherwise.





The
      following discussion and analysis of financial condition, results of operations,
      liquidity and capital resources should be read in conjunction with our audited
      consolidated financial statements and notes thereto included in our 2006 Form
      10-K, as filed with the SEC, and our unaudited interim condensed consolidated
      financial statements and the notes thereto appearing elsewhere in this
      report.





**Critical
      Accounting Policies and Use of Estimates**





Our
      condensed consolidated financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States of America.
      The preparation of these financial statements requires us to make estimates
      and
      judgments that affect the reported amounts of assets, liabilities, revenue
      and
      expenses and related disclosures of contingent assets and liabilities. The
      estimates and assumptions are evaluated on a periodic basis and are based on
      historical experience and various other factors that are believed to be
      reasonable under the circumstances. Actual results may differ significantly
      from
      these estimates.





Except
      for our accounting policy on inventories, our critical accounting policies
      and
      use of estimates utilized in the preparation of the condensed consolidated
      financial statements as of September 29, 2007, remain unchanged from December
      30, 2006.  Effective December 31, 2006, we elected to change our
      method of valuing inventories from the last-in, first-out (“LIFO”) method to the
      first-in, first-out (“FIFO”) method.  See Note 2 “Change in Accounting
      Principles” for additional information on this change in
      methodology.  The effect of this change in accounting principle for
      the three and nine months ended September 29, 2007, and September 30, 2006,
      was
      not material.  Our accounting policy on inventories effective the
      beginning of fiscal 2007 is described in the following paragraph.  Our
      remaining critical accounting policies are discussed in our 2006 Form 10-K,
      as
      filed with the SEC, and should be read in conjunction with the annual
      consolidated financial statements and notes thereto.





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**Inventories**





Merchandise
      inventories, net of
      allowances for shrink, returned or damaged goods and obsolescence are stated
      at
      the lower of cost or market. Cost is determined using the first-in first-out
      method, or FIFO, for all inventories. Prior to fiscal 2007, cost was determined
      using the last-in, first-out method (dollar value, link-chain) for all
      inventories except those inventories owned by two of our wholly-owned
      subsidiaries, Van Dyke Supply Company, Inc. and Wild Wings, LLC, which used
      the
      FIFO method. If all inventories for fiscal 2006 and 2005 had been valued using
      the FIFO method, which approximates replacement cost, the stated inventory
      value
      at the fiscal years ended 2006 and 2005 would have been equivalent to the values
      using the LIFO method. All inventories are in one inventory class and are
      classified as finished goods.





We
      estimate a provision for shrink
      based on historical cycle count adjustments and periodic physical inventories.
      These estimates may vary significantly due to a variety of internal and external
      factors. The allowance for damaged goods from returns is estimated based on
      historical experience. Most items that are returned and slightly damaged are
      sent to our Retail segment, marked down and sold. We also reserve our inventory
      for obsolete or slow moving inventory based on inventory performance reports
      and, in certain cases, by specific identification of slow moving or obsolete
      inventory. The inventory is grouped and analyzed in various
      categories.  All categories that are subject to obsolescence are
      reserved for based upon management’s estimates, which estimates reflect past
      experience and management’s assessment of future merchandising trends. Our most fashion-sensitive
      categories of merchandise are apparel and footwear. However, a significant
      percentage of our inventory has a low fashion component, such as hunting,
      camping, and fishing gear. Slow moving inventory is marked down and sold
      primarily in the ‘Bargain Cave’ section of our merchandising
      business.





**Overview**





We
      are
      the world’s largest direct marketer, and a leading specialty retailer, of
      hunting, fishing, camping and related outdoor merchandise.  We serve
      people who enjoy the outdoor lifestyle through our well-established direct
      business and our growing number of retail stores.  Additionally, we
      benefit from our credit card operation that strategically supports our
      merchandising business by reinforcing our brand and increasing customer
      loyalty.  We report our business operations in the following
      segments:





·
            Direct
                - consisting of our catalogs and websites;·
            Retail
                - consisting of our retail stores;·
            Financial
                Services - consisting of our credit card business managed and administered
                by our wholly-owned bank subsidiary, World’s Foremost Bank;
                and·
            Corporate
                Overhead and Other - consisting of corporate and other expenses,
                aggregated non-merchandising outfitter services and our real estate
                sales.





In
      the
      following discussion, where we refer to our “merchandising business” we mean our
      Direct and Retail segment operations, collectively.  Where we make
      reference to our “bank,” we are referring to the operations of our Financial
      Services segment; and where we refer to “corporate overhead” or our “other”
segment we mean corporate and other expenses and operations pertaining to our
      Other segment (non-merchandising outfitter services and real estate sales),
      respectively.





Net
      income for the three months ended September 29, 2007, was $13.2 million, or
      $0.20 per diluted share, compared to net income of $15.0 million, or $0.23
      per
      diluted share, for the three months ended September 30, 2006.  For the
      nine months ended September 29, 2007, net income was $31.6 million, or $0.47
      per
      diluted share, compared to net income of $32.4 million, or $0.49 per diluted
      share, for the nine months ended September 30, 2006.





Our
      efforts continue to focus on increasing our market share through expanding
      our
      merchandising business and increasing exposure to our loyalty programs,
      increasing comparable store sales, improving our operating margin and enhancing
      our systems.  Total revenue increased $56.3 million, or 11.5%, to
      $546.8 million for the three months ended September 29, 2007, compared to $490.5
      million for the three months ended September 30, 2006.  For the nine
      months ended September 29, 2007, total revenue increased $177.6 million, or
      13.8%, to $1.46 billion, compared to $1.28 billion for the nine months ended
      September 30, 2006.


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Our
      three
      main business segments – Retail, Direct and Financial Services – continued to
      show significant revenue increases for the three and nine months ended September
      29, 2007, compared to the respective periods of fiscal 2006. Retail revenue
      growth was primarily due to our four new retail stores that opened in the last
      half of fiscal 2006 and our Hazelwood, Missouri, store that opened in April
      2007.  We also opened a retail store in Hoffman Estates, Illinois, in
      mid-September 2007 that contributed to revenue growth.  Retail revenue
      was also positively affected by increases in comparable store sales of 4.6%
      and
      1.3%, respectively, for the three and nine months ended September 29, 2007,
      compared to the fiscal 2006 periods.  Marketing and search
      optimization initiatives to expand our Direct business also resulted in
      increased revenue for the fiscal 2007 periods compared to the respective periods
      of fiscal 2006. Increases in Financial Services revenue primarily resulted
      from
      growth in active credit card accounts.





Our
      operating margin decreased to 4.5% for the three months ended September 29,
      2007, compared to 5.4% for the three months ended September 30,
      2006.  Our operating margin was 3.9% for the nine months ended
      September 29, 2007, compared to 4.3% for the nine months ended September 30,
      2006.  Our operating margin for our Direct segment increased for the
      three and nine months ended September 29, 2007, compared to the respective
      fiscal 2006 periods reflecting our emphasis on controlling costs and improving
      efficiencies while continuing our merchandise business expansion.  The
      operating margin for our Retail segment decreased for the three and nine months
      ended September 29, 2007, compared to the respective fiscal 2006 periods. During
      the fiscal 2007 third quarter, we initiated an advertising strategy for our
      retail stores aimed at capturing additional market share.  This
      advertising strategy, combined with an increase in the proportion of hard good
      sales to total sales and softer apparel sales, negatively affected our gross
      profit and operating margin for the fiscal 2007 three and nine month periods
      compared to the fiscal 2006 periods.  In addition, pre-opening costs
      increased $3.3 million and $5.1 million, respectively, comparing the three
      and
      nine months ended September 29, 2007, to the same fiscal 2006 periods due to
      new
      retail store openings.





Corporate
      overhead operating expenses increased during the three and nine month fiscal
      2007 periods compared to the fiscal 2006 periods.  This increase in
      corporate overhead was primarily due to (i) increased salaries and benefits
      due
      to more employees in our distribution centers and headquarters compared to
      2006,
      (ii) a higher bonus expense comparing the respective periods and (iii) increased
      depreciation expense associated with system upgrades that were not in service
      in
      the fiscal 2006 periods.





Beginning
      in fiscal 2007, we changed the targets and criteria used to measure performance
      under our short-term cash incentive plan.  For most participants in
      fiscal 2007, each target cash bonus opportunity will be based upon the
      achievement of corporate financial objectives as well as upon the achievement
      of
      pre-established individual performance goals.  Estimating the overall
      achievement of these goals for all participants results in higher expense of
      approximately $1.1 million and $4.9 million, respectively, for the three and
      nine months ended September 29, 2007, compared to the respective fiscal 2006
      periods.  We expect the bonus expense for the fourth quarter of fiscal
      2007 to be lower compared to the fiscal 2006 fourth quarter.  The
      expense related to this bonus plan is reflected in the Corporate Overhead and
      Other operating segment.





**Retail
      Store Expansion**





At
      the
      end of fiscal 2006, we operated 18 retail stores.  For fiscal 2007, we
      plan to open a total of eight retail stores. We opened a retail store in Hoffman
      Estates, Illinois, in September 2007, and in April 2007, we opened a retail
      store in Hazelwood, Missouri.  The remaining six retail stores that
      will be opened in fiscal 2007 are East Hartford, Connecticut; Gonzales,
      Louisiana; Hammond, Indiana; Reno, Nevada; Post Falls, Idaho; and Lacey,
      Washington.  These fiscal 2007 retail store openings will increase our
      total retail square footage by approximately 1.3 million square feet, or 47.3%,
      bringing our total retail store square footage to approximately 4.0 million
      square feet at the end of 2007.





We
      have
      also announced plans for retail stores to be opened in Rapid City, South Dakota;
      Wheat Ridge, Colorado; East Rutherford, New Jersey; Greenwood, Indiana;
      Scarborough, Maine; Billings, Montana; and Montreal, Canada. We will not open
      a
      retail store in Adairsville, Georgia, as previously announced.  We
      have identified many locations that may be suitable for new retail stores as
      part of our retail expansion strategy. We are beginning to locate our stores
      closer to more densely populated areas, and we believe that smaller-format
      retail stores provide more opportunities to facilitate faster retail expansion.
      Our new store development model will be more adaptable to different regional
      markets, provide a more cost-effective layout of product merchandise, and also
      make each store unique and tailored to its region in terms of both product
      offerings and store features that our customers have come to
      expect.  Through our extensive customer database generated by our
      Direct business and additional demographic and competitive research, we can
      identify geographic areas with a high concentration of customers that represent
      potential new markets for our retail stores. We believe there are many
      additional markets throughout North America that could potentially support
      one
      of our retail stores. We also believe that our customer database gives us a
      competitive advantage in tailoring product offerings in each of our retail
      stores to reflect our customers' regional preferences.


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We
      had
      previously announced that beginning in January 2008 we would incorporate certain
      customer service enhancements in our retail stores.  We have moved up
      our execution date for these changes and, beginning in the third quarter of
      fiscal 2007, we began incorporating customer service enhancements into certain
      of our existing retail stores that are designed to increase customer
      convenience, purchasing and delivery options.  We expect that these
      enhancements will be available in most existing retail stores in early 2008
      and
      in all future retail stores.  These enhancements include Internet
      kiosks, catalog order desks and in-store pick-up areas for catalog and Internet
      purchases.  Because these enhancements will cause our Direct business
      to establish nexus in the states where retail stores incorporating the
      enhancements are located, we will begin collecting and remitting sales taxes
      on
      Direct business sales to customers located in these states when the enhancements
      are implemented.





Significant
      amounts of cash are needed to open new retail stores. Depending upon the
      location and a variety of other factors, including store size and the extent
      of
      infrastructure improvements necessary, whether a proposed store site is new
      construction or leased, and based upon our prior experience, opening a single
      retail store generally requires expenditures in the range of $25.0 million
      to
      $60.0 million.  This amount includes the cost of real estate, site
      work, infrastructure improvements such as utilities and roads, buildings,
      equipment, fixtures (including taxidermy) and inventory.





**Results
      of Operations**





Our
      third
      fiscal quarter ended on the Saturday closest to September 30.  The
      three and nine month periods ended September 29, 2007, and September 30, 2006,
      each consisted of 13 weeks and 39 weeks, respectively.  Our operating
      results expressed as a percentage of revenue were as follows for the periods
      presented.





**Three
                months ended**
            
            
            **Nine
                months ended****September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**
            
            
            **September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**Revenue
            
            
            100.00
            %
            
            
            100.00
            %
            
            
            100.00
            %
            
            
            100.00
            %Cost
                of revenue
            
            
            58.99
            %
            
            
            59.16
            %
            
            
            58.95
            %
            
            
            59.41
            %Gross
                profit (exclusive of
                depreciation and amortization)
            
            
            41.01
            %
            
            
            40.84
            %
            
            
            41.05
            %
            
            
            40.59
            %Selling,
                general and administrative expenses
            
            
            36.56
            %
            
            
            35.36
            %
            
            
            37.15
            %
            
            
            36.25
            %Operating
                income
            
            
            4.45
            %
            
            
            5.48
            %
            
            
            3.90
            %
            
            
            4.34
            %Other
                income (expense):Interest
                income
            
            
            0.01
            %
            
            
            0.06
            %
            
            
            0.12
            %
            
            
            0.13
            %Interest
                expense
            
            
            (0.77
            )%
            
            
            (0.98
            )%
            
            
            (0.94
            )%
            
            
            (1.01
            )%Other
                income
                (net)
            
            
            0.18
            %
            
            
            0.41
            %
            
            
            0.37
            %
            
            
            0.59
            %Total
                other income (expense)
            
            
            (0.58
            )%
            
            
            (0.51
            )%
            
            
            (0.45
            )%
            
            
            (0.29
            )%Income
                before provision for income taxes
            
            
            3.87
            %
            
            
            4.97
            %
            
            
            3.45
            %
            
            
            4.05
            %Provision
                for income taxes
            
            
            1.45
            %
            
            
            1.91
            %
            
            
            1.28
            %
            
            
            1.52
            %Net
                income
            
            
            2.42
            %
            
            
            3.06
            %
            
            
            2.17
            %
            
            
            2.53
            %





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**Segment
      Information**





The
      following table sets forth the revenue and operating income of each of our
      segments for the periods presented.





**Three
                months ended**
            
            
            **Nine
                months ended****(Dollars
                in Thousands)**
            
            **September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**
            
            
            **September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**Direct
                revenue
            
            $
            241,900
            
            
            $
            232,172
            
            
            $
            683,646
            
            
            $
            656,052Retail
                revenue
            
            
            257,282
            
            
            
            218,649
            
            
            
            641,599
            
            
            
            515,441Financial
                Services revenue
            
            
            44,749
            
            
            
            37,392
            
            
            
            121,497
            
            
            
            98,946Other
                revenue
            
            
            2,878
            
            
            
            2,240
            
            
            
            13,357
            
            
            
            12,082Total
                revenue
            
            $
            546,809
            
            
            $
            490,453
            
            
            $
            1,460,099
            
            
            $
            1,282,521Direct
                operating income
            
            $
            40,897
            
            
            $
            35,727
            
            
            $
            107,356
            
            
            $
            97,420Retail
                operating income
            
            
            26,940
            
            
            
            29,630
            
            
            
            66,403
            
            
            
            58,870Financial
                Services operating income
            
            
            9,569
            
            
            
            7,689
            
            
            
            26,961
            
            
            
            21,815Other
                operating income (loss)
            
            
            (53,060
            )
            
            
            (46,195
            )
            
            
            (143,731
            )
            
            
            (122,506
            )Total
                operating
                income
            
            $
            24,346
            
            
            $
            26,851
            
            
            $
            56,989
            
            
            $
            55,599*As
                a Percentage of Total Revenue:*Direct
                revenue
            
            
            44.2
            %
            
            
            47.3
            %
            
            
            46.8
            %
            
            
            51.2
            %Retail
                revenue
            
            
            47.1
            %
            
            
            44.6
            %
            
            
            44.0
            %
            
            
            40.2
            %Financial
                Services revenue
            
            
            8.2
            %
            
            
            7.6
            %
            
            
            8.3
            %
            
            
            7.7
            %Other
                revenue
            
            
            0.5
            %
            
            
            0.5
            %
            
            
            0.9
            %
            
            
            0.9
            %Total
                revenue
            
            
            100.0
            %
            
            
            100.0
            %
            
            
            100.0
            %
            
            
            100.0
            %*As
                a Percentage of Segment Revenue:*Direct
                operating income
            
            
            16.9
            %
            
            
            15.4
            %
            
            
            15.7
            %
            
            
            14.8
            %Retail
                operating income
            
            
            10.5
            %
            
            
            13.6
            %
            
            
            10.4
            %
            
            
            11.4
            %Financial
                Services operating income
            
            
            21.4
            %
            
            
            20.6
            %
            
            
            22.2
            %
            
            
            22.0
            %Total
                operating income (1)
            
            
            4.5
            %
            
            
            5.4
            %
            
            
            3.9
            %
            
            
            4.3
            %





(1)
            The
                percentage of total operating income is a percentage of total consolidated
                revenue.





**Three
      Months Ended September 29, 2007, Compared to Three Months Ended September 30,
      2006**





**Revenue**





Total
      revenue increased $56.3 million, or 11.5%, to $546.8 million for the three
      months ended September 29, 2007, compared to $490.5 million for the three months
      ended September 30, 2006, due to revenue growth in all segments.





*Direct
      Revenue*.  Direct revenue includes sales from orders placed over
      the phone, by mail and through our website and includes customer shipping
      charges.  Direct revenue increased $9.7 million, or 4.2%, to $241.9
      million for the three months ended September 29, 2007, from $232.2 million
      for
      the fiscal 2006 third quarter. Internet visits increased 27.7%, to 22.7 million
      visits for the three months ended September 29, 2007, compared to 17.8 million
      visits for the three months ended September 30, 2006, as we continue to
      focus our efforts on utilizing marketing programs and search optimization
      programs to increase traffic to our website. The general product category that
      contributed the largest dollar volume increase to our Direct revenue for the
      three months ended September 29, 2007, compared to the fiscal 2006 third quarter
      was camping.





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*Retail
      Revenue*.  Retail revenue includes all sales at our retail
      stores.  Retail revenue increased $38.7 million, or 17.7%, to $257.3
      million for the three months ended September 29, 2007, compared to $218.6
      million for the three months ended September 30, 2006, primarily due to a net
      increase in new store sales of $29.8 million.  In April 2007, we
      opened a retail store in Hazelwood, Missouri, and in mid-September 2007, we
      opened another retail store in Hoffman Estates, Illinois, compared to four
      new
      stores opened in the last half of fiscal 2006.  In addition,
      comparable store sales increased $8.9 million, or 4.6%, compared to the fiscal
      2006 third quarter.  A store is included in our comparable store sales
      base on the first day of the month following the fifteen month anniversary
      of
      its opening or expansion by greater than 25% of total square
      footage.  The general product category that contributed the largest
      dollar volume increase to our Retail revenue growth for the three months ended
      September 29, 2007, compared to the three months ended September 30, 2006,
      was
      hunting equipment.





*Financial
      Services Revenue*.  Financial Services revenue includes
      securitization income, interest income and interchange and other fees net of
      reward program costs, interest expense, and credit losses from our credit card
      operations.  On a generally accepted accounting principles (“GAAP”)
      basis, Financial Services revenue increased $7.4 million, or 19.7%, to $44.7
      million for the three months ended September 29, 2007, compared to the three
      months ended September 30, 2006.





For
      credit card loans securitized and sold, the loans are removed from our
      consolidated balance sheet and the net earnings on these securitized assets
      after paying outside investors are reflected as a component of our
      securitization income on a GAAP basis. The following table summarizes the
      results of our Financial Services segment for the three and nine months ended
      September 29, 2007, and September 30, 2006, on a GAAP basis with interest and
      fee income, interest expense and provision for loan losses for the credit card
      loans receivable we own reported in net interest income. Non-interest income
      on
      a GAAP basis includes servicing income, gains on sales of loans and income
      recognized on our retained interests, as well as interchange income on the
      entire managed portfolio.





**Financial
                Services Revenue as**
              **Reported
                on a GAAP Basis:**
            
            **Three
                months ended**
            
            
            **Nine
                months ended****(In
                Thousands)**
            
            **September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**
            
            
            **September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**Interest
                and fee income, net of provision for loan losses
            
            $
            9,139
            
            
            $
            6,372
            
            
            $
            20,233
            
            
            $
            17,360Interest
                expense
            
            
            (1,807
            )
            
            
            (1,299
            )
            
            
            (4,252
            )
            
            
            (3,600
            )Net
                interest income, net of provision for loan losses
            
            
            7,332
            
            
            
            5,073
            
            
            
            15,981
            
            
            
            13,760Non-interest
                income:Securitization
                income
                (1)
            
            
            50,679
            
            
            
            44,294
            
            
            
            144,315
            
            
            
            120,074Other
                non-interest
                income
            
            
            13,592
            
            
            
            10,505
            
            
            
            36,072
            
            
            
            28,586Total
                non-interest
                income
            
            
            64,271
            
            
            
            54,799
            
            
            
            180,387
            
            
            
            148,660Less:
                Customer rewards costs
            
            
            (26,854
            )
            
            
            (22,480
            )
            
            
            (74,871
            )
            
            
            (63,474
            )Financial
                Services revenue
            
            $
            44,749
            
            
            $
            37,392
            
            
            $
            121,497
            
            
            $
            98,946





(1)
            Includes
                pre-tax gains on sales of credit card loans totaling $7.2 million
                and $3.4
                million for the three months ended September 29, 2007, and September
                30,
                2006, respectively, and $19.0 million and $12.1 million for the nine
                months ended September 29, 2007, and September 30, 2006,
                respectively.





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In
      addition, we measure the results of our Financial Services business on a
      non-GAAP managed basis as presented in the following table labeled *Managed
      Financial Services Revenue on a non-GAAP Basis*. Interest income measured on
      a non-GAAP managed basis increased $10.2 million for the three months ended
      September 29, 2007, compared to the fiscal 2006 third quarter. The increase
      in
      interest income was primarily due to the increase in managed accounts and an
      increase in interest rates. Interchange income, net of rewards costs, increased
      $3.0 million. The increase in interchange income was driven by net purchases,
      which increased 19.7%, and by interchange rates, but was partially offset by
      an
      increase in customer rewards costs of 19.5%. The net increases in interest
      income and interchange income were partially offset by an increase in interest
      expense of $4.5 million due to increases in securitized credit card loans,
      borrowings and interest rates. Compared to the three months ended September
      30,
      2006, the number of average active accounts increased by 15.2% to 978,984 and
      the average balance per active account grew by 7.8% to approximately
      $1,768.





Our
      managed credit card loans represent credit card loans receivable we own plus
      securitized credit card loans. Since the financial performance of the managed
      portfolio has a significant impact on the earnings we will receive from
      servicing the portfolio, we believe the following table on a managed basis
      is
      important information to analyze our revenue in the Financial Services segment.
      This non-GAAP presentation reflects the financial performance of the credit
      card
      loans receivable we own plus those that have been sold for the three and nine
      months ended September 29, 2007, and September 30, 2006, and includes the effect
      of recording the retained interest at fair value. Interest income, interchange
      income (net of customer rewards) and fee income on both the owned and
      securitized portfolio are recorded in their respective line items. Interest
      paid
      to outside investors on the securitized credit card loans is included with
      other
      interest costs and included in interest expense. Credit losses on the entire
      managed portfolio are included in provision for loan losses. Although our
      consolidated financial statements are not presented in this manner, management
      reviews the performance of its managed portfolio in order to evaluate the
      effectiveness of its origination and collection activities, which ultimately
      affects the income we will receive for servicing the portfolio. The
      securitization of credit card loans primarily converts interest income,
      interchange income, credit card fees, credit losses and other income and expense
      related to the securitized loans into securitization income.





**Managed
                Financial Services**
              **Revenue
                on a non-GAAP Basis:**
            
            **Three
                months ended**
            
            
            **Nine
                months ended****(Dollars
                in Thousands)**
            
            **September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**
            
            
            **September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**Interest
                income
            
            $
            48,465
            
            
            $
            38,257
            
            
            $
            136,010
            
            
            $
            104,720Interchange
                income, net of customer rewards costs
            
            
            16,940
            
            
            
            13,981
            
            
            
            46,690
            
            
            
            37,974Other
                fee income
            
            
            7,425
            
            
            
            6,058
            
            
            
            19,502
            
            
            
            16,532Interest
                expense
            
            
            (21,776
            )
            
            
            (17,263
            )
            
            
            (60,187
            )
            
            
            (46,590
            )Provision
                for loan losses
            
            
            (8,931
            )
            
            
            (6,442
            )
            
            
            (23,374
            )
            
            
            (18,354
            )Other
            
            
            2,626
            
            
            
            2,801
            
            
            
            2,856
            
            
            
            4,664Managed
                Financial Services revenue
            
            $
            44,749
            
            
            $
            37,392
            
            
            $
            121,497
            
            
            $
            98,946***As
                a Percentage of Average Managed***
              ***Credit
                Card Loans*****Managed
                Financial Services Revenue:**Interest
                income
            
            
            11.2
            %
            
            
            11.0
            %
            
            
            11.1
            %
            
            
            10.6
            %Interchange
                income, net of customer rewards costs
            
            
            3.9
            %
            
            
            4.0
            %
            
            
            3.8
            %
            
            
            3.9
            %Other
                fee income
            
            
            1.7
            %
            
            
            1.7
            %
            
            
            1.6
            %
            
            
            1.6
            %Interest
                expense
            
            
            (5.0
            )%
            
            
            (5.0
            )%
            
            
            (4.9
            )%
            
            
            (4.7
            )%Provision
                for loan losses
            
            
            (2.1
            )%
            
            
            (1.8
            )%
            
            
            (1.9
            )%
            
            
            (1.9
            )%Other
            
            
            0.6
            %
            
            
            0.8
            %
            
            
            0.2
            %
            
            
            0.5
            %Managed
                Financial Services revenue
            
            
            10.3
            %
            
            
            10.7
            %
            
            
            9.9
            %
            
            
            10.0
            %Average
                reported credit card loans
            
            $
            182,719
            
            
            $
            133,866
            
            
            $
            155,073
            
            
            $
            128,161Average
                managed credit card loans
            
            
            1,730,886
            
            
            
            1,394,377
            
            
            
            1,633,446
            
            
            
            1,315,000





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**Gross
      Profit**





We
      define
      gross profit as revenue minus cost of revenue.  Cost of revenue for
      our merchandising business includes cost of merchandise, shipping costs,
      inventory shrink and other miscellaneous costs.  However, it does not
      include occupancy costs, depreciation and amortization, direct labor or
      warehousing costs, which are included in selling, general and administrative
      expenses.  Our Financial Services segment does not have costs
      classified as cost of revenue.  Other cost of revenue includes the
      basis in land that we have sold.





Gross
      profit increased $23.9 million, or 11.9%, to $224.2 million for the three months
      ended September 29, 2007, from $200.3 million for the three months ended
      September 30, 2006.  Gross profit as a percentage of revenue increased
      20 basis points to 41.0% for the three months ended September 29, 2007, from
      40.8% for the three months ended September 30, 2006.  The 20 basis
      points increase in gross profit as a percentage of revenue was primarily due
      to
      an increase in our Financial Services revenue, which does not have any
      corresponding increase in cost of revenue.





*Merchandising
      Business.* The gross profit of our merchandising business increased $16.5
      million, or 10.3%, to $176.6 million for the three months ended September 29,
      2007, from $160.1 million for the three months ended September 30, 2006. The
      gross profit of our merchandising business decreased 10 basis points as a
      percentage of merchandise revenue to 35.4% for the three months ended September
      29, 2007, compared to 35.5% for the three months ended September 30, 2006.
      During the fiscal 2007 third quarter, we initiated a promotional and advertising
      strategy for our retail stores aimed at capturing additional market
      share.  This strategy, combined with an increase in the proportion of
      hard good sales to total sales and softer apparel sales, decreased our gross
      profit for the fiscal 2007 third quarter by 90 basis points compared to the
      fiscal 2006 quarter.  Helping to offset this decrease was an 80 basis
      points increase resulting from increases in our shipping margins for the fiscal
      2007 third quarter compared to the fiscal 2006 third quarter.





**Selling,
      General and Administrative Expenses**





Selling,
      general and administrative (“SG&A”) expenses include directly identifiable
      operating costs and other expenses, as well as depreciation and
      amortization.  SG&A expenses on a consolidated basis increased
      $26.5 million, or 15.3%*,* to $199.9 million for the three months ended
      September 29, 2007, from $173.4 million for the three months ended September
      30,
      2006. SG&A expenses were 36.6% of revenue for the three months ended
      September 29, 2007, compared to 35.4% for the three months ended September
      30,
      2006.  SG&A was higher for the three months ended September 29,
      2007, compared to the fiscal 2006 third quarter primarily due to (i) increased
      salaries, benefits and recruiting costs because of more employees in our distribution
      centers,
      headquarters and new retail storescompared to 2006, (ii) increased
      Internet marketing costs and (iii) increased depreciation expense associated
      with new stores and system upgrades that were not in service in the fiscal
      2006
      quarter.





The
      most
      significant factors contributing to the increase in SG&A expenses by segment
      for the three months ended September 29, 2007, compared to the fiscal 2006
      third
      quarter included:





·
            *Other*
                SG&A expenses increasing approximately $6.9 million.
              
              This
                net increase was primarily a result of increases in wages and related
                benefits of $3.0 million primarily due to increases in personnel
                as our
                corporate expansion continues.  In addition, there was an
                increase in bonus expense of $1.3 million primarily related to a
                change in
                the performance measurement under our short-term cash incentive plan.
                Depreciation expense increased $0.7 million due to system upgrades
                that
                were not in service in the fiscal 2006 quarter.  Equipment and
                software costs increased $1.6 million due to additional maintenance
                costs
                related to system upgrades.  Total Other SG&A costs as a
                percentage of consolidated revenue was 10.2% for the three months
                ended
                September 29, 2007, compared to 10.0% for the three months ended
                September
                30, 2006.·
            *Direct*SG&A expenses increasing approximately $1.9 million.
              
              The
                net increase in Direct SG&A was primarily due to an increase in Direct
                marketing costs of $3.5 million mainly associated with costs promoting
                our
                website.  Direct marketing costs increased to $35.6 million, or
                10.9%, for the three months ended September 29, 2007, from $32.1
                million
                for the three months ended September 30, 2006.  As a percentage
                of Direct revenue, Direct marketing costs were 14.7% for the three
                months
                ended September 29, 2007, compared to 13.8% for the three months
                ended
                September 30, 2006. Our catalog costs increased comparing the respective
                quarters primarily due to three new catalogs, additional remailings
                and
                inserts in the fiscal 2007 quarter that were not in the fiscal 2006
                quarter. Costs related to our website have also increased comparing
                the fiscal 2007 third quarter to the third quarter of fiscal
                2006.  Historically,
                we have
                disclosed catalog costs only as a percentage of Direct revenue as
                an
                indicator for catalog productivity.As our Direct
                business has grown, certain marketing costs have become a more meaningful
                number.  Accordingly, we believe
                Direct
                marketing costs, which includes catalog costs, provides a more meaningful
                representation of the performance of our Direct
                business.Increases in Direct SG&A were partially
                offset by the marketing fee paid to the Direct segment from the Financial
                Services segment which increased $1.6 million over the fiscal 2006
                quarter, or 0.7% of Direct
                revenue.


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·
            *Retail*SG&A expenses increasing approximately $12.2
                million.
              
              New
                store operating costs increased $7.9 million related to our new retail
                stores that are not in our comparable store base. Total SG&A expenses
                in our comparable store base increased only $0.3 million.  As a
                percentage of comparable store base revenue, SG&A expenses decreased
                0.7% to 18.0% for the three months ended September 29, 2007, compared
                to
                18.7% for the fiscal 2006 quarter.  Pre-opening costs were up
                $3.3 million, and Retail overhead costs increased $0.7 million, or
                0.3% of
                Retail revenue, compared to the third quarter of fiscal
                2006.  This net increase in Retail overhead costs was primarily
                due to a net increase in Retail SG&A operating expenses of $2.9
                million (of which $2.5 million is for salary, benefits, recruiting
                costs,
                training and travel expenses) partially offset by the marketing fee
                paid
                to the Retail segment from the Financial Services segment which increased
                $2.2 million over the 2006 quarter, or 1.0% of Retail revenue.·
            *Financial
                Services*SG&A expenses increasing approximately $5.5
                million.
              
              This
                increase in SG&A expenses was primarily due to an increase in the
                marketing fee of $3.8 million paid to our other segments. In addition,
                third-party data processing services related to our credit card processing
                increased $1.1 million as the number of credit card accounts and
                credit
                card transactions increased.





**Operating
      Income**





We
      define
      operating income as revenue less cost of revenue and selling, general and
      administrative expenses.  Given the mixture of segments we report and
      the different cost classifications inherent in each of their respective
      businesses, it is difficult to compare our consolidated results on the basis
      of
      gross profit, or the difference between revenue and cost of
      revenue.  We believe that operating income presents a more meaningful
      measure of our consolidated operating performance than gross profit because
      of
      the following factors:





·
            our
                Financial Services segment does not have costs classified as cost
                of
                revenue, which results in a disproportionate gross profit contribution
                for
                this segment;·
            we
                do not include occupancy costs, depreciation, direct labor or warehousing
                costs in cost of revenue, which affects comparability to other retailers
                who may account differently for some or all of these costs;
                and·
            we
                have historically attempted to price our customer shipping charges
                to
                generally match our shipping expenses, which reduces gross profit
                as a
                percentage of Direct revenue.





Consequently,
      we believe that operating income is the best metric to compare the performance
      and profitability of our segments to each other and to judge our consolidated
      performance because it includes all applicable revenue and cost
      items.





Operating
      income decreased $2.5 million, or 9.3%, to $24.3 million for the three months
      ended September 29, 2007, compared to the three months ended September 30,
      2006.
      Operating income as a percentage of revenue decreased to 4.5% for the three
      months ended September 29, 2007, from 5.4% for the fiscal 2006 third quarter.
      This operating margin decrease of 90 basis points was primarily due to the
      decrease in our merchandising gross profit over the fiscal 2006 quarter and
      to
      increases in expenses incurred in corporate overhead compared to the fiscal
      2006
      third quarter.  In addition, pre-opening costs increased $3.3 million
      comparing the three months ended September 29, 2007, to the fiscal 2006 quarter
      due to new store openings.





**Interest
      Expense**





Interest
      expense decreased $0.6 million to $4.2 million for three months ended September
      29, 2007, compared to $4.8 million for the three months ended September 30,
      2006.  During the three months ended September 29, 2007, we
      capitalized interest totaling $2.7 million on qualifying fixed assets relating
      primarily to retail store construction compared to $0.2 million for the three
      months ended September 30, 2006. In addition, during the third quarter of fiscal
      2007, we accrued approximately $0.3 million in interest expense relating to
      estimated tax benefits associated with uncertainties applicable to certain
      income tax positions.





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**Provision
      for Income Taxes**





Our
      effective tax rate was 37.5% for the three months ended September 29, 2007,
      compared to 38.4% for the three months ended September 30, 2006. We expect
      our
      effective tax rate to increase incrementally as we open additional retail stores
      in more states. We adjusted upward our estimated annual effective income tax
      rate to 37.5% during the third quarter of fiscal 2006 causing the effective
      tax
      rate to be higher for the three months ended September 30, 2006.





**Nine
      Months Ended September 29, 2007, Compared to Nine Months Ended September 30,
      2006**





**Revenue**





Total
      revenue increased $177.6 million, or 13.8%, to $1.46 billion for the nine months
      ended September 29, 2007, compared to $1.28 billion for the nine months ended
      September 30, 2006, due to revenue growth in all segments.





*Direct
      Revenue*.  Direct revenue increased $27.5 million, or 4.2%, to
      $683.6 million for the nine months ended September 29, 2007, from $656.1 million
      for the nine months ended September 30, 2006. Internet visits increased 27.3%,
      to 63.5 million visits for the nine months ended September 29, 2007, compared
      to
      49.9 million visits for the nine months ended September 30,
      2006.  Continuing to focus our efforts on utilizing marketing programs
      and search optimization programs to increase traffic to our website helped
      increase Direct revenue. The general product categories that contributed the
      largest dollar volume increase to our Direct revenue for the nine months ended
      September 29, 2007, compared to the respective fiscal 2006 period were clothing
      and footwear and camping.





*Retail
      Revenue*.  Retail revenue increased by $126.2 million, or 24.5%,
      to $641.6 million for the nine months ended September 29, 2007, compared to
      $515.4 million for the nine months ended September 30, 2006, primarily due
      to
      new store sales of $119.8 million.  In April 2007, we opened a retail
      store in Hazelwood, Missouri, and in mid-September 2007, we opened another
      retail store in Hoffman Estates, Illinois, compared to four new stores in the
      last half of fiscal 2006.  In addition, comparable store sales
      increased $6.4 million, or 1.3%, compared to the nine months ended September
      30,
      2006.  The general product category that contributed the largest
      dollar volume increase to our Retail revenue growth for the nine months ended
      September 29, 2007, compared to the respective fiscal 2006 period was hunting
      equipment.





*Financial
      Services Revenue*.  On a GAAP basis, Financial Services revenue
      increased $22.6 million, or 22.8%, to $121.5 million for the nine months ended
      September 29, 2007, compared to the nine months ended September 30,
      2006.





Interest
      income measured on a non-GAAP managed basis increased $31.3 million for the
      first nine months of fiscal 2007 compared to the nine months ended September
      30,
      2006.  The increase in interest income was primarily due to the
      increase in managed accounts and an increase in interest rates. Interchange
      income, net of rewards costs, increased $8.7 million. The increase in
      interchange income was driven by net purchases, which increased 19.7%, and
      by
      interchange rates, but was partially offset by an increase in customer rewards
      costs of 18.0%. The net increases in interest income and interchange income
      were
      partially offset by an increase in interest expense of $13.6 million due to
      increases in securitized credit card loans, borrowings and interest rates.
      Compared to the nine months ended September 30, 2006, the number of average
      active accounts increased 15.5% to 955,940 and the average balance per active
      account grew 7.6% to approximately $1,709.





**Gross
      Profit**





Gross
      profit increased $78.9 million, or 15.2%, to $599.4 million for the nine months
      ended September 29, 2007, from $520.5 million for the nine months ended
      September 30, 2006.  Gross profit as a percentage of revenue increased
      50 basis points to 41.1% for the nine months ended September 29, 2007, from
      40.6% for the nine months ended September 30, 2006. This increase in our gross
      profit as a percentage of revenue was primarily due to an increase in our
      Financial Services revenue, which does not have any corresponding increase
      in
      cost of revenue.





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*Merchandising
      Business.* The gross profit of our merchandising business increased $53.8
      million, or 13.1%, to $466.2 million for the nine months ended September 29,
      2007, from $412.4 million for the nine months ended September 30, 2006. The
      gross profit of our merchandising business as a percentage of merchandise
      revenue was 35.2% for both the nine months ended September 29, 2007, and
      September 30, 2006. An advertising and promotional strategy initiated in the
      fiscal 2007 third quarter to capture additional market share, combined with
      an
      increase in the proportion of hard good sales to total sales and softer apparel
      sales, as well as a refinement in the estimate of our drop ship costs in the
      fiscal 2007 first quarter, negatively affected our gross profit for the nine
      months ended September 29, 2007, compared to the nine months ended September
      30,
      2006. This negative effect on our merchandising gross profit was partially
      offset by improved merchandising operations which helped reduce our inventory
      shrink as well as our obsolete and slow moving inventory levels.  In
      addition, increases in our shipping margin increased our merchandising gross
      profit by 40 basis points over the fiscal 2006 nine month period.




**Selling,
      General and Administrative Expenses**





SG&A
      expenses on a consolidated basis increased $77.5 million, or 16.7%*,* to
      $542.4 million for the nine months ended September 29, 2007, from $464.9 million
      for the nine months ended September 30, 2006.  SG&A expenses were
      37.2% of revenue for the nine months ended September 29, 2007, compared to
      36.3%
      for the nine months ended September 30, 2006.  SG&A was higher for
      the nine months ended September 29, 2007, compared to the nine months ended
      September 30, 2006, primarily due to (i) increased salaries, benefits and
      recruiting costs  because of more employees in our distribution
      centers,
      headquarters and new retail stores compared to 2006, (ii) a higher bonus
      accrual comparing the respective periods due to timing differences, (iii)
      increased Internet marketing costs and (iv) increased depreciation expense
      associated with new stores and system upgrades that were not in service in
      the
      fiscal 2006 nine month period.





The
      most
      significant factors contributing to the increase in SG&A expenses by segment
      for the nine months ended September 29, 2007, compared to the nine months ended
      September 30, 2006 included:





·
            *Other*
                SG&A expenses increasing approximately $23.7 million.
              
              This
                increase was primarily a result of increases in wages and related
                benefits
                of $10.1 million due to increases in personnel as our merchandise
                revenue
                growth continues.  In addition, there was an increase in bonus
                expense of $5.9 million primarily related to the change in the performance
                measurement under our short-term cash incentive plan. Also, depreciation
                increased by $2.8 million due to system upgrades that were not in
                service
                during the first nine months of fiscal 2006. Total Other SG&A costs as
                a percentage of consolidated revenue increased from 10.2% to
                10.6%.·
            *Direct*SG&A expenses increasing approximately $6.1 million.
              
              This
                increase in Direct SG&A was primarily due to an increase in Direct
                marketing costs of $7.0 million related to costs promoting our
                website.  Direct marketing costs increased to $99.5 million, or
                approximately 7.6%, for the nine months ended September 29, 2007,
                from
                $92.5 million for the nine months ended September 30, 2006. As a
                percentage of Direct revenue, Direct marketing costs increased to
                14.6%
                for the nine months ended September 29, 2007, from 14.1% for the
                nine
                months ended September 30, 2006. This increase in Direct marketing
                costs
                as a percentage of our Direct revenue was primarily due to increased
                costs
                related to our website, partially offset by the effective management
                of
                our print, paper and internal catalog production costs, despite postage
                increases comparing the nine months ended September 29, 2007, to
                the nine
                months ended September 30, 2006.  We continue to refine catalog
                content and distribution to increase catalog efficiency. Incidental
                equipment and software expenses increased by $2.0 million, specifically
                related to our website.  Increases to Direct SG&A were
                partially offset by the marketing fee paid to the Direct segment
                from the
                Financial Services segment which increased $5.1 million over the
                respective fiscal 2006 period, or 0.8% of Direct
                revenue.





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·
            *Retail*SG&A expenses increasing approximately $30.3
                million.
              
              New
                store operating costs increased $25.5 million related to our new
                retail
                stores that are not in our comparable store base. Total SG&A expenses
                in our comparable store base decreased by $1.3 million.  As a
                percentage of comparable store base revenue, SG&A expenses decreased
                0.5% to 20.2% for the nine months ended September 29, 2007, compared
                to
                20.7% for the nine months of fiscal 2006.  Pre-opening costs
                were up $5.1 million, and Retail overhead costs increased by $1.0
                million,
                or 0.2% of Retail revenue, compared to the nine months ended September
                30,
                2006.  This net increase in retail overhead was primarily due to
                an increase of $6.9 million in Retail SG&A operating expenses
                (primarily salary, benefits, recruiting costs, training and travel
                expenses) partially offset by the marketing fee paid to the Retail
                segment
                from the Financial Services segment which increased $5.9 million
                over the
                respective fiscal 2006 period, or 1.2% of Retail
                revenue.·
            *Financial
                Services*SG&A expenses increasing approximately $17.4
                million.
              
              This
                increase in SG&A expenses was primarily due to an increase in the
                marketing fee of $11.0 million paid to our other segments. Advertising
                and
                promotional costs increased by $2.8 million due to increases in Visa
                assessments, new account acquisition costs and account retention
                tools.
                Fraud losses increased $0.8 million primarily due to an increase
                in
                counterfeit fraud.  Third-party data processing services related
                to our credit card processing increased $1.7 million as the number
                of
                credit card accounts and credit card transactions
                increased.





**Operating
      Income**





Operating
      income increased $1.4 million, or 2.5%, to $57.0 million for the nine months
      ended September 29, 2007, compared to $55.6 million for the nine months ended
      September 30, 2006. Operating income as a percentage of revenue on a
      consolidated basis was 3.9% for the nine months ended September 29, 2007,
      compared to 4.3% for the nine months ended September 30, 2006.  The
      operating margin of our Direct segment, and revenue from our Financial Services
      segment, increased for the nine months ended September 29, 2007, compared to
      the
      fiscal 2006 nine month period. These increases in operating income were reduced
      by additional expenses incurred in corporate overhead and pre-opening costs
      increasing by $5.1 million in the Retail segment associated with new store
      openings during the nine months ended September 29, 2007, compared to the nine
      months of fiscal 2006.





**Interest
      Expense**





Interest
      expense increased $0.8 million to $13.7 million for the nine months ended
      September 29, 2007, from $12.9 million for the nine months ended September
      30,
      2006.  The net increase in interest expense was primarily due to
      additional debt taken down during the nine months ended September 29, 2007,
      compared to the nine months of fiscal 2006.  During the nine months
      ended September 29, 2007, we capitalized interest totaling $3.1 million on
      qualifying fixed assets relating primarily to retail store construction compared
      to $0.3 million for the three months ended September 30, 2006. In addition,
      during the nine months ended September 29, 2007, we accrued approximately $0.7
      million in interest expense relating to estimated tax benefits associated with
      uncertainties applicable to certain income tax positions.





**Provision
      for Income Taxes**





Our
      effective tax rate was 37.2% for the nine months ended September 29, 2007,
      compared to 37.5% for the nine months ended September 30, 2006. The current
      fiscal year decrease in the effective tax rate compared to the 37.5% effective
      tax rate for fiscal 2006 was due to a reduction in our income tax provision
      relating to a state tax settlement partially offset by an increase due to
      additional state income taxes where we have opened stores. We expect our
      effective tax rate to increase incrementally as we open additional retail stores
      in more states.





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**Bank
      Asset Quality**





We
      securitize a majority of our credit card loans. On a quarterly basis, we
      transfer eligible credit card loans into a securitization trust. We are required
      to own at least a minimum twenty day average of 5.0% of the interests in the
      securitization trust. Therefore, these retained loans have the same
      characteristics as those loans sold to outside investors. Certain accounts
      are
      ineligible for securitization because they are delinquent at the time of sale
      to
      the trust, originated from sources other than Cabela's CLUB Visa credit cards
      and various other requirements. The total amount of ineligible loans and
      receivables were $14.4 million and $19.1 million at September 29, 2007, and
      December 30, 2006, respectively.





The
      quality of our managed credit card loan portfolio at any time reflects, among
      other factors, the creditworthiness of the individual cardholders, general
      economic conditions, the success of our account management and collection
      activities, and the life cycle stage of the portfolio.  Our financial
      results are sensitive to changes in delinquencies and net charge-offs of this
      portfolio.  During periods of economic weakness, delinquencies and net
      charge-offs are more likely to increase.  We have sought to manage
      this sensitivity by selecting a customer base that has historically shown it
      to
      be very creditworthy based on charge-off levels, credit bureau scores, such
      as
      Fair Isaac & Company (FICO) scores, and behavior scores.





Our
      average managed credit card loans outstanding increased $275.8 million, or
      20.3%, to $1.6 billion for the nine months ended September 29, 2007, from $1.4
      billion for fiscal year 2006 and by $318.4 million, or 24.2%, from $1.3 billion
      for the nine months ended September 30, 2006. We believe that as our credit
      card
      accounts mature they are less likely to charge-off and less likely to be
      closed.





**Delinquencies**





We
      consider the entire balance of an account, including any accrued interest and
      fees, delinquent if the minimum payment is not received by the payment due
      date.
      Our aging methodology is based on the number of completed billing cycles during
      which a customer has failed to make a required payment. Delinquencies not only
      have the potential to reduce earnings by increasing the unrealized loss
      recognized to reduce the loans to market value and reducing securitization
      income, but they also result in additional operating costs dedicated to
      resolving the delinquencies.





The
      following chart shows the percentage of our managed loans that have been
      delinquent at the periods ended:





**Number
                of days delinquent**
            
            **September
                29, 2007**
            
            **December
                30, 2006**
            
            **September
                30, 2006**Greater
                than 30 days
            
            0.99%
            
            0.75%
            
            0.84%Greater
                than 60 days
            
            0.58%
            
            0.44%
            
            0.45%Greater
                than 90 days
            
            0.30%
            
            0.18%
            
            0.19%





**Charge-offs**





Gross
      charge-offs reflect the uncollectible principal, interest and fees on a
      customer's account. Recoveries reflect the amounts collected on previously
      charged-off accounts.  We charge off credit card loans after an
      account becomes 130 days contractually delinquent, except for cardholder
      bankruptcies, cardholder deaths and fraudulent transactions, which are charged
      off sooner.





Our
      charge-off activity for the managed portfolio for the following periods is
      summarized below:





**Three
                months ended**
            
            
            **Nine
                months ended****(Dollars
                in Thousands)**
            
            **September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**
            
            
            **September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**Gross
                charge-offs
            
            $
            10,964
            
            
            $
            7,859
            
            
            $
            29,396
            
            
            $
            22,015Recoveries
            
            
            (2,095
            )
            
            
            (1,447
            )
            
            
            (6,549
            )
            
            
            (4,059
            )Net
                charge-offs
            
            $
            8,869
            
            
            $
            6,412
            
            
            $
            22,847
            
            
            $
            17,956Net
                charge-offs as a percentage of average managed loans
            
            
            2.05
            %
            
            
            1.84
            %
            
            
            1.86
            %
            
            
            1.82
            %


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**Liquidity
      and Capital Resources**





**Overview**





Our
      merchandising business and our Financial Services segment have significantly
      different liquidity and capital needs. The primary cash requirements of our
      merchandising business relate to capital for new retail stores, purchases of
      inventory, investments in our management information systems and other
      infrastructure, purchases of economic development bonds related to the
      construction of new retail stores and other general working capital
      needs.  We historically have met these requirements by generating cash
      from our merchandising business operations, borrowing under revolving credit
      facilities, issuing debt and equity securities, obtaining economic development
      grants from state and local governments in connection with developing our retail
      stores, collecting principal and interest payments on our economic development
      bonds and from the retirement of economic development bonds.  The cash
      flow we generate from our merchandising business is seasonal, with our peak
      cash
      requirements for inventory occurring between May and November.  While
      we have consistently generated overall positive annual cash flow from our
      operating activities, other sources of liquidity are generally required by
      our
      merchandising business during these peak cash use periods.  These
      sources historically have included short-term borrowings under our revolving
      credit facility and access to debt markets.  While we generally have
      been able to manage our cash needs during peak periods, if any disruption
      occurred to our funding sources, or if we underestimated our cash needs, we
      would be unable to purchase inventory and otherwise conduct our merchandising
      business to its maximum effectiveness, which would result in reduced revenue
      and
      profits.





The
      primary cash requirements of our Financial Services segment relate to the
      generation of credit card loans and the purchase of points used in the Cabela’s
      CLUB Visa customer loyalty rewards program from our merchandising
      business.  The bank obtains funds for these cash requirements in the
      ordinary course of business through various financing activities, which include
      funding from securitization transactions, borrowing under its credit agreement
      or federal funds purchase agreements, accepting certificates of deposit and
      generating cash from operations.  Our bank’s charter is limited to
      issuing credit cards and accepting brokered certificates of deposit of
      one-hundred thousand dollars or more, and it does not accept demand deposits
      or
      make non-credit card loans.  Consequently, our bank cannot lend money
      to Cabela’s Incorporated or our other affiliates. The bank is subject to capital
      requirements imposed by Nebraska banking law and the Visa membership rules,
      and
      its ability to pay dividends is limited by Nebraska and federal banking
      law.





We
      believe that we will have sufficient capital available from current cash on
      hand, our revolving credit facility and other borrowing sources, expected future
      operations, and possibly additional monetization of our economic development
      bonds to fund our cash requirements and growth plans for the next 12 to 18
      months.





**Operating,
      Investing and Financing Activities**





The
      following table presents changes in our cash and cash equivalents for the
      periods presented.





**Nine
                months ended****(In
                Thousands)**
            
            **September
                29,**
              **2007**
            
            
            **September
                30,**
              **2006**Net
                cash used in operating activities
            
            $
            (157,737
            )
            
            $
            (110,817
            )Net
                cash used in investing activities
            
            
            (228,532
            )
            
            
            (96,228
            )Net
                cash provided by financing activities
            
            
            316,480
            
            
            
            193,437





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Cash
      used
      in operating activities increased $46.9 million for the nine months ended
      September 29, 2007, compared to the nine months ended September 30, 2006. This
      net increase in cash used was primarily due to inventory balances increasing
      $72.9 million during the nine months ended September 29, 2007, from inventory
      levels as of September 30, 2006, due to more new store openings scheduled in
      the
      Fall of 2007 compared to 2006.  Accounts payable decreased $13.6
      million comparing the nine months ended September 29, 2007, to the nine months
      of fiscal 2006.  The net decrease in the change within accounts
      payable comparing periods was due to a decrease in the bank’s accounts payable
      totaling $20.2 million primarily related to the payable to the bank’s
      third-party processor for its credit card transactions and a decrease in
      payables for catalog costs of $4.3 million, partially offset by a net increase
      in inventory payables of $10.1 million.  We also utilized cash in the
      acquisition of land held for sale accounting for the net decrease of $13.3
      million comparing the fiscal 2007 nine month period to the nine month period
      of
      fiscal 2006.  These uses of cash from operating activities were
      partially offset by a $22.6 million net increase in other current assets
      primarily from the bank’s Visa interchange funding account.  Timing
      issues for both this account and the third-party processing account are the
      primary reasons for the net changes between the nine months ended September
      29,
      2007, and September 30, 2006.  We received $17.0 million in tenant
      allowances during the nine months ended September 29, 2007, which accounts
      for
      the net increase of $12.0 million in deferred grant income and tenant
      allowances.  In addition, depreciation increased $9.5 million and
      accounts receivable increased $9.5 million offsetting cash used in operating
      activities.





Our
      LIFO
      calculation for income tax purposes utilizes a simplified LIFO approach which
      results in a book-tax difference. The aforementioned accounting change to the
      FIFO method increased the current portion of income taxes payable by
      approximately $4.7 million.  At September 29, 2007, we had $18.7
      million included in the current portion of deferred income taxes payable in
      our
      condensed consolidated balance sheet related to the LIFO method used for income
      tax purposes.  We will incur this cash outlay of $18.7 million over
      the next four years based on our election in our 2007 federal income tax return
      to change our method of accounting for inventory from LIFO to FIFO for income
      tax purposes.





Cash
      used
      in investing activities increased $132.3 million for the nine months ended
      September 29, 2007, compared to the nine months ended September 30, 2006. This
      net increase was primarily due to capital expenditures relating to the
      construction of our new retail stores.  For the nine months ended
      September 29, 2007, capital expenditures totaled $259.5 million, an increase
      of
      $125.3 million over the first nine months of fiscal 2006.  We opened
      two retail stores in the nine months ended September 29, 2007, and plan to
      open
      another six stores during the fourth quarter.  For fiscal 2006, four
      retail stores were opened in the second half of 2006.  Significant
      amounts of cash are needed in order to open new retail stores and implement
      our
      retail growth strategy.  Depending upon the location and a variety of
      other factors, including store size and the amount of infrastructure
      improvements necessary, whether a proposed store site is new construction or
      leased, and based upon our prior experience, opening a single retail store
      generally requires expenditures in the range of $25.0 million to $60.0
      million.  This amount includes the cost of real estate, site work,
      infrastructure improvements such as utilities and roads, buildings, equipment,
      fixtures (including taxidermy) and inventory. At September 29, 2007, we had
      estimated total cash commitments of $107.0 million related to our 2007 retail
      stores and $162.0 million related to our new retail stores scheduled to open
      in
      2008. These estimated cash commitments do not include any costs associated
      with
      two other announced retail store locations as their costs are not determinable
      at this time.  Certain contractual aspects of our retail store
      locations are in various stages of negotiations and are subject to customary
      conditions to closing.  We expect to incur the majority of the costs
      for the 2007 retail stores in the fourth quarter of fiscal
      2007.  Purchases of marketable securities decreased $6.8 million
      comparing the respective nine-month periods. Economic development bonds totaling
      $1.1 million relating to our Lehi, Utah, retail store were redeemed in the
      third
      quarter of fiscal 2007.  In addition, economic development bonds
      totaling $42.9 million and $53.0 million relating to our Wheeling, West
      Virginia, retail store and distribution center were retired during the nine
      months ended September 29, 2007, and September 30, 2006, respectively, resulting
      in a net decrease of $9.0 million in proceeds from the retirement of marketable
      securities.





Cash
      provided by financing activities totaled $316.5 million for the nine months
      ended September 29, 2007, compared to $193.4 million for the nine months ended
      September 30, 2006. This net increase in cash comparing periods was due to
      a net
      increase of $232.1 million in borrowings on lines of credit, inventory financing
      and other short-term borrowings primarily related to purchasing inventory for
      the additional new stores scheduled to open in the Fall of 2007 compared to
      2006.  In addition, unpresented checks net of bank balance increased
      $50.4 million due to timing of when checks cleared our
      bank.  Partially offsetting these increases was a net difference of
      $154.2 million in long-term debt issuances used to support our retail store
      expansion.





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On
      June
      15, 2007, we issued $60.0 million aggregate principal amount of 6.08% senior
      unsecured notes. The notes mature on June 15, 2017, and interest on the notes
      is
      payable semi-annually.  We used the proceeds from this offering for
      new retail store expansion, including capital expenditures and purchase of
      economic development bonds, and general corporate
      purposes.





WFB
      entered into a credit agreement on June 21, 2007, for a $50.0 million variable
      funding facility.  This facility is secured by a participation
      interest in the transferor’s interest of the Cabela’s Master Credit Card
      Trust.  As of September 29, 2007, $50.0 million was outstanding under
      the facility. The credit agreement expires on June 20, 2008.





In
      addition to the cash commitments for capital expenditures and economic
      development bonds, we have entered into certain lease agreements for retail
      locations.  See Note 9 “Commitments and Contingencies” for our
      commitments for future minimum rental payments under operating leases as of
      September 29, 2007.  Some of these leases for constructed assets
      contain customary conditions of performance by other parties.  Certain
      of these leases include tenant allowances that will be amortized over the life
      of the lease. During the nine months ended September 29, 2007, we received
      $17.0
      million in tenant allowances.  We expect to receive tenant allowances
      totaling $36.7 million in 2008.





**Grants
      and Economic Development Bonds**





*Grants.*Under various grant programs, state or local governments provide funding
      for certain costs associated with developing and opening a new retail store.
      We
      generally have received grant funding in exchange for commitments made by us
      to
      the state or local government providing the funding.  The commitments,
      such as assurance of agreed employment and wage levels at our retail stores
      or
      that the retail store will remain open, typically phase out over approximately
      five to 10 years. If we fail to maintain the commitments during the applicable
      period, the funds we received may have to be repaid or other adverse
      consequences may arise, which could affect our cash flows and profitability.
      As
      of September 29, 2007, and December 30, 2006, the total amount of grant funding
      subject to a specific contractual remedy was $13.1 million and $14.4 million,
      respectively.





*Economic
      Development Bonds.*Through economic development bonds, the state or local
      government sells bonds to provide funding for land acquisition, readying the
      site, building infrastructure and related eligible expenses associated with
      the
      construction and equipping of our retail stores. Generally, we have been the
      sole purchaser of these bonds. The bond proceeds that are received by the
      governmental entity are then used to fund the construction and equipping of
      new
      retail stores and related infrastructure development. While purchasing these
      bonds involves an initial cash outlay by us in connection with a new store,
      some
      or all of these costs can be recaptured through the repayments of the bonds.
      The
      payments of principal and interest on the bonds are typically tied to sales,
      property or lodging taxes generated from the store and, in some cases, from
      businesses in the surrounding area, over periods which range between 20 and
      30
      years. In addition, some of the bonds that we have purchased may be repurchased
      for par value by the governmental entity prior to the maturity date of the
      bonds. However, the governmental entity from which we purchase the bonds is
      not
      otherwise liable for repayment of principal and interest on the bonds to the
      extent that the associated taxes are insufficient to pay the
      bonds.  After purchasing the bonds, we typically carry them on our
      consolidated balance sheet as “available for sale” marketable securities and
      value them based upon management’s projections of the amount of tax revenue
      expected to be generated to support principal and interest payments on the
      bonds.  We have limited experience in valuing these bonds and, because
      of the unique features of each project, there is no independent market data
      for
      valuation of these types of bonds.  If sufficient tax revenue is not
      generated by the subject properties, we will not receive scheduled payments
      and
      will be unable to realize the full value of the bonds carried on our
      consolidated balance sheet.  As of September 29, 2007, and December
      30, 2006, we carried $79.3 million and $116.2 million, respectively, of economic
      development bonds on our consolidated balance sheet.





**Securitization
      of Credit Card Loans**





Our
      Financial Services segment historically has funded most of its growth in credit
      card loans through an asset securitization program.  We sell our
      credit card loans in the ordinary course of business through a commercial paper
      conduit program and longer term fixed and floating rate securitization
      transactions. In a conduit securitization, our credit card loans are converted
      into securities and sold to commercial paper issuers, which pool the securities
      with those of other issuers. The amount securitized in a conduit structure
      is
      allowed to fluctuate within the terms of the facility, which may provide greater
      flexibility for liquidity needs.





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The
      total
      amounts and maturities for our credit card securitizations as of September
      29,
      2007, were as follows:





**Series**
            **Type**
            
            **Initial**
              **Amount**
            
            **Interest
                Rate**
            **Expected
                Final**
              **Maturity****(Dollars
                in Thousands)**Series
                2003-1
            Term
            
            $
            300,000
            
            Floating
                (1)
            January
                2008Series
                2004-I
            Term
            
            
            75,000
            
            Fixed
            March
                2009Series
                2004-II
            Term
            
            
            175,000
            
            Floating
            March
                2009Series
                2005-I
            Term
            
            
            140,000
            
            Fixed
            October
                2010Series
                2005-I
            Term
            
            
            110,000
            
            Floating
            October
                2010Series
                2006-III
            Term
            
            
            250,000
            
            Fixed
            October
                2011Series
                2006-III
            Term
            
            
            250,000
            
            Floating
            October
                2011Series
                2006-I
            Variable
                Funding
            
            
            350,000
            
            Floating
            October 2008





(1)
            The
                trust has entered into an agreement to convert the floating rate
                certificate into a fixed rate
                obligation.





We
      have
      been, and will continue to be, particularly reliant on funding from
      securitization transactions for our Financial Services segment. A failure to
      renew existing facilities or to add additional capacity on favorable terms
      as it
      becomes necessary could increase our financing costs and potentially limit
      our
      ability to grow our Financial Services business. Unfavorable conditions in
      the
      asset-backed securities markets generally, including the unavailability of
      commercial bank liquidity support or credit enhancements, such as financial
      guaranty insurance, could have a similar effect.





Furthermore,
      poor performance of our securitized credit card loans, including increased
      delinquencies and credit losses, lower payment rates or a decrease in excess
      spreads below certain thresholds, could result in a downgrade or withdrawal
      of
      the ratings on the outstanding securities issued in our securitization
      transactions, cause early amortization of these securities or result in higher
      required credit enhancement levels. This could jeopardize our ability to
      complete other securitization transactions on acceptable terms, decrease our
      liquidity and force us to rely on other potentially more expensive funding
      sources, to the extent available, which would decrease our
      profitability.





**Certificates
      of Deposit**





We
      utilize certificates of deposit to partially finance the operating activities
      of
      our bank. Our bank issues certificates of deposit in a minimum amount of
      one-hundred thousand dollars in various maturities.   As of
      September 29, 2007, we had $97.6 million of certificates of deposit outstanding
      with maturities ranging from October 2007 to April 2016 and with a weighted
      average effective annual fixed rate of 5.05%. Certificate of deposit borrowings
      are subject to regulatory capital requirements.





**Credit
      Facility and Other Indebtedness**





On
      June
      15, 2007, we issued and sold $60.0 million aggregate principal amount of 6.08%
      senior unsecured notes pursuant to a supplement to our February 2006 debt
      issuance of $215.0 million. The notes mature on June 15, 2017, and interest
      on
      the notes is payable semi-annually.  These notes contain the same
      default provisions and covenants as those pertaining to the February 2006 debt
      issuance, including limitations on indebtedness and financial covenants relating
      to net worth and fixed charges.





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We
      are
      party to a credit agreement that provides for a $325.0 million unsecured
      revolving credit facility that expires on June 30, 2012.  The credit
      facility may be increased to $450.0 million upon our request and the consent
      of
      the banks that are party to the credit agreement.  The credit
      agreement permits the issuance of up to $200.0 million in letters of credit
      and
      standby letters of credit, the nominal amount of which are applied against
      the
      overall credit limit available under the credit facility. During the term of
      the
      facility, we are required to pay a quarterly facility fee on the average daily
      unused principal balance on the line of credit. At September 29, 2007, the
      principal amount outstanding on the credit facility was $195.0 million and
      the
      average outstanding principal balance during the first nine months of fiscal
      2007 was $30.7 million.  The weighted average interest rate on the
      line of credit was 6.24% during the nine months ended September 29,
      2007.  Letters of credit and standby letters of credit totaling $99.2
      million were outstanding at September 29, 2007.  The average
      outstanding amount of letters of credit during the nine months ended September
      29, 2007, was $66.4 million.  Our total remaining borrowing capacity
      under the credit facility as of September 29, 2007, after subtracting the
      outstanding principal amount, outstanding letters of credit of $76.0 million
      and
      standby letters of credit of $23.2 million, was $30.8 million.  The
      credit agreement requires that we comply with certain financial and other
      customary covenants, including requirements that we maintain the following
      financial ratios:





·
            a
                fixed charge coverage ratio, as defined, of no less than 1.50 to
                1.00 as
                of the last day of any fiscal quarter;·
            a
                cash flow leverage ratio, as defined, of no more than 3.00 to 1.00
                as of
                the last day of any fiscal quarter; and·
            a
                minimum tangible net worth, as defined, of no less than $350.0 million
                plus 50% of positive consolidated net income on a cumulative basis
                for
                each fiscal year beginning with the fiscal year ended
                2006.





The
      credit agreement includes a dividend provision limiting the amount we can pay
      to
      our stockholders, which at September 29, 2007, was not in excess of $99.5
      million.  The agreement also has a provision permitting acceleration
      by the lenders in the event there is a change in control, as
      defined.  In addition, the credit agreement contains cross default
      provisions to other outstanding debt.  In the event we fail to comply
      with these covenants, a default is triggered, and all outstanding letters of
      credit and all principal and outstanding interest would immediately become
      due
      and payable. In addition, at September 29, 2007, we have an obligation under
      our
      open account documents instructions program to pay $4.5 million to participating
      vendors.





We
      had
      $215.0 million in unsecured notes outstanding at September 29, 2007, with
      principal payable in full February 2016 and interest payable semiannually at
      a
      rate of 5.99%.  These notes require that we comply with several
      financial and other covenants, including requirements that we maintain the
      following financial ratios as set forth in the note purchase
      agreements:





·
            a
                consolidated adjusted net worth, as defined, of no less than $350.0
                million plus 25% of positive consolidated net earnings on a cumulative
                basis for each fiscal year beginning with fiscal 2005;·
            a
                fixed charge coverage ratio, as defined, of no less than 2.00 to
                1.00 as
                of the last day of any fiscal quarter; and·
            a
                consolidated funded debt to total funded capitalization of no more
                than
                60%.





In
      the
      event the Company fails to comply with these covenants and the failure to comply
      goes beyond 30 days, the Company will trigger a default. In the event of
      default, all principal and outstanding interest would immediately become due
      and
      payable. In addition, the notes contain cross default provisions to other
      outstanding debt.




On
      September 19, 2007, we entered into an unsecured revolving credit agreement
      for
      $14.9 million ($15.0 million Canadian) in conjunction with the acquisition
      of
      the net assets of an outdoors specialty retailer located in Winnipeg,
      Canada.  This credit agreement expires on June 30, 2010. As of
      September 29, 2007, the amount outstanding under this revolving credit agreement
      was $9.3 million.  Interest is variable, computed at rates as defined
      in the agreement plus a margin and payable monthly.  At September 29,
      2007, the interest rate was 5.88%.


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At
      September 29, 2007, we also had $50.0 million in senior unsecured notes
      outstanding with a fixed interest rate of 4.95% payable
      semi-annually.  These senior notes have principal payable in annual
      installments of $25.0 million and are due September 2009.  At
      September 29, 2007, we were in compliance with all financial covenants under
      our
      credit agreements and unsecured notes.





We
      are
      party to inventory financing agreements that allow certain vendors providing
      boat and all terrain vehicle merchandise to give us extended payment
      terms.  The vendors are responsible for all interest payments for the
      financing period and the financing company holds a security interest in the
      specific inventory we hold.  Our revolving credit facility limits this
      security interest to $50.0 million. The extended payment terms to the vendors
      do
      not exceed one year.  The outstanding liability under the inventory
      financing agreements was $4.1 million at September 29, 2007, compared with
      $9.8
      million at December 30, 2006.





Our
      bank
      has unsecured federal funds purchase agreements with two financial
      institutions.  The maximum amount of funds that can be outstanding is
      $85.0 million of which no amounts were outstanding at September 29, 2007. During
      the three and nine months ended September 29, 2007, the average balance
      outstanding was approximately $2.6 million and $1.5 million, respectively,
      with
      a weighted average rate of 5.53% for the nine months ended September 29,
      2007.




Our
      bank
      entered into a credit agreement on June 21, 2007, for a $50.0 million variable
      funding facility.  This facility is secured by a participation
      interest in the transferor’s interest of the Cabela’s Master Credit Card
      Trust.  The facility limit was increased to $75.0 million on October
      9, 2007.  The facility carries a liquidity fee of 0.15% on the
      outstanding commitment and a program fee of 0.10% on the principal amount
      outstanding. The interest rate on the facility is based upon the interest rate
      for commercial paper issued by the lender and was 5.68% at September 29, 2007.
      The weighted average interest rate was 5.52% on this credit agreement since
      June
      21, 2007. The credit agreement expires on June 20, 2008.





We
      may or
      may not engage in future long-term borrowing transactions to fund our operations
      or our growth plans.  Whether or not we undertake such borrowings will
      depend on a variety of factors, including prevailing interest rates, our retail
      growth plans, our financial strength, alternative sources and costs of funding
      and our assessment of potential returns on investment that may be realized
      from
      the proceeds of such borrowings.





**Off-Balance
      Sheet Arrangements**





*Operating
      Leases*-- We lease various items of office equipment and
      buildings.  Rent expense for these operating leases is recorded in
      selling, general and administrative expenses of the condensed consolidated
      statements of income.





*Credit
      Card Limits*-- The bank bears off-balance sheet risk in the normal course
      of its business. One form of this risk is through the bank's commitment to
      extend credit to cardholders up to the maximum amount of their credit limits.
      The aggregate of such potential funding requirements totaled $10.9 billion
      as of
      September 29, 2007, and $9.5 billion as of December 30, 2006, which amounts
      were
      in addition to existing balances cardholders had at such dates. These funding
      obligations are not included on our consolidated balance sheet. While the bank
      has not experienced, and does not anticipate that it will experience, a
      significant draw down of unfunded credit lines by its cardholders, a significant
      draw down would create a cash need at the bank which likely could not be met
      by
      our available cash and funding sources. The bank has the right to reduce or
      cancel these available lines of credit at any time.





*Securitizations*-- All of the bank's securitization transactions have been accounted for
      as
      sales transactions and the credit card loans relating to those pools of assets
      are not reflected in our consolidated balance sheet.  These
      transactions are included in the discussions of the Financial Services business
      on a non-GAAP managed basis as previously discussed.





**Seasonality**





Our
      business is seasonal in nature and interim results may not be indicative of
      results for the full year. Due to buying patterns around the holidays and the
      opening of hunting seasons, our merchandise revenue is traditionally higher
      in
      the third and fourth fiscal quarters than in the first and second fiscal
      quarters, and we typically earn a disproportionate share of our operating income
      in the third and fourth fiscal quarters.  We anticipate our sales will
      continue to be seasonal in nature.


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**Item
      3.                                Quantitative
      and Qualitative Disclosures About Market Risk**





We
      are
      exposed to interest rate risk through our bank's operations and, to a lesser
      extent, through our merchandising operations. We also are exposed to foreign
      currency risk through our merchandising operations.





**Financial
      Services Interest Rate Risk**





Interest
      rate risk refers to changes in earnings or the net present value of assets
      and
      off-balance sheet positions less liabilities (termed "economic value of equity")
      due to interest rate changes.  To the extent that interest income
      collected on managed loans and interest expense do not respond equally to
      changes in interest rates, or that rates do not change uniformly, securitization
      earnings and economic value of equity could be affected.  Our net
      interest income on managed credit card loans is affected primarily by changes
      in
      short-term interest rate indices such as LIBOR and prime rate. The variable-rate
      credit card loans are indexed to the prime rate. Securitization certificates
      and
      notes are indexed to LIBOR-based rates of interest and are periodically
      repriced.  Interest on our variable funding facility is based on the
      interest rate for commercial paper issued by the lender and interest on federal
      funds reprices daily based on current federal funds
      rates.  Certificate of deposits are priced at the current prevailing
      market rate at the time of issuance.  We manage and mitigate our
      interest rate sensitivity through several techniques, but primarily by modifying
      the contract terms with our cardholders, including interest rates charged,
      in
      response to changing market conditions. Additional techniques we use include
      (i)
      managing the maturity, repricing and distribution of assets and liabilities
      by
      issuing fixed-rate securitization certificates and notes and (ii) by entering
      into interest rate swap agreements to hedge our fixed-rate exposure from
      interest strips.**





The
      following table shows the mix of credit card account balances for each interest
      rate at the periods ended:





**September
                29,**
              **2007**
            
            
            **December
                30,**
              **2006**
            
            
            **September
                30,**
              **2006***As
                a percentage of total balances outstanding*Balances
                carrying interest rate based upon the national
              prime
                lending rate
            
            
            62.8
            %
            
            
            60.2
            %
            
            
            62.7
            %Balances
                carrying an interest rate of 9.99% or lower
            
            
            2.7
            %
            
            
            3.4
            %
            
            
            2.7
            %Balances
                not carrying interest because their previous
              month's
                balance was paid in full
            
            
            34.5
            %
            
            
            36.4
            %
            
            
            34.6
            %100.0
            %
            
            
            100.0
            %
            
            
            100.0
            %




Charges
      on the credit cards issued by our Financial Services segment are priced at
      a
      margin over the defined national prime lending rate, subject to certain interest
      rate floors, except purchases of Cabela’s merchandise, certain other charges and
      balance transfer programs, which are financed at a fixed interest rate of 9.99%.
      No interest is charged if the account is paid in full within 20 days of the
      billing cycle.





Management
      has performed an interest rate gap analysis to measure the effects of the timing
      of the repricing of our interest sensitive assets and liabilities. Based on
      this
      analysis, we believe that if there is an immediate increase of 100 basis point
      in the market rates for which our assets and liabilities are indexed during
      the
      next twelve months, our projected operating results would not be materially
      affected. Management also has performed a projected interest rate gap analysis
      for the same future twelve month period to measure the effects of a change
      in
      the spread between the prime interest rate and the LIBOR interest rate. Based
      on
      this analysis, we believe that an immediate 50 basis point decrease in this
      spread would cause a corresponding decrease of approximately $6.1 million on
      the
      projected pre-tax income of our Financial Services segment over the next 12
      months, while an immediate 50 basis point increase in this spread would cause
      an
      increase of approximately $6.1 million on the projected pre-tax income of our
      Financial Services segment over the next 12 months, either of which could have
      a
      material effect on our operating results.





**Merchandising
      Interest Rate Risk**





One
      of
      our economic development bond agreements was priced at a variable interest
      rate
      with its base rate tied to the prime rate and adjusted annually in November.
      Portions of these bonds were retired in June 2006 and the interest rates were
      renegotiated.  The remainder of these particular economic development
      bonds had a balance of $42.9 million and were redeemed in full on April 23,
      2007.


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The
      interest payable on our line of credit is based on variable interest rates
      and
      therefore affected by changes in market interest rates. If interest rates on
      existing variable rate debt increased 1.0%, our interest expense and results
      from operations and cash flows could be materially affected.





**Foreign
      Currency Risk**





We
      purchase a significant amount of inventory from vendors outside of the United
      States in transactions that are primarily U.S. dollar transactions. A small
      percentage of our international purchase transactions are in currencies other
      than the U.S. dollar. Any currency risks related to these transactions are
      immaterial to us. A decline in the relative value of the U.S. dollar to other
      foreign currencies could, however, lead to increased merchandise
      costs.





**Item
      4.                                Controls
      and Procedures**





We
      maintain disclosure controls and
      procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act
      of
      1934, as amended (the “Exchange Act”)), designed to ensure that information
      required to be disclosed in reports filed under the Exchange Act is recorded,
      processed, summarized and reported within specified time periods. Disclosure
      controls and procedures include, without limitation, controls and procedures
      designed to ensure that information required to be disclosed by us in the
      reports that we file or submit under the Exchange Act is accumulated and
      communicated to management, including our Chief Executive Officer and Chief
      Financial Officer, or persons performing similar functions, as appropriate
      to
      allow timely decisions regarding required disclosure.





In
      connection with this quarterly
      report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer
      evaluated, with the participation of our management, the effectiveness of our
      disclosure controls and procedures as of the end of the period covered by this
      report. Based on management’s evaluation, our Chief Executive Officer and Chief
      Financial Officer each concluded that our disclosure controls and procedures
      were effective as of September 29, 2007.




Changes
      in Internal Control Over
      Financial Reporting





There
      were no changes in our internal control over financial reporting that occurred
      during the quarter ended September 29, 2007, that materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.








**Item4T.                            
Controls and Procedures**





Not
      applicable.


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**PART
      II – OTHER INFORMATION**








**Item1.                                Legal
      Proceedings.**





We
      are party to certain lawsuits in the
      ordinary course of our business. The subject matter of these proceedings
      primarily includes commercial disputes, employment issues and product liability
      lawsuits.  We do not believe that the ultimate dispositions of these
      proceedings, individually or in the aggregate, will have a material adverse
      effect on our consolidated financial position, results of operations or
      liquidity.





**Item
      1A.                           
Risk Factors.**





There
      have been no material changes from the risk factors disclosed in the “Risk
      Factors” section of our Annual Report on Form 10-K for the fiscal year ended
      December 30, 2006, except as described in Part II, Item 1A, of our Quarterly
      Report on Form 10-Q for the fiscal quarter ended March 31, 2007.





**Item2.                                Unregistered
      Sales of Equity Securities and Use of Proceeds.**





Not
      applicable.





**Item
      3.                                Defaults
      Upon Senior Securities.**





Not
      applicable.





**Item
      4.                                Submission
      of Matters to Vote of Security Holders.**





Not
      applicable.





**Item
      5.                                Other
      Information.**





Not
      applicable.








**Item
      6.                                Exhibits.**





(a)
            Exhibits.





Exhibit
              Number
            Description10
            First
                Amendment to Second Amended and Restated Credit
                Agreement31.1
            Certification
                of CEO Pursuant to Rule 13a-14(a) under the Exchange
                Act31.2
            Certification
                of CFO Pursuant to Rule 13a-14(a) under the Exchange
                Act32
            Certifications
                Pursuant to 18 U.S.C. Section 1350





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**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.








CABELA'S
                INCORPORATEDDated:  November
                5, 2007
            By:
            /s/
                Dennis HighbyDennis
                HighbyPresident
                and Chief Executive OfficerDated:  November 5,
                2007
            By:
            /s/
                Ralph W. CastnerRalph
                W. CastnerVice
                President and Chief Financial
                Officer





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**EXHIBIT
      INDEX**





Exhibit
              Number
            Description10
            First
                Amendment to Second Amended and Restated Credit
                Agreement31.1
            Certification
                of CEO Pursuant to Rule 13a-14(a) under the Exchange
                Act31.2
            Certification
                of CFO Pursuant to Rule 13a-14(a) under the Exchange
                Act32
            Certifications
                Pursuant to 18 U.S.C. Section 1350




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