**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 March 31,
                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 filerx
            Accelerated
                filero
            Non-accelerated
                filero





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: 65,774,848 shares, including 1,820,437 shares
      of non-voting common stock, as of April 28, 2007.








**CABELA’S
      INCORPORATED**


**FORM
      10-Q**


**QUARTERLY
      PERIOD ENDED MARCH 31, 2007**


**TABLE
      OF CONTENTS**








PagePART
                I - FINANCIAL INFORMATIONItem
                1.
            Financial
                StatementsCondensed
                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
            17Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            32Item
                4.
            Controls
                and Procedures
            34Item
                4T.
            Controls
                and Procedures
            34PART
                II - OTHER INFORMATIONItem
                1.
            Legal
                Proceedings
            35Item
                1A.
            Risk
                Factors
            35Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            36Item
                3.
            Defaults
                Upon Senior Securities
            36Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            36Item
                5.
            Other
                Information
            36Item
                6.
            Exhibits
            36SIGNATURES
            37INDEX
                TO EXHIBITS
            38





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**
            
            **March
                31,**
              **2007**
            
            **December
                30,**
              **2006**
            
            **April
                1,**
              **2006**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            51,985
            
            $
            172,903
            
            $
            96,700Accounts
                receivable, net of allowance for doubtful accounts of $1,701, $1,932
                and
                $1,597
            
            
            36,541
            
            
            43,676
            
            
            35,005Credit
                card loans held for sale (Note 3)
            
            
            115,593
            
            
            136,072
            
            
            113,175Credit
                card loans receivable, net of allowances of $968, $699 and $382 (Note
                3)
            
            
            14,463
            
            
            16,611
            
            
            12,833Inventories
            
            
            505,337
            
            
            484,414
            
            
            418,383Prepaid
                expenses and deferred catalog costs
            
            
            41,722
            
            
            42,502
            
            
            38,584Other
                current assets
            
            
            89,932
            
            
            58,043
            
            
            48,165Total
                current assets
            
            
            855,573
            
            
            954,221
            
            
            762,845PROPERTY
                AND EQUIPMENT, NET
            
            
            637,111
            
            
            600,065
            
            
            473,403OTHER
                ASSETS:Land
                held for sale or development
            
            
            21,078
            
            
            20,947
            
            
            13,496Retained
                interests in securitized loans (Note 3)
            
            
            35,334
            
            
            39,033
            
            
            32,571Marketable
                securities
            
            
            117,008
            
            
            117,360
            
            
            156,981Other
                assets
            
            
            18,678
            
            
            19,604
            
            
            19,537Total
                other assets
            
            
            192,098
            
            
            196,944
            
            
            222,585Total
                assets
            
            $
            1,684,782
            
            $
            1,751,230
            
            $
            1,458,833**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**CURRENT
                LIABILITIES:Accounts
                payable
            
            $
            221,166
            
            $
            239,285
            
            $
            122,517Unpresented
                checks net of bank balance
            
            
            18,502
            
            
            --
            
            
            11,074Accrued
                expenses and other liabilities
            
            
            50,887
            
            
            72,124
            
            
            42,617Gift
                certificates and credit card reward points
            
            
            132,992
            
            
            144,210
            
            
            110,214Accrued
                employee compensation and benefits
            
            
            33,438
            
            
            61,275
            
            
            27,323Time
                deposits
            
            
            29,748
            
            
            33,401
            
            
            52,121Short-term
                borrowing
            
            
            --
            
            
            6,491
            
            
            --Current
                maturities of long-term debt
            
            
            26,689
            
            
            26,803
            
            
            28,232Income
                taxes payable
            
            
            --
            
            
            17,267
            
            
            14,462Deferred
                income taxes
            
            
            15,508
            
            
            17,978
            
            
            6,071Total
                current liabilities
            
            
            528,930
            
            
            618,834
            
            
            414,631LONG-TERM
                LIABILITIES:Long-term
                debt, less current maturities
            
            
            287,556
            
            
            284,579
            
            
            305,021Long-term
                time deposits
            
            
            71,094
            
            
            68,795
            
            
            52,110Deferred
                compensation
            
            
            5,148
            
            
            5,174
            
            
            4,934Deferred
                grant income and tenant allowances
            
            
            10,922
            
            
            9,550
            
            
            12,050Deferred
                income taxes
            
            
            29,316
            
            
            30,440
            
            
            19,289Other
                long-term liabilities
            
            
            8,969
            
            
            --
            
            
            --Total
                long-term liabilities
            
            
            413,005
            
            
            398,538
            
            
            393,404COMMITMENTS
                AND CONTINGENCIES (Note 8)STOCKHOLDERS’
                EQUITY: (Note 6)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; 63,851,652, 59,556,431 and
                57,051,681 shares
              issued
                and outstanding
            
            
            639
            
            
            596
            
            
            571Class
                B Non-voting, 245,000,000 shares authorized: 1,820,437, 5,807,305
                and
                8,073,205 shares
              issued
                and outstanding
            
            
            18
            
            
            58
            
            
            80Additional
                paid-in capital
            
            
            251,571
            
            
            247,741
            
            
            242,188Retained
                earnings
            
            
            490,535
            
            
            485,148
            
            
            408,446Accumulated
                other comprehensive income (loss), net
            
            
            84
            
            
            315
            
            
            (487
            )Total
                stockholders’ equity
            
            
            742,847
            
            
            733,858
            
            
            650,798Total
                liabilities and stockholders’ equity
            
            $
            1,684,782
            
            $
            1,751,230
            
            $
            1,458,833


See
        notes
        to unaudited condensed consolidated financial statements.





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****March
                31, 2007**
            
            **April
                1, 2006**REVENUE:Merchandise
                sales
            
            $
            422,639
            
            $
            374,214Financial
                services revenue
            
            
            35,734
            
            
            28,534Other
                revenue
            
            
            3,718
            
            
            2,057Total
                revenue
            
            
            462,091
            
            
            404,805COST
                OF REVENUE:Cost
                of merchandise sales
            
            
            278,046
            
            
            241,883Cost
                of other revenue
            
            
            (14
            )
            
            406Total
                cost of revenue (exclusive of depreciation and
                amortization)
            
            
            278,032
            
            
            242,289SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES
            
            
            171,668
            
            
            148,313OPERATING
                INCOME
            
            
            12,391
            
            
            14,203OTHER
                INCOME (EXPENSE):Interest
                income
            
            
            1,236
            
            
            401Interest
                expense
            
            
            (4,634
            )
            
            (3,344
            )Other
                income, net
            
            
            2,196
            
            
            2,977Total
                other income (expense)
            
            
            (1,202
            )
            
            34INCOME
                BEFORE PROVISION FOR INCOME TAXES
            
            
            11,189
            
            
            14,237PROVISION
                FOR INCOME TAXES
            
            
            4,047
            
            
            5,154NET
                INCOME
            
            $
            7,142
            
            $
            9,083EARNINGS
                PER COMMON SHARE (NOTE 5):Basic
            
            $
            0.11
            
            $
            0.14Diluted
            
            $
            0.11
            
            $
            0.14WEIGHTED
                AVERAGE SHARES OUTSTANDING (NOTE 5):Basic
            
            
            65,495,612
            
            
            65,069,840Diluted
            
            
            67,103,984
            
            
            66,359,544





See
      notes
      to unaudited condensed consolidated financial statements.


4
 TABLE
          OF CONTENTS





**CABELA’S
                INCORPORATED AND SUBSIDIARIES**
              **CONDENSED
                CONSOLIDATED STATEMENTS OF CASH FLOWS**
              **(In
                Thousands)**
              **(Unaudited)****Three
                Months Ended**CASH
                FLOWS FROM OPERATING ACTIVITIES:
            
            **March
                31, 2007**
            
            **April
                1, 2006**Net
                income
            
            $
            7,142
            
            $
            9,083Adjustments
                to reconcile net income to net cash flows from operating
                activities:Depreciation
            
            
            13,031
            
            
            9,899Amortization
            
            
            222
            
            
            220Stock
                based compensation
            
            
            856
            
            
            803Deferred
                income taxes
            
            
            (3,455
            )
            
            1,437Other,
                net
            
            
            947
            
            
            432Change
                in operating assets and liabilities:Accounts
                receivable
            
            
            7,493
            
            
            638Origination
                of credit card loans held for sale, net of collections
            
            
            20,479
            
            
            (35,485
            )Retained
                interests in securitized loans
            
            
            3,699
            
            
            1,894Inventories
            
            
            (20,923
            )
            
            (21,748
            )Prepaid
                expenses and deferred catalog costs
            
            
            770
            
            
            4,009Other
                current assets
            
            
            (30,218
            )
            
            (5,422
            )Land
                held for sale or development
            
            
            (131
            )
            
            (80
            )Accounts
                payable
            
            
            (30,428
            )
            
            (50,940
            )Accrued
                expenses and other liabilities
            
            
            (21,289
            )
            
            (13,325
            )Gift
                certificates and credit card reward points
            
            
            (11,218
            )
            
            (10,906
            )Accrued
                employee compensation and benefits
            
            
            (27,991
            )
            
            (32,924
            )Income
                taxes payable/receivable
            
            
            (18,854
            )
            
            (17,022
            )Deferred
                compensation
            
            
            (26
            )
            
            (2,235
            )Deferred
                grant income and tenant allowances
            
            
            1,424
            
            
            (956
            )Other
                long-term liabilities
            
            
            7,214
            
            
            --Net
                cash used in operating activities
            
            
            (101,256
            )
            
            (162,628
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Capital
                expenditures
            
            
            (37,640
            )
            
            (14,541
            )Purchases
                of marketable securities
            
            
            (415
            )
            
            (12,288
            )Maturities
                of marketable securities
            
            
            369
            
            
            315Purchases
                of short-term investments
            
            
            --
            
            
            (65,000
            )Proceeds
                from sales or maturities of short-term investments
            
            
            --
            
            
            65,000Change
                in credit card loans receivable, net
            
            
            1,580
            
            
            (820
            )Other,
                net
            
            
            9
            
            
            6Net
                cash used in investing activities
            
            
            (36,097
            )
            
            (27,328
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Change
                in unpresented checks net of bank balance
            
            
            18,502
            
            
            (10,578
            )Change
                in time deposits, net
            
            
            (
                1,354
            )
            
            (5,257
            )Borrowings
                on lines of credit, inventory financing and short-term
                borrowing
            
            
            77,901
            
            
            126,724Repayments
                on lines of credit, inventory financing and short-term
                borrowing
            
            
            (82,039
            )
            
            (125,663
            )Proceeds
                from issuance of long-term debt
            
            
            800
            
            
            215,000Payments
                on long-term debt
            
            
            (450
            )
            
            (1,573
            )Proceeds
                from exercise of employee stock options and stock purchase plan
            
            
            2,329
            
            
            1,281Excess
                tax benefits from exercise of stock options
            
            
            746
            
            
            246Payment
                of debt issuance costs
            
            
            --
            
            
            (447
            )Net
                cash provided by financing activities
            
            
            16,435
            
            
            199,733NET
                (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            (120,918
            )
            
            9,777CASH
                AND CASH EQUIVALENTS, beginning of fiscal year
            
            
            172,903
            
            
            86,923CASH
                AND CASH EQUIVALENTS, end of period
            
            $
            51,985
            
            $
            96,700


See
      notes
      to unaudited condensed consolidated financial statements.


5
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          OF CONTENTS





**CABELA’S
      INCORPORATED AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


(Dollars
      inThousandsExcept
      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 condensed 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 period 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.








**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 quarters ended March 31, 2007 and April 1, 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.





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 and
      therefore 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.





6
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          OF CONTENTS


***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 had been 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, in 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 statement of income. During the three months ended March
      31, 2007, the Company recognized $194 in interest expense. No penalties were
      accrued.





The
      liability for unrecognized tax benefits of $7,579 at March 31, 2007 is
      classified as other long-term liabilities in the condensed consolidated balance
      sheet. In addition, a liability of $1,390 for estimated interest on unrecognized
      tax benefits at March 31, 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 March 31, 2007, there were no uncertain
      tax
      positions for which reversal is reasonably possible during the next 12 months.
      The Company files income tax returns in the United States and various states.
      The tax years 2002 through 2006 remain open to examination by major taxing
      jurisdictions to which the Company is subject.








**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.





7
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          OF CONTENTS


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





**March
                31,**
              **2007**
            
            **December
                30,**
              **2006**
            
            **April
                1,**
              **2006**Composition
                of credit card loans held for sale and credit card loans
                receivable:Loans
                serviced
            
            $
            1,530,641
            
            $
            1,674,064
            
            $
            1,261,998Loans
                securitized and sold to outside investors
            
            
            (1,396,000
            )
            
            (1,514,000
            )
            
            (1,133,000
            )Securitized
                loans with securities owned by WFB which are classified as
              retained
                interests
            
            
            (2,208
            )
            
            (4,922
            )
            
            (1,013
            )132,433
            
            
            155,142
            
            
            127,985Less
                adjustments to market value and allowance for loan losses
            
            
            (2,377
            )
            
            (2,459
            )
            
            (1,977
            )Total
                (including transferor’s interest of $112,394, $122,824 and
                $106,468)
            
            $
            130,056
            
            $
            152,683
            
            $
            126,008Delinquent
                loans in the managed credit card loan portfolio
              at
                the respective periods ended:30-89
                days
            
            $
            9,195
            
            $
            9,589
            
            $
            7,01390
                days or more and still accruing
            
            $
            3,475
            
            $
            3,095
            
            $
            2,498Total
                net charge-offs on the managed credit card loans
              portfolio
                for the respective three, 12 and three months ended
            
            $
            7,333
            
            $
            25,199
            
            $
            5,624Annual
                average credit card loans:Managed
                credit card loans
            
            $
            1,560,968
            
            $
            1,357,671
            
            $
            1,253,948Securitized
                credit card loans including seller's interest
            
            $
            1,521,925
            
            $
            1,325,149
            
            $
            1,221,844Total
                net charge-offs as a percentage of annual average
              managed
                credit card loans
            
            
            1.88
            %
            
            1.86
            %
            
            1.79
            %





***Retained
      Interests:***





Retained
      interests in securitized loans consisted of the following at the periods ended:





**March
                31,**
              **2007**
            
            **December
                30,**
              **2006**
            
            **April
                1,**
              **2006**Cash
                reserve account
            
            $
            9,886
            
            $
            9,638
            
            $
            16,720Interest-only
                strips
            
            
            23,240
            
            
            24,473
            
            
            14,838Class
                B securities
            
            
            2,208
            
            
            4,922
            
            
            1,013$
            35,334
            
            $
            39,033
            
            $
            32,571








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**4.** **DEBT**





The
      Company has a credit agreement that provides for a $325,000 unsecured revolving
      credit facility that expires on June 30, 2010. The credit facility may be
      increased to $450,000 upon request of the Company and the consent of the banks
      party to the credit agreement. The credit agreement permits the issuance of
      up
      to $150,000 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 March 31, 2007, the principal amount outstanding on the
      line
      of credit totaled $2,311. The weighted average interest rate for borrowings
      on
      the line of credit was 6.32% during the three months ended March 31, 2007.
      Letters of credit and standby letters of credit totaling $68,793 were
      outstanding at March 31, 2007.





The
      Company had $215,000 in unsecured notes outstanding at March 31, 2007, with
      principal payable in full February 2016 and interest payable semiannually at
      a
      rate of 5.99%. At March 31, 2007, the Company had $75,000 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 $25,000
      and
      are due September 2009. At March 31, 2007, the Company was in compliance with
      all financial covenants under its credit agreement and unsecured notes.





The
      Company is party to inventory financing agreements that allow certain vendors
      providing boat and all terrain vehicle merchandise 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 $20,000. The Company records this merchandise
      in inventory with an offsetting liability in accounts payable in the
      consolidated balance sheet. 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 $9,871 at March 31, 2007.





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. There were no amounts outstanding as
      of
      March 31, 2007 under these agreements.








**5.** **EARNINGS
          PER SHARE**





Basic
      earnings per share (“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.
      Options exercised prior to vesting have not been considered in the basic EPS
      calculation, but are considered in the computation of diluted EPS. Options
      outstanding considered anti-dilutive for the three months ended March 31, 2007
      and April 1, 2006 totaled 4,000 and 1,358,616, respectively.





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





**Three
                Months Ended****March
                31,**
              **2007**
            
            **April
                1,**
              **2006**Weighted
                average number of shares:Common
                shares - basic
            
            
            65,495,612
            
            
            65,069,840Effect
                of incremental dilutive securities:Stock
                options and employee stock purchase plan shares
            
            
            1,608,372
            
            
            1,289,704Common
                shares - diluted
            
            
            67,103,984
            
            
            66,359,544





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





***Shelf
      Registration*** -
      On
      September 2, 2005, the Company filed with the SEC a Form S-3 Registration
      Statement (Registration No. 333-128100) to register 6,252,768 shares of its
      common stock (the “Form S-3 Registration Statement”). On March 8, 2007, the
      Company entered into an underwriting agreement providing for the sale by the
      selling stockholders named in the underwriting agreement (the “Selling
      Stockholders”) of 4,736,868 shares of the Company’s common stock. On March 9,
      2007, the Company filed with the SEC a prospectus supplement to the effective
      Form S-3 Registration Statement relating to the underwritten public offering
      of
      the 4,736,868 shares of the Company’s common stock by the Selling Stockholders.
      The sale of the shares of the Company's common stock by the Selling Stockholders
      closed on March 14, 2007, and the public offering price was $24.05 per share.
      The Company did not receive any proceeds from the sale of its common stock
      by
      the Selling Stockholders.





***Retained
      Earnings*** -
      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 March 31, 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.








**7.** **COMPREHENSIVE
          INCOME**





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





**Three
                Months Ended****March
                31,**
              **2007**
            
            **April
                1,**
              **2006**Net
                income
            
            $
            7,142
            
            $
            9,083Changes
                in net unrealized holding losses on marketable
              securities,
                net of tax benefit of $(149) and $(270)
            
            
            (248
            )
            
            (476
            )Less
                adjustment for net losses on marketable
              securities
                included in net income, net of tax of $-- and $4
            
            
            --
            
            
            6(248
            )
            
            (470
            )Changes
                in net unrealized holding gains on derivatives designated as
              cash
                flow hedges, net of tax of $14 and $7
            
            
            24
            
            
            12Less
                adjustment for reclassification of derivatives includedin
                net income, net of tax of $(4) and $(1)
            
            
            (6
            )
            
            (3
            )18
            
            
            9Comprehensive
                income
            
            $
            6,912
            
            $
            8,622








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**8.** **COMMITMENTS
          AND CONTINGENCIES**





The
      Company leases various buildings, computer equipment, signs and storage space
      under operating leases, which expire on various dates through 2026. Rent expense
      on these leases as well as other month to month rentals was $2,754 and $1,275
      for the three months ended March 31, 2007 and April 1, 2006, respectively.





The
      following is a schedule of future minimum rental payments under operating leases
      as of March 31, 2007:





For
                the nine months ended December 29, 2007
            
            $
            4,302For
                fiscal year:2008
            
            
            2,6242009
            
            
            2,0092010
            
            
            1,9762011
            
            
            2,2032012
            
            
            2,017Thereafter
            
            
            27,320$
            42,451





Certain
      leases include tenant allowances that will be amortized over the life of the
      lease. The Company expects to receive tenant allowances approximating $15,000
      and $25,700 in 2007 and 2008, respectively. During the three months ended March
      31, 2007, the Company received $2,000 in tenant allowances.





The
      Company has entered into real estate purchase, construction and/or economic
      development agreements for various future destination retail store site
      locations. At March 31, 2007, the Company had cash commitments totaling
      approximately $285,000 for fiscal 2007 and $97,000 for fiscal 2008 for estimated
      capital expenditures and the purchase of future economic development bonds
      in
      connection with the construction and development of new destination retail
      stores. The Company is also committed to fund $2,333 of economic development
      bonds related to its retail stores that opened in fiscal 2005.  When these
      bonds are funded, the Company will be reimbursed for the qualifying construction
      costs it has incurred.





Under
      various grant programs, state or local governments provide funding for certain
      costs associated with developing and opening a new destination retail store.
      The
      Company generally receives grant funding in exchange for commitments, such
      as
      assurance of agreed employment and wage levels at the destination retail store
      or that the destination retail store will remain open, made by the Company
      to
      the state or local government providing the funding. As of March 31, 2007,
      the
      total amount of grant funding subject to a specific contractual remedy was
      $13,903.





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 consist of commitments to extend credit, totaling
      $10,070,823 and $9,528,456, in addition to any other balances a cardholder
      might
      have, at March 31, 2007 and December 30, 2006, respectively. These instruments
      involve, to varying degrees, elements of credit risk in excess of the amount
      recognized in the consolidated balance sheet. The principal amounts of these
      instruments reflect the maximum exposure WFB has in the instruments. WFB has
      not
      experienced and does not anticipate that all of the customers will exercise
      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 counsel’s 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.


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***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 $2,749, $3,934 and $3,333 at March 31, 2007, December
      30,
      2006 and April 1, 2006, respectively.





The
      Company is also self-insured for workers’ compensation claims up to $500 per
      individual. The Company liability for workers’ compensation claims submitted and
      for claims incurred but not yet reported totaled $3,502, $3,843 and $2,829
      at
      March 31, 2007, December 30, 2006 and April 1, 2006, respectively.






**9.** **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 destination 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
      destination 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.





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.





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Results
      by business segment are presented in the following table for the three months
      ended March 31, 2007 and April 1, 2006:





**March
                31, 2007**
            
            **Direct**
            
            **Retail**
            
            **Financial**
              **Services**
            
            **Corporate**
              **Overhead**
              **and
                Other**
            
            **Total**Revenue
                from external
            
            $
            237,542
            
            $
            184,247
            
            $
            35,884
            
            $
            4,418
            
            $
            462,091Revenue
                (loss) from internal
            
            
            343
            
            
            507
            
            
            (150
            )
            
            (700
            )
            
            --Total
                revenue
            
            
            237,885
            
            
            184,754
            
            
            35,734
            
            
            3,718
            
            
            462,091Operating
                income (loss)
            
            
            32,493
            
            
            17,355
            
            
            8,559
            
            
            (46,016
            )
            
            12,391As
                a % of revenue
            
            
            13.7
            %
            
            9.4
            %
            
            24.0
            %
            
            N/A
            
            
            2.7
            %Depreciation
                and amortization
            
            
            1,008
            
            
            6,133
            
            
            264
            
            
            5,848
            
            
            13,253Assets
            
            
            498,590
            
            
            659,439
            
            
            319,230
            
            
            207,523
            
            
            1,684,782





**April
                1, 2006**
            
            **Direct**
            
            **Retail**
            
            **Financial**
              **Services**
            
            **Corporate**
              **Overhead**
              **and
                Other**
            
            **Total**Revenue
                from external
            
            $
            228,445
            
            $
            144,925
            
            $
            28,684
            
            $
            2,751
            
            $
            404,805Revenue
                (loss) from internal
            
            
            426
            
            
            418
            
            
            (150
            )
            
            (694
            )
            
            --Total
                revenue
            
            
            228,871
            
            
            145,343
            
            
            28,534
            
            
            2,057
            
            
            404,805Operating
                income (loss)
            
            
            33,004
            
            
            12,736
            
            
            7,035
            
            
            (38,572
            )
            
            14,203As
                a % of revenue
            
            
            14.4
            %
            
            8.8
            %
            
            24.7
            %
            
            N/A
            
            
            3.5
            %Depreciation
                and amortization
            
            
            1,131
            
            
            4,212
            
            
            220
            
            
            4,556
            
            
            10,119Assets
            
            
            379,283
            
            
            477,428
            
            
            244,386
            
            
            357,736
            
            
            1,458,833





The
      components and amounts of total revenue for the Financial Services business
      segment were as follows for the periods presented.





**Three
                Months Ended****March
                31,******
              **2007**
            
            **April
                1,******
              **2006**Interest
                and fee income, net of provision for loan losses
            
            $
            4,760
            
            $
            6,485Interest
                expense
            
            
            (1,240
            )
            
            (1,127
            )Net
                interest income, net of provision for loan losses
            
            
            3,520
            
            
            5,358Non-interest
                income:Securitization
                income
            
            
            43,610
            
            
            33,719Other
                non-interest income
            
            
            11,172
            
            
            8,711Total
                non-interest income
            
            
            54,782
            
            
            42,430Less:
                Customer rewards costs
            
            
            (22,568
            )
            
            (19,254
            )Financial
                Services total revenue
            
            $
            35,734
            
            $
            28,534


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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.





**10.** **SUPPLEMENTAL
          CASH FLOW INFORMATION**





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





**Three
                Months Ended****March
                31,**
              **2007**
            
            **April
                1,**
              **2006**Non-cash
                financing and investing activities:Unpaid
                purchases of property and equipment included in
              accounts
                payable (1)
            $
            32,118
            
            $
            18,589Capital
                lease obligations
            
            201
            
            
            --Recording
                liabilities for unrecognized tax benefits and related
              interest
                expense as a reduction of beginning retained earnings
              on
                initial adoption of FIN 48
            
            1,755
            
            
            --Other
                cash flow information:Interest
                paid, net of capitalized interest of $60 and $8
            
            9,915
            
            
            4,409Income
                taxes, net
            
            22,100
            
            
            20,453





(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.






**11.** **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, nonvested stock, nonvested
      stock units and other stock-based awards to employees, directors and
      consultants. A maximum of 2,752,500 shares, subject to adjustment in the event
      of a stock split, consolidation or stock dividend, of the Company’s common stock
      are available for awards under the 2004 Plan. As of March 31, 2007, there were
      2,622,819 shares subject to options under the 2004 Plan and 39,434 shares
      authorized and available for grant. The Company’s Board of Directors has
      approved amendments to the 2004 Plan, subject to shareholder approval. The
      proposed amendments to the 2004 Plan would increase the number of shares
      authorized for award under the 2004 Plan by 3,500,000 shares. This proposal
      will
      be voted on by the shareholders at the May 15, 2007 Annual Meeting of
      Shareholders.





In
      March
      2004, the Company adopted 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. As of March 31, 2007, 277,946 shares
      had
      been issued under the ESPP and 1,557,054 shares were authorized and available
      for issuance. Of the total shares issued in the ESPP, 46,889 were issued under
      a
      market purchase rather than a new issuance. The Company intends to utilize
      a
      market purchase method when 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 March 31,
      2007, there were 1,956,237 shares subject to options under the 1997 Plan and
      no
      shares available for grant.





As
      of
      March 31, 2007, the Company’s total unrecognized deferred share-based
      compensation balance for unvested shares issued after becoming a public company,
      net of expected forfeitures, was approximately $5,193 net of tax, which is
      expected to be amortized over a weighted average period of 4.25
      years.





The
      Company’s consolidated net income for the first quarter of fiscal 2007 includes
      share-based compensation expense of $856 ($535 after-tax, or $0.01 per diluted
      share) compared to $803 ($512 after-tax, or $0.01 per diluted share) in the
      first quarter of fiscal 2006. This share-based compensation expense is recorded
      as a component of selling, general and administrative expenses in the
      consolidated statement of income.





During
      the first quarter of fiscal 2007 there were 290,003 options exercised. The
      aggregate intrinsic value of awards exercised was $4,815 and $1,243 during
      the
      first quarters of fiscal 2007 and 2006, respectively. Based on the Company’s
      closing stock price of $24.81 as of March 31, 2007, a total of 2,445,734 awards
      were in-the-money and exercisable at March 31, 2007.








**12.** **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 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. Under certain circumstances, early adoption is permitted. No entity
      is
      permitted to apply this statement retrospectively to fiscal years preceding
      the
      effective date unless the entity chooses early adoption. 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.








**13.** **SUBSEQUENT
          EVENTS**





Economic
      development bonds totaling $42,870 at March 31, 2007 relating to the Wheeling,
      West Virginia retail store and distribution center were retired on April 23,
      2007. Principal and interest proceeds from the settlement totaled $45,722.





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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; expansion into new markets; market saturation due to new
      destination retail store openings; the acceleration of new destination 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 destination
      retail stores; road construction around our existing destination 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”)), 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 March 31, 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 quarters ended March 31, 2007 and April 1,
      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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**Critical
      Accounting Policies - 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 would have been equivalent to the values at the fiscal years
      ended 2006 and 2005, 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 aging reports and, in certain cases, by specific identification
      of
      slow moving or obsolete inventory. The aged inventory is grouped and analyzed
      in
      various categories, with particular attention given to fashion-sensitive
      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 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 destination 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 destination 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 aggregated non-merchandising outfitter
                services, our real estate land sales and corporate and other
                expenses.





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 our “other” segment or “corporate overhead” we
      mean operations pertaining to our Corporate Overhead and Other segment.





Net
      income for the three months ended March 31, 2007 was $7.1 million, or $0.11
      per
      diluted share, compared to net income of $9.1 million, or $0.14 per diluted
      share, for the three months ended April 1, 2006. We expected our first fiscal
      quarter 2007 earnings per share to be a few cents below our first fiscal quarter
      2006 results primarily due to additional fixed costs, such as increased
      depreciation, recording higher incentive compensation due to timing differences,
      incremental pre-opening costs related to our Hazelwood, Missouri store which
      opened in April 2007 and increased interest expense.





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We
      continue to focus our efforts on expanding our merchandising business,
      increasing exposure to our loyalty programs, increasing comparable store sales,
      improving our operating margin and enhancing our systems. Total revenue
      increased $57.3 million, or 14.2%, to $462.1 million for the three months ended
      March 31, 2007 compared to $404.8 million in the three months ended April 1,
      2006 due to revenue increases from our three main business segments. Retail
      revenue increased $39.4 million, or 27.1%, to $184.8 million; Direct revenue
      increased $9.0 million, or 3.9%, to $237.9 million; and Financial Services
      revenue increased $7.2 million, or 25.2%, to $35.7 million. The increase in
      Retail revenue is primarily due to the four new destination retail stores opened
      in the last half of fiscal 2006. Initiatives to expand our Direct business
      resulted in increased revenue for the current quarter compared to the 2006
      first
      quarter even with the opening of the four new stores in 2006. Our comparable
      store sales declined $1.3 million, or 0.9%, compared to the first quarter of
      2006.





Our
      operating margin was 2.7% for the quarter ended March 31, 2007 compared to
      3.5%
      for the three months ended April 1, 2006. This operating margin decrease of
      80
      basis points, or $1.8 million decrease in operating income comparing the
      respective quarters, was primarily due to a 70 basis point decrease in the
      operating margin of the Direct operating segment compared to the 2006 first
      quarter, additional expenses incurred in corporate overhead compared to the
      2006
      first quarter and pre-opening costs increasing by $1.6 million in the Retail
      segment associated with new store openings compared to the first quarter of
      2006. Our Direct operating income for the first quarter of 2007 decreased $0.5
      million compared to the first quarter of 2006 primarily due to increased catalog
      production and circulation costs as well as incidental equipment and software
      expenses. Corporate overhead was higher for the three months ended March 31,
      2007 compared to the 2006 first quarter primarily due to (i) increased salaries
      and benefits because of more employees in our distributions centers compared
      to
      2006, (ii) a higher bonus accrual comparing the respective periods, and (iii)
      increased depreciation expense associated with new stores and system upgrades
      that were not in service in the 2006 quarter.





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 a higher accrual and expense
      totaling approximately $2.4 million on a consolidated basis for the 2007
      first quarter compared to the 2006 first quarter. We also expect the accrual
      and
      related expense to be higher in the second quarter of 2007 compared to the
      2006
      second quarter, but for the third and fourth quarters of 2007 to be lower
      compared to the respective 2006 quarters, resulting in bonus expense for fiscal
      2007 approximating the fiscal 2006 amount.





**Retail
      Store Expansion**





At
      the
      end of fiscal 2006, we operated 18 destination retail stores. For fiscal 2007,
      we plan to open eight new destination retail stores, which will increase our
      total retail square footage by approximately 1.3 million square feet, or 48.6%,
      bringing our total retail store square footage to approximately 4.0 million
      square feet at the end of 2007. We opened a destination retail store in
      Hazelwood, Missouri in April 2007. The remaining seven destination retail stores
      announced for openings in 2007 are in Gonzales, Louisiana; Hoffman Estates,
      Illinois; East Hartford, Connecticut; Hammond, Indiana; Reno, Nevada; Post
      Falls, Idaho; and Lacey, Washington.





We
      have
      also announced plans for retail stores to be opened in Rapid City, South Dakota;
      Wheat Ridge, Colorado; East Rutherford, New Jersey; Adairsville, Georgia; and
      Montreal, Canada. We have identified many locations that may be suitable for
      new
      destination retail stores as part of our retail expansion strategy. We have
      begun locating our stores closer to larger populated areas and we believe that
      smaller-format destination 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 a unique destination 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 destination retail stores. We believe
      that there are many additional markets throughout North America that could
      potentially support one of our destination retail stores. We also believe that
      our customer database gives us a competitive advantage in tailoring product
      offerings in each of our destination retail stores to reflect our customers'
      regional preferences.





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Beginning
      in January 2008, we expect that most of our destination retail stores will
      receive customer service enhancements designed to increase customer convenience,
      purchasing, and delivery options. We also expect that future destination retail
      stores will receive these enhancements. These enhancements are expected to
      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 that receive
      the
      enhancements are located, we will, effective January 2008, begin collecting
      and
      remitting sales taxes on direct business sales to customers located in these
      states.





Significant
      amounts of cash will be needed in order to open new destination retail stores
      and implement our retail expansion strategy. Depending upon the location and
      a
      variety of other factors, including store size and the amount of public
      improvements necessary, and based upon our prior experience, opening a single
      destination retail store generally requires expenditures in the range of $30
      million to $50 million. This amount includes the cost of real estate, site
      work,
      public improvements such as utilities and roads, buildings, equipment, fixtures
      (including taxidermy) and inventory.





**Results
      of Operations**




Our
      first
      fiscal quarter ends on the Saturday closest to March 31. The three months ended
      March 31, 2007 and April 1, 2006 each consisted of 13 weeks. Our operating
      results expressed as a percentage of revenue were as follows for the periods
      presented.





**Three
                Months Ended****March
                31,**
              **2007**
            
            **April
                1,**
              **2006**Revenue
            
            
            100.00
            %
            
            100.00
            %Cost
                of revenue
            
            
            60.17
            %
            
            59.85
            %Gross
                profit (exclusive of depreciation and amortization)
            
            
            39.83
            %
            
            40.15
            %Selling,
                general and administrative expenses
            
            
            37.15
            %
            
            36.64
            %Operating
                income
            
            
            2.68
            %
            
            3.51
            %Other
                income (expense):Interest
                income
            
            
            0.27
            %
            
            0.10
            %Interest
                expense
            
            
            (1.00)
            %
            
            (0.83)
            %Other
                income (net)
            
            
            0.47
            %
            
            0.74
            %Total
                other income (expense)
            
            
            (0.26)
            %
            
            0.01
            %Income
                before provision for income taxes
            
            
            2.42
            %
            
            3.52
            %Provision
                for income taxes
            
            
            0.87
            %
            
            1.28
            %Net
                income
            
            
            1.55
            %
            
            2.24
            %





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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****March
                31,**
              **2007**
            
            **April
                1,**
              **2006****(Dollars
                in Thousands)**Direct
                revenue
            $
            237,885
            
            $
            228,871Retail
                revenue
            
            184,754
            
            
            145,343Financial
                Services revenue
            
            35,734
            
            
            28,534Other
                revenue
            
            3,718
            
            
            2,057Total
                revenue
            $
            462,091
            
            $
            404,805Direct
                operating income
            $
            32,493
            
            $
            33,004Retail
                operating income
            
            17,355
            
            
            12,736Financial
                Services operating income
            
            8,559
            
            
            7,035Other
                operating income (loss)
            
            (46,016
            )
            
            (38,572
            )Total
                operating income
            $
            12,391
            
            $
            14,203*As
                a Percentage of Total Revenue:*Direct
                revenue
            
            51.5
            %
            
            56.5
            %Retail
                revenue
            
            40.0
            %
            
            35.9
            %Financial
                Services revenue
            
            7.7
            %
            
            7.1
            %Other
                revenue
            
            0.8
            %
            
            0.5
            %Total
                revenue
            
            100.0
            %
            
            100.0
            %*As
                a Percentage of Segment Revenue:*Direct
                operating income
            
            13.7
            %
            
            14.4
            %Retail
                operating income
            
            9.4
            %
            
            8.8
            %Financial
                Services operating income
            
            24.0
            %
            
            24.7
            %Total
                operating income (1)
            
            2.7
            %
            
            3.5
            %





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






**Three
      Months Ended March 31, 2007 Compared to Three Months Ended April 1,
      2006**





**Revenue**





Total
      revenue increased $57.3 million, or 14.2%, to $462.1 million for the three
      months ended March 31, 2007 compared to $404.8 million for the three months
      ended April 1, 2006 due to revenue growth in our Direct, Retail and Financial
      Services 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
      $9.0 million, or 3.9%, to $237.9 million for the three months ended March 31,
      2007 from $228.9 million for the 2006 first quarter. Internet visits increased
      26.9% in the three months ended March 31, 2007 compared to the three months
      ended April 1, 2006 as we continue to utilize 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 March 31, 2007 compared to the 2006 first
      quarter was clothing and footwear.





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*Retail
      Revenue* .
      Retail
      revenue includes all sales at our destination retail stores. 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. Retail revenue increased by $39.5 million, or 27.1%,
      to
      $184.8 million for the three months ended March 31, 2007 compared to $145.3
      million for the three months ended April 1, 2006 due to new store sales of
      $40.8
      million. We opened four new destination retail stores in the last half of fiscal
      2006. These new store sales were partially offset by a slight decrease in
      comparable store sales of $1.3 million, or 0.9%, compared to the 2006 first
      quarter. The general product category that contributed the largest dollar volume
      increase to our Retail revenue growth for the three months ended March 31,
      2007
      compared to the 2006 first quarter 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 $7.2
      million, or 25.2%, to $35.7 million for the three months ended March 31, 2007
      from $28.5 million for the three months ended April 1, 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 months ended March
      31,
      2007 and April 1, 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****March
                31,**
              **2007**
            
            **April
                1,**
              **2006****(In
                Thousands)**Interest
                and fee income, net of provision of loan losses
            $
            4,760
            
            $
            6,485Interest
                expense
            
            (1,240
            )
            
            (1,127
            )Net
                interest income, net of provision of loan losses
            
            3,520
            
            
            5,358Non-interest
                income:Securitization
                income (1)
            
            43,610
            
            
            33,719Other
                non-interest income
            
            11,172
            
            
            8,711Total
                non-interest income
            
            54,782
            
            
            42,430Less:
                Customer rewards costs
            
            (22,568
            )
            
            (19,254
            )Financial
                Services revenue
            $
            35,734
            
            $
            28,534





(1)
            For
                the three months ended March 31, 2007 and April 1, 2006, we recognized
                pre-tax gains on the sale of credit card loans of $7.5 million and
                $4.1
                million, respectively, which are reflected as a component of
                securitization income.





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 Presented on a non-GAAP Basis* .
      Interest income measured on a non-GAAP managed basis increased $10.9 million
      for
      the first quarter of 2007 compared to the 2006 first quarter. The increase
      in
      interest income was due to the increase in managed accounts and an increase
      in
      interest rates. Interchange income, net of reward costs, increased $2.4 million.
      Interchange income was driven by net purchases, which increased 19.1%, but
      was
      partially offset by an increase in customer reward costs of 17.2%. The net
      increases in interest income and interchange income were partially offset by
      an
      increase in interest expense of $4.8 million due to increases in securitized
      credit card loans, borrowings and interest rates. Compared to the three months
      ended April 1, 2006, the number of average active accounts increased by 15.5%
      to
      935,685 and the average balance per active account grew by 7.8% to approximately
      $1,668.


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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 months
      ended March 31, 2007 and April 1, 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****March
                31,**
              **2007**
            
            **April
                1,**
              **2006****(Dollars
                in Thousands)**Interest
                income
            $
            43,807
            
            $
            32,914Interchange
                income, net of customer rewards costs
            
            13,465
            
            
            11,104Other
                fee income
            
            6,038
            
            
            5,163Interest
                expense
            
            (18,860
            )
            
            (14,027
            )Provision
                for loan losses
            
            (7,333
            )
            
            (5,862
            )Other
            
            (1,383
            )
            
            (758
            )Managed
                Financial Services revenue
            $
            35,734
            
            $
            28,534**As
                a Percentage of Average Managed Credit Card Loans****Managed
                Financial Services Revenue:**Interest
                income
            
            11.2
            %
            
            10.5
            %Interchange
                income, net of customer rewards costs
            
            3.5
            %
            
            3.5
            %Other
                fee income
            
            1.5
            %
            
            1.7
            %Interest
                expense
            
            (4.8
            )%
            
            (4.5
            )%Provision
                for loan losses
            
            (1.8
            )%
            
            (1.9
            )%Other
            
            (0.4
            )%
            
            (0.2
            )%Managed
                Financial Services revenue
            
            9.2
            %
            
            9.1
            %Average
                reported credit card loans
            $
            141,436
            
            $
            122,860Average
                managed credit card loans
            $
            1,560,968
            
            $
            1,253,948








**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.





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Gross
      profit increased by $21.6 million, or 13.3%, to $184.1 million for the three
      months ended March 31, 2007 from $162.5 million for the three months ended
      April
      1, 2006. Gross profit as a percentage of revenue decreased 30 basis points
      to
      39.8% for the three months ended March 31, 2007 from 40.1% for the three months
      ended April 1, 2006. Gross profit as a percentage of revenue decreased the
      30
      basis points due to a 120 basis point decrease in the gross profit of our
      merchandising business as a percentage of merchandising revenue offset by 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 by $12.3 million, or 9.3%,
      to $144.6 million for the three months ended March 31, 2007 from $132.3 million
      for the three months ended April 1, 2006. The gross profit of our merchandising
      business decreased by 120 basis points as a percentage of merchandise revenue
      to
      34.2% for the three months ended March 31, 2007 compared to 35.4% for the three
      months ended April 1, 2006. This decrease in our merchandising gross profit
      was
      primarily attributable to timing issues and a refinement in the estimate of
      our
      drop ship costs as well as an increase in freight costs.








**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 $23.4 million, or
      15.7% *,* to
      $171.7 million for the three months ended March 31, 2007 from $148.3 million
      for
      the three months ended April 1, 2006. SG&A expenses were 37.2% of revenue
      for the three months ended March 31, 2007 compared to 36.6% for the 2006 first
      quarter. SG&A was higher for the three months ended March 31, 2007 compared
      to the 2006 first quarter primarily due to (i) increased salaries and benefits
      because of more employees in our distribution centers compared to 2006, (ii)
      a
      higher bonus accrual comparing the respective periods due to timing differences,
      and (iii) increased depreciation expense associated with new stores and system
      upgrades that were not in service in the 2006 quarter.




The most significant factors contributing to the increase in SG&A expenses
      by segment for the three months ended March 31, 2007 compared to the 2006 first
      quarter included:





·
            *Other*SG&A expenses increasing approximately $9.5 million.
              
              This
                increase was primarily a result of increases in wages and related
                benefits
                of $3.9 million due to increases in personnel in our distribution
                centers
                as our merchandise revenue growth continues. An increase in bonus
                expense
                of $2.8 million compared to the 2006 first quarter related to the
                change
                in the performance measurement under our short-term cash incentive
                plan.
                In addition, depreciation increased by $1.3 million, and contract
                labor
                increased by $0.5 million. Depreciation increased due to system upgrades
                that were not in service in the 2006 quarter. Contract labor increased
                due
                to project costs related to system upgrades that do not meet our
                capitalization policy. Total Other SG&A costs as a percentage of
                consolidated revenue increased from 9.9% to 10.3%.·
            *Direct*SG&A
                expenses increasing approximately $1.9 million.
              
              This
                increase was primarily due to an increase in Catalog production costs
                of
                $2.1 million, or 6.4%. Catalog costs increased to $35.4 million for
                the
                three months ended March 31, 2007 from $33.3 million for the three
                months
                ended April 1, 2006. As a percentage of Direct revenue, catalog costs
                increased to 14.9% for the three months ended March 31, 2007 from
                14.5%
                for the three months ended April 1, 2006. This increase in catalog
                costs
                as a percentage of our Direct revenue was due to an increase in the
                number
                of catalogs mailed to new markets. Incidental equipment and software
                expenses increased by $1.7 million, specifically related to our website.
                These increases were partially offset by an increase in the marketing
                fee
                paid to the Direct segment from the Financial Services segment of
                $2.3
                million, or 1.0% of Direct
                revenue.


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·
            *Retail*SG&A
                expenses increasing approximately $6.3 million.
              
              Pre-opening
                costs were up $1.6 million compared to the 2006 comparative quarter.
                We
                also incurred an increase in new store operating costs of $8.4 million
                related to our new stores, which were not open in the comparable
                quarter
                of 2006. Total SG&A expenses in our comparable store base decreased by
                $2.8 million, or 2.0% as a percentage of comparable store sales,
                due to a
                decrease in labor costs. Corporate overhead costs decreased by $0.8
                million, or 0.5% of Retail revenue, compared to the first quarter
                of
                fiscal 2006 primarily due to an increase in the marketing fee paid
                to the
                Retail segment from the Financial Services segment of $2.0 million,
                or
                1.1% of Retail revenue.·
            *Financial
                Services*SG&A
                expenses increasing approximately $5.7 million.
              
              This
                increase in SG&A expenses compared to the first quarter of 2006 was
                primarily due to increased marketing fees of $4.3 million paid to
                our
                other segments. Bad debt expense increased $0.7 million primarily
                due to
                an increase in counterfeit fraud. Third-party data processing services
                related to our credit card processing increased $0.4 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 $1.8 million, or 12.8%, to $12.4 million for the three months
      ended March 31, 2007 compared to $14.2 million for the three months ended April
      1, 2006. Operating income as a percentage of revenue decreased to 2.7% for
      the
      three months ended March 31, 2007 from 3.5% for the 2006 first quarter. The
      operating margin decrease of 80 basis points, or $1.8 million, was primarily
      due
      to a 70 basis point decrease in the operating margin of the Direct operating
      segment compared to the 2006 first quarter, additional expenses incurred in
      corporate overhead compared to the 2006 first quarter and pre-opening costs
      increasing by $1.6 million in the Retail segment associated with new store
      openings compared to the first quarter of 2006. Corporate overhead was higher
      for the three months ended March 31, 2007 compared to the 2006 first quarter
      primarily due to (i) increased salaries and benefits because of more employees
      in our distribution centers over 2006, (ii) a higher bonus accrual comparing
      the
      respective periods, and (iii) increased depreciation expense associated with
      new
      stores and system upgrades that were not in service in the 2006 quarter. Our
      Direct operating income for the first quarter of 2007 decreased $0.5 million
      compared to the first quarter of 2006 primarily due to increased catalog
      production and circulation costs as well as incidental equipment and software
      expenses.


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**Interest
      Expense**





Interest
      expense increased $1.3 million to $4.6 million for the three months ended March
      31, 2007 from $3.3 million for the three months ended April 1, 2006. The
      increase in interest expense was primarily due to the $215.0 million private
      placement of notes completed in February 2006. In addition, we accrued
      approximately $0.2 million in interest expense in the 2007 first quarter
      relating to estimated tax benefits associated with uncertainties applicable
      to
      certain income tax positions.





**Provision
      for Income Taxes**





Our
      effective tax rate was 36.2% for the three months ended March 31, 2007 compared
      to 36.2% for the three months ended April 1, 2006. The 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 tax settlement from a state
      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 enter more states with our destination retail stores.








**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 sales
      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 $15.8 million and $19.1 million at March 31, 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 FICO scores, and behavior
      scores.





Our
      average managed credit card loans outstanding increased by $203.3 million,
      or
      15.0%, to $1,561.0 million as of March 31, 2007 from $1,357.7 million in fiscal
      2006 and by $307.0 million, or 24.5%, from $1,254.0 million as of April 1,
      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**
            **March
                31, 2007**
            **December
                30, 2006**
            **April
                1, 2006**Greater
                than 30 days
            0.82%
            0.75%
            0.75%Greater
                than 60 days
            0.49%
            0.44%
            0.44%Greater
                than 90 days
            0.23%
            0.18%
            0.20%








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**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. Most bankcard issuers charge off accounts at 180 days.
      We
      charge off all accounts on the 24th day of the month after an account becomes
      115 days contractually delinquent, except for cardholder bankruptcies which
      are
      charged off 30 days after notification, and delinquencies caused by cardholder
      deaths which are charged off on the 24th day of the month after an account
      is 60
      days contractually delinquent. As a result, our charge-off rates are not
      directly comparable to other participants in the bankcard industry.





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





**Three
                Months Ended****(Dollars
                in Thousands)**
            
            **March
                31, 2007**
            
            **April
                1, 2006**Gross
                charge-offs
            
            $
            9,481
            
            $
            6,732Recoveries
            
            
            (2,148
            )
            
            (1,108
            )Net
                charge-offs
            
            $
            7,333
            
            $
            5,624Net
                charge-offs as a percentage of average managed loans
            
            
            1.88
            %
            
            1.79
            %





Our
      bank
      issued co-branded Visa credit cards for fans of International Speedway Corp.
      and
      for customers of Woodworker's Supply Inc., a retailer of tools for woodworking
      enthusiasts. At December 30, 2006, these credit card loans totaled $17.3
      million. We terminated the agreement with International Speedway Corp. in
      December 2006 and converted those cardholders into Cabela’s CLUB Visa
      cardholders in January 2007. We expect to sell the Woodworker’s Supply Inc.
      portfolio in fiscal 2007. Neither of these transactions are material to our
      financial position, results of operations or liquidity.








**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 destination 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 destination 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 destination 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 requirement purposes through various financing
      activities, which include funding from securitization transactions, borrowing
      under 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.


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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 existing operations 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.





**Three
                Months Ended****(In
                Thousands)**
            
            **March
                31, 2007**
            
            **April
                1, 2006**Net
                cash used in operating activities
            
            $
            (101,256
            )
            $
            (162,628
            )Net
                cash used in investing activities
            
            $
            (36,097
            )
            $
            (27,328
            )Net
                cash provided by financing activities
            
            $
            16,435
            
            $
            199,733





Cash
      used
      in operating activities improved $61.4 million in the three months ended March
      31, 2007 compared to the three months ended April 1, 2006. This net improvement
      in cash was primarily due to a $56.0 million net increase relating to the bank’s
      credit card securitization transactions and principal collections of credit
      card
      loan receivables, net of originations, for the 2007 first quarter over the
      2006
      first quarter. This volume is attributable to the growth in the bank’s credit
      card loan operations. There was also an increase from changes in accounts
      payable totaling $20.5 million comparing the three months ended March 31, 2007
      to the 2006 first quarter. This net increase in the change for accounts payable
      comparing periods was primarily due to a net increase in the bank’s accounts
      payables totaling $30.6 million primarily related to the payable to the bank’s
      third-party processor for its credit card transactions offset by net decreases
      in inventory payables of $6.7 and in payables for catalog costs of $4.0 million.
      These improvements in cash from operating activities were partially offset
      by a
      $24.8 million net change in other current assets. The account in this category
      making up most of the change is 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 three months ended March
      31,
      2007 and April 1, 2006.





Our
      LIFO
      calculation for income tax purposes utilizes a simplified LIFO approach and
      therefore results in a book-tax difference. The aforementioned accounting change
      to the FIFO method will increase the current portion of income taxes payable
      by
      approximately $4.7 million. At March 31, 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 $8.8 million in the three months ended March
      31, 2007 compared to the three months ended April 2, 2005. This net increase
      was
      primarily due to capital expenditures relating to the construction of our new
      destination retail stores. For the three months ended March 31, 2007, capital
      expenditures totaled $37.6 million, an increase of $23.1 million over the first
      quarter of 2006. We opened one retail store in April 2007 and plan to open
      another seven stores in 2007, with one scheduled to open the latter part of
      the
      2007 third quarter and the other openings during the 2007 fourth quarter. For
      fiscal 2006, four retail stores were opened in the second half of 2006.
      Significant amounts of cash will be needed in order to open new destination
      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
      public improvements necessary, and based upon our prior experience, opening
      a
      single destination retail store generally requires expenditures in the range
      of
      $30 million to $50 million. This amount includes the cost of real estate, site
      work, public improvements such as utilities and roads, buildings, equipment,
      fixtures (including taxidermy) and inventory. At March 31, 2007, we had cash
      commitments totaling approximately $285.0 million for fiscal 2007 and $97.0
      million for fiscal 2008 for estimated capital expenditures and the purchase
      of
      future economic development bonds in connection with the construction and
      development of new destination retail stores. Purchases of marketable securities
      decreased $11.9 million comparing quarterly periods. We purchased securities
      totaling $12.3 million during the 2006 first quarter. Economic development
      bonds
      totaling $42.9 million at March 31, 2007, relating to the Wheeling, West
      Virginia retail store and distribution center were retired on April 23, 2007.
      Principal and interest proceeds from the settlement totaled $45.7 million.


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Cash
      provided by financing activities totaled $16.4 million for the three months
      ended March 31, 2007 compared to $199.7 million in the three months ended April
      1, 2006. This net decrease in cash was primarily due to the debt issuance of
      $215.0 million in February 2006 to support our destination retail store
      expansion and the net decrease in cash of $5.2 million in short-term borrowings
      and inventory financing. Partially offsetting these decreases were net increases
      in time deposits of $3.9 million and in unpresented checks net of bank balance
      of $29.1 million due to timing of when checks cleared our bank.





As
      of
      March 31, 2007, we had entered into material cash commitments totaling
      approximately $285.0 million for fiscal 2007 and $97.0 million for fiscal 2008
      primarily for estimated capital expenditures and the purchase of future economic
      development bonds in connection with the construction and development of new
      destination retail stores. These amounts do not include any contractual
      obligations associated with retail stores scheduled to open in Rapid City,
      South
      Dakota; Adairsville, Georgia; and Montreal, Canada. Certain contractual aspects
      of these locations are in various stages of negotiations and will be subject
      to
      customary conditions to closing. We expect to incur the majority of the costs
      of
      these locations in 2007 and 2008. In addition, we are also committed to fund
      $2.3 million of economic development bonds related to our fiscal 2005
      stores.  When the bonds are funded, we will be reimbursed for the
      qualifying construction costs we have incurred.





In
      addition to the cash commitments for capital expenditures and economic
      development bonds, we have entered into certain lease agreements for retail
      locations. Certain of these leases include tenant allowances that will be
      amortized over the life of the lease. We will receive tenant allowances in
      the
      amounts of $15.0 million and $25.7 million 2007 and 2008, respectively. These
      long-term leases include options to renew with total terms, including
      extensions, varying from 10 to 70 years. Some of these leases for constructed
      assets contain customary conditions of performance by other
      parties.





**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 destination retail store.
      We
      generally have received grant funding in exchange for commitments, such as
      assurance of agreed employment and wage levels at our destination retail stores
      or that the destination retail store will remain open, made by us to the state
      or local government providing the funding. The commitments 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 March 31, 2007 and December 30, 2006, the total amount
      of
      grant funding subject to a specific contractual remedy was $13.9 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
      destination 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 destination 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. In one
      location, the bonds will become subordinated to other bonds associated with
      the
      development if we fail to continue to operate the store over a prescribed
      period. After purchasing the bonds, we typically carry them on our consolidated
      balance sheet a “available for sale” marketable securities and value them based
      upon managements 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 March 31,
      2007 and December 30, 2006, we carried $115.4 million and $116.2 million,
      respectively, of economic development bonds on our consolidated balance
      sheet.





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**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.





The
      total
      amounts and maturities for our credit card securitizations as of March 31,
      2007
      were as follows:





**Series**
            **Type**
            **Initial******
              **Amount**
            **Interest
                Rate**
            **Expected
                Final****Maturity****(Dollars
                in Thousands)**Series
                2003-I
            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
            $300,000
            Floating
            July
                2007





(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 March 31, 2007, we
      had
      $100.8 million of certificates of deposit outstanding with maturities ranging
      from April 2007 to April 2016 and with a weighted average effective annual
      fixed
      rate of 4.97%. Certificate of deposit borrowings are subject to regulatory
      capital requirements.








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**Credit
      Facility and Other Indebtedness**





We
      are
      party to a credit agreement that provides for a $325.0 million unsecured
      revolving credit facility that expires on June 30, 2010. The credit facility
      may
      be increased to $450.0 million upon our request and the consent of the banks
      party to the credit agreement. The credit agreement permits the issuance of
      up
      to $150.0 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 March 31, 2007, the principal amount outstanding on
      the
      credit facility was $2.3 million and the average outstanding principal balance
      during the first quarter of 2007 was $3.0 million. The weighted average interest
      rate on the line of credit was 6.32% during the three months ended March 31,
      2007. Letters of credit and standby letters of credit totaling $68.8 million
      were outstanding at March 31, 2007. The average outstanding amount of letters
      of
      credit during the three months ended March 31, 2007 was $42.3 million. Our
      total
      remaining borrowing capacity under the credit facility as of March 31, 2007,
      after subtracting outstanding letters of credit of $55.5 million and standby
      letters of credit of $13.3 million, was $256.2 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 March 31, 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.





We
      had
      $215.0 million in unsecured notes outstanding at March 31, 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 the any fiscal quarter; and·
            a
                consolidated funded debt to total funded capitalization of no more
                than
                60%.





In
      addition, the notes contain cross default provisions to other outstanding debt.
      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, the obligations shall automatically become immediately due and payable.
      All principal and outstanding interest would immediately become due and payable.





At
      March
      31, 2007, we also had $75.0 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 March 31, 2007, we were in compliance with all financial covenants
      under our credit agreements and unsecured notes.


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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 $20.0
      million. The extended payment terms to the vendors do not exceed one year.
      The
      outstanding liability under the inventory financing agreements was $9.9 million
      at March 31, 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 March 31, 2007. During the three months ended March
      31, 2007, the average balance outstanding was approximately
      $1.0 million with a weighted average rate of 5.79%.





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 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 $10.1 billion as of March 31, 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 customers, 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.








**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.





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**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. 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 managing the maturity, repricing and
      distribution of assets and liabilities by issuing fixed-rate securitization
      certificates and notes and 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:


**March
                  31,**
                **2007**
              
              **December
                  30,**
                **2006**
              
              **April
                  1,**
                **2006***As
                  a percentage of total balances outstanding*Balances
                  carrying interest rate based upon the national
                prime
                  lending rate
              
              
              64.8
              %
              
              60.2
              %
              
              61.9
              %Balances
                  carrying an interest rate of 9.99% or lower
              
              
              3.0
              %
              
              3.4
              %
              
              2.9
              %Balances
                  not carrying interest because their previous
                month's
                  balance was paid in full
              
              
              32.2
              %
              
              36.4
              %
              
              35.2
              %


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 had been an immediate 100 basis point, or
      1.0%, increase 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,
      or
      0.5%, decrease or increase in this spread would cause a corresponding decrease
      or increase of approximately $6.1 million and $5.6 million, respectively, on
      the
      projected pre-tax income of our Financial Services segment over the next 12
      months, which could have a material effect on our operating results.





**Merchandising
      Interest Rate Risk**





One
      of
      our economic development bond agreements is 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 at March 31, 2007. These bonds were redeemed in full
      on
      April 23, 2007.





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.


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**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 March 31, 2007.




Changes
      in Internal Control Over Financial Reporting





During
      the first quarter of fiscal 2007, the implementation of the warehouse management
      system for tracking inventory in a multi-channel environment was completed
      for
      most of our destination retail stores. Process level controls related to
      maintaining our inventory at the unit level were affected by this change. It
      is
      anticipated that the warehouse management system will be fully implemented
      in
      all stores by the end of the second quarter of fiscal 2007. There were no other
      changes in our internal control over financial reporting that occurred during
      the quarter ended March 31, 2007 that materially affected, or are reasonably
      likely to materially affect, our internal control over financial reporting.








**Item
      4T.**  **Controls
      and Procedures**





Not
      applicable.




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**PART
      II - OTHER INFORMATION**





**Item
      1.****Legal
      Proceedings.**





We
      are
      party to certain lawsuits in the ordinary course of our business. The subject
      matter of these proceedings primarily include 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 that the risk factors titled “Our use tax collection
      policy for our direct business may subject us to liabilities for unpaid use
      taxes on past sales” and “Our destination retail store expansion strategy may
      result in our direct business establishing nexus with additional states which
      may cause our direct business to pay additional income and use taxes and have
      an
      adverse effect on the profitability and cash flows of our direct business” shall
      be deleted in their entirety and the following new risk factors shall be added.





**Our
      historic sales tax collection policy for our direct business may subject us
      to
      liabilities for unpaid sales taxes on past direct business
      sales.**





Many
      states have attempted to require that out-of-state direct marketers, whose
      only
      contacts with the state are solicitations and delivery to their residents of
      products purchased through the mail or the Internet, collect sales taxes on
      the
      sale of these products. In addition, a private litigant, purportedly on behalf
      of various states, has initiated litigation against several out-of-state direct
      marketers alleging that the failure to collect and remit sales tax violates
      various state false claims laws. The U.S. Supreme Court has held that states,
      absent congressional legislation, may not impose tax collection obligations
      on
      out-of-state direct marketers unless the out-of-state direct marketer has nexus
      with the state. Nexus generally is created by the physical presence of the
      direct marketer, its agents or its property within the state. Our sales tax
      collection policy for our direct business is to collect and remit sales tax
      in
      states where our direct business has established nexus. Prior to the opening
      of
      a destination retail store, we have historically sought a private letter ruling
      from the state in which the store will be located as to whether our direct
      business will have nexus with that state as a result of the store opening.
      Some
      states have enacted legislation that requires sales tax collection by direct
      marketers with no physical presence in that state. In some instances, the
      legislation assumes nexus exists because of the physical presence of an
      affiliated entity engaged in the same line of business. We may receive future
      assessments from states for unpaid sales taxes on prior direct business sales.
      In addition, a competitor has commenced an action against us alleging that
      our
      failure to collect and remit sales tax in certain states constitutes unfair
      competition. We presently intend to vigorously contest any future sales tax
      assessments and this action, but we may not prevail. If we do not prevail,
      we
      could be held liable for sales taxes on prior direct business sales which could
      be substantial.





**The
      customer service enhancements we plan to implement at most of our destination
      retail stores beginning in January 2008 will cause our direct business to
      establish nexus in the states where destination retail stores that receive
      the
      enhancements are located, which will cause our direct business to pay additional
      income and sales taxes and may have an adverse effect on the profitability
      and
      cash flows of our direct business.**





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Beginning
      in January 2008, we expect that most of our destination retail stores will
      receive customer service enhancements designed to increase customer convenience,
      purchasing, and delivery options. We also expect that future destination retail
      stores will receive these enhancements. These enhancements are expected to
      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 destination retail stores that
      receive the enhancements are located, we will, effective January 2008, begin
      collecting and remitting sales taxes on direct business sales to customers
      located in these states. The establishment of nexus and imposition of income
      and
      use taxes by states on sales of our direct business:





·
            will
                increase the tax collection and payment obligations of our direct
                business, which could create administrative burdens for
                us;·
            could
                increase the total cost of our products in our direct business to
                our
                customers relative to our competitors that do not collect sales taxes
                on
                direct sales; and·
            could
                decrease the sales of our direct business or cause us to reduce the
                underlying prices for the products sold through our direct
                business.





These
      events could have an adverse effect on the profitability and cash flows of
      our
      direct business.







**Item
      2.****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 a Vote of Security Holders.**





Not
      applicable.





**Item
      5.****Other
      Information.**





Not
      applicable.





**Item
      6.****Exhibits.**








(a)
            Exhibits.Exhibit
              Number
            Description18
            Letter
                re Change in Accounting Principle31.1
            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:
                May 4, 2007
            By:
            /s/
                Dennis HighbyDennis
                HighbyPresident
                and Chief Executive OfficerDated:
                May 4, 2007
            By:
            /s/
                Ralph W. CastnerRalph
                W. CastnerVice
                President and Chief Financial
                Officer





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**EXHIBIT
      INDEX**





Exhibit
              Number
            Description18
            Letter
                re Change in Accounting Principle31.1
            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




38