Boat market exit hurt Gander Mountain’s 2Q bottom line

ST. PAUL, Minn. – Outdoor retail chain Gander Mountain Co. (Nasdaq: GMTN) felt the impact of its withdrawal from the boat, ATV and power sports services categories during the second fiscal quarter ended Aug. 1, it reported in a recent statement.

Consolidated net loss was $7.3 million for the fiscal 2009 second quarter compared to a consolidated net loss of $4.9 million for the same quarter last year, according to the company. The increased loss resulted primarily from discounts and markdowns associated with the withdrawal from powersports categories and increased advertising expense, the company stated. Gander Mountain reported a net loss per share of $0.30 compared with a net loss per share of $0.20 for the second quarter of fiscal 2008.

Consolidated SG&A costs, as a percentage of sales, increased 110 basis points to 27.6 percent of sales in the quarter, reflecting increased advertising expense, the company stated.

Sales decreased slightly

Fiscal 2009 second quarter consolidated sales were $248.4 million, compared to consolidated sales of $252.9 million for the second quarter of fiscal 2008, a 1.8 percent decrease.

Retail segment sales for the second quarter were $210.8 million, a decrease of $2.3 million or 1.1 percent, as compared to the fiscal 2008 second quarter. Direct segment sales were $37.6 million for the quarter, compared to $39.7 million for the same quarter last year, a decrease of 5.4 percent, Gander Mountain reported.

Comparable store sales during the second quarter of fiscal 2009 declined 2.4 percent. The firearms, ammunition, hunting accessories, fishing, marine and camping categories all experienced comparable store sales gains during the quarter, the company said. During the quarter, Gander Mountain substantially completed its withdrawal from the boat, ATV and power sport services categories. Excluding the negative 4.2 percent impact of these categories, comparable store sales were a positive 1.8 percent during the quarter, the retailer explained.

Retail segment net loss was $9.1 million compared to a retail net loss of $6.8 million for the second quarter of last year. Net income for the direct segment was $1.7 million for the quarter, compared with $2.0 million for the second quarter of last year, reflecting start up costs related to the Gander Mountain direct business, according to the company.

Improvement in inventory management resulted in a decrease in retail segment inventory of 7.1 percent per square foot year-over-year.

For the 26 weeks ended Aug. 1, the company reported sales of $476.1 million, an increase of 3.4 percent over the same period in fiscal 2008. Comparable store sales for the 26-week fiscal 2009 period increased 2.2 percent. Excluding the negative 4.8 percent impact of boat and ATV sales and power sport services, comparable store sales were a positive 7.0 percent for the first half of 2009. The company reported a net loss for the 26-week period of $26.0 million, or $1.07 per share, compared with a net loss of $29.3 million, or $1.22 per share for the 26 weeks ended August 2, 2008.

“A difficult retail environment slowed Gander Mountain’s progress during the second quarter, as overall sales declined slightly,” said David C. Pratt, chairman and interim chief executive officer. “Positive comparable store sales in our core categories and continued gains in initial margin were offset by costs associated with exiting powersports as well as increased marketing efforts. We continue to apply a more disciplined approach to our operations, capital, and expense decisions. While we expect the retail environment to be challenging in the second half of the year, our ongoing efforts to improve operating margins, manage costs and reduce debt will continue into the second half of the year.”

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