The Sportsman's Guide sales inched up 1.9% to $44.6 million for the first quarter compared to $43.7 million in Q1 last year. Gross margins slipped 80 basis points, from 32.5% in 2003 to 31.7% in Q1 2004. In spite of the less-than-inspiring sales growth and the decreasing gross profits, net earnings increased 22% to $1.2 million, or 22 cents per share, when compared to the $957,000, or 19 cents per share, reported for Q1 2003.
Company president and CEO Gregory Binkley told analysts on a conference call that sales were “under what we anticipated.” He cited two underperforming catalogs as the main reasons for the slow sales, both of which were heavy on the camping equipment.
The decline in gross profit was due to a combination of factors. Product mix and an increase in factory direct sales, and promotional pricing all impacted gross margins negatively. Binkley cited increased competitive pricing from other retailers including Wal-Mart as the main reason. “We do not want to be undersold, we have competitive pressures we have to meet,” he said.
The increased earnings came primarily from the decreases in SG&A expenses, which fell 140 basis points to 27.7% of sales. The increased factory direct sales and Internet sales, which both carry lower costs, helped to keep expenses down. SG&A expenses are expected to continue to decline throughout the year.
On the Internet front, the company said that its new relationship with Amazon.com has been relatively immaterial, but the sports and outdoor store is still in the test phase for Amazon, so this has inhibited growth.
In spite of the lower than projected sales numbers, SGDE maintains their guidance for the year of $205-$210 million in sales and $1.28-$1.30 in diluted EPS.
