Following up on an especially strong first quarter that saw boosts from several key product segments, Gander Mountain reported disappointing second quarter results as losses widened on sliding revenues. Company management attributed disappointing results to discounts and markdowns associated with the PowerSports category and increased advertising expenses.


Gander Mountain’s PowerSports segment, which the company said has substantially been phased out, reported a loss of $2.8 million for the quarter compared to a $350,000 profit for the year-ago period. Excluding the negative 4.2% impact of the exit from the ATV, boat and pwersports services categories, same-store sales were up 1.8% for the quarter.


The company’s net loss, reflecting a $3.2 million hit from the exit of the PowerSports business, widened to $7.3 million from $4.9 million a year ago. As mentioned, increased retail advertising expenses also had a significant impact on the net loss.


In a conference call with analysts, management said strength continued to come from firearms, ammunition, hunting accessories, fishing, marine and camping.


Retail segment revenues for the second quarter slid 1.1% to $210.8 million from $213.1 in the year-ago period. The net loss for the segment, which was directly impacted by markdowns in the PowerSports category, widened to $9.1 million from $6.8 million a year ago.


Retail operations delivered 108 basis points improvement in initial merchandise margin, which management said reflected improved product mix and merchandise assortments. Management noted that inventory per square foot was down 7.1% in the retail business as reduced product clearance levels led to increased inventory returns.
For the Direct segment, start-up costs from the investment in the Gander Direct business continued to impact results, as revenues decreased 5.4% to $37.6 million from $39.7 million in the comp period last year.  Net income from the direct segment was $1.7 million as compared to $2.0 million last year. The Direct segment for Gander remains in a bit of a transitional mode following the August 2008 launch of GanderMtn.com and the 2007 acquisition of Overton’s.


Management said the company would continue to make progress in the development of their multi-channel sales strategy, including increasing online assortments, developing cross-promotional activities for in-store and Web specials and expanding the customer list to improve revenue and profitability.