Gander Mountain saw the elimination of most of its vendor proof-of-performance rebates impact second quarter earnings to the tune of $1.5 million this year, resulting in a 6.3% increase in the net loss for the period when measured on a pro forma basis. On a GAAP basis, GMTN saw its loss shrink 16% to $3.7 million versus $4.4 million in the year-ago period. Sans the rebate change, the net loss would have been cut in half to $2.2 million for the period. On a GAAP basis, the net loss per share for Q2 was 26 cents per common share compared with a net loss of $8.75 per common share for Q2 last year.
Gander now heads into the meat of its year, with roughly two-thirds of its business done in the back half of the year and 50% of its sales done after mid-October.
The 35% increase in sales for the period was helped along by the addition of three new stores in the quarter for a total of 70 stores with a 34% increase in square footage at the end of the period. The average square footage per store was 41,400 sf at quarter-end this year versus 34,900 sf at the same time last year. The average will continue to increase as Gander plans new stores to average between 60,000 and 65,000 sf.
Customer transactions grew by 27.1% in the quarter on increasing traffic in the smaller and “more mature” stores. The average customer ticket increased 5.3% to $48.04 versus $45.64 in Q1 LY. The average ticket in the warehouse format stores was $57, compared to $45 in the smaller stores. Sales per square foot was $215 for the trailing twelve month period, up 2.4% from $210 per sf for the comparable period last year.
GMTN saw bigger gains in the Hunting, Apparel, and Footwear categories in the second quarter, while Fishing and Camping grew at a slower pace. Poor weather in the great Lakes region was called out a reason for the weaker results.
The 100 basis point improvement in gross margin was said to be due in large part to the same rebate shift issue that hurt bottom line profits, since the rebates now go on the balance sheet until the product is sold. Other factors such as increased Apparel sales, higher markdowns in Fish and Camp, and clearance sales at two closing stores pretty much offset each other.
Gander is switching out waterfalls for waterfalls in their stores as they find more selling space for Apparel, Footwear, and Fieldwear and dismantle their functioning waterfall displays. The change gives them another 1,000 to 1,200 square feet of selling space for each store. They expect 80% to 90% of their comp base of stores to see benefit from the change this fall.
GMTN ended the quarter with “substantially no long-term debt”.
Gander plans to open 13 new stores in Q3 and one additional store in Q4. Sales for the year are expected to increase between 38% and 43% to a range of $675 million to $700 million. Comps are seen in the +3% to +5% range. Pre-tax is estimated to be in the $16 million to $21 million range versus just $1.5 million LY.