Gander Mountains fourth quarter was hurt by the abnormally warm weather experienced by much of the country, some unforeseen cannibalization, and an inability to forecast accurate growth rates among its rapidly growing base of large-format retail stores. These three factors worked together to pull comp-store sales down 5.4% for the fourth quarter ended January 29, while total sales grew 30.3% to $237.2 million. Gander Mountain did over 60% of its business in the back-half of the year and 37% of its business in Q4.
Gross margin was 26.6% for Q4, up 60 basis points over the 26.0% posted last year. Gander also reversed its loss for the year during the fourth quarter, posting a 35.9% increase in net income to $17.6 million, or $1.21 per diluted share, compared to $12.4 million, or 91 cents per diluted share, in Q4 last year.
In an effort to balance sales and income across the entire year, GMTN is moving into the marine segment, increasing the amount of floor space dedicated to the category and adding several new market leading brands to their mix. The initial test store, which set in late January, is said to be “producing positive results.” GMTN also feels that its expansion into Texas and the Southeast will decrease the seasonality of its business.
Gander processed 4.2 million transactions during the quarter compared to 3.6 million last year. The average ticket price increased from $51 to $57 for the quarter and was $10 higher at the chains larger stores.
Even though the company is producing higher per-customer sales at the larger stores, on a sales-per-square-foot basis, they are not performing up to expectations. During a conference call with analysts and the media, president and CEO Mark Baker said the company may have under-estimated the Grand-Opening effect on their larger formatted stores, and this may have caused some of the comp-store decline. Baker does believe the larger-format stores will eventually reach comparable performance to their smaller stores.
While forecasting performance may be a problem for the retailer, competition does not seem to worry the management team. “Two years ago we built an 80,000 square foot store within 30 miles of one of the entertainment retailers in the Twin Cities here and then further built another 50,000 square foot store probably 20 or 30 miles to the west of them,” said Mr. Baker.
However, Ganders two stores did not complement each other and the company found that cannibalization impacted them more than projected. “In the Twin Cities, where we have two big box stores we have seen more continued cannibalization of our smaller stores than we anticipated,” he said.
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