Gander Mountain Q2 Pro Forma Net Loss Inches Up; Comps Up 1.8%

Gander Mountain Company reported total sales for the second quarter of fiscal 2004 increased 35% to $128.1 million from $94.8 million in the year-ago period. Comparable store sales increased 1.8% on top of a 15.5% increase in the second quarter of fiscal 2003. The net loss for the quarter was $3.7 million compared with a net loss of $4.4 million in the second quarter of fiscal 2003.

For the 26 weeks ended July 31, 2004, sales increased $62.6 million, or 38%, to $226.8 million. Comparable store sales increased 4.8%. The net loss for the 26 weeks ended July 31, 2004 was $17.3 million, compared with a net loss of $15.6 million for the 26 weeks ended August 2, 2003.

On April 26, 2004, Gander Mountain closed its initial public offering of 6,583,750 shares of its common stock and converted existing preferred stock to common stock.

On a GAAP basis, the per share net loss for the second quarter of 2004 was $0.26 per common share compared with a net loss of $8.75 per common share for the second quarter of fiscal 2003.

For the 26 weeks ended July 31, 2004 on a GAAP basis, the Company's net loss was $2.71 per common share compared with a net loss of $24.56 per common share for the 26 weeks ended August 2, 2003.

Giving effect to the conversion of preferred shares and the application of the net proceeds of the offering as of the beginning of each period presented, pro forma net loss for the second quarter of fiscal 2004 was unchanged from the GAAP net loss of $3.7 million, or $0.26 per share, compared to a pro forma net loss of $3.5 million, or $0.25 per share, for the second quarter of last year. Pro forma net loss for the 26 weeks ended July 31, 2004 was $16.3 million, or $1.15 per share, compared to a pro forma net loss of $14.2 million, or $1.09 per share, for the 26 weeks ended August 2, 2003.

“Our industry leading 35% sales growth this quarter reflects our focus on both comparable store performance and new store development,” said Mark Baker, President and CEO. “We are on track to meet our overall financial plan for 2004 as we move into the higher volume third and fourth quarters.”

During the second quarter of fiscal 2004, the Company opened stores in Fredricksburg, VA, Indianapolis, IN and Coldwater, MI, bringing total square footage to 2.9 million, an increase of 34% over the prior year. The Company operates 70 stores in ten states.

“During the third quarter, Gander Mountain expects to continue on pace as the fastest-growing outdoor lifestyle retailer,” Baker added. “We plan to open an additional 14 stores before year end, including two relocations and five stores in new markets — Texas, Kentucky and Colorado. Strong brand recognition and positive response to our outdoor lifestyle store concept are evident even as we enter new markets. Our more than 4,000 dedicated associates continue to lead the industry in serving every customer.”

For full fiscal year 2004, the company expects to open 19 new stores, including two relocations, during the year, representing incremental square footage of approximately 1.2 million square feet.

Full year sales are expected to reach $675-$700 million, an increase of 38% to 43% over fiscal 2003. Comparable store sales are expected to increase by approximately 3% to 5%. Income before income taxes is expected to be $16-$21 million, compared with $1.5 million in fiscal 2003.

                             Gander Mountain Company
                  Condensed Statements of Operations - Unaudited
                      (In thousands, except per share data)

                                         13 Weeks Ended      26 Weeks Ended
                                        July 31, August 2, July 31,  August 2,
                                          2004     2003      2004      2003

    Sales                               $128,096  $94,821  $226,815  $164,247
    Cost of goods sold                    96,558   72,571   176,010   129,875
    Gross profit                          31,538   22,250    50,805    34,372

    Operating expenses:
       Store operating expenses           26,968   18,135    50,600    34,296
       General and administrative
        expenses                           6,115    5,601    12,613    10,674
       Pre-opening expenses                1,246    1,661     2,477     2,980
    Loss from operations                  (2,791)  (3,147)  (14,885)  (13,578)
    Interest expense, net                    895    1,241     2,397     2,057
    Loss before income taxes              (3,686)  (4,388)  (17,282)  (15,635)
    Income tax provision (benefit)           -        -         -         -
    Net loss                              (3,686)  (4,388)  (17,282)  (15,635)

    Less preferred stock dividends           -      4,131     4,305     8,262

    Loss applicable to common
     shareholders                        $(3,686) $(8,519) $(21,587) $(23,897)

    Basic and diluted loss applicable
     to common shareholders per share     $(0.26)  $(8.75)   $(2.71)  $(24.56)

    Weighted average common shares
     outstanding                          14,222      973     7,962       973

    Pro Forma Data (1) (Basic and
     Diluted)
    Pro forma loss applicable to common
     shareholders                        $(3,686) $(3,468) $(16,340) $(14,163)
    Pro forma loss applicable to common
     shareholders per share               $(0.26)  $(0.25)   $(1.15)   $(1.09)
    Pro forma weighted average common
     shares outstanding                   14,222   14,089    14,222    13,022

    Reconciliation of Pro Forma Data to
     GAAP
    Loss applicable to common
     shareholders                        $(3,686) $(8,519) $(21,587) $(23,897)
    Preferred stock dividends                -      4,131     4,305     8,262
    Interest expense reduction               -        920       942     1,472
    Pro forma net loss applicable to
     common shareholders                 $(3,686) $(3,468) $(16,340) $(14,163)