Gander Mountain Q3 Comps Fall 8.5%; Reports $7.5 Million Net Loss

Gander Mountain Company third quarter sales increased to $214.4 million, an increase of 20% over the third quarter of 2004. Comparable store sales decreased 8.5%. The company reported a net loss for the third quarter of 2005 of $7.5 million, compared to a $1.7 million restated profit for the third quarter of fiscal 2004.

For the 39 weeks ended October 29, 2005, sales increased $118.2 million, or 29 percent, to $523.2 million. Comparable store sales decreased 5.1 percent. The net loss for the 39 weeks ended October 29, 2005, was $35.5 million, compared with a restated net loss of $16.0 million for the 39 weeks ended October 30, 2004.

“We are disappointed in our sales performance and loss for the quarter,” said Mark Baker, President and CEO. “We continue to believe that outdoor lifestyle retailing is a great industry and that Gander Mountain, with our value positioning and large-format stores, has the right concept to succeed in this business. However, we recognize that we need to prove the strength of this concept by delivering profits.

“Despite the recent challenges, there were achievements in the quarter,” added Baker. “Customers reacted very positively to our new stores, which all opened on schedule. Our store opening teams have done a fantastic job this year of creating excitement around the new stores while making the process more efficient and less costly. In addition, we launched our new Gander Mountain credit card in September and enrollments to date are well ahead of plan.”

In the third quarter of fiscal 2005, Gander Mountain opened nine new stores and relocated and consolidated two stores, bringing the total store count to 98 at the end of the quarter. The company entered three new states in the quarter — Maryland, Kansas and North Carolina — bringing the total number of states to 18. The company anticipates opening six to eight new stores in 2006, including two relocations.

The company also announced that it has amended its credit facility with Fleet Retail Group, LLC. The requirements for EBITDA and operating cash flow, as defined in the agreement, have been adjusted, and operating cash flow will be tested quarterly. The company is confident that it will have the liquidity it needs to execute its plans in 2006.

Earnings per Share Calculation

On a GAAP basis, basic and diluted net loss per share for the third quarter of fiscal 2005 were $0.53, compared with basic net income per share of $0.12 and diluted net income per share of $0.11 for the third quarter of fiscal 2004. For the nine months ended October 29, 2005, on a GAAP basis, basic and diluted net loss per share were $2.49, compared with basic and diluted net loss per share of $2.02, for the nine months ended October 30, 2004.

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. 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 basic and diluted net loss per share for the nine months ended October 29, 2005, were $2.49, compared with pro-forma basic and diluted net loss per share of $1.06 for the nine months ended October 30, 2004.

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

                                13 Weeks Ended            39 Weeks Ended
                             October 29, October 30,  October 29, October 30,
                                 2005       2004          2005       2004
                                         (restated)               (restated)

    Sales                     $214,421    $178,145     $523,166    $404,960
    Cost of goods sold         164,200     129,820      407,080     305,541
    Gross profit                50,221      48,325      116,086      99,419

    Operating expenses:
       Store operating
        expenses                42,889      33,258      113,592      84,314
       General and
        administrative
        expenses                 8,857       6,933       24,178      19,546
       Pre-opening expenses      2,779       5,224        6,555       7,917
    Income (loss) from
     operations                 (4,304)      2,910      (28,239)    (12,358)
    Interest expense, net        3,236       1,218        7,250       3,615
    Income (loss) before
     income taxes               (7,540)      1,692      (35,489)    (15,973)
    Income tax provision             -           -            -           -
    Net Income (loss)           (7,540)      1,692      (35,489)    (15,973)
    Less preferred stock
     dividends                       -           -            -       4,305
    Income (loss) applicable
     to common shareholders    $(7,540)     $1,692     $(35,489)   $(20,278)

    Income (loss) per common share
     Basic                      $(0.53)      $0.12       $(2.49)     $(2.02)
     Diluted                    $(0.53)      $0.11       $(2.49)     $(2.02)

    Weighted average common shares outstanding
     Basic                      14,264      14,222       14,252      10,048
     Diluted                    14,264      14,883       14,252      10,048