Gander Mountain saw its third quarter net income cut in half versus the year-ago period on a 7.5% decline in comparable store sales. The company fueled its reported increase in Q3 sales with a 52% increase in total square footage and 14 new stores opened during the third quarter. With two relocated stores, this brings the total store count to 82 at the end of the quarter, compared to 64 at the end of the third quarter of 2003.

During a conference call with analysts, GMTN EVP of Merchandising and Marketing, Al Dittrich outlined three main reasons for the negative comps-unseasonably warm weather, negative firearms comps, and the impact of “new competition” on some stores.

The warm weather is self-explanatory, and hurt sales of all insulated products, especially footwear. There was a slight upside to the meteorological patterns, Dittrich said camping, fishing, marine accessories, canoe, and kayak sales were all up for the quarter.

The negative fire arms comps were said to be caused by a co-branded credit card promotion the company ran in 2003 which offered 11 month deferred payments. The promo spurred purchases of big-ticket items and fueled a 12.5% comp sales increase in Q3 last year. The program was described as “The biggest promotion we had by far throughout the course of the year.”

The third issue of increased competition is viewed by GMTN management as a temporary set-back. “Clearly these entertainment based stores draw customers for an occasional visit to see the attractions,” Dittrich told analysts. Dennis Lindahl, GMTN EVP & CFO told analysts that 24 of their stores are within 50 miles of a Cabela’s store, and “at least 15” are within the same range of a Bass Pro. The company re-iterated several times throughout the call that Gander’s strength is “the ability to be convenient and satisfy these customers on a day-by-day, week-by-week basis.”

Mark Baker, president and CEO, said that the negative comps were not the result of “poor retail execution.” The numbers appear to reflect this as well-Gander was able to lower their inventory per square foot even though sales did not meet estimates.

Average ticket price was flat at $56 for the quarter and customer transactions increased to 3.1 million compared to 2.5 million last year. Sales per square foot declined to $208 compared to $218 last year. Inventory turns were 1.7 times compared to 1.9 times last year.

GMTN will push forward with its aggressive growth strategy, increasing store count by over 25% and square footage by roughly 50%. “We will continue to drive our growth by building new stores, as well as by offering an enhanced assortment of products and services,” Baker said. Lindahl told analysts that the company’s operating income target in the 5% to 6% range.

To achieve this he said that the store count would need to be around 175 and the company expects to reach this mark in three to five years.

GMTN reiterated its full year guidance of $640 million to $670 million in sales, or an increase of 31% to 37%. Comparable store sales should decline 1% and net income should be $8 million to $13 million compared to $1.5 million last year.