Gander Mountain Company reported that total sales for the fiscal third quarter ended October 30 increased 24.4%, or $34.9 million, to $178.1 million. Comparable store sales decreased 7.5% after a 12.5% increase in the third quarter of fiscal 2003. The company reported net income for the quarter of $2.1 million, compared with net income of $4.4 million in the third quarter of fiscal 2003. The company opened 14 stores in the quarter versus four in the third quarter of 2003, incurring pre-opening expenses of $4.6 million compared to $1.4 million in the 2003 period.
For the first nine months of fiscal 2004, sales increased $97.5 million, or 31.7%, to $405.0 million. Comparable store sales declined 0.7% after an increase of 11.1% in the first nine months of 2003. The net loss for the first nine months of fiscal 2004 was $15.2 million, compared with a net loss of $11.2 million for same period of fiscal 2003.
“With almost 6,000 dedicated associates providing outstanding service to every customer, we have increased sales 32% for the year to date. Building scale is crucial to gaining operating efficiencies in retailing, and we believe that the investment in opening new stores this year will be rewarded in improved profitability,” said Mark Baker, President and CEO. “While we are disappointed in the slower-than-expected growth in sales for the recent quarter, we proactively managed our business to minimize the impact on profits.
“We will continue to drive our growth by building new stores, as well as by offering an enhanced assortment of products and services,” Baker continued. “We were gratified by the strong brand recognition and overwhelming customer response as we entered new markets like Texas.”
During the third quarter of fiscal 2004, the company opened 14 new stores, including two relocated stores, bringing the total store count to 82 at the end of the quarter, compared to 64 at the end of the third quarter of fiscal 2003. Gander Mountain operates more retail stores in the outdoor lifestyle segment than the next three competitors combined. The company entered five new states in 2004 and now operates stores in 14 states.
The company anticipates opening 18 to 22 stores in fiscal 2005, including two or three relocations. Some of the new stores will continue to reinforce the company’s penetration of its current markets, including markets the company entered in 2004, such as Texas and Colorado. Other new stores will be in new markets contiguous to the company’s current markets. To further 2005 revenue growth, the company plans to expand its assortment in the marine and boating categories, providing customers with one-stop-shopping convenience. As a further product line extension, Gander Mountain is now offering hunting and fishing vacation packages in the U.S. and Canada.
On a GAAP basis, basic and diluted net income per share for the third quarter of fiscal 2004 were $0.15 and $0.14, respectively, compared with basic and diluted net income per share for the third quarter of fiscal 2003 of $0.26. For the first nine months of fiscal 2004, on a GAAP basis, basic and diluted net loss per share were $1.94 compared with a basic and diluted net loss per share of $24.29 for the first nine months of fiscal 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. 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 income per share for the third quarter of fiscal 2004 were $0.15 and $0.14, respectively, compared with basic and diluted net income per share for the third quarter of fiscal 2003 of $0.37. For the first nine months of fiscal 2004, pro-forma basic and diluted net loss per share were $1.00 compared with a pro-forma basic and diluted net loss per share of $0.65 for the first nine months of fiscal 2003.
For Full Fiscal Year 2004 sales are expected to reach $640 to $670 million, an increase of 31% to 37% over fiscal 2003. Comparable store sales are expected to be negative 1% to 3%. Income before income taxes is expected to be $8 to $13 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 39 Weeks Ended October November October November 30, 1, 30, 1, 2004 2003 2004 2003 Sales $178,145 $143,205 $404,960 $307,453 Cost of goods sold 130,035 106,276 306,045 236,151 Gross profit 48,110 36,929 98,915 71,302 Operating expenses: Store operating expenses 33,247 23,595 83,847 57,892 General and administrative expenses 6,933 6,178 19,547 16,852 Pre-opening expenses 4,587 1,404 7,063 4,384 Income (loss) from operations 3,343 5,752 (11,542) (7,826) Interest expense, net 1,218 1,366 3,615 3,423 Income (loss) before income taxes 2,125 4,386 (15,157) (11,249) Income tax provision (benefit) - - - - Net income (loss) 2,125 4,386 (15,157) (11,249) Less preferred stock dividends - 4,131 4,305 12,393 Income (loss) applicable to common shareholders $2,125 $255 $(19,462) $(23,642) Income (loss) per common share: Basic $0.15 $0.26 $(1.94) $(24.29) Diluted $0.14 $0.26 $(1.94) $(24.29)