Gander’s Loss Widens on Double-Digit Comp Decline

Gander Mountain Company first quarter sales increased 15% to $155.6 million compared to the first quarter of fiscal 2005. Comparable store sales decreased 10.4%. The company reported a loss for the first quarter of fiscal 2006 of $23.0 million for both pretax and net loss, compared to a first quarter 2005 pretax and net loss of $20.1 million before a one-time payment to Gander Mountain of $2.5 million related to the termination of the company’s previous co-branded credit card agreement. The reported pretax and net loss for the first quarter of 2005 was $17.6 million.

“Since many of our stores are unprofitable during our seasonally small first quarter, the increase in our first quarter loss over last year is primarily the result of having, on average, an additional 16 stores open during the period,” said Mark Baker, President and CEO. “We have maintained tight control over our expenses, and we have a number of initiatives in place to drive sales during the remainder of the year, including the important hunting and holiday seasons.”

The net loss per share for the first quarter of fiscal 2006 was $1.61, compared to a net loss of $1.23 per share for the first quarter of fiscal 2005. The company does not currently record a tax benefit in calculating net loss or loss per share. In contrast, analysts estimates of the company’s loss per share as reported by First Call reduce the loss by the amount of a pro forma tax benefit. If a tax benefit were recorded at a 40 percent rate, the net loss per share for the first quarter of 2006 would be $0.97 compared to a net loss of $0.74 per share for the 2005 quarter.

In the first quarter of fiscal 2006, Gander Mountain opened a new store in Tyler, Tex., and relocated one smaller store to a large-format store in Blaine, Minn., bringing the total store count to 99 at the end of the quarter. The company anticipates opening a total of eight new stores in 2006, including one relocation.

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

                                                        13 Weeks Ended
                                                   April 29,        April 30,
                                                     2006             2005
    Sales                                         $155,581          $135,259
    Cost of goods sold                             128,589           109,949
    Gross profit                                    26,992            25,310

    Operating expenses:
       Store operating expenses                     35,855            32,570
       General and administrative expenses           9,353             8,384
       Gain on contract settlement (1)                   -            (2,500)
       Pre-opening expenses                            765             2,759
    Loss from operations                           (18,981)          (15,903)
    Interest expense, net                            3,986             1,665
    Loss before income taxes                       (22,967)          (17,568)
    Income tax provision                                 -                 -
    Net loss                                      $(22,967)         $(17,568)

    Basic and diluted loss per share                $(1.61)           $(1.23)

    Weighted average common shares outstanding      14,285            14,235

    (1)  Gain on contract settlement reflects a $2.5 million payment received
         in connection with the termination of our previous co-branded credit
         card agreement.