While the full-line sporting goods chains are reporting solid quarters, the Hunt/Fish retailers were impacted by the heavy hurricane season during the third quarter of 2005. At the end of October, Cabelas reported slower sales due to “the CNN effect” following the Gulf Coast hurricanes (SEW_0544). Now, Gander Mountain is showing an even greater negative impact with comp store sales falling in the high-single-digits and a considerable net loss for the quarter.
During a conference call with financial analysts and the media, Mark Baker, Gander Mountain president and CEO, said that in some cases, comparable store sales were down in the mid-teens during certain periods surrounding the three major hurricanes that hit the Gulf Coast. He also stated that the outdoor consumer is more impacted by the natural disasters and the following economic uncertainty caused by higher energy prices. “There were three significant weeks of real shortfalls,” he said. “We did see these three very significant sales gaps in comparable and all store sales during those weather phenomenon. Now, I cant explain why our customer seems to tune into that more than anybody else, but they do.”
Gross margins dropped more than three full percentage points due to an aggressive inventory clearance leading up to the fall selling season. Gander is increasing the penetration of its private label merchandise in casual apparel and outerwear in an effort to improve margins. The company is also sourcing the majority of this private label directly to further improve margins.
While Gander Mountains management did not provide specific guidance for the fourth quarter or year to date, Mr. Baker did say that he looks forward to a profitable fourth quarter and still believes that the outdoor lifestyle sector is under-served at retail.
>>> Interesting that Mr. Baker sees it as under-served when the rest of the world sees it as over-retailed. The market will need to watch if they get the consumer back as gas prices continue to fall and the holidays approach…
|Third Quarter Results|
|(in $ millions)||2005||2004||Change|
|Gross Margin||23.4%||27.1%||-370 bps|
|Net Income||($7.5)||$1.7||vs. profit|
|Diluted EPS||(53¢)||11¢||vs. profit|