Gander Mountain fought through its seasonally-slow first quarter with its usual strategy to bolster sales – open more stores. The company opened six new stores, including one relocated store, bringing the total store count to 87 at the end of the quarter. Gander sees the outdoor market as “fragmented” and “underserved” with the opportunity to operate up to 300 locations nationwide. The company will continue with opening new stores “for the foreseeable future” and fiscal year 2005 will see total of 18 to 20 openings.

Gander is getting more efficient at opening these new locations as per store opening costs improved roughly 10% compared to last year. The strategy is keeping overall sales growth high, but comp sales continue to decline. GMTN is counting on its increased volume to help profitability through a number of initiatives.

Total sales for Q1 increased 37% to $135.1 million compared to $98.7 million last year, but comps declined 1% for the period. Gross margins dropped 100 basis points to 18.6% of sales compared to 19.6% last year. Gander managed to keep expenses in check and reduced operating expenses as a percentage of sales by 170 basis points to 30.4% compared to 32.1% last year.

The company’s net loss increased to $17.6 million compared to $13.8 million with the diluted loss per share falling to $1.23 versus a pre-IPO loss per share of $10.65 last year. On a pro-forma basis the diluted loss per share actually increased to $1.23, compared to a loss of 90 cents last year. Much of the loss is due to the low volume of sales during the first quarter compared to the rest of the year.

The company is looking to boost its gross margins with better volume discounts from vendors and increase its private label offering, primarily in hardgoods. Private label is currently “not much below” 10% and the company wants to expand that to the “middle teens.” Furthermore, Gander management is looking to increase apparel, which also sells at higher margins, from the mid-20% range into the low-30% range.

Gander recorded $17.4 million in capital expenditures associated with the relocation of their “base camp,” new store openings, and upgrading their distribution center. This upgrade is expected to support the current growth rate through 2006 and possibly into 2007.

The company anticipates full-year 2005 sales to be in the $850 million neighborhood with comp-store sales increasing 2% for the period. Pre-tax income should be at least $16 million. Total capital expenditures for store openings, relocations, and completing the upgrades to the retailer’s distribution center will be $45 million to $55 million. Gander projects that it can fund growth through 2006 under its current credit facility and with any cash generated from operations.